Shawn Kluver, Seven Star Holdings, LLC, and Little Knife Disposal, LLC, v. SGJ Holdings, LLC, GO Capital, LLC, 3DP, LLC, Environmental Driven Solutions, LLC, Renewable Resources, LLC, Gary Olsen, K. Jayce Howell, and Jeff Bennett
No. 20220132
IN THE SUPREME COURT STATE OF NORTH DAKOTA
MARCH 31, 2023
2023 ND 65
Tufte, Justice.
FILED IN THE OFFICE OF THE CLERK OF SUPREME COURT MARCH 31, 2023 STATE OF NORTH DAKOTA
Shawn Kluver, Seven Star Holdings, LLC, and Little Knife Disposal, LLC, Plaintiffs and Appellees
v.
SGJ Holdings, LLC, GO Capital, LLC, 3DP, LLC, Environmental Driven Solutions, LLC, Renewable Resources, LLC, Gary Olsen, K. Jayce Howell, and Jeff Bennett, Defendants and Appellants
No. 20220132
Appeal from the District Court of Dunn County, Southwest Judicial District, the Honorable William A. Herauf, Judge.
AFFIRMED.
Opinion of the Court by Tufte, Justice.
Ariston E. Johnson, Watford City, N.D., for plaintiffs and appellees.
Christina A. Sambor (argued) and Carey A. Ziemann Goetz (appeared), Bismarck, N.D., and Michael T. Andrews (on brief), Fargo, N.D., for defendants and appellants.
Kluver v. SGJ Holdings
No. 20220132
Tufte, Justice.
I
[¶2] Seven Star Holdings (“Seven Star“) is a company that Shawn Kluver started and still owns. In late 2010 or early 2011, Kluver founded Renewable Resources (“Renewable“), an oilfield waste treatment business, with non-party partners. Kluver owned 30% of Renewable through Seven Star. In fall 2012, Kluver founded Environmental Driven Solutions (“EDS“), a fluids disposal business, without partners, owning 100% through Seven Star. In January 2013, Seven Star purchased ranch land in Dunn County. Gary Olsen and K. Jayce Howell agreed to finance the ranch purchase. Seven Star deeded the ranch to GO Capital, a company owned by Olsen, as security for the loan.
[¶3] In summer 2013, Olsen and Howell bought out Kluver‘s partners in Renewable. Kluver also sold Olsen and Howell part of EDS. Kluver, Olsen, and Howell formed a holding company named SGJ Holdings (“SGJ“), with Kluver owning 50% through Seven Star and Olsen and Howell owning 50% through their company 3DP. Kluver, Olsen, and Howell eventually transferred 100% of Renewable and 100% of EDS to SGJ. They agreed that Kluver was to receive EDS‘s pre-closing accounts receivable, a salary of $200,000 per year, and a commission of 5% of all gross sales from EDS and Renewable, and that the remaining debt on the loan from GO Capital to Seven Star to finance the ranch was to be forgiven (“2013 contract“). At trial, the jury found Renewable breached the 2013 contract, awarding Kluver and Seven Star $260,000.
[¶4] In January 2016, Kluver, Olsen, and Howell agreed that Seven Star‘s 50%
[¶5] The parties also agreed in January 2016 that Kluver would become an employee of Renewable with a salary of $204,000 per year plus bonuses and benefits including a retirement plan and he would receive severance pay of $500,000 if he were terminated without cause (“2016 employment contract“). In fall 2017, Renewable manager Jeff Bennett fired Kluver. The jury found Renewable breached the 2016 employment contract and awarded Kluver and Seven Star $500,000.
[¶6] In February 2017, Little Knife Disposal (“Little Knife“) was formed, with Kluver owning 100% of the company. Kluver misrepresented to Olsen and Renewable that 3DP owned Little Knife. Kluver directed Renewable personnel and equipment to be used to clean up and operate Little Knife‘s disposal site. Kluver testified that he emailed Howell and Olsen in June 2017, stating that he was sole owner, but 3DP could be changed to the owner if they requested such change. No change in ownership was made. Howell opened a bank account in Little Knife‘s name, and 3DP, EDS, and Renewable requested that Little Knife‘s customers deposit their payments into the account. Customer payments in the amount of $479,608 were deposited into the account, which were eventually transferred to an account owned by EDS. The jury found the defendants converted $479,000 of Little Knife‘s property.1
[¶7] Kluver testified that in April 2020 criminal charges were filed against him for theft and exploitation of an eligible adult. Bennett testified that he told law enforcement that he believed Kluver stole approximately $5.38 million from EDS, Renewable, and SGJ. He also testified that he spoke with reporters about the charges. The charges were eventually dismissed. Kluver testified the criminal charges led to reputational damage to himself and Little Knife. Kluver testified that Little Knife‘s 2020 sales were approximately $4,000,000 less than its 2019 sales, citing oil producers’ unwillingness to do business with Little Knife as the primary reason for the decrease in sales. The jury found in favor of the plaintiffs on their claims of deceit, defamation, and unlawful interference with business. The jury awarded zero dollars for the deceit and defamation and $2,000,000 against the defendants for the unlawful interference with business.
