Summary
affirming injunction against use of the plaintiffs' names in corporate communications where such use threatened fundamental harm to the plaintiffs' reputations
Summary of this case from HINZ v. NEUROSCIENCE, INC.Opinion
No. A05-2210.
Filed August 8, 2006.
Appeal from the District Court, Hennepin County, File No. 05-1046.
Shawn L. Pearson, Seymour J. Mansfield, V. John Ella, Mansfield Tanick Cohen, P.A., (for respondents).
Michael S. Ryan, Melanie P. Persellin, Murnane Brandt, (for appellants).
Considered and decided by Dietzen, Presiding Judge; Toussaint, Chief Judge; and Stoneburner, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
Appellants challenge the district court's order granting summary judgment and injunctive relief in favor of respondents and denying appellants' motion to amend to assert counterclaims, arguing that (1) issues of material fact regarding the formation of an agreement precludes summary judgment; and that the district court abused its discretion, (2) in denying its motion to amend, and (3) granting permanent injunctive relief. Because we conclude that the district court properly applied the law and did not abuse its discretion, we affirm.
FACTS
Appellant Hypertension Diagnostics, Inc. (HDI) designs, develops, manufactures, and markets medical devices that non-invasively measure blood vessel elasticity, and appellants Mark Schwartz and Greg Guettler serve, respectively, as its CEO and president. Respondent Charles Chesney founded HDI and was employed as its Chief Technology Officer until the termination of his employment in March 2004. Respondent Julie Radosevich was employed by HDI as the Director of Marketing and Reimbursement until the termination of her employment in April 2004.
Following the terminations, respondents asserted various "whistleblower" claims against appellants. During litigation of these claims, the parties engaged in voluntary mediation that resulted in a settlement and execution of a "Memorandum of Understanding in Settlement of Dispute" (memorandum agreement).
The memorandum agreement provided, inter alia, that HDI would pay to respondents (1) $85,000 at the time of settlement, and (2) $45,000 within 6 months of settlement execution; that HDI would issue (1) $70,000 worth of stock to Chesney, and (2) $30,000 worth of stock to Radesovich; that HDI would remove Chesney and Radesovich from the HDI website and corporate communications; that respondents would return all of HDI's property or business records in their possession or provide an accounting of any missing property; and that the parties would "exchange mutual complete releases and stipulations of dismissals with prejudice and without costs to any party." The memorandum agreement was signed by the parties and their counsel.
Subsequently, appellants' attorneys prepared a draft final settlement agreement that provided a list of the missing property and conditioned appellants' monetary payment and issuance of stock on respondents accounting for and returning of all HDI property. Respondents countered with a draft that removed the return or accounting of HDI property as a condition precedent to appellant's obligation to perform the payment provisions of the agreement, specified the stock valuation date, and replaced the missing property provision with the following statement: "By signing this Agreement, Chesney and Radosevich warrant that they have no HDI property in their possession." But the parties were unable to agree on either the language of the draft final settlement agreement or the use of a mediator to assist the parties in resolving the final language of the draft settlement agreement.
Respondents then brought an action to enforce the memorandum agreement and moved for summary judgment and a permanent injunction, arguing that they had performed their obligations under the agreement but that appellants had failed to tender monetary payments, issue stock, and remove their names from HDI materials. Appellants opposed respondents' motion and moved to amend their answer to assert counterclaims relating to the alleged missing property, including misappropriation of trade secrets and conversion.
At the hearing on the motions, appellants argued that summary judgment should be denied because respondents had failed to return or properly account for missing HDI property, including HDI records that were discovered missing after execution of the memorandum agreement. Respondents argued that they provided an accounting of all property at issue in a 19-page letter provided to appellants in March 2005.
The district court granted summary judgment, concluding that (1) the memorandum agreement is binding and enforceable and that appellants had breached the agreement; (2) appellants were obligated, jointly and severally, to provide to respondents $130,000 and 714,286 shares of HDI stock; and (3) respondents were entitled to a permanent injunction enjoining appellants from affirmatively, or by their inaction, representing that respondents are employed by HDI. The district court denied appellants' motion to amend their answer to assert counterclaims. Appellants moved for amended findings and conclusions of law, but later withdrew the motion. This appeal followed.
DECISION I.
Appellants argue that the district court erred by granting summary judgment because genuine issues of material fact exist as to (1) the enforceability of the memorandum agreement, and (2) the interpretation of ambiguous terms of the memorandum agreement.
