Non-lawyers and even lawyers who do not focus on contract disputes lay too much emphasis on whether or not there is a signed contract. Business litigators should know better.

Even if a contract literally provides, “There is no contract unless there is a writing, setting out material terms, and signed by both parties,” courts (and juries) may conclude there is a contract.

So ruled Sr. U.S. District Court Judge David S. Doty (D. Minn.) in a lawsuit between Rust Consulting and the law firm of Schneider Wallace Cottrell Konecky Wotkyns, LLP (“SWCKW”). (Here is the complaint. Here is the Court’s ruling on SWCKW’s motion for summary judgment. (See pages 8-9.)) SWCKW argued that Rust could not sue on the contract between them because Rust could not come up with the signed contract (signed by Rust, that is). (Rust could come up with plenty of evidence that the parties agreed to the contract and that Rust performed under the constract.)

This dispute is now scheduled for trial in October. Rust claims it is due around $320,000 (see here at p. 6 ). SWCKW has a counterclaim against Rust apparently for over $1 million (see here at p. 6 (“Schneider Wallace asserts that it had to use an attorney to complete Rust’s work and to correct its mistakes. … Schneider Wallace paid the attorney $1,198,313.”)).

(Surprisingly, Rust and SWCKW starting working together in 2009 and will work together to this day (see here at p. 2, ftn. 1) but our guess is that this is “legacy work” because sometimes Rust’s work, settlement claims administration and the like, can have a long tail.)

It’s been a hot minute since we’ve stretched and made a prediction on Minnesota Litigator so we’ll make a modest bet that this case will settle before trial.

Flickr: https://goo.gl/k6uI0g

We’ve previously posted on bringing lawsuits anonymously and the sometimes difficult or delicate balance that courts have to strike.

Some cases are easy though.

If your name is already known and associated with the lawsuit or the facts underlying the lawsuit, courts will not allow you to proceed anonymously because “the benefit of proceeding under a pseudonym has already been defeated” and “there is a presumption against parties proceeding under pseudonyms” (see here at p. 9).

We predict this will doom the efforts of Mr. Doe in his efforts to stay anonymous in his lawsuit against Carleton College, arising out of his discipline (expulsion) for involvement in an alleged sexual assault (strongly denied). (Here is Carleton’s memorandum of law arguing that Mr. Doe must shed his anonymity.)

And, finally, an aside: we note that Mr. Doe has executed a “verified complaint,” signing the complaint, “John Doe” (see here at p. 50).

This seems odd for several reasons. Verified complaints are complaints signed by the party based on personal knowledge under penalty of perjury. Verified complaints are the exception and not the rule.

Query whether the signing of a pseudonym, literally, a false name, is effective. We also note that Mr. Doe’s “verified complaint” does not actually include any declaration, oath, or affirmation that the allegations in the complaint are based on personal knowledge and alleged with knowledge that they are executed under penalty of perjury.

In our experience, verified complaints are used in a few circumstances. First, if a party envisions immediate emergency measures (e.g., seeking a temporary restraining order), a verified complaint can be useful because it doubles as a sworn affidavit; it would be admissible evidence for such measures.

Second, if a lawyer has concerns about their client’s honesty, it places the burden of veracity on the client rather than exposing the lawyer to Rule 11 sanctions for false or baseless allegations.

Third, verified complaints are sometimes required by statute for particular claims. See Murphy Motor Freight Lines v. Weiss, 253 N.W. 1, 2 (Minn. 1934) (action based on objections to railroad tariff requiring verified complaint); see also Minn. Stat. § 624.62 (providing for a verified complaint in prosecuting people for jumping on moving trains).

Finally, we suppose some lawyers might feel that verified complaints might have some greater rhetorical allure. They’re more “official”? They might connote, “We mean business” or something? Putting aside that Mr. Doe’s verification is sketchy for a few reasons (described above), however, it is not clear that having a verified complaint in the Doe v. Carleton complaint has any more persuasive value than the same complaint unverified.

Patty Plaintiff sues Donnie Defendant. Donnie feels wronged, feels the fault lies with Theodore Third Party.

