• May 27, 2010

As a member of the Heins Mills law firm, Plaintiff Brian Williams (now with Gustafson Gluek P.L.L.C.) participated in the shareholder lawsuit headed by the Heins Mills law firm against AOL.  The case made Williams a millionaire, but it made Defendants Sam Heins and Stacey Mills MILLIONAIRES (that is, the case made something like $4.5 million for Williams, $90 million for Sam and Stacey).

At the trial court, the case had elements tried to a jury (fraudulent misrepresentation, fraudulent omission) and elements tried before the bench (Reilly, J. (Hennepin Cty.)) (breach of fiduciary duty, unjust enrichment).  The essential claim was that the firm had promised Williams “5%” but it became a bit of a puzzle, apparently — 5% of what?  The jury found against the defendants, finding a misrepresentation by omission and awarding Williams $1.6 million.   The Court, in turn, found for Plaintiff on his equitable claims for breach of fiduciary duty and unjust enrichment.  Cross appeals were argued before the Minnesota Court of Appeals this week.  

The key arguments of Appellant Heins Mills were that the measure of damages — “benefit of the bargain” or “expectation” damages was wrong as a matter of law  (argued through counsel, William Pentelovitch from the Maslon firm).  Therefore, Heins Mills’ counsel continued, the case should not have been submitted to the jury.  Therefore, the entire result below had to be thrown out because the trial court relied on the jury’s findings for its own decision.

A related argument: reliance.  Heins Mills pointed out that Williams had not gotten the “5%” he thought he was entitled to  in an earlier class action settlement (Broadcom (getting about $300,000 rather than the $1 million he’d anticipated)) and, Pentelovich argued, Minnesota case law is clear that one cannot “speculate on fraud.”  That is, Heins Mills argued that Williams knew he was not getting what he felt he was entitled to and, rather than make a demand, he bided his time, waited for the big money to come to the firm, and then “cried foul” (too late, Heins Mills argues).

As appellee, with jury verdict and trial judge findings both in his favor, Williams (represented by Vincent Leuwagie of Anthony Ostlund Baer & Leuwagie) had the wind at his back on appeal.  His argument was basic:  although all agree that the general rule is that fraud losses are limited to out of pocket losses, Minnesota case law is clear that there are exceptions when in the interest of fairness and justice.  (Pentelovich strenuously argued that those exceptions are narrow and inapplicable on the facts of this case.)

While, as a general matter, the appellee can be said to have an edge on appeal (he already won once, after all), this appeal is clearly too close to call.  One interesting permutation of potential results which was clearly in the panel’s mind (Hudson, Minge, Muehlberg (Retired Dist. Ct. Judge, sitting by appointment)) was throwing out the jury verdict (whether on the supposed lack of damages or failure to show reasonable reliance) and upholding the court’s judgment in plaintiff’s favor.  Heins Mills counsel suggested that this would not be possible or permissible.  Plaintiff’s counsel suggested the result would essentially (and permissibly) convert the jury’s role into that of an advisory jury.

Leave a Reply

Your email address will not be published. Required fields are marked *