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John Gieseke, on behalf of Diversified Water Diversion, Inc., v. IDCA, Inc.. MN tortious interference with prospective economic advantage
Michael (Mike) Hogenson and Arthur (Art) Hogenson are brothers and are competitors in the drain tile installation business in the Twin Cities. Starting in 1984, they were co-owners of Standard Water Control Systems and also Hogenson Properties, a holding company that owned various properties. The two brothers had a falling out in 1999, and they divided up their business holdings. Mike became sole owner of Standard, and Art became sole owner of Hogenson. John Gieseke, a friend of Art, had been employed by Standard, but he was terminated when the brothers split. Gieseke, along with another former Standard employee, started a new drain tile business named Diversified. Art became a part owner of Diversified a few months later.
The brothers were engaged in various lawsuits against one another over the next few years, the end result of which was that Diversified had a $67,000 judgment against Standard.
Not to be outdone, a company owned by Mike purchased a judgment that one Thomas Fallon had obtained against both Art and Diversified. This judgment was for over $700,000. Art later challenged the validity of that judgment on the grounds that the court lacked jurisdiction. But while that challenge was pending, Mike's company, MWH Properties, pursued the judgment. MWH executed on the judgment, and Mike (through a company called IDCA which he had formed) bought a 50% interest in Diversified at the sheriff's sale. After doing so, he changed the company's registered address. He also seized equipment.
Gieseke then brought this lawsuit against IDCA for conversion and tortious interference with prospective economic advantage. While that case was pending, the $700,000 Fallon judgment (the one Mike had used to seize the property) was set aside, since that court concluded that it lacked jurisdiction.
Trial was held, and a jury found largely in Gieseke's favor. In particular, the jury concluded that Mike and the other defendants had tortiously interfered with Diversified's prospective economic advantage. The jury awarded damages of $220,000 for that claim.
The defendants asked the court to set aside the verdict, and argued that tortious interference with prospective economic advantage is not recognized in Minnesota. Both the district court and the Court of Appeals disagreed, and upheld the verdict. IDCA (Mike's company) asked the Minnesota Supreme Court to take the case, and the high court granted review.
In an opinion released on March 26, 2014, the Minnesota Supreme Court affirmed, and agreed that Minnesota law supported a claim for tortious interference with prospective economic advantage. In so ruling, the court held that to successfully pursue the claim, a plaintiff must prove five elements, including that the defendant’s interference was intentional and either independently tortious or in violation of a state or federal statute or regulation.
However, the Supreme Court ultimately reversed, because in this case, the plaintiff had failed to specifically identify any third parties with whom it had a reasonable expectation of a future economic relationship. Therefore, it failed to prove damages caused by the wrongful interference with such a relationship, and the district court erred when it denied the defendants' motion for judgment as a matter of law.
For these reasons, the Supreme Court reversed the lower courts and remanded the case.
No. A12-0713 (Minn. Mar. 26, 2014).
Please see the original opinion for the court's exact language.
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Richard P. Clem is an attorney and continuing legal education (CLE) provider in Minnesota. He has been in private practice in the Twin Cities for 25 years. He has a J.D., cum laude, from Hamline University School of Law in St. Paul and a B.A. in History from the University of Minnesota. His reported cases include: Asociacion Nacional de Pescadores a Pequena Escala o Artesanales de Colombia v. Dow Quimica de Colombia, 988 F.2d 559, rehearing denied, 5 F.3d 530 (5th Cir. 1993), cert. denied, 510 U.S. 1041 (1994); LaMott v. Apple Valley Health Care Center, 465 N.W.2d 585 (Minn. Ct. App. 1991); Abo el Ela v. State, 468 N.W.2d 580 (Minn. Ct. App. 1991).
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