"A motion for summary judgment shall be granted when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that either party is entitled to a judgment as a matter of law." Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). On appeal from summary judgment, this court makes two determinations: (1) whether there are any genuine issues of material fact; and (2) whether the district court erred in its application of the law. N. States Power Co. v. Minn. Metro. Council, 684 N.W.2d 485, 491 (Minn. 2004). "[T]he reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted." Fabio, 504 N.W.2d at 761. But "[t]he party opposing summary judgment may not establish genuine issues of material fact by relying upon unverified and conclusory allegations, or postulated evidence that might be developed at trial, or metaphysical doubt about the facts." Dyrdal v. Golden Nuggets, Inc., 689 N.W.2d 779, 783 (Minn. 2004). "A party need not show substantial evidence to withstand summary judgment. Instead, summary judgment is inappropriate if the nonmoving party has the burden of proof on an issue and presents sufficient evidence to permit reasonable persons to draw different conclusions." Schroeder v. St. Louis County, 708 N.W.2d 497, 507 (Minn. 2006) (emphasis in original).
A. Enforceability of Memorandum Agreement
Initially, appellants contend that the memorandum agreement was merely a preliminary document and that a contract was never formed between the parties. A settlement is contractual in nature and is enforceable if there is a definite offer and acceptance with a meeting of the minds on the essential terms of the agreement. Jallen v. Agre, 264 Minn. 369, 373, 119 N.W.2d 739, 743 (1963). A mediated settlement agreement is binding if:
(1) it contains a provision stating that it is binding and a provision stating substantially that the parties were advised in writing that (a) the mediator has no duty to protect their interests or provide them with information about their legal rights; (b) signing a mediated settlement agreement may adversely affect their legal rights; and (c) they should consult an attorney before signing a mediated settlement agreement if they are uncertain of their rights; or (2) the parties were otherwise advised of the conditions in clause (1).
Minn. Stat. § 572.35, subd. 1 (2004).
Here, the memorandum agreement includes the requisite advisories required under section 572.35, subdivision 1, and states, "We intend that this memorandum shall bind each of us" and "[w]hile we understand that formal documents will be prepared to facilitate the detail of our agreement contained here, we do not intend our settlement to be dependent upon our agreement as to any such detail, and agree that our agreements contained here are fully enforceable against us." It provides that the parties "agree" to nine settlement terms and that "the dispute has been settled by the agreements contained here and the settlement is not conditioned upon any further agreement." Thus, on its face, the memorandum agreement was valid, binding, and enforceable.
B. Ambiguity of Terms
Appellants further argue that five terms of the memorandum agreement are ambiguous. The determination of whether a contract is ambiguous is a question of law, which this court reviews de novo. Yang v. Voyagaire Houseboats, Inc., 701 N.W.2d 783, 788 (Minn. 2005).
"[T]he primary goal of contract interpretation is to determine and enforce the intent of the parties." Motorsports Racing Plus, Inc. v. Arctic Cat Sales, Inc., 666 N.W.2d 320, 323 (Minn. 2003). When there is a written agreement, the intent of the parties is determined from the plain language of the agreement itself. Metro. Sports Facilities Comm'n v. Gen. Mills, 470 N.W.2d 118, 123 (Minn. 1991). An ambiguous contract is one that, based solely on the plain language, is reasonably susceptible of more than one construction. Denelsbeck v. Wells Fargo Co., 666 N.W.2d 339, 346 (Minn. 2003). "Because a word has more than one meaning does not mean it is ambiguous. The sense of a word depends on how it is being used; only if more than one meaning applies within that context does ambiguity arise." Bd. of Regents v. Royal Ins. Co. of Am., 517 N.W.2d 888, 892 (Minn. 1994). An appellate court will not consider the terms of a contract to be ambiguous simply because the parties dispute their proper interpretation. Knudsen v. Transp. Leasing/Contract, Inc., 672 N.W.2d 221, 223 (Minn.App. 2003), review denied (Minn. Feb. 25, 2004). An unambiguous contract "must be given its plain and ordinary meaning, and shall be enforced by courts even if the result is harsh." Minneapolis Pub. Hous. Auth. v. Lor, 591 N.W.2d 700, 704 (Minn. 1999) (citations omitted).
The crux of appellants' argument is that the term "return of all HDI property . . . or an accounting for any missing property" is ambiguous and has not been fully performed. Appellants argue that the term "return of all HDI property" is ambiguous because it is unclear whether it extends to HDI property discovered missing after execution of the memorandum agreement. The language at issue states, "return of all HDI property or business records in [respondents'] possession or an accounting for any missing property." Thus, all HDI property, whether discovered missing before or after execution of the agreement, must be returned or an accounting provided. We conclude that all missing HDI property is covered by the agreement; hence, we find no ambiguity in the term "all HDI property."
