Lead Opinion
OPINION
The issue presented in this case is whether the court, as a matter of public policy, should extend the protection against negligent misrepresentation to prospective employees of the University of Minnesota, which is a constitutional corporation and agency of the state.
Respondent James R. Williams brought a claim against appellants the University of Minnesota (University) and Orlando Henry “Tubby” Smith for negligent misrepresentation, alleging that Smith, the University’s men’s basketball coach, offered him the position of assistant coach, that he negligently misrepresented that he had authority to hire Williams, and that Williams suffered damage. The University argued, among other things, that the district court lacked subject-matter jurisdiction over the claim. The jury found in favor of Williams and awarded damages. The district court granted the University’s and Smith’s motion to reduce the jury’s award, but otherwise denied their motion for judgment as a matter of law. The court of appeals affirmed the district court. We conclude that the district court had subject-matter jurisdiction to address Williams’ negligent misrepresentation claim. Additionally, we conclude that when a prospective government employment relationship is negotiated at arm’s length between sophisticated business persons who do not have a professional, fiduciary, or other special legal relationship, the prospective employee is not entitled to protection against negligent misrepresentations by the representative for the prospective government employer. We therefore reverse.
In March 2007 Smith became the head coach of the University’s men’s basketball team. Shortly after he was hired, Smith considered a number of individuals as po
On March 30, 2007, Williams and Smith, who were both at the NCAA Final Four basketball tournament in Atlanta, .Georgia, had a two-hour meeting to discuss the University, the role Williams could play as an assistant on Smith’s staff, and possible compensation for such a position. Williams believed that Smith already knew about the NCAA violations, and Smith acknowledged that the disciplinary history of Williams may have been mentioned at that meeting.
Williams and Smith spoke on April -1, 2007, again discussing the possibility of Williams becoming an assistant coach at the University. Smith asked Williams to fax his resume to the University’s basketball office, and Williams did so the next day.
On April 2, 2007, Smith spoke with University Athletic Director Joel .Maturi. Smith told Maturi that he wanted to hire Williams and two other individuals as his assistant coaches. Smith and Maturi discussed concerns raised by Senior Associate Athletic Director Regina Sullivan regarding Williams, but Smith reassured Maturi about Williams. Following this conversation, Maturi directed others at the University to work on “temporary housing, transportation, University paperwork, keys, [and] ID” for Williams and the other potential new assistant coaches. In response to Maturi’s direction, the University prepared, but did not finalize, a Memorandum of Agreement between the University and Williams.
Later that same day, Smith called Williams and told him the University would pay the salary Williams had requested. Smith asked Williams if he was “ready to join him at the University of Minnesota,” and Williams replied, “[Y]es.” Williams believed that Smith had offered him a job and that he had accepted. They also discussed the upcoming collegiate recruiting period, scheduled to begin that weekend. Smith wanted Williams to travel to Arkansas or Texas to recruit for the University. Williams told Smith that he had a recruiting trip scheduled with OSU head coach Sean Sutton on April 5, and if Williams was going to join Smith’s staff, he needed to call Sutton that night. Williams testified that Smith offered to call Sutton, but Williams believed that he should do so.
Williams spoke with Sutton on the evening of April 2, 2007, told him that Smith had offered him a job at the University, that he had accepted Smith’s offer, and that he would resign from OSU. Sutton asked Williams to submit a resignation letter the next day. Williams also called his real estate agent that night and told her to put his house on the market.
The next day, April 3, 2007, Williams went to OSU to prepare and submit his resignation letter. Before Williams sub
Later that same day, Smith told Williams that Maturi strongly opposed hiring Williams because Maturi had learned for the first time that Williams had multiple major NCAA rules infractions when he was previously with the University. Given the University’s history of NCAA rules violations in the men’s basketball program, Maturi was concerned about maintaining a clean program and the potential media reaction if Williams returned. Smith also expressed concern about his own reputation and indicated that he did not want to get off on the wrong foot with his athletic director. Sutton received Williams’ resignation letter on the afternoon of April 3, 2007. That same day, Sutton made arrangements to hire a new assistant basketball coach to replace Williams. By April 8, 2007, Williams knew that the University did not consider him to be one of its assistant basketball coaches. On May 29, 2007, the University notified Williams that the position of assistant men’s basketball coach had been filled. Williams was unable to find another coaching position for the 2007-08 basketball season.