Is it proper for Donnie to bring a third-party complaint against Theodore, stating, in effect, “I am not the correct defendant; Theodore is,” or, alternately, to argue, “If I am liable to Patty, Theodore shares some of the blame”?

U.S. District Court Judge Patrick J. Schiltz (D. Minn. answered this question in Delta Industrial Services, Inc. v. Kollmorgen Corp. v. Kaman Automation, Inc. Can you guess the answer?

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A red car and one black crash in an accident

A case from the Minnesota Supreme Court last week reminded us that courts are loath to change course, even where that course is a little muddy.

In Bandemer v. Ford Motor Company, Plaintiff Bandemer was in a serious car accident as a passenger in a 1994 Ford Crown Victoria. Bandemer was a Minnesota resident, as was the driver of the Crown Vic. The accident took place in Minnesota, and Bandemer was treated for his injuries by Minnesota doctors in Minnesota. He later sued the driver and Ford, who made the Crown Vic, alleging that his brain injury was caused by a defective air bag in the car.

Ford moved to dismiss Bandemer’s claims for lack of personal jurisdiction, arguing that its contacts with Minnesota were not sufficiently connected to the case since the Crown Vic was designed, manufactured, and originally sold by Ford outside of Minnesota. The car arrived in Minnesota in 2011, seventeen years after its first retail sale in North Dakota, and it was eventually purchased by the driver’s father in Minnesota in 2013.

During the litigation, Bandemer agreed that Ford was not subject to general personal jurisdiction in Minnesota. (Remember that general personal jurisdiction applies when a company is so pervasively active in a state that it is reasonable to hold them accountable in that state for all of their behavior. A company can always be sued in its home state for that reason.) He argued, however, that specific jurisdiction—when a lawsuit’s claims relate to the defendant’s contacts with the forum—was proper, both because the events surrounding the accident itself all took place in Minnesota and because Ford had a number of other contacts with Minnesota. These include the sale of 200,000 vehicles to dealerships in Minnesota over a three-year period; advertising and marketing contacts, including direct mail advertisements, national advertising campaigns, and sponsorship of athletic events in Minnesota; and Ford’s collection of data from its dealerships in Minnesota for use in redesigns and repairs.

Given these contacts, the district court held that the exercise of jurisdiction over Ford was proper. The court of appeals agreed, and so did the Minnesota Supreme Court, with two justices dissenting.

The Court held that a defendant’s contacts with the state need not be the cause of the claim in the underlying case (as Ford argued); rather, those contacts need only “arise out of or be related to” the claim. Writing for the Court, Justice McKeig held that Bandemer’s claims arose out of or related to Ford’s contacts with Minnesota because Ford’s own data collection, marketing, and advertising in Minnesota demonstrated that it delivered its cars into the “stream of commerce” with an intention that Minnesotans purchase those cars. The driver’s father purchased such a car in Minnesota and Bandemer was injured, he claimed, by a design defect in that car.

In so holding, the majority relied on federal law, and in particular, on Bristol-Myers Squibb Co. v. Superior Court of California and Rilley v. MoneyMutual, LLC, a Minnesota case also applying federal law. (A practice note: although procedural matters are typically governed by state law, here’s where the exception proves the rule. Since Minnesota’s long-arm statute extends the personal jurisdiction of Minnesota courts only as far as the federal Constitution’s Due Process Clause will allow, Minnesota’s personal jurisdiction is a federal question governed by federal court cases. Litigators, take note.) In Bristol-Myers, the U.S. Supreme Court held that the California courts did not have jurisdiction over claims by out-of-state plaintiffs against out-of-state defendants, even if the claims of the out-of-state plaintiffs were packaged with claims by California residents in a mass tort action. Unlike in Bristol-Myers, in Bandemer both the car crash and the injury to Bandemer took place in Minnesota. So although the personal jurisdiction test focuses primarily on a defendant’s contacts with the forum, the Court found that a plaintiff’s contacts are nonetheless relevant to the analysis of the connection between the forum and the underlying dispute.