Appellants also argue that the meaning of an "accounting" of any missing HDI property is ambiguous. But the settlement agreement clearly requires that respondents either return appellants' property or business records in their possession, or provide "an accounting for any missing property." The plain and ordinary meaning of "account" is a "1. A narrative or record of events. 2a. A reason given for a particular action or event. . . . b. A report relating to one's conduct . . ." The American Heritage Dictionary 12 (4th ed. 2000). Appellants provide various theories of how "accounting" may be "prone to a number of different interpretations," but fail to demonstrate how it is ambiguous as applied to the HDI property. Indeed, appellants conceded that "they gave us an accounting but, you know, this is a lot of missing property." Thus, there is no ambiguity in the term "accounting."
Appellants further argue that the memorandum agreement must be vacated because respondents, by failing to return all HDI property, have not fully performed under the "return of property" term. But respondents' obligation under the memorandum agreement was conjunctive in that they could either return the property or provide an accounting. Because respondents provided an accounting, they fully performed under the memorandum agreement and there is no basis for vacating the agreement.
Appellants also argue that the term requiring "[r]emoval of [respondents'] names from HDI website and corporate communications" is ambiguous and that it should not extend to historical press releases presently found on their website. But an appellate court will not consider the terms of a contract to be ambiguous simply because the parties dispute their proper interpretation. Knudsen, 672 N.W.2d at 223. And we see no basis for reading such an exception into the plain and express language of the term.
Appellants next argue that the "issuance of stock" term is ambiguous because the parties did not specify the stock valuation date. Minnesota law provides no bright-line rule for setting the date of damages in contract actions, but the purpose of contract damages is to place plaintiffs where they would have been had the contract been performed. Sprangers v. Interactive Techs., Inc., 394 N.W.2d 498, 503-04 (Minn.App. 1986), review denied (Minn. Nov. 19, 1986). Here, it is undisputed that on the date that the memorandum agreement was executed, HDI's stock was valued at $.14 per share and, had appellants not breached the memorandum agreement by failing to promptly issue the stock, respondents would have received 714,286 shares (714,286 X $.14 = $100,000.04). Consequently, the district court's issuance of 714,286 shares of stock based on its value on the date of execution of the memorandum agreement was proper under contract principles, and respondents were entitled to judgment on the issuance of stock as a matter of law.
Finally, appellants argue that the signatures of appellants Schwartz and Guettler in the memorandum agreement does not result in personal liability because they signed in their corporate capacity. But both parties concede on appeal that the monetary payment is in escrow in the district court pending the outcome of this appeal, and thus personal liability is no longer an issue. Consequently, we decline to address this issue as moot. See Kahn v. Griffin, 701 N.W.2d 815, 821 (Minn. 2005) (noting that generally appellate court will dismiss a case as moot if it is unable to grant effectual relief).
Because appellants failed to establish genuine issues of material fact regarding the enforceability of the memorandum agreement or ambiguities in its terms, the district court did not err by granting summary judgment.
II.
Appellants argue that the district court erred by granting a permanent injunction enjoining appellants from "affirmatively, or by their inaction, representing that [respondents] are employed by HDI" because the court failed to make the requisite findings regarding the Dahlberg factors and respondents failed to demonstrate irreparable harm.
This court reviews orders granting permanent injunctions under an abuse-of-discretion standard. Cherne Indus., Inc. v. Grounds Assocs., Inc., 278 N.W.2d 81, 91 (Minn. 1979). This court will not set aside a district court's findings regarding entitlement to injunctive relief unless they are clearly erroneous. Citizens for a Safe Grant v. Lone Oak Sportsmen's Club, Inc., 624 N.W.2d 796, 806-07 (Minn.App. 2001).
A party seeking a permanent injunction must establish that there is no adequate legal remedy and that an "injunction is necessary to prevent great and irreparable injury." Jackel v. Brower, 668 N.W.2d 685, 688 (Minn.App. 2003), review denied (Minn. Nov. 25, 2003) (citation omitted). Before permanent injunctive relief may be awarded, the merits of the dispute must be determined. Bio-Line, Inc. v. Burman, 404 N.W.2d 318, 320 (Minn.App. 1987). In contract cases, irreparable harm "can be inferred from a [district court's] actual finding of a breach by the defendant." Cherne, 278 N.W.2d at 92. "Moreover, where a [district court] has determined that the prevailing party is entitled to relief, it may fashion such remedies, legal and equitable, as are necessary to effectuate such relief." Id.
