Crosstown Holding Company, et al., Appellants, vs. Marquette Bank, N.A., et al., Respondents.

Crosstown Holding Company, et al., Appellants, vs. Marquette Bank, N.A., et al., Respondents. A04-1693, Court of Appeals Unpublished, May 17, 2005.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-1693

 

Crosstown Holding Company, et al.,

Appellants,

 

vs.

 

Marquette Bank, N.A., et al.,

Respondents.

 

Filed May 17, 2005

Affirmed

Gordon W. Shumaker, Judge

 

Hennepin County District Court

File No. CT 02-5980

 

 

Richard T. Ostlund, Randy G. Gullickson, Janel M. Dressen, Anthony Ostlund & Baer, P.A., 36009 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN 55402 (for appellants)

 

Charles F. Webber, Karla C. Robertson, Faegre & Benson, LLP, 2200 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN 55402 (for respondents)

 

            Considered and decided by Shumaker, Presiding Judge; Dietzen, Judge; and Poritsky, Judge.*

U N P U B L I S H E D   O P I N I O N

GORDON W. SHUMAKER, Judge

This lawsuit arose after appellant Crosstown Holding Company's attempt to purchase three branch banks from respondent Wells Fargo failed, and the latter instead sold the bank to First Federal Savings Bank.  Crosstown claimed this was the result of improper actions by one of Wells Fargo's employees, and sued for damages for (a) breach of contract; (b) breach of the covenant of good faith and fair dealing; (c) misrepresentation; (d) negligent misrepresentation; (e) promissory estoppel; (f) unjust enrichment; and (g) civil conspiracy.  The district court granted summary judgment to respondents on all claims.  Crosstown also asserts the court erred in failing to rule on its motion for leave to file a second amended complaint.  We affirm.

FACTS

Appellant Crosstown Holding Company (Crosstown) sued after its attempts to purchase three branch banks from respondents failed and respondents sold the banks to another company.  Crosstown argues that improper activities by one of respondents' employees caused the deal to fail and appeals from summary judgment in favor of respondents.  Additionally, Crosstown asserts that the district court erred in not addressing appellants' motion for leave to amend its complaint. 

Respondent Wells Fargo is a banking and financial services company.  Respondent Marquette Bank is a Minnesota corporation that owns a number of banks in Minnesota.  In October 2001, Wells Fargo acquired Marquette Banks.  In order to gain federal regulatory approval for this acquisition, Wells Fargo agreed to sell some Marquette branch banks, including three branches in Rochester, Minnesota.

Crosstown contacted Wells Fargo and expressed an interest in bidding on the Rochester branches.  In order to receive a bid package from Wells Fargo, each bidder was required to sign a confidentiality agreement.  Crosstown signed the confidentiality agreement on November 1, 2001, and received a bid package shortly thereafter. 

The bid package set forth the process that would be used for the sale of the Marquette branch banks.  The bidding companies were invited to review the materials provided on each of the branches and submit "non-binding indications of interest" or, in other words, a preliminary bid.  Potential purchasers were asked to submit their preliminary bids by noon on November 7, 2001.  Wells Fargo intended then to review the bids and determine which potential purchasers would be allowed to move forward in the process by conducting limited due diligence for the purchase of the branches. 

Crosstown submitted a timely bid of $19,406,555 for the Rochester branches.  Crosstown's bid was the highest of the three received for the Rochester branches, and Crosstown was the only company invited to perform due diligence on the Rochester branches.  Steve McConley, a vice-president of Wells Fargo's Corporate Development Department, notified Crosstown that its bid was very impressive and Wells Fargo would proceed to due diligence "with you and you alone."

After Crosstown was given permission to complete further due diligence on the Rochester banks, Wells Fargo introduced Crosstown's CEO to Michael Bue.  Bue was a Marquette employee and president of the Rochester branches and was also in charge of the due diligence that was conducted at the Rochester branches. 

Bue wanted to ensure that he would have a job with the purchaser of the Rochester banks.  In efforts to ensure future employment with the purchaser of the banks, Bue entered into a contract with Robert Edelman, a Milwaukee investment banker, to find a "strategic partner" to buy the Rochester branches.  Edelman knew of First Federal bank in Wisconsin, and contacted it about an opportunity to buy the Rochester branches.  Wells Fargo does not dispute that it was not part of Bue's job to solicit possible purchasers of the Rochester branches. 