Justice Anderson and Chief Justice Gildea dissented. The dissent would have reversed and remanded the case to be dismissed for lack of jurisdiction because none of Ford’s Minnesota contacts had anything to do with the design and manufacture of the 1994 Crown Vic in which Bandemer was injured.

Bandemer strikes us as an eminently sensible decision in the midst of sparse federal caselaw. We’ve said before that American jurisprudence on specific personal jurisdiction leaves something to be desired, and that’s still the case even after Bristol-Myers. Bristol-Myers deals with the somewhat unusual situation of non-resident plaintiffs suing non-resident defendants, but is silent on the more common question of what specific jurisdiction requires when a resident plaintiff sues a non-resident defendant. In the absence of robust Supreme Court guidance, the Court chose to stay the course and follow its earlier cases (namely Rilley),which required only that a defendant’s contacts with Minnesota arise out of or be related to a plaintiff’s claim. Moreover, it’s only reasonable (as observed at oral argument), that a company of Ford’s size should expect to be sued in a state where it has sold hundreds of thousands of cars.

This looser standard also makes practical sense: if the Court had held that there was not specific jurisdiction over Ford, Bandemer would have had to file two separate cases—one against the driver in Minnesota and another against Ford, presumably in Michigan—relating to the exact same accident. Requiring Bandemer to litigate the same case in two separate forums would work against the just and economic adjudication of disputes and would deprive Minnesota of its interest in resolving a dispute involving its residents that took place in Minnesota. The Court tends to shy away from creating significant practical difficulties in its rulings, and it did so here.

So, the Court stays the course, and Bandemer’s case moves forward. Now, he only needs to prove liability, and causation, and damages. So . . . well, his whole case. Isn’t litigation fun?

Kelly Pierce is a Minneapolis-based lawyer who represents businesses in commercial disputes and advises on business and employment law issues. You can find Kelly at https://piercelawmn.com.

There Will Be Blood

The lawsuit of Chargo v. Gurstel Law Firm, P.C. fka Gurstel Chargo P.A., a law firm break-up, settled earlier this year on the threshold of trial.

The break-up appears to have been bitter and hard-fought. One might even go so far as to call it bloody.

The settlement is non-public but, from the linked trial brief and a look at the case’s docket, we speculate that about half of the dollar amount in dispute (maybe more?) went to the lawyers’ lawyers and the lawyers’ experts in the lawsuit. See here at p. 28 (“[T]he Firm has incurred hundreds of thousands of dollars in legal fees while Plaintiff gained an extra $2,925 [by contesting the Firm’s original valuation].”); here at p. 31 (arguing that Chargo’s payout under the firm shareholder agreement should be $153,698.12) ; here at p. 36 (arguing that Chargo should get about $315,000 for his share in a building purchased by the owners for the law firm).

That’s unfortunate. While the case may have been a sad and painful waste of time and money for the parties, maybe the rest of us can profit from what the case tells us about business appraisals.

Years ago, we discussed that no appraisal can ever be “right,” exactly. Appraisals are inevitably estimates or approximations. But they can (and sometimes clearly are) “wrong.”

The Gurstel law firm, like all law firms, had in place a procedure for when a co-owner leaves the law firm. The Gurstel firm’s procedure included an appraisal, a counter-appraisal, if desired by the counterparty, and a “tie-breaker” appraisal if the first two appraisals are dramatically different and require reconciliation. The “tie-breaker” appraiser would be chosen by the first two appraisers and the tie-breaker’s appraisal, it was agreed, would result in the definitive and binding valuation.

We note that the Firm’s appraiser appraised Mr. Chargo’s share of the law firm at $323,400. Here at p. 12. Mr. Chargo’s appraisal expert gave a “rough estimate” of the value of Mr. Chargo’s share of the firm of $1,988,391.37. (Are we the only ones who find it absurd that a “rough estimate” should be down to the penny?) Here at p. 16. This striking deviation in appraised values triggered the “tie-breaker” appraiser, whose appraisal of the value of Mr. Chargo’s share was $326,325. Here at p. 18. In other words, the Firm’s appraisal and the tie-breaker appraisal varied by less than 1%. Neither can be said to be right, exactly, but Mr. Chargo’s expert’s “rough estimate” appraisal would definitely appear to have been wrong.

