• July 31, 2014

 Wily Coyote Burnt HelpUpdate (July 31, 2014): It seems that Carlson, Inc. made a small fortune by starting with a larger fortune, then spending years fighting with and blaming IBM for problems in an attempt to wiggle out of Carlson’s own contractual obligations to IBM (that is, paying a steep early termination fee for their multi-year project).

At least, this is how U.S. District Court Judge Joan N. Ericksen (D. Minn.) called it in her findings of fact, conclusions of law, and judgment after a bench trial following about four years of litigation

Carlson alleged in its complaint that IBM damaged Carlson in an amount more than $200 million. Carlson argued at trial that it was entitled to $67.4 million (at p. 47). Carlson lost at trial. Judge Ericksen ruled that Carlson should recover nothing and that Carlson owes IBM $14,232,000 (plus prejudgment interest (10% per annum!) (at p. 48 and 54)).

Judge Ericksen leveled some fairly caustic criticism on Carlson’s trial counsel, suggesting they had left a “glaring hole” in Plaintiff’s case (at p. 30) by failing to offer evidence that IBM failed to achieve 1,074 tasks that were on its SOW (“Statement of Work”). She suggested that Carlson counsel’s explanation for the lapse (not enough time) was “outlandish”  (at p. 30) and that, instead of providing the necessary evidence, Carlson “spent a good deal of its time at trial mining for innuendo in an inordinately long series of emails and Sametime chats among managers…” (Id.)

Judge Ericksen’s critique of Carlson’s experts was no more glowing. “Andriole provides no meaningful or helpful analysis.” Carlson’s damages expert did not impress the Court much either (at p. 47).

Readers: do not overindulge in feelings of superiority or schadenfreude for plaintiff’s counsel. There but for the grace of God….etc. Instead, though, take a little time to pick up some civil litigation pointers and have a little sympathy for plaintiff’s counsel’s years of unsuccessful but undoubtedly hard work? After all, remember: things can change on a dime on appeal.

Bill Griffith's "Zippy the Pinhead"

Bill Griffith’s “Zippy the Pinhead”

Update (3/27/2014)(under subject The Latest Local Battle of Civil Litigation Titans): The bench trial before U.S. District Court Judge Joan N. Ericksen is on-going (it started, as scheduled, on 3/18). As for the lawyers, this long-standing battle (describec in earlier posts) pits Twin Cities powerhouse Robins Kaplan Miller & Ciresi for the plaintiff Carlson Companies against World powerhouse Kirkland & Ellis (served locally by Blackwell Burke P.A.) for defendant IBM. If you are one of the legions of young lawyers looking for work, you might learn a thing or two about civil litigation by sitting in on some of this trial.

Update (1/15/2014): (under the subject line: Another way to make a small fortune…): Last week, the court issued an order for a bench trial before U.S. District Court Judge Joan R. Ericksen (D. Minn.) starting Tuesday, March 18.  Really? Will this fee-asco never end?

Previous post (11/19/2013): My father raised me on a steady diet of memorable maxims often in the form of one-line jokes, one of which was, “Wanna know how to make a small fortune?  Start with a big fortune and invest in ____________” (examples: gold, diamonds, art, solar, aquaculture, a Broadway play, a Hollywood movie, etc., etc.).  (The common thread running through the maxims was cynicism.  My father was a lawyer. Go figure.) [Tangent: I recently heard that there is a belief in the Twin Cities legal community that my father is St. Paul attorney Larry Leventhal.  I am flattered but we are not related. My father practiced in Hartford, Connecticut for fifty years or so and never in Minnesota.]

Another one: What’s the difference between used car sellers and computer systems sellers? (Answer: used car sellers know when they’re lying.)

Minnetonka-based Carlson, Inc., entered into a contract with IBM in 2005. The deal did not go well and Carlson sued IBM in 2010.  We head into 2014 and they’re still at each others’ throats. (Minnesota Litigator had an earlier post on the dispute in the Summer of ’12.)

So IBM and Carlson have both sought to have the other side’s expert testimony thrown out before trial.  But U.S. District Court Judge Joan N. Ericksen (D. Minn.) ruled earlier this month:

Here, where the case will be tried to the Court, nothing raised in the parties’ memoranda persuades the Court that the exclusion of the experts’ testimony, either in whole or in part, is required. The Court is confident that the parties, represented ably by counsel, will make good use of the opportunity to highlight any perceived weaknesses in the experts’ methodology and opinions at trial.

One has to wonder how much money it cost both parties to brief these motions (along with giving each side a nice road-map to its adversary’s attack of its experts in advance of trial).

Also, Carlson claimed that IBM owed Carlson a “fiduciary duty” and IBM succeeded in having this claim tossed out on summary judgment.  As Judge Ericksen pointed out, “Under Minnnesota law, a fiduciary relationship exists ‘when confidence is reposed on one side and there is resulting superiority and influence on the other; and the relation and duties involved in it need not be legal, but may be moral, social, domestic, or merely personal.’” This is “the highest standard of duty” implied under Minnesota law.

“[O]nly a small number of relationships have been found to be per se fiduciary relationships, including trustee- beneficiary, attorney-client, business partnerships, director-corporation, officer-corporation, and husband-wife.” But Carlson argued that the court should find a “de facto fiduciary relationship here” due to “special circumstances.”

However, under Minnesota law, reliance on a professional and a certain degree of trust and a duty of good faith among parties to a business arrangement are “merely characteristic of an ordinary business relationship,” not “special circumstances warranting a finding of a “de facto fiduciary relationship.”

Assuming that the lawyers and experts in this case are being paid by the hour, it seems quite clear that they have actually made small fortunes in this case in the good sense. (Read the intro in this memorandum of law, for example.)

Time will tell whether IBM, on the other hand, has made a small fortune by starting with a big one and then taking on and failing at a large project for Carlson or conversely, whether Carlson has made a small fortune by setting up a new system badly and then spending years fighting with and blaming IBM, its former  business partner.

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