Subsequently, Williams sued the Board of Regents of the University of Minnesota and Maturi, asserting common law breach of contract, negligent misrepresentation, and estoppel claims (among others), and constitutional claims under 42 U.S.C. § 1983. The University moved to dismiss the common law claims, arguing that the district court lacked subject-matter jurisdiction over those claims because the issuance of a writ of certiorari is the only method by which a party can challenge the University’s employment decisions. The University also sought dismissal of the claims under 42 U.S.C. § 1983 for failure to state a claim upon which relief could be granted. In March 2008 the district court granted the motions and dismissed all of the claims. Williams appealed.
The court of appeals affirmed the district court’s dismissal of the common law, estoppel, and section 1983 claims, but reversed as to the negligent misrepresentation claim. Williams v. Bd. of Regents of Univ. of Minn. (Williams I),
Williams then commenced a separate action against Smith, asserting claims for fraud, negligent misrepresentation, interference with contract, and promissory es-toppel, and the district court consolidated the two cases. Before trial, the district court granted Smith’s motion to dismiss the contract and promissory estoppel claims and dismissed Maturi as a party to the litigation. The case then proceeded to trial on the negligent misrepresentation claims against the University and Smith, and the fraud claim against Smith. During the trial, Williams dismissed his fraud claim against Smith. The jury found for Williams and awarded damages.
After post-trial motions were resolved, the University and Smith appealed. Together, they challenged the denial of their motion for judgment as a matter of law; the denial of their motion for a new trial based on alleged evidentiary errors; the district court’s subject-matter jurisdiction over Williams’ negligent misrepresentation claim as presented at trial; and the dis
The court of appeals affirmed. Williams v. Smith (Williams II), Nos. A10-1802, A11-0567,
The University then sought review by our court. We granted the University’s petition for review on the following issues: (1) whether a duty of care exists in arm’s-length negotiations between a prospective employer and a prospective employee; and (2) whether a person negotiating a contract with a government representative is conclusively presumed to know the extent of the authority of that representative. The University also challenged the district court’s subject-matter jurisdiction over Williams’ negligent misrepresentation claim.
I.
We first address the question of the district court’s subject-matter jurisdiction over Williams’ negligent misrepresentation claim. The University challenged jurisdiction at several points in this litigation. The court of appeals held that Williams’ negligent misrepresentation claim did not “directly implicate[]” the University’s “internal decision-making process” because the focus at trial would be on Smith’s representations, Williams’ reliance, and Williams’ damages as a result of that reliance. Williams I,
When a party challenges the subject-matter jurisdiction of the court, the court must examine whether it has the authority to hear the type of dispute and
Previously, we have observed that the University of Minnesota is a “unique constitutional corporation, established by territorial act in 1853 and perpetuated by the state constitution in 1857.” Winberg v. Univ. of Minn.,
As with any state agency, judicial review of the University’s administrative and quasi-judicial decisions is both limited and deferential, and under separation of powers principles, the exclusive method of review is by certiorari pursuant to Minn. Stat. § 606.01 (2010).
But judicial deference to the University’s administrative, quasi-judicial decisions is not absolute. Indeed, we will not hesitate to sustain a certiorari challenge to a decision of the University that is based on an error of law, or that is arbitrary, oppressive, unreasonable, or without evidence to support it. See Dietz,
We conclude that a tort claim, such as for negligent misrepresentation, that is “separate and distinct” from the government agency’s employment decision and does not involve any inquiry into the agency’s “discretionary decision” is not subject to certiorari review. Our conclusion is simply an extension of our reasoning in Willis, in which we recognized that the inquiry into the basis for a defamation claim was separate and distinct from the inquiry required for a termination decision. Here, the central issues decided by the jury were (a) whether Smith misrepresented the extent of his hiring authority, (b) whether Williams reasonably relied on that representation, and (c) whether Williams was damaged as a result. Unlike a challenge to a quasi-judicial hiring decision, Williams’ negligent misrepresentation claim did not challenge the “propriety” of the University’s discretionary decision not to hire him. Williams’ claim thus was separate and distinct from the University’s decision not to hire him because the central inquiry and focus was on Smith’s representations.