Appellants argue that granting permanent injunctive relief requires findings regarding the Dahlberg factors. See Dahlberg Bros. v. Ford Motor Co., 272 Minn. 264, 274-75, 137 N.W.2d 314, 321-22 (1965) (setting forth five factors that a party must demonstrate to be granted temporary injunctive relief). But Minnesota cases addressing permanent injunctions have not required Dahlberg findings and instead have limited the requirements for permanent injunctive relief to a determination on the merits, a showing of an inadequate legal remedy, and a demonstration of great and irreparable harm. See, e.g., Cherne, 278 N.W.2d at 91-92 (stating standard for permanent injunction as a party must establish that the legal remedy is not adequate and that the injunction is necessary to prevent great and irreparable harm).
Here, respondents met the requirements for a permanent injunction. First, the district court's grant of summary judgment that enforced the terms of the memorandum agreement constituted a determination on the merits. Second, irreparable harm can be inferred from appellants' breach of the settlement term requiring removal of respondents' names from the HDI website and all corporate communications. Cherne, 278 N.W.2d at 92. Finally, respondents established that their legal remedies were inadequate because monetary damages would not address the fundamental harm to respondents' reputation of continued association with HDI, a company against which they had previously asserted whistleblower claims based on illegal practices. Because respondents met the requirements for a permanent injunction, and enjoining appellants from representing that respondents are employed by HDI on its website or in its corporate communications effectuates appropriate relief for appellants' breach, the district court did not abuse its discretion by granting permanent injunctive relief.
III.
Appellants argue that the district court abused its discretion by denying their motion to amend their answer to assert counterclaims. Respondents argue that the district court properly denied the motion because the counterclaims would not have survived summary judgment given the "complete releases" set forth in the memorandum agreement.
A party may amend its pleadings by leave of the court. Minn. R. Civ. P. 15.01. The district court should liberally grant motions to amend when justice requires and doing so would not result in prejudice to the adverse party. Id. But courts can deny motions to amend when the additional claims cannot withstand summary judgment. Ag. Servs. of Am., Inc. v. Schroeder, 693 N.W.2d 227, 235 (Minn.App. 2005). The decision of whether to grant leave to amend a pleading is within the district court's broad discretion and "will not be reversed absent a clear abuse of discretion." Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted).
A release is an agreement not to enforce an existing cause of action against a party to the agreement and is governed by the rules of contract construction. Karnes v. Quality Pork Processors, 532 N.W.2d 560, 562 (Minn. 1995). A release is generally presumed valid. Sorenson v. Coast-to-Coast Stores (Cent. Org.), Inc., 353 N.W.2d 666, 669 (Minn.App. 1984), review denied (Minn. Nov. 7, 1984). Factors to be considered in determining the validity of a release include the presence or absence of legal counsel at the time of settlement, the language of the release, the adequacy of consideration, and whether the injury complained of was unknown or known at the time the release was signed. Karnes, 532 N.W.2d at 562.
Here, appellants sought to amend their answer to assert counterclaims after executing the memorandum agreement, which contained "mutual complete releases" of future claims. At the time of the release, the parties were represented by counsel. Appellants' consideration for the release was the dismissal of respondents' whistleblower claims and all other claims relating to their employment and termination. Further, the counterclaims, i.e., relating to the missing HDI property, were known to appellants at the time of the release albeit for a lesser number of documents. But it was incumbent on appellants to ascertain the identity of the missing documents before it signed the memorandum agreement. Thus, the releases were valid and appellants' proposed counterclaims fail as a matter of law. Ag. Servs., 693 N.W.2d at 235. Therefore, the district court did not abuse its discretion by denying appellants' motion to amend to assert counterclaims.
V.
Respondents request that portions of appellants' brief be stricken because it is "a vehicle for disrespect, insult, and slanderous accusations" and because appellants cite to proposed counterclaims and findings of fact that are not part of the appellate record.
The papers filed in the district court, the exhibits, and the transcript of the proceedings, if any, shall constitute the record on appeal. Minn. R. Civ. App. P. 110.01. Generally, documents may not be included in a party's brief unless they are part of the appellate record. Podvin v. Jamar Co., 655 N.W.2d 645, 648 (Minn.App. 2003). It is well established that when a brief is used "as a vehicle for disrespect, insult, and slanderous accusations which find no support in the record," this court will grant a motion to strike portions of or an entire brief. State v. Gamelgard, 287 Minn. 74, 82, 177 N.W.2d 404, 409 (1970), superseded by statute on other grounds as stated in State v. Whitledge, 500 N.W.2d 488 (Minn. 1993).
Here, the proposed counterclaim and findings of fact were filed with the district court in conjunction with motions under its consideration. Thus, under the broad language of Rule 110.01, they are part of the appellate record and need not be stricken. And while certain accusations in appellants' brief come close to over-stepping the bounds of zealous advocacy, they do not cross the line and, therefore, need not be stricken.