TCI Business Capital, Inc. v. Five Star American Die Casting, LLC, Brian T. Flynn
2017 Minn. App. LEXIS 13
| Minn. Ct. App. | 2017Background
- Flynn, TCI’s chief risk officer, falsified records to show a $250,378.40 credit to customer Five Star’s account by fabricating transactions involving another customer (Company X); no auction of Five Star’s seized equipment occurred.
- Flynn caused TCI treasury to wire $250,378.40 to Company X’s agent and then receive the same amount back with instructions to credit Five Star; Flynn told colleagues the funds were auction proceeds.
- TCI, unaware of the falsification, settled with Five Star for $84,262.50; TCI’s books at the time showed Five Star owed ~$213,238 though the true balance was ~$468,616.
- TCI discovered Flynn’s scheme after his termination, adjusted Company X’s account, and sued Flynn for conversion, civil theft (Minn. Stat. §604.14), fraudulent misrepresentation, and breach of fiduciary duty.
- District court granted summary judgment for Flynn on all claims; appellate court affirmed on conversion and civil-theft, reversed on fraud and breach of fiduciary duty, and remanded damages for those two claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Conversion | Flynn’s wires and accounting entries deprived TCI of property (money) and therefore constitute conversion. | Flynn did not intend to permanently dispossess TCI; funds were returned and entries were intended to be reversed. | Affirmed for defendant: conversion fails (no requisite intent to permanently deprive; also uncertainty whether intangible money is convertible). |
| Civil theft (statutory) | Flynn ‘stole’ TCI funds by appropriating and misapplying them to Five Star, so §604.14 applies. | Flynn didn’t steal—he didn’t keep or use the money; transfers were temporary and internal. | Affirmed for defendant: “steals” requires intent to keep/use; no evidence Flynn intended to keep or use funds. |
| Fraudulent misrepresentation | Flynn knowingly made false representations (auction proceeds/credit) intending TCI to rely, and TCI did rely and suffered out‑of‑pocket loss in settlement. | Flynn lacked intent to induce harmful reliance and causation of damages is speculative. | Reversed for defendant: sufficient undisputed evidence of intent and reliance; damages causation is a factual question for trial. |
| Breach of fiduciary duty | As an officer, Flynn owed honesty and care; his falsified records breached that duty and caused TCI loss. | Flynn acted to maximize recovery/minimize loss; no profit requirement for liability. | Reversed for defendant: duty and breach established; damages causation is a factual issue for trial. |
Key Cases Cited
- Christensen v. Milbank Ins. Co., 658 N.W.2d 580 (Minn. 2003) (defines conversion and intent requirement)
- Rudnitski v. Seely, 452 N.W.2d 664 (Minn. 1990) (conversion as exercise of dominion inconsistent with owner’s rights)
- Hildegarde, Inc. v. Wright, 70 N.W.2d 257 (Minn. 1955) (conversion involves serious interference with possession)
- Larson v. Archer-Daniels-Midland Co., 32 N.W.2d 649 (Minn. 1948) (conversion definition involving willful interference)
- Hoyt Props., Inc. v. Production Res. Grp., L.L.C., 736 N.W.2d 313 (Minn. 2007) (elements of fraudulent misrepresentation)