• April 22, 2013
Philadelphia Love Park

Philadelphia Love Park

The name of the city of Philadelphia derives from the Greek for love (philos) and brother (adelphos).  The ideal of tight familial bonds is hardly controversial (although some suggest that the relationship between the alleged Boston Marathon bomber brothers, Tamerlan and Dzhokhar Tsarnaev, underscores that there may be a dangerous link between bond and bondage).

From the perspective of civil litigators, however, it might sometimes seem that brotherly love is a distant foreign land and that fraternal strife is all around us.

Minnesota Litigator covered one such bruising battle some time ago and now another no-holds-barred bro-down is headed for Minnesota Supreme Court review.

This one might have some far-reaching ramifications for various aspects of Minnesota business litigation.

Factual Backdrop

Brothers Michael and Arthur Hogenson  have long been involved in a protracted and bitter feud over their competing “water control systems companies” (Standard Water (Michael) and Diversified Water Diversion (seriously) (Aurthur)) from what was once their single shared business, Standard Water.

John Gieseke, formerly an employee of Standard Water, found himself in the cross-fire between the brothers.  He sided with Arthur, leaving Standard to become 50% owner of Diversified with Arthur.

At some point, Diversified (Arthur) sued Standard (Michael) for violation of a non-disparagement agreement and recovered $67,717.45 (at what cost, one has to wonder).

Diversified (Arthur) then got socked with a $737,679 personal injury judgment in an action brought by an employee, Fallon, but that judgment was vacated because the claimant, Fallon, worked for Diversified at the time of the injury and therefore his recovery was barred by the state workers compensation laws.  But before that court vacated the judgment, Standard (Michael) bought the judgment from Fallon (for $62,500) so Standard (Michael) could bedevil his brother pursuing Fallon’s personal injury judgment against brother Arthur.

And, brother, did he ever.

Standard (Michael) used the personal injury judgment to force a buy-out of Arthur’s 50% interest in Diversified.  That is, Michael used the judgment to force the sale of Arthur’s interest in Diversified, after which Michael, as 50% shareholder of Diversified (through another entity he seems to have formed for the purpose, IDCA) shut Diversified down and took its equipment over to Standard.

But what about Gieseke?

The plan of Standard (IDCA) (Michael) seems to have overlooked that Gieseke, the fratricidal bystander, was a 50% shareholder of Diversified.  Didn’t Standard (IDCA) (Michael) owe its fellow shareholder Gieseke (ally of Michael’s bitter enemy) duties of loyalty, honestly, fairness (“fiduciary duties,” that is) as co-owner and fellow shareholder in Diversified?

Gieseke, on behalf of Diversified, brought claims for tortious interference, etc., and was awarded total damages of $230,000 after a trial before Hennepin County District Court Judge Kerry W. Meyer (and, again, at what cost?).

Legal Issues

It is not clear from easily accessible documents at this time what issues IDCA (Michael) is appealing from in the Court of Appeals decision.  [UPDATE:  From respondent’s brief in opposition to the petition for Supreme Court review, it seems that the Supreme Court may take on the first legal issue described below.]  [UPDATE:  here is appellant’s brief.]

Could it be taking the opportunity to clear up some fairly muddled law as to what causes of action exist under Minnesota along the lines of a “tortious interference with prospective economic opportunity” and a variety of variants of these words? (Discussed at some length here.)

Could it be that the Supreme Court, without condoning commercial fratricide, questions whether aggressive (or even vindictive) commercial conduct may be ugly but might not be tortious or unlawful?

Or perhaps the Court will address the issue of corporate veil-piercing, another of the five issues address by the intermediate Court of Appeals?

Or the equitable doctrine of “unclean hands,” yet another?  ((Standard) (IDCA) Michael pointed out that Gieseke (Diversified) (Arthur) allegedly made “false statements” in connection with the Fallon injury claim.)

Or, finally, there is the question of how one is to determine damages when your claim is for tortious interference with prospective economic advantage.  How does one prove up one’s “reasonable expectation of economic advantage”?

There are a great many ways this appeal could go.  It is possible (probable?) that none will be of much use to Michael and Arthur in the grand scheme.  The damage is done.  It is diverted water under the bridge.

But for Minnesota Litigators dealing with familial fracases day in and day out this could be an important case to watch.

Seth Leventhal in a Twin Cities business/commercial litigator who has helped brothers and others disentangle their commercial dysfunction and move on in their business lives.  If you need a lawyer to lay waste to a loved one, call someone else.  But if you are looking for affordable, efficient, experienced representation in difficult business conflicts, call: 612-234-7349.

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