Gieseke ex rel. Diversified Water Diversion, Inc. v. IDCA, Inc.
826 N.W.2d 816
Minn. Ct. App.2013Background
- Protracted feud between the Hogensons and their two companies, Standard Water and Diversified Water Diversion, with Standard Water owning 50% of Diversified Water and employing Gieseke.
- Gieseke sued Diversified Water and IDCA (a company formed by Michael and Debra Hogenson) for fiduciary duty, conversion, replevin, interference with prospective economic advantage, and alter-ego liability.
- IDCA purchased Arthur Hogenson’s Fallon judgment and pursued collection assets from Diversified Water, then settled Diversified Water’s judgment against Standard Water for $12,000.
- IDCA changed Diversified Water’s address to Standard Water’s address and diverted Diversified Water assets, under the umbrella of IDCA’s 50% stake.
- A district court found the Fallon judgment void for lack of jurisdiction, and the advisory jury found IDCA liable for conversion, replevin, and tortious interference; the court pierced the corporate veil but held no fiduciary duty breach by IDCA.
- The district court awarded $10,000 for conversion/replevin and $220,000 for tortious interference, totaling $230,000, which the trial court and appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of tortious interference with prospective advantage under Minnesota law | IDCA lacked a valid claim; Minnesota has not recognized it. | Minnesota recognizes the tort per Wild/United Wild Rice. | Recognized as a valid tort claim. |
| Sufficiency of evidence supporting IDCA’s tortious interference verdict | Evidence shows improper conduct and lost prospective advantage. | Evidence insufficient to sustain the verdict. | Evidence supports the verdict. |
| Unclean-hands preclusion of veil piercing | Unclean hands barred piercing due to collateral false statements in Fallon matter. | Unclean hands barred only collateral matter; not applicable here. | Unclean hands did not preclude piercing. |
| Piercing IDCA’s corporate veil to hold Debra/Michael personally liable | IDCA acted as alter ego of the Hogensons; veil should be pierced. | IDCA had some formal structure; veil-piercing unavailable. | Veil piercing warranted; Debra and Michael liable. |
| Damages for tortious interference excessive or improper | Damages appropriate given loss of prospective economic advantage. | Damages appear inconsistent; JMOL warranted. | Damage award not excessive; JMOL denied. |
Key Cases Cited
- Wild v. Rarig, 302 Minn. 419 (Minn. 1975) (interference with prospective economic advantage recognized as actionable)
- United Wild Rice, Inc. v. Nelson, 313 N.W.2d 628 (Minn. 1982) (recognizes interference with prospective contractual relations; Restatement guidance)
- Witte Transp. Co. v. Murphy Motor Freight Lines, Inc., 291 Minn. 461 (Minn. 1971) (acknowledges interference with noncontractual relations")
- Harbor Broad., Inc. v. Boundary Waters Broadcasters, Inc., 636 N.W.2d 560 (Minn.App. 2001) (questioned recognition of tort for business expectancy")
- Hoyt Props., Inc. v. Prod. Res. Grp., L.L.C., 736 N.W.2d 313 (Minn. 2007) (alter ego/veil-piercing factors and equity framework)
- White v. Jorgenson, 322 N.W.2d 607 (Minn. 1982) (alter ego piercing requires injustice or unfairness; two-prong test)
- Victoria Elevator Co. v. Meriden Grain Co., 283 N.W.2d 509 (Minn. 1979) (two-prong alter-ego test factors; injustice element)
- Barton v. Moore, 558 N.W.2d 746 (Minn. 1997) (veil-piercing to avoid fundamental unfairness)