This may be our final word on a subject that to some will seem too obvious to discuss: appraisal methodology is legitimate and science-based. It is not “junk science.” It is not “speculation” or “entirely subjective.” On the other hand, as in any discipline that requires nuance and judgment, in any discipline that defies precision, variables can be manipulated, levers can be pushed, and, at times, they are — excessively and improperly.

Regular Minnesota Litigators know how enthusiastically we celebrate significant triumphs in Minnesota civil litigation but, in the same posts in which we praise the winners, we try to remember to warn against gloating. We highlight the ever-present risk of reversal (see here, for example).

(And we have experienced the thrill of victory followed by the agony of defeat in a single case first-hand. See here and here.)

Somehow, we missed congratulating the excellent lawyers at Greene Espel, a Minneapolis civil litigation boutique/powerhouse, for their trial win in a patent case last year against USBank and its formidable lawyers at Dorsey & Whitney and Jones Day. It certainly was not because we had a sense that the multi-million dollar verdict was vulnerable on appeal.

But it was.

For those of our readers who practice in patent litigation (or even patent prosecution (why are you reading this? what is wrong with you?)), the Solutran v. Elavon and USBank decision will be of interest for its discussion of “patent ineligibility.”

For the rest of you, in a nutshell, an “abstract idea” or “an idea of itself” is not patentable. Valid patents must “contain[] an ‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent eligible application” (here at p. 7).

The three-judge panel of the U.S. Court of Appeals for the Federal Circuit conceded: “We understand that it may be difficult at times to determine what the correct level of abstraction is to characterize the claims. After all, all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” But here, the panel continued, “the abstract idea tracks the claim language and accurately captures what the patent asserts to be the focus of the claimed advance over the prior art” (here at p. 11).

Though we’re not I.P experts ourselves, it seems that the Federal Circuit got this one right. Solutran’s patent describes its invention as a system and method of electronically processing checks that basically allows merchants to get their money faster (here at p. 4). Solutran did not come up with some new “thing” or any novel concept. It claimed “basic steps of electronic check processing,” as an invention — an entrepreneurial innovation, not a technological one.

We sympathize with the once-winning lawyers and, again, emphasize that successful civil litigators are playing a numbers game. All great civil litigators lose cases. Congratulations to the defendants and their lawyers at Dorsey & Whitney and Jones Day (at least pending U.S. Supreme Court review?).

Update (August 2, 2019): We predicted this one correctly.

Update (May 3, 2019):  The Minnesota Court heard argument in the the case described below, Engstrom v. Whitebirch, this week.

For those of you looking for a rule of thumb for predicting outcomes of appellate courts, watch the video of this oral argument. Watch the questioning of the lawyers. In the case of Engstrom’s counsel, the questions are slow in coming and, when they do come, are either softballs or wild pitches.

We found the Supreme Court justices questions (and the relative lack of them for Whitebirch counsel, Mr. Gerald Von Korff) revealing and almost excruciating to watch. Mr. Von Korff is asked very little at the start of his argument but then is asked essentially the same question at great length (in light of his evasive responses).

We do not believe that it is risky to predict a win for Mr. Engstrom and a win for consumer fraud plaintiffs, generally. The Minnesota Supreme Court, we predict, will find that plaintiffs state actionable fraud when their only “injury” is having had to hire lawyers and challenge a false claim made by a supposed creditor (or other allegedly unscrupulous schemer).

Update (December 5, 2018): Following up on the post below about how one commits a massive fraud, let’s hypothesize a situation where a company falsely charges people for services that the people do not owe but stops doing so immediately when the invoiced people object (or hire lawyers to object on their behalf).

Could an intended victim, who incurred legal fees hiring a lawyer to fight the false charge, sue for consumer fraud?