Edelman contacted Wells Fargo on behalf of First Federal on November 20, 2001.  Wells Fargo allowed First Federal to bid.  First Federal signed the confidentiality agreement on November 21, 2001, and was sent the bid package shortly thereafter.  Based on its preliminary bid, Wells Fargo then decided to invite First Federal to perform due diligence at the Rochester branches.  On December 5, 2001, Wells Fargo informed Crosstown that another party also was being allowed to conduct due diligence on the Rochester branches. 

The final bids for the Rochester branches were due on December 18, 2001.  Crosstown submitted a final bid of $17,609,332 for the Rochester branches.  First Federal submitted a bid of $26,521,110 for the Rochester branches on December 18, 2001.  Wells Fargo decided to sell the banks to First Federal and entered into a written agreement of that understanding on January 15, 2002.  The sale of the banks to First Federal closed in April 2002. 

Crosstown sued for damages for breach of contract, breach of covenant of good faith and fair dealing, misrepresentation, negligent misrepresentation, promissory estoppel, unjust enrichment, and civil conspiracy.  The district court granted summary judgment to respondents on all claims.

D E C I S I O N

 

On an appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the district court erred in its application of the law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). 

A motion for summary judgment shall be granted when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that either party is entitled to a judgment as a matter of law.  On appeal, the reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted.

 

Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted).  No genuine issue of material fact exists "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party."  DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997).

1.         Breach-of-Contract Claim

            Crosstown claims that the district court erroneously concluded that no contract existed between the parties.  "Whether a contract exists is generally an issue for the factfinder," but if, taking the record as a whole, a rational trier of fact could not find for the nonmoving party, summary judgment is appropriate.  Gresser v. Hotzler, 604 N.W.2d 379, 382 (Minn. App. 2000). 

            The district court determined that no contract existed on which Crosstown could base its claim, stating that both parties signed an agreement that neither party would be bound until they both executed a written agreement.  Crosstown asserts three separate breach-of-contract theories: (1) respondents breached their contract to conduct a fair and evenhanded bidding process; (2) respondents breached their contract to exclusively negotiate with Crosstown for the sale of the Rochester branches; and (3) Wells Fargo breached their contract to keep Crosstown's bidding information confidential. 

            a.         Contract to conduct fair bidding process

            Crosstown argues that Wells Fargo had a duty to conduct a fair and evenhanded bidding process, but failed to do so and, thus, breached its contract with Crosstown.  The evidence Crosstown points to for the existence of a contract for a fair bidding process is a "fair reading" of the confidentiality agreement and bid package.  The confidentiality agreement states that none of the parties "shall have any obligation with respect to an Acquisition except pursuant to written agreements, if any, entered into after the date hereof."  A signed agreement is not required for formation of a contract.  Aratex Servs., Inc. v. Blue Horse, Inc., 497 N.W.2d 283, 285 (Minn. App. 1993), review denied (Minn. May 11, 1993). However, when the parties understand that a written contract is a condition precedent to their being bound, there can be no binding contract until the written agreement is executed.  Powell v. MVE Holdings, Inc., 626 N.W.2d 451, 462 (Minn. App. 2001).

Additionally, the first page of the bid package provided from Wells Fargo states:

The acceptance by a bidder of the offering procedures set forth in the Memorandum does not constitute an agreement in the principle or letter of intent with respect to the terms of any possible transaction between the bidder and the Companies.  The Companies further expressly reserve the right, at any time, to modify any of the terms, conditions or procedures of the offering or to terminate discussions and request the return of this Memorandum.

 

The bid package contained specific instructions and materials on how an interested company should go about submitting a preliminary bid to allow it to move forward in negotiations.  In Minnesota, an agreement to negotiate in good faith in the future is not enforceable because it does not constitute the parties' complete and final agreement.  Mohrenweiser v. Blomer, 573 N.W.2d 704, 706 (Minn. App. 1998), review denied (Minn. Feb. 19, 1998).  In this case, the parties expressly agreed not to be bound without a written contract; the package of materials was an offer solely to make an offer of potential future negotiations; and the package expressly withheld the right to modify the procedures at any point in time.  Therefore, no contract for a fair bidding process existed.