The University argues, however, that review by certiorari should be required because Williams merely cloaks a contract dispute in the mantle of negligent misrepresentation. See Willis,
We recognize that evidence relating to the University’s hiring practices generally and decisions with respect to Williams specifically was presented at trial. For example, Athletic Director Maturi testified about his experience with collegiate athletic hiring practices, negotiations, and hiring authority. Williams testified about his previous job searches and called former and current coaches to testify about hiring
But the introduction of this evidence did not transform Williams’ negligent misrepresentation claim against Smith into a breach of contract claim for failure to hire against the University. Much, if not all, of this evidence was relevant to the reasonableness of Williams’ reliance on Smith’s misrepresentations. Some of it was also relevant to Williams’ damages claim. Further, the district court ensured that the jury did not evaluate the evidence as a challenge to the University’s decision not to hire by instructing the jury that the University’s decision not to hire Williams was not at issue and that its focus was on the negligent misrepresentation claim. Finally, the special verdict form, in a detailed eight-question format, asked the jury to decide whether Smith “falsely repre-sentad] that he had final authority to hire” at the University, whether Williams reasonably relied on that representation, and whether Williams was harmed in doing so. Nothing in the special verdict form allowed the jury to decide anything about the University’s decision not to hire Williams. We assume that the jury follows a court’s instructions. State v. Ferguson,
In summary, we conclude that Williams’ negligent misrepresentation claim is not subject to certiorari review under Minn. Stat. ch. 606 (2010) because it is separate and distinct from the University’s decision not to hire him. Moreover, the jury was appropriately instructed to consider only the issues related to Smith’s alleged negligent misrepresentations, and to limit its consideration to that claim. We therefore conclude that the district court had subject-matter jurisdiction over Williams’ negligent misrepresentation claim.
II.
Having concluded that the district court had subject-matter jurisdiction to address Williams’ negligent misrepresentation claim, we now consider whether the University owed Williams a duty of care to protect him against negligent misrepresentations, and whether the claimed reliance is reasonable when a person negotiating with a government representative is conclusively presumed to know the authority of that representative.
This court has adopted the definition of negligent misrepresentation set forth in Restatement (Second) Torts § 552 (1976):
One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
See Bonhiver v. Graff,
A.
The University argues that an employer owes no duty to a prospective employee in the context of negotiations for an employment opportunity and therefore Williams’ negligent misrepresentation claim fails as a matter of law. Williams, on the other hand, contends that Smith owed him a duty of care because liability for misrepresentations can arise even during an arm’s-length negotiation, and because once Smith chose to speak, he had a duty not to mislead Williams after Williams’ and Smith’s interests were “unified.”
We believe that the manner in which appellants treated Williams regarding his prospective employment with the University was unfair and disappointing. We do not condone their conduct. But the question we must decide is whether appellants owed Williams a duty of care and, therefore, whether appellants’ conduct is actionable. The question of whether a duty of care exists in a particular relationship is a question of law, which this court determines de novo. Domagala v. Rolland,
Previously, we have recognized a duty of care exists, for a negligent misrepresentation claim, in the context of certain legal relationships. For example, we have recognized a duty exists in professional relationships such as an accountant/client and attorney/client, and in certain fiduciary relationships involving, for example, guardians, executors, and directors of corporations. See Florenzano,
Thus, if a duty exists in a given case, it is derived from the legal relationship between the parties and a determination that the plaintiffs interests are entitled to legal protection against defendant’s conduct. See Caritas Family Servs.,
In Caritas, the adoptive parents asserted that once the agency undertook to disclose that incest existed in the child’s background, it assumed a duty of care that its disclosure be complete and unambiguous to ensure that the parents were not misled.
Recently, we declined to decide whether a negligent misrepresentation claim can be brought by a party to an arm’s-length commercial transaction. Valspar Refinish, Inc. v. Gaylord’s, Inc.,
Nor have we recognized a duty of care in the context of prospective government transactions. Indeed, we have required parties who challenge erroneous government action as “wrongful” to show something more than “simple inadvertence, mistake, or imperfect conduct” by the defendant government agency. See City of N. Oaks v. Sarpal,
Applying these principles, we consider whether public policy favors protecting a prospective government employee from the negligence of a government representative. To do so, we consider the nature of the relationship between Williams and Smith. See, e.g., Florenzano,
We conclude that the legal relationship between Williams and Smith is not the type of relationship entitled to legal protection, and therefore no duty of care against negligent misrepresentation is owed. Three reasons support our conclusion. First, their relationship in negotiating potential employment was not a professional, fiduciary, or special legal relationship in which one party had superi- or knowledge or expertise. Florenzano,
Moreover, Smith did not have the type of superior knowledge or expertise typically indicative of a special legal relationship. Instead, the parties stood on equal footing regarding the scope of Smith’s authority in negotiating a prospective employment relationship. The scope of Smith’s authority was equally available to both parties. A review of the University’s publicly accessible web site, which is a matter of public record, readily demonstrates that Maturi had the authority to hire the assistant men’s basketball coach, and that Smith did not. See Delegations of Authority Pro
Second, the nature of the relationship between Williams and Smith does not support recognizing a duty of care in this case. The relationship between Williams and Smith in their discussions of Williams’ prospective employment as an assistant basketball coach was that of two sophisticated business people, both watching out for their individual interests while negotiating at arm’s length. Both coaches had decades of coaching experience at a variety of institutions, with a variety of hiring practices, a variety of athletic directors, and a variety of employment conditions. Williams had successfully negotiated coaching contracts with several elite institutions, both public and private, including the University, OSU, The University of Tulsa, San Diego State University, the University of Nebraska, the University of Louisiana — Lafayette, and the Minnesota Timberwolves. Williams’ contract with OSU was in writing. Smith and Williams were, by their own admissions, experienced participants in the collegiate basketball coaching environment, including the hiring practices within that environment.