On the one hand, this “intended victim” suffered no loss. On the other hand, the “intended victim” incurred legal fees to avoid suffering a loss. Furthermore, this “intended victim” might be a good candidate to vindicate the rights of ALL of the ACTUAL victims, right?

What would be wrong or problematic about allowing the intended victim to bring a lawsuit to enjoin the improper conduct?

These are issues to be addressed by the Minnesota Supreme Court in Engstrom v. Whitebirch. Here is the plaintiff’s petition for Supreme Court review, here is the response, and the Supreme Court granted the petition for review last week.

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We had the good fortune and misfortune of going to trial last week in a two-day jury trial.

We won.

The “good fortune” is purely selfish. As many U.S. civil litigators know, it is difficult to get trial experience since 95-99% of civil lawsuits settle or are resolved before trial.

True, trial is stressful and exhausting for everyone involved but, for trial lawyers, it is often fun (if they have chosen their profession successfully, at least (and if they feel confident in their clients’ case)). It is the culmination, one might say, of one’s training.

The misfortune of our trials are mainly borne by our clients. In last week’s trial, though victorious, the company client had to spend about two years (and two stressful days of trial) defending a case that had no merit. Our client won but paid dearly to defeat what, in our view, was a ridiculous case from the get-go.

Our Practice Pointers From Trial

POINTER NO. 1: HAVE A TRIAL NOTES NOTEBOOK. Keep a trial notebook throughout your practice as a litigator, from your first trial to your last. After every trial, quickly jot down “post-trial notes” to capture what you learned for your future trials (which might be several years later).

In every trial, there will be slips, lapses, oversights, complications, and unforeseen twists. There will be lessons learned.

POINTER NO. 2: USE MANILA FOLDER FOR VOIR-DIRE. The voir-dire process (in Minnesota, at least, in our experience) moves very fast. It is a fire-hose of information. It is at the start of trial when nerves most interfere with cognition. It comes before one has found one’s rhythm. One trick that we learned in an earlier trial (from an adversary lawyer with loads of trial experience) was the use of a manila folder to diagram the jury venire in voir-dire. This is extremely useful in keeping track of the information that one learns about each juror.

The unfolded manila folder is larger than a standard pad of paper. You will need the extra space. In Minnesota civil trials, there are often 11-12 jurors, seated in two rows of six (or a row of six and five or whatever, depending on available seating etc.), of whom 7 will be empaneled for trial. Draw boxes on the manila folder corresponding to the seating configuration of the venire (e.g., two rows of six boxes each). This will help you capture information about each juror quicker and more efficiently and help in your decision-making about the exercise of peremptory challenges.

POINTER NO. 3: JURORS MUST SEE EXHIBITS IN REAL TIME DURING TRIAL. Figure out a way to have the jury see documents that are exhibits in the case and about which witnesses testify.

To many, POINTER NO. 3 will seem like a “no-brainer” and it is, in fact, a no-brainer that you want the jury to see “Exhibit ###” while you question a witness about it. In our view (some disagree), it might be hard to imagine a more boring and useless experience than jurors sitting and watching a witness talk through a document that the jurors cannot see, particularly, of course, a document that is central to the case or that contains a lot of important information for the case.

What is NOT a “no-brainer,” however, is that different courthouses have different technology available. Different courtrooms have different physical configurations.

In federal courts, in our experience (that is, in U.S. district court (D. Minn.)), civil litigators are “good to go” with courtroom presentation technology. The same is not true in state court.

POINTER NO. 4: DO NOT ANTAGONIZE YOUR ADVERSARY; YOU SHOULD COLLABORATE WITH OPPOSING COUNSEL IF AT ALL POSSIBLE. In last week’s trial, we had the good fortune of extremely respectful, civil, and collaborative relations with opposing counsel. This was particularly important for “Pointer No. 3,” above, as we shared document display technology without any game-playing, without sharp elbows.

