Opinion
No. C1-02-1571.
Filed June 3, 2003.
Appeal from the District Court, St. Louis County, File No. CX99300683.
Kay Nord Hunt, Seth M. Colton, Lommen, Nelson, Cole Stageberg, P.A., (for respondent)
Edward J. Matonich, David A. Arndt, Matonich Persson, (for appellant)
Considered and decided by Stoneburner, Presiding Judge, Lansing, Judge, and Klaphake, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
On appeal following remand for conditional remittitur or a new trial on damages for breach of a partnership agreement, Kevin Roche Financial Services, Inc., challenges the sufficiency of the evidence to support the verdict, the denial of JNOV, the denial of a new trial, and the allowance of an expert-witness fee. By notice of review Michelle Severson challenges an expert-witness fee and the denial of preverdict interest. Because the district court did not abuse its discretion, misapply the law, or make findings unsupported by the record, we affirm.
FACTS
This is the second appeal to this court arising from litigation involving the partnership agreement between Michelle Severson and Kevin Roche Financial Services, Inc., for the development and operation of a health-insurance sales network. Severson began working for Roche, an insurance agency, and its principal, Kevin Roche, following her graduation from college in 1990. After Severson had been in the office a short time, Roche proposed that he and Severson develop a network of agents to sell health-insurance products. This business initially consisted of three partners: Severson, Roche, and a general-insurance network, Blackburn, Nickels, Smith, Inc. (BNS). Roche supplied the office, and BNS supplied lists of trained agents.
Severson worked to develop the health-insurance sales network by soliciting business from listed agents, processing contracts, providing information about policies, and obtaining quotes. She also performed administrative tasks that included answering the phone and generating, processing, and calculating commission payments. Although Roche had a written consulting agreement with BNS, the agreement between Roche and Severson was never put in writing. The parties orally agreed that the agents would receive the customary 85% of the commission and the remaining 15% would be split between BNS (20%), Severson (33%), and Roche (47%).
In 1992 BNS withdrew from the network agreement. Severson and Roche renegotiated the 15% share to allocate 40% to Severson and 60% to Roche. BNS sued Roche on an unrelated matter and binding arbitration obligated Roche to pay 5% of the 15% override to BNS for a ten-year period, ending in 2003. To meet that obligation Roche asked Severson to reduce her commission from 40% to 38%, and Roche reduced his from 60% to 57%.
The health-care-insurance business was successful and Severson's 38% of the profits grew steadily from $7,700 in 1994 to $18,000 in 1997. Severson had a child in February 1997 and took a maternity leave. In December 1997, Kevin Roche informed her that the infrastructure of the office had to change. Two months later, he cut her commission in half, and on August 24, 1998, he asked her to leave.
Severson sued Roche for breach of the health-insurance-network agreement. A jury determined that a partnership agreement existed, that it was breached, and that Severson was entitled to damages of $250,000. The district court denied Roche's motions for JNOV or a new trial but, in an unconditional remittitur, reduced the damages to $38,000. On appeal, Severson challenged the remittitur, and Roche, in a notice of review, challenged the jury's determination that a partnership agreement existed and that it was breached.
On appeal, this court affirmed the jury's determination on the existence of a partnership agreement and its breach, and also affirmed the denial of a new trial on alleged procedural and evidentiary errors. We reversed the unconditional remittitur and remanded for conditional remittitur or a new trial on damages. Severson v. Roche Fin. Servs., C2-00-1834, 2001 WL 741396 (Minn.App. 2001). The remand also allowed the district court, in its discretion, to reopen the record for additional evidence, if necessary. Id. at *5.
Severson did not accept the conditional remittitur, and the district court ordered a new trial on damages. At the second trial, Severson's accounting expert, Frances McCloskey, testified that the future income stream of the partnership, which Severson lost as a result of the breach, amounted to $385,815. Roche presented three expert witnesses, who relied on a different method of valuing insurance agencies that is based on the amount of commissions generated by the agency.
The jury found that Severson's damages amounted to $80,700. Roche moved for JNOV or, alternatively, a new trial or remittitur; Severson moved for a new trial. The district court denied all posttrial motions except Roche's objection to Severson's taxation of costs on an expert witness in the first trial. Roche appealed and Severson filed a notice of review.
DECISION I
We review de novo the denial of a motion for judgment notwithstanding the verdict. Pouliot v. Fitzsimmons, 582 N.W.2d 221, 224 (Minn. 1998). The denial must be affirmed if "any competent evidence reasonably tend[s] to sustain the verdict." Id. (quotation omitted). This court will not set the verdict aside unless the evidence is practically conclusive against the verdict. Obst v. Microtron, Inc., 614 N.W.2d 196, 199-200 (Minn. 2000).