Third, we perceive no reason or public policy that warrants imposing a duty of care in the context of a prospective government employment relationship involving negotiations by sophisticated parties who do not stand in a special legal relationship. The weight of authority from other jurisdictions refuses to recognize a claim for negligent misrepresentation in such circumstances. See, e.g., McNierney v. McGraw-Hill, Inc.,
We conclude that Williams’ interests in prospective employment with the University’s men’s basketball program are not entitled to legal protection against Smith’s negligent misrepresentations.
It is true, as the dissent suggests, that we observed in Northemaire that we “will continue to allow a cause of action against government officers and employees for negligent misrepresentation of fact” id. at 390,
Second, our recent cases have carefully limited recognition of the tort of negligent misrepresentation, against both private actors and government officials. Recently, in Valspar Refinish, Inc. v. Gaylord’s, Inc., we declined to decide whether a negligent misrepresentation claim can be brought by a party to an arm’s-length commercial transaction.
Alternatively, Williams relies on Caritas to argue that when Smith spoke to Williams, he had a duty not to mislead Williams. But this argument is flawed. Specifically, this argument conflates the question of whether Smith owed a duty of care to Williams based upon a legal relationship, with the question of whether Smith supplied false information to Williams. See Restatement (Second) of Torts, § 552. The duty of care examines the legal relationship between the parties, not the nature of the representations, and in the absence of a duty, there can be no breach. See Domagala,
Additionally, the holding in Caritas is narrow. In Caritas, we held that once the adoption agency undertook to disclose some genetic information to the adoptive parents, it had a duty “to not mislead [the parents] by only partially disclosing the truth.”
Unlike the situation in Caritas, Williams never asked whether Smith had the authority to hire; he simply assumed that authority existed. We have never held that the plaintiffs mistaken assumption can impose a duty, particularly in the context of sophisticated parties negotiating at arm’s length.
We have not previously recognized the tort of negligent misrepresentation in the context of government employment relationships and we decline to do so here. In summary, we conclude that Smith did not owe Williams a duty of care in these negotiations. We therefore hold that in the absence of a duty of care, Williams’ claim for negligent misrepresentation fails as a matter of law.
B.
Our conclusion that no duty of care was owed makes it unnecessary to address the issue of Williams’ reliance.
We conclude that we also need not resolve the scope of the decision relied on by the University, Jewell Belting Co. v. Village of Bertha, to argue that Williams’ reliance was unreasonable.
Reversed.
. The jury awarded damages in the amount of $1,247,293. On post-trial motions, the district court reduced that award to $1,000,000 pursuant to Minn.Stat. § 3.736, subd. 4(e) (2010), because Smith was acting within the scope of his employment at the time he made the misrepresentations. On appeal, the University argued that a greater reduction should have been granted because Williams failed to mitigate his damages, any misrepresentations were not the proximate cause of his damages, or the damages awarded were the result of Williams’ improper flaming of jury passion in closing arguments. Williams argued that Minn.Stat. § 3.736 was inapplicable, and therefore the full award should be restored. The court of appeals rejected all of these arguments. Williams v. Smith, Nos. A10-1802, All-0567,
. Minn.Stat. § 606.01 (2010) provides:
No writ of certiorari shall be issued, to correct any proceeding, unless such writ shall be issued within 60 days after the party applying for such writ shall have received due notice of the proceeding sought to be reviewed thereby. The party shall apply to the Court of Appeals for the writ.