These pointers may be well-known and obvious to all experienced civil trial lawyers (maybe criminal trial lawyers, as well; we’re unqualified to say). To those still learning, however, we hope the pointers will be useful. But, keep in mind that, in our legal system, trial generally represents a failure, a sub-optimal resolution. For the sake of your clients, may you be disappointed and deprived of trial experience and, instead, prevail on your adversary to be reasonable and amenable to a less expensive, less error-prone, and uncertain resolution.

Minnesota, the land of 10,000 lake disputes…

In the attached, diagram, we see the relative location of Lot 1, Lot 3, Lot B, and Gleason’s Lake in Plymouth, Minnesota.

What we do not get to see is the Sterling dock that, Sterling, the owner of Lot 1 built across Lot B to access Gleason Lake. Ren Xu and Baiqing Liu, owners of Lot 3 and Lot B brought a lawsuit for trespass against Defendant Scott Sterling on account of the Sterling dock to Gleason Lake.

At issue on appeal was whether to uphold the district court’s decision in favor of Sterling.

To prove trespass Xu and Liu had to prove that Sterling (Lot 3) did not have “riparian rights” over Lot B to reach Gleason Lake or, in order to prove “no trespass,” Sterling had to prove he did have riparian rights over Lot B.

Riparian Rights

“[O]ne may have rights to the use and enjoyment of the water, rights exclusive of the general public, through ownership of lakeshore or lakebed. These rights the law calls riparian. One does not own the water; one owns riparian rights to the use and enjoyment of the water.” Pratt v. State, Dep’t of Nat. Res., 309 N.W.2d 767, 772 (Minn. 1981) (footnote omitted). “The riparian owner may, to facilitate access to the water, build and maintain wharves, piers, landings, and docks on and in front of his land and extend the same into the water, even beyond low-water mark, to the point of navigability.” State ex rel. Head v. Slotness, 185 N.W.2d 530, 532 (Minn. 1971).

Xu v. Sterling

Burden of Proof

One simple concept that many non-lawyers do not fully appreciate or understand is the burden of proof. If Individual #1 for Party #1 offers testimony that “The light was red,” and the Individual #2 for Party #2 offers testimony that “The light was green,” and each witness is equally credible, who is the fact-finder supposed to believe?

By definition (that is, because each is equally credible), there is no way to decide who to believe. The evidence on each side is the same. And the question, then, will be which side bears the burden of proof. Whichever side that is, would lose. The evidence is “in equipoise,” courts say. (Baseball rules solves the common impasse by adopting a default rule: a tie “goes to the runner.”)

In Xu, et al. v. Sterling, the Minnesota Court of Appeals affirmed the district court’s decision, after a trial, in favor of Sterling. Xu appealed, arguing that the district court had improperly placed the burden of proof on Xu to prove no riparian rights rather than placing the burden of proof on Sterling to prove that he had riparian rights.

The Minnesota Court of Appeals, over a dissent, found, that Sterling’s evidence “tend[ed] to demonstrate” that Sterling had riparian rights so, their reasoning went, if Sterling had the burden of proof, he met that burden (see here at p.8). In other words, it would appear that both the district court and the court of appeals “punted” as to which side had the burden of proof, finding that, either way, the Plaintiff lost. (Judge Matthew Johnson, dissenting, argued that “the erroneous burden of proof is baked into all of the findings of fact, making them invalid and unreliable”).

We had pleasure of meeting up with a lawyer in a medium sized Minnesota law firm recently and learned that firm uses no dedicated document review system for the vast majority of its client matters.

As a result, a document review at the law firm that might take 8 hours with a dedicated document review system takes the lawyers at this law firm three or four times that. And, if the case is active in Month #1 and then is inactive for Months #2-5 (or even, in some cases, inactive until Year 2), the institutional memory of the results of the document review is not well preserved and is seriously degraded by the passage of time. In other words, in Month #6 (or Year 2), the firm has to spend more time marshaling the documents than it would have if it had used a dedicated document review system in the first instance.

Different Minnesota Litigator readers might have different questions. Some might ask, “What do you mean by a ‘dedicated document review system’?” Others might ask, “What’s so nauseating about a law firm’s not using a dedicated document review system as a matter of course?”

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