Under the law-of-the-case doctrine, issues that are considered and adjudicated on an initial appeal become the law of the case, and these issues will not be reexamined or readjudicated on a second appeal of the same case. Lange v. Nelson-Ryan Flight Serv., Inc., 263 Minn. 152, 156, 116 N.W.2d 266, 269 (1962). This doctrine comports with the well- established policy, which requires that issues, once fully litigated, should be set to rest. Id. "[T]he scope of the finality of an appellate decision depends on what the court intends to be final, and this is determined by what the court's decision says." Mattson v. Underwriters at Lloyds of London, 414 N.W.2d 717, 720 (Minn. 1987).
In the first appeal we affirmed the district court's denial of JNOV on the jury's determinations that a partnership existed and that the oral partnership agreement was breached. Severson v. Roche Fin. Servs., C2-00-1834, 2001 WL 741396, at *3 (Minn.App. 2001). The opinion concluded that, although the parties agreed to split the profits from the sales network, Roche paid Severson only one-half the agreed-on sum in February 1998, and in August 1998 asked her to leave the agency. Id. The determination that a partnership existed and that the agreement to share profits was breached constitute the law of the case, and we decline to reexamine them in this second appeal.
Roche argues that the jury's verdict in the second trial constitutes error because Severson should be limited to an action for partnership dissolution, rather than an action for breach of the partnership agreement. This argument attempts to circumvent the law-of-the-case doctrine. Furthermore, Minn. Stat. § 323.37 (1996), which governed the wrongful dissolution of partnerships at the time this cause of action accrued, provided specifically that "[e]ach partner who has not caused dissolution wrongfully shall have * * * [t]he right, as against each partner who has caused the dissolution wrongfully, to damages for breach of the agreement." Minn. Stat. § 323.37, subd. 2(1)(b). This statutory right codified a longstanding common law principle. See Swanson v. Lindstrom, 151 Minn. 19, 23, 185 N.W. 950, 951 (1921) (noting that "where a partnership is formed to accomplish a specific purpose and one partner defeats the accomplishment of the purpose by dissolving the partnership without cause, he may be made to respond in damages * * * "); see also Gherman v. Colburn, 140 Cal.Rptr. 330, 343 (Cal.App. 1977) (construing California statute identical to Minn. Stat. § 323.37 as providing action for breach of partnership agreement distinct from action for judicial dissolution and accounting).
The partnership between Roche and Severson was designed for the express purpose of creating the health- insurance network. Each had an obligation to BNS to operate that network until 2003 and to divide the commissions earned from the network business. When Roche repudiated their agreement, Severson had a cause of action for breach under Minn. Stat. § 323.37, separate from a partnership dissolution. Furthermore, this court's prior determinations on the issues of the partnership agreement and breach of the agreement continue to govern as the applicable law of this case, and we decline to reverse the denial of JNOV on this issue.
Roche also argues that the district court erred as a matter of law in allowing evidence of damages based on projected future profits from the sales network. A business may recover lost profits if the loss can be proved with reasonable certainty. Leoni v. Bemis Co., 255 N.W.2d 824, 826 (Minn. 1977). Establishing a loss with reasonable certainty depends on the circumstances of the particular case, but proof may include both a company's past performance and its future success. Spinett, Inc. v. Peoples Nat. Gas Co., 385 N.W.2d 834, 839 (Minn.App. 1986); see also Cardinal Consulting Co. v. Circo Resorts, Inc., 297 N.W.2d 260, 266-67, 269 (Minn. 1980) (allowing damages for anticipated profits when the nature of the business supports an "inference of definite profits grounded upon a reasonably sure basis of fact").
We reject Roche's argument that Sharp v. Laubersheimer, 347 N.W.2d 269 (Minn. 1984), precludes future profits in the termination of an at-will partnership. The court in Sharp declined to award lost profits because of the absence of an express contractual provision for future compensation. Id. at 271, n. 1. Unlike the agreement in Sharp, Roche and Severson's express agreement to divide future profits formed the entire basis of the bargain between the two parties. The contract with BNS, which had previously provided incremental growth for the health-insurance network along with a 93% renewal rate, was sufficient to support an inference of future profits commensurate with that growth. The district court did not err in allowing the consideration of damages based on future profits.
II
Although the standard for granting a new trial is less stringent than for a judgment notwithstanding the verdict, the denial of a motion for a new trial must be sustained unless the verdict is manifestly and palpably contrary to the evidence viewed as a whole and in the light most favorable to the verdict. Raze v. Mueller, 587 N.W.2d 645, 648 (Minn. 1999). To obtain a new trial on the basis of improper evidentiary rulings the complaining party must demonstrate prejudicial error. Uselman v. Uselman, 464 N.W.2d 130, 138 (Minn. 1990). When jury instructions fairly and correctly state the applicable law, this court will not reverse the denial of a new trial. Cameron v. Evans, 241 Minn. 200, 208, 62 N.W.2d 793, 798 (1954).