            b.         Exclusivity Agreement

Crosstown's second theory is that Wells Fargo breached its contract to negotiate exclusively with Crosstown for the sale of the Rochester branches.  Crosstown claims that when it was notified on November 9, 2001 that respondents had decided to go forward "with you and you alone," this created a duty to negotiate exclusively with Crosstown as an oral modification of a contract.  The general common-law rule is that a written contract can be varied or rescinded by oral agreement of the parties, even if the contract provides it shall not be varied or rescinded orally.  Larson v. Hill's Heating & Refrigeration, 400 N.W.2d 777, 781 (Minn. App. 1987), review denied (Minn. April 17, 1987).  However, this implies that there was a contract in existence to modify.  As stated in the section above, the only documents Crosstown had received at the point when the statement was made were the confidentiality agreement and the bid package.  These documents created only an offer to make a preliminary offer and expressly reserved the right to change the terms and procedures at any time.  Therefore, based on the express language of the two documents Crosstown had received, no contract existed.  Because no contract existed between Crosstown and Wells Fargo at the point the "promise" was made, there could not be an oral modification of the alleged contract. 

c.         Confidential Information

            Finally, Crosstown asserts that Wells Fargo breached its contract to keep Crosstown's preliminary bid information and identity confidential.  Crosstown suggests that Bue supplied First Federal with Crosstown's confidential preliminary bid offer and that First Federal then structured its bid to be slightly higher than Crosstown's.  Crosstown suggests that because Bue worked for Marquette at the time this information was allegedly shared, Marquette and Wells Fargo are vicariously liable.

Crosstown signed a confidentiality agreement in order to receive the bid package from Wells Fargo.  By signing the confidentiality agreement, Crosstown agreed to keep confidential any discussions with Wells Fargo as well as any information Wells Fargo supplied Crosstown regarding the potential purchase of the divested branches.  Nowhere in the confidentiality agreement does Wells Fargo agree to keep any of the information it received confidential.  Because the confidentiality agreement does not require Wells Fargo to keep any information confidential, this claim for breach of contract fails. 

2.         Good Faith and Fair Dealing

            Crosstown asserts that the district court erred when it determined Crosstown did not have a valid claim for breach of duty of good faith and fair dealing.  A duty of good faith and fair dealing is read into every contract in Minnesota.  In re Hennepin County 1986 Recycling Bond Litigation, 540 N.W.2d 494, 502 (Minn. 1995).  When it exists, a duty of good faith prevents a party from unjustifiably hindering another party's performance of the contract.  Id.  Additionally, the types of bad faith recognized in judicial opinions are evasion of the spirit of the bargain and abuse of a power to specify terms.  White Stone Partners, LP. v. Piper Jaffray Cos., Inc., 978 F. Supp. 878, 881 (D. Minn. 1997).  But, a party to a contract does not act in bad faith by asserting or enforcing its legal or contractual rights.  Sterling Capital Advisors, Inc. v. Herzog, 575 N.W.2d 121, 125 (Minn. App. 1998). 

            The district court determined that no contract existed, and, as such, Crosstown did not have a valid claim for breach of duty of good faith and fair dealing.  Minnesota does not recognize a claim for breach of the implied covenant of good faith and fair dealing separate from the underlying breach of contract claim.  Medtronic, Inc. v. Convacare, Inc., 17 F.3d 252, 256 (8th Cir. 1994).  Therefore, because the district court correctly determined that no contract existed between the parties, the claim for breach of the covenant of good faith and fair dealing fails.

3.         Misrepresentation Claim

            Crosstown claims that the district court erred when it granted summary judgment to respondents on its misrepresentation claim.  A claim for intentional misrepresentation requires Crosstown to allege (1) that respondents made a representation (2) that was false (3) having to do with a past or present fact (4) that is material (5) and susceptible of knowledge (6) that the representor knows to be false or is asserted without knowing whether the fact is true or false (7) with the intent to induce the other person to act (8) and the person in fact is induced to act (9) in reliance on the representation (10) that the plaintiff suffered damages (11) attributable to the misrepresentation.  M.H. v. Caritas Family Servs., 488 N.W.2d 282, 289 (Minn. 1992). 

            Crosstown's misrepresentation claim is based on statements contained in the bid package as well as the statement McConley made about Wells Fargo going forward with "[Crosstown] alone."  The district court concluded that the misrepresentation claim failed because there was no evidence showing that the statements, when made, were false.  McConley made the statement to Crosstown on November 9, 2001; it was not until November 29, 2001 that First Federal even submitted a preliminary bid for the Rochester branches.  Therefore, when McConley made the statement that respondent Wells Fargo would be going forward with "[Crosstown] and [Crosstown] alone," he was not aware of First Federal's interest, and thus the statement was not false at the time.  Furthermore, after Wells Fargo decided to allow First Federal to complete due diligence on the Rochester branches, it so informed Crosstown.  Wells Fargo did not let Crosstown continue to believe it was the only company completing due diligence in contemplation of a final bid to purchase the banks.  Rather, Wells Fargo notified Crosstown of the change in circumstances.  Therefore, because Wells Fargo's statements were not false when made and because Wells Fargo informed Crosstown of the change in circumstances, the district court properly granted summary judgment on the misrepresentation claim. 