[¶8] After trial, the district court quieted title in the ranch in favor of Seven Star and entered judgment. The defendants moved for a new trial under
II
[¶9] The plaintiffs argue that several issues raised by the defendants on appeal are waived because they were not raised in the defendants’ motion for a new trial. When a party moves for a new trial, that party is limited to the issues raised in its motion:
[I]t is well settled that where a motion for a new trial is made in the lower court the party making such a motion is limited on appeal to a review of the grounds presented to the trial court. This restriction of appealable issues applies not only to review of a denial of the motion for a new trial, but also to the review of the appeal from the judgment itself . . . . [T]his rule forecloses appellate review of alleged errors . . . which were not raised on the motion for a new trial.
Prairie Supply, Inc. v. Apple Elec., Inc., 2015 ND 190, ¶ 7, 867 N.W.2d 335. “A motion for new trial is not necessary for appellate review, but when a new trial is sought, the moving party is limited on appeal to the grounds presented to the district court in the motion for a new trial.” Id.
[¶10] The defendants moved for a new trial on the following grounds: 1) the jury was influenced by passion or prejudice against them based on references to wealth, 2) there was insufficient evidence to support the jury‘s verdict as to the claims of breach of the 2016 employment contract, conversion, defamation, and unlawful interference with business, and 3) the court erred by failing to instruct the jury on comparative fault and determining the defendants are jointly and severally liable. Thus, the defendants are precluded from arguing on appeal that the district court erred by failing to decide whether a joint venture existed and in quieting title to the ranch.
[¶11] In addition to waiving issues not raised in their new trial motion, the defendants failed to raise issues prior to the new trial motion. The defendants argued in their new trial motion and now on appeal that Kluver first breached the 2016 employment contract with Renewable, as provided by the judicially established facts in the jury instructions, excusing Renewable‘s later breach of that same contract. They argue for the first time on appeal that res judicata or collateral estoppel precluded this claim. Arguments raised for the first time on appeal are generally waived. Working Capital No. 1, LLC v. Quality Auto Body, Inc., 2012 ND 115, ¶ 13, 817 N.W.2d 346. Further, the defendants did not object to the special verdict form requiring the jury to determine whether this claim was proven, request a jury instruction informing the jury to excuse its breach if it found Kluver first breached the contract, or request a question on the special verdict form asking whether Kluver first committed a material breach of the contract. Under
[¶12] The defendants also argue that the district court erred by failing to instruct the jury on the entirety of the modified comparative fault statute,
III
[¶13] The defendants assert the district court erred in denying their motion for a new trial, because the evidence was insufficient to support the jury‘s verdict. Our standard of review of an appeal from a denial of a motion for a new trial is “limited to a determination of whether or not the trial court manifestly abused its discretion.” Bjorneby v. Nodak Mut. Ins. Co., 2016 ND 142, ¶ 13, 882 N.W.2d 232.
[A] district court considering a motion for a new trial based on insufficiency of the evidence may not substitute its own judgment for that of the jury, or act as a thirteenth juror when the evidence is such that different persons would naturally and fairly come to different conclusions, but may set aside a jury verdict when, in considering and weighing all the evidence, the court‘s judgment tells it the verdict is wrong because it is manifestly against the weight of the evidence.
A
[¶14] The defendants argue the judicially determined facts conclusively establish that they did not convert Little Knife‘s customer payments. The judicially determined facts state that Kluver misrepresented to Olsen and Renewable that 3DP owned Little Knife and that Kluver used Renewable personnel and equipment to clean up and operate Little Knife‘s disposal site. However, these facts do not negate a finding of conversion. “Conversion consists of a tortious detention or destruction of personal property, or a wrongful exercise of dominion or control over the property inconsistent with or in defiance of the rights of the owner.” Ritter, Laber & Assocs., Inc. v. Koch Oil, Inc., 2004 ND 117, ¶ 11, 680 N.W.2d 634. The parties stipulated that Howell opened a bank account in Little Knife‘s name, and 3DP, EDS, and Renewable requested that Little Knife‘s customers deposit their payments into the account. Customer payments in the amount of $479,608 were deposited in the account, which were eventually transferred to an account owned by EDS. The jury found the defendants converted $479,000 of Little Knife‘s property. We conclude the district court did not abuse its discretion in determining the verdict was not manifestly against the weight of the evidence and denying the new trial motion on this ground.
B
[¶15] The defendants argue there was insufficient evidence to support the jury‘s verdict finding they defamed Kluver.