Roche argues that the district court gave improper jury instructions, which allowed the jury to consider evidence of damages based on projected future profits from the health-insurance network. The court, however, gave the jury the same general instruction on damages affirmed by this court in the previous appeal of this case. Severson, 2001 WL 741396, at *5. This determination constitutes the law of the case, which we will not disturb in this appeal. See Mattson, 414 N.W.2d at 719-20. Furthermore, Roche had a full opportunity to present an alternate theory of damages to the jury. Consistent with the law-of-the-case doctrine, the district court properly refused to allow testimony on the scope of the parties' agreement and the circumstances of the breach, both of which had been fully litigated in the first trial.
Severson, in her notice of review, contends that a new trial is warranted because the district court failed to restrict argument and evidence to the issue of damages alone. See Kissoondath v. U.S. Fire Ins. Co., 620 N.W.2d 909, 917 (Minn.App. 2001) (holding that allowing testimony that impeached this court's prior decision was reversible and prejudicial error), review denied (Minn. Apr. 17, 2001).
In the first appeal, this court gave the district court discretion to receive new evidence on damages. Severson, 2001 WL 741396, at *5. The district court's duty on remand is to execute the mandate of the appellate court faithfully according to its terms. Halverson v. Village of Deerwood, 322 N.W.2d 761, 766 (Minn. 1982). In the absence of explicit direction on how to proceed, the district court may exercise broad discretion so long as it is consistent with the remand order. Duffey v. Duffey, 432 N.W.2d 473, 476 (Minn.App. 1988), review denied (Minn. Feb. 24, 1988). Before the second trial began, the district court told the attorneys that he intended to allow them to provide a "full picture" to the jury. Severson argues that the presentation of evidence on Roche's personal and business history undermined the prior determination that Roche had breached the partnership agreement. But even if the admission of this evidence were determined to be improper, it would be harmless error in light of the jury's verdict allocating damages to Severson for breach of the agreement. Similarly, we find no abuse of discretion in the district court's jury instructions regarding at-will partnership or the provisions of Minn. Stat. § 323.37 (1996).
III
Roche challenges the sufficiency of the evidence to sustain the jury's damage award of $80,700. A jury's answer to a special-verdict question "can be set aside only if no reasonable mind could find as did the jury." Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724, 734 (Minn. 1997) (citation omitted). The jury's calculation of damages amounted to considerably less than the $385,815 proposed by Severson's expert, using the income-stream-valuation approach. But the calculation greatly exceeded Roche's experts' valuation of zero, which was predicated on the absence of a non-compete provision in the partnership agreement. In view of the previously-determined breach and the evidence presented, the jury's calculation is well within a reasonable range of figures, and we decline to disturb it on appeal.
IV
The final issues relate to expert-witness fees and preverdict interest. Roche appeals the district court's allowance of expert-witness fees for Frances McCloskey, Severson's accounting expert, and Severson appeals the denial of expert-witness fees for Otto Schults, a former associate of Roche's who testified at the first trial.
The district court has discretion in determining expert-witness fees and we reverse only when that discretion is abused. Carpenter v. Mattison, 300 Minn. 273, 280, 219 N.W.2d 625, 631 (1974). The district court is authorized to "allow such fees or compensation as may be just and reasonable" for expert witnesses. Minn. Stat. § 357.25 (2002). Severson's affidavit showing expert-witness fees paid to McCloskey was supported by McCloskey's testimony specifying the amount of required professional time and the amount of time expended by an associate. In view of the broad discretion accorded the district court in allowing expert-witness fees, we cannot conclude that the court abused its discretion in permitting the recovery of these fees.
Roche's expert, Otto Schults, testified to personal conversations he had with Roche, some taking place during a hunting trip. The amount requested for his reimbursement included only travel expenses and lodging, rather than fees for expert trial preparation. The district court did not abuse its discretion in denying these costs. See Spinett, 385 N.W.2d at 840 (evidence was inadequate for determination of expert-witness fees when it did not include normal hourly charges, hours spent at trial, or hours spent preparing for trial).
The district court denied Severson preverdict interest on damages. Minn. Stat. § 549.09 allows preverdict interest on pecuniary damages other than, among other exceptions, "judgments or awards for future damage[s]." Minn. Stat. § 549.09, subd. 1(b)(2) (2002). The district court's interpretation of a statute is a legal question subject to de novo review. See Hibbing Educ. Ass'n v. Pub. Employment Relations Bd., 369 N.W.2d 527, 529 (Minn. 1985).
The district court reasoned that the judgment was for future damages because Severson's theory of damages was based on a future stream of income, and "a major component of the jury award reflected this approach." Severson contends that the jury could have based its award instead on the different valuation theory presented by Roche, which was not based on future profits. But because the jury failed to distinguish between past and future damages in its verdict, an award of preverdict interest would have been improper. See Nelson v. Ill. Farmers Ins. Co., 567 N.W.2d 538, 543 (Minn.App. 1997) (stating that Minn. Stat. § 549.09 "applies to final judgments for liquidated or ascertainable damages that do not depend on contingencies"), review denied (Minn. Oct. 21, 1997). The district court did not err in failing to order preverdict interest.