4.         Negligent-Misrepresentation Claim

            Crosstown argues that Wells Fargo was not entitled to summary judgment on the negligent-misrepresentation claim.  Negligent misrepresentation occurs when someone, in the course of business, profession, or employment, or in a transaction in which he has a pecuniary interest, supplies false information for the guidance of another in their business transactions and that person justifiably relies on the information.  Hurley v. TCF Banking & Savs., 414 N.W.2d 584, 586 (Minn. App. 1987).  And persons making representations are negligent when they have not discovered or communicated certain information that the ordinary person in his or her position would have discovered or communicated.  Safeco Ins. Co. of Am. v. Dain Bosworth Inc., 531 N.W.2d 867, 870 (Minn. App. 1995), review denied (Minn. July 20, 1995).  However, when adversarial parties negotiate at arm's length, there is no duty imposed such that a party could be liable for negligent representations.  Id.at 871. 

            Here, the district court determined that the parties were sophisticated businesses negotiating at arm's length, and, thus, Crosstown did not have a valid claim for negligent misrepresentation.  Crosstown argues that the district court's reliance on Safeco was misplaced.  Crosstown suggests that in Safeco the defendant was not supplying information for the guidance of the plaintiff but was negotiating with the plaintiff as part of a commercial transaction, which is why no negligent misrepresentation was found.  Crosstown contends that the present situation differs from Safeco because Wells Fargo was providing information for the guidance of Crosstown.  However, Crosstown was completing due diligence in contemplation of an approximately $20 million purchase from Wells Fargo.  Wells Fargo was not attempting to provide "guidance" to Crosstown regarding the contemplated purchase of the Rochester branches; it was attempting to sell the Rochester branches for the highest price offered.  Therefore, because the parties were sophisticated businesses negotiating at arm's length for the sale of banks, Wells Fargo did not owe a duty to Crosstown such that it could be liable for negligent representations, and the district court's grant of summary judgment is correct. 

5.         Promissory Estoppel

            Crosstown contends that the district court erroneously weighed the evidence when it granted summary judgment in favor of Wells Fargo on the promissory estoppel claim.  Promissory estoppel implies a contract in law where no contract exists in fact.  Deli v. Univ. of Minnesota, 578 N.W.2d 779, 781 (Minn. App. 1998), review denied (Minn. July 16, 1998).  The doctrine of promissory estoppel is applicable when (1) a promise has been made; (2) the promisor should have reasonably expected the promise to induce action by the promisee; (3) the promisee does in fact act; and (4) justice requires enforcement of the promise.  McNeill & Assocs., Inc. v. ITT Life Ins. Corp., 446 N.W.2d 181, 186 (Minn. App. 1989), review denied (Minn. Dec. 1, 1989). 

            We will begin with the last element of promissory estoppel, because it is dispositive of this claim.  The last element of the promissory estoppel claim is whether justice requires that the promise be enforced.  This element is a question of law the court must decide.  Faimon v. Winona State Univ., 540 N.W.2d, 879, 883 (Minn. App. 1995), review denied (Minn. Feb. 9, 1996).  Numerous considerations enter into a judicial determination of injustice, including the reasonableness of a promisee's reliance and a weighing of public policies in favor of both enforcing bargains and preventing unjust enrichment.  Id.  A promise of a possible benefit is too uncertain to require special judicial action to avoid injustice.  Id.at 884. 

            Here, Crosstown argues that Wells Fargo promised that it would go forward in due diligence "with you and you alone."  Crosstown does not dispute that the parties had never reached a final contract.  The promise was that Crosstown was to complete due diligence on its own, not that it would automatically receive the Rochester branches.  Additionally, Wells Fargo had stated, in both the confidentiality agreement and the bid package which Crosstown received, that the process of the acquisition would be in the sole discretion of Wells Fargo and that Wells Fargo would be able to reject any offers and terminate any discussions at any time.  Therefore, at best, the promise from Wells Fargo indicated that a benefit would possibly be given to Crosstown.  Because this benefit is too uncertain, justice does not require the enforcement of the "promise."  The district court's grant of summary judgment was proper, and we need not address the other elements of this claim. 