[¶16] Defamation takes the form of either libel or slander.
[¶17] The defendants claim that any statements they made to law enforcement during the investigation of Kluver‘s criminal activity are qualifiedly privileged. In Richmond v. Nodland, 552 N.W.2d 586, 589 (N.D. 1996), we concluded that “defamatory statements voluntarily made to law enforcement during the investigation of criminal activity are qualifiedly privileged.” Thus, we assume Bennett‘s statements to law enforcement that he believed Kluver stole approximately $5.38 million from EDS, Renewable, and SGJ were qualifiedly privileged.
[¶18] The plaintiffs argue that the defendants abused their qualified privilege and that the evidence shows the statements were made with actual malice to sustain the verdict. “A qualified privilege is abused ‘if statements are made with actual malice, without reasonable grounds for believing them to be true, and on a subject matter irrelevant to the common interest or duty.‘” Richmond, 552 N.W.2d at 589. Actual malice in this context “is not the same as the constitutional standard of actual malice that a plaintiff must prove when the person is a public figure bringing a defamation claim.” Krile, 2022 ND 28, ¶ 22. The constitutional standard requires “knowledge that the statements are false or that the statements were made with reckless disregard for whether they were false.” Id. “To defeat a qualified privilege under
[¶19] Plaintiffs contend that Bennett‘s actions and statements to law enforcement and the North Dakota Industrial Commission show actual malice. They assert that after Kluver informed the Industrial Commission that Blue Appaloosa—a company owned by Olsen and managed by Bennett—was operating without a permit, the defendants made false statements about Kluver to law enforcement leading to Kluver‘s criminal charges.
[¶20] At trial, the district court received into evidence an Industrial Commission order finding Blue Appaloosa violated the
[¶21] The jury as the finder of fact could infer that Bennett on behalf of the defendants made these statements with malice in fact, ill will, or wrongful motive as retaliation for Kluver‘s informing the Industrial Commission of Blue Appaloosa‘s failure to obtain a permit or as a result of the defendants’ and Kluver‘s deteriorating relationship. The defendants fail to cite to any evidence in the record that would undermine any such findings. We conclude the district court did not abuse its discretion in determining the jury‘s verdict finding the defendants defamed Kluver was not manifestly against the weight of the evidence and rejecting the defendants’ new trial motion on this ground.
[¶22] The defendants also argue the jury was not lawfully instructed on qualified privilege or actual malice. They do not, however, assert they proposed an instruction on qualified privilege or actual malice. “A court may consider a plain error in the instructions affecting substantial rights that has not been preserved as required by Rule 51(d).”
C
[¶23] The defendants argue the judicially established facts in the jury instructions precluded the jury from finding they unlawfully interfered with the plaintiffs’ business. The district court instructed the jury on the elements of unlawful interference with business: The existence of a valid business relationship or expectancy, knowledge by the defendant of the relationship or expectancy, the defendant interfered with the relationship or expectancy by committing an independently tortious or otherwise unlawful act, the interference was a proximate cause of the harm sustained, and the plaintiff was actually damaged. The defendants assert that because Kluver misrepresented the ownership of Little Knife, they had no knowledge of a business relationship or expectancy which did not belong to them and had no intent to interfere with that relationship or expectancy.
[¶24] The evidence shows that the defendants were aware of Little Knife‘s business relationship or expectancy with its customers, so much so that 3DP, EDS, and
[¶25] The defendants contend the underlying tortious act could not have been defamation or deceit. We disagree. For the reasons stated in the previous section, the jury‘s verdict finding the defendants defamed Kluver is not manifestly against the weight of the evidence. Kluver testified that Little Knife‘s business relationships or expectancies were harmed as a result. The defendants argue that because the parties had a contractual relationship, the plaintiffs cannot assert both a breach of contract and a deceit claim, citing Bakke v. Magi-Touch Carpet One Floor & Home, Inc., 2018 ND 273, ¶ 20, 920 N.W.2d 726. However, Bakke is clear that where a party alleges facts giving rise to deceit that are separate from the parties’ contract, the deceit claim is not foreclosed. Id.; see also Delzer v. United Bank of Bismarck, 527 N.W.2d 650, 654 (N.D. 1995). The defendants have not identified what aspects of their contractual relationship overlap with, and foreclose, the plaintiffs’ deceit claim. We conclude the district court did not abuse its discretion in determining the jury verdict finding the defendants tortiously interfered with the plaintiffs’ business was not manifestly against the weight of the evidence and denying the new trial motion on this ground.
IV
[¶26] The parties’ remaining arguments are either unnecessary to our decision or without merit. The judgment and order denying the motion for a new trial are affirmed.
[¶27] Jon J. Jensen, C.J.
Daniel J. Crothers
Lisa Fair McEvers
Jerod E. Tufte
Douglas A. Bahr