. We note that the court of appeals has declined to recognize such a claim in the context of private, sophisticated parties negotiating a commercial transaction at arm’s length. See Smith v. Woodwind. Homes, Inc., 605 N.W.2d 418, 424-25 (Minn.App.2000) (declining to recognize a duty of care in a transaction negotiated by adversarial parties at arm’s length, where both parties were “experienced at closing real-estate transactions and [the closing company] has not demonstrated any special relationship between them indicating they were anything other than sophisticated equals negotiating a business transaction.”); Safeco Ins. Co. of Am. v. Dain Bosworth Inc.,
. The dissent inaccurately states that we hold the University has no obligation to “supply accurate and truthful information to a prospective employee.” In doing so, the dissent misstates our holding. Specifically, we hold that when a prospective employment relationship is negotiated at arm’s length between two sophisticated parties, the prospective employee is not entitled to legal protection against negligent misrepresentation by the
. The dissent contends that we "mischarac-terize[]” the adoptive parents’ inquiries in Caritas. These inquiries were relevant because liability for negligent misrepresentation "depends in the first analysis on whether a duty of care is owed,” L & H Airco, Inc.,
. Moreover, we fail to see how Smith's disclosure could have misled Williams into believing that Smith had final hiring authority when Smith told Williams the opposite — that Maturi had that authority. See Domagala,
Concurrence in Part
(concurring in part, dissenting in part).
I agree with the majority that the district court had subject-matter jurisdiction to resolve the negligent misrepresentation claim of James Williams against the University of Minnesota, but I respectfully dissent from the majority’s conclusion that public policy does not support imposing a duty of care on the University to supply accurate and truthful information to a prospective employee. The majority ignores our case law that expressly recognizes a cause of action against the government for negligent misrepresentations of fact when there is no other access to the information. Therefore, consistent with our precedent, I would affirm the jury verdict on the negligent misrepresentation claim.
We have since reaffirmed that “[w]e will continue to allow a cause of action against government officers and employees for negligent misrepresentation of fact.” Northemaire Prods., Inc. v. Cnty. of Crow Wing,
Members of the public have no other access to factual information maintained by the government except through government officers and employees. Therefore, the policy of promoting accuracy through the prospect of tort liability outweighs the possibility of inhibiting performance of duties of office or employment.
Id. at 390,
In this case, Smith, as a University employee, assumed to act on behalf of the University and knew that Williams would act in reliance upon his job offer. Williams presented evidence that the University’s head men’s basketball coach Tubby Smith offered him the job of assistant men’s basketball coach. Smith told Williams that he “got the money” they had discussed: $175,000 from the Athletics Department and $25,000 from basketball camps. Smith knew that the job offer was subject to the approval of the University’s Athletic Director, but falsely represented that Smith had final hiring authority, knowing and intending that Williams would rely on Smith’s representation to
There is no evidence in the record that Williams had access to any publicly available information regarding the authority to hire within the men’s basketball program.
On these facts, I would conclude that the government official (Smith) owed a duty of care to provide accurate information to the public (Williams). The government official’s duty should be imposed as a matter of law by this court. Recognizing a duty of care in this case would serve the public policy of promoting accuracy when a government official knows that others will act
The majority further observes that Smith and Williams were both “sophisticated business people” and “experienced participants in the collegiate basketball coaching environment,” thereby suggesting that Williams should have realized that Smith did not have final hiring authority. Williams testified, however, that in all his years of coaching, he did not know of a single head basketball coach who did not possess the authority to hire his own staff. Other experienced coaches similarly testified that they had never heard of a university administrator vetoing the hiring decision of a head coach. The majority also questions how Smith “could have misled Williams into believing that Smith had final hiring authority” when Smith told Williams that the Athletic Director had that authority, but this disclosure took place only after Williams had orally resigned from his position at OSU and the head coach had acted to fill that position. Therefore, in describing the nature of the relationship between Williams and Smith, the majority has unfairly skewed the evidence to support its result, contrary to our standard of review.
In addition, the majority erroneously suggests that a duty did not arise under these circumstances, in part because “Williams never asked whether Smith had the authority to hire.” The majority attempts to distinguish the duty we recognized in M.H. v. Caritas Family Services,
Like the duty we recognized in Caritas, a duty to not negligently misrepresent factual information in the possession of the University does not impose an “extraordinary or onerous burden” on the University.
. The majority indicates that parties who challenge government action must show "wrongful'' conduct. City of N. Oaks v. Sargal,
. The University relies on our 1903 decision in Jewell Belting Co. v. Village of Bertha,
Concurrence in Part
(concurring in part, dissenting in part).
I join in the concurrence and dissent of Justice MEYER.