6.         Unjust Enrichment

            Crosstown argues that the district court erred when it granted summary judgment on the unjust-enrichment claim.  To establish a claim for unjust enrichment, the claimant must show that another party knowingly received something of value to which he was not entitled and that the circumstances are such that it would be unjust for that person to retain the benefit.  Schumacher v. Schumacher, 627 N.W.2d 725, 729 (Minn. App. 2001).  However, an unjust-enrichment claim does not lie merely because one party benefits from another's efforts or obligations.  Rather, it must be shown that a party was unjustly enriched in the sense that the term "unjustly" could mean illegally or unlawfully.  Custom Design Studio v. Chloe, Inc., 584 N.W.2d 430, 433 (Minn. App. 1998), review denied (Minn. Nov. 24, 1998). 

            Here, Crosstown argues that Wells Fargo was unjustly enriched when it sold the Rochester branches to First Federal for a higher price than Crosstown offered.  Essentially, Crosstown's theory is that Wells Fargo acted unlawfully when Bue misused Crosstown's confidential bid information as well as when Wells Fargo reneged on its promise to move forward exclusively with Crosstown.  The product of this "unlawful" action was a "windfall of several million dollars" when Wells Fargo sold the Rochester branches to First Federal at a higher price than what Crosstown had offered.  Crosstown has not shown that Wells Fargo was not entitled to seek out the highest bidder for the Rochester branches.  Nor has it shown that it would be unjust for Wells Fargo to keep the money it received when it sold the branches to First Federal.  Therefore, because Crosstown has failed to show a genuine issue of material fact supporting its claim for unjust enrichment, the district court's grant of summary judgment was proper.

7.         Conspiracy Claim

            Crosstown argues that the district court erred when it granted summary judgment on the conspiracy claim.  A conspiracy is a combination of persons to accomplish an unlawful purpose or a lawful purpose by unlawful means.  Harding v. Ohio Cas. Ins. Co., 230 Minn. 327, 337, 41 N.W.2d 818, 824 (1950).  To constitute a conspiracy, the minds of the alleged conspirators must meet upon a plan or purpose of action to achieve the contemplated result.  Bukowski v. Juranek, 227 Minn. 313, 318, 35 N.W.2d 427, 429 (1948).

            In this case, Crosstown alleges that Marquette and Wells Fargo engaged in concerted efforts with First Federal and Edelman to remove Crosstown from its promised position of sole bidder and to sell the Rochester branches to First Federal.  Although a conspiracy can be proved by circumstantial evidence, Nathan v. St. Paul Mut. Ins. Co., 251 Minn. 74, 81, 86 N.W.2d 503, 509 (1957), Crosstown fails to show how the purchase of the banks was an unlawful purpose, or that the actions taken by Marquette and Wells Fargo were unlawful, or that the minds of the alleged conspirators were united in a common plan or result.  Therefore, because Crosstown failed to prove the existence of any conspiracy, this claim is without merit, and the district court's grant of summary judgment was proper.

8.         Crosstown's Motion to Amend

            The district court has broad discretion to grant or deny leave to amend a complaint, and its ruling will not be reversed absent a clear abuse of discretion.  Fabio, 504 N.W.2d at 761.  Whether the district court abused its discretion in ruling on a motion to amend may turn on whether it was correct in an underlying legal ruling.  Id. at 761-62. 

            After a response is served, a party can amend its pleadings only by leave of the court, "and leave shall be freely given when justice so requires."  Minn. R. Civ. P. 15.01. Generally, an amendment will be allowed, except when there is prejudice to the other party, substantial delay will result, or the amendment does not state a cognizable claim.  Envall v. Indep. Sch. Dist. No. 704, 399 N.W.2d 593, 597 (Minn. App. 1987), review denied (Mar. 25, 1987).  Additionally, the district court may consider the stage of the proceedings when deciding whether or not to allow an amendment.  Id.  

            Crosstown argues that the district court abused its discretion when it denied Crosstown's motion for leave to amend its complaint.  Crosstown moved to amend its complaint to include Bue, Edelman, and First Federal as parties, and to assert additional claims.  The district court heard Crosstown's motion jointly with Marquette's and Wells Fargo's motion for summary judgment.  It appears that, because the district court granted Marquette's and Wells Fargo's motion for summary judgment on all of the claims, it denied Crosstown's motion to amend.  However, the district court's reasoning is unclear because it did not provide any explanation or order addressing Crosstown's motion.  Because the district court has wide discretion to grant or deny motions to amend and because the district court may consider the stage of the proceedings when making its decision, we affirm the district court's denial of the motion based solely on the timing of the motion and do not reach the merits of the motion.

            Affirmed.

* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.