Commandeur LLC, et al., Appellants, vs. Howard Hartry, Inc., Respondent.

Commandeur LLC, et al., Appellants, vs. Howard Hartry, Inc., Respondent. A05-2014, Court of Appeals Unpublished Decision, December 21, 2007.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2006).

 

STATE OF MINNESOTA

IN COURT OF APPEALS
A05-2014
 
Commandeur LLC, et al.,
Appellants,
 
vs.
 
Howard Hartry, Inc.,
Respondent.
 

Filed December 21, 2007

Reversed and remanded

Willis, Judge

Dissenting, Minge, Judge

 

Hennepin County District Court

File No. CT 04-19127

 

David F. Herr, Mark W. Lee, Matthew P. Lewis, Maslon Edelman Borman & Brand, LLP, 3300 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN  55402-4140; and Robert Gonderinger, Croker, Huck, Kasher, Dewitt, Anderson & Gonderinger, LLC, Suite 1250 Commercial Federal Tower, 2120 South 72nd Street, Omaha, NE 68124 (for appellants)

 

William G. Cottrell, Cottrell Law Firm, P.A., 3445 Washington Drive, Suite 204, Eagan, MN 55122 (for respondent)

 

            Considered and decided by Hudson, Presiding Judge; Willis, Judge; and Minge, Judge.

 

U N P U B L I S H E D   O P I N I O N

WILLIS, Judge

            Appellants challenge the district court's grant of summary judgment to respondent, arguing that the district court erred by applying California's statutes of limitations to appellants' claims.  Because we conclude that Minnesota's limitations period applies, we reverse and remand. 

FACTS

The parties do not dispute the material facts for purposes of the narrow legal issue on appeal.  Appellant Commandeur, LLC (Commandeur) is a Minnesota limited-liability company that imports wine and other alcoholic beverages.  Appellant ACRO Business Finance Corporation (ACRO), a Minnesota corporation, is Commandeur's secured lender.  ACRO has a lien on all of Commandeur's collateral, including receivables and inventory.  Respondent Howard Hartry, Inc. (Hartry), a California corporation, is a customs brokerage. 

            In early 1998, Commandeur entered into a contract with Northwest Airlines, Inc. (NWA), a Minnesota corporation, by the terms of which NWA agreed to purchase champagne from Commandeur and Commandeur agreed to have the champagne shipped to various locations in California at NWA's direction.  To fulfill its obligations under the contract, Commandeur ordered champagne from Gosset, a French champagne producer, and had the champagne shipped monthly from France to Hartry's warehouse in California.  In a separate oral contract between Commandeur and Hartry, Hartry agreed to receive and store the champagne, and to deliver the champagne on behalf of Commandeur to NWA for use on its international flights. 

             Between March 1998 and July 2000, Commandeur and Hartry communicated monthly about shipments of champagne and NWA's delivery orders.  In the summer of 2000, a dispute arose between Gosset and Commandeur that resulted in NWA stopping payment for the champagne.  Gosset, although not a party to the Commandeur-Hartry contract, agreed to indemnify Hartry for any liability it might incur for releasing the champagne to NWA.  And in August 2000, Hartry released a shipment of champagne to NWA. 

            On November 23, 2004, appellant ACRO brought this suit in its own name and in the name of Commandeur against Hartry for breach of contract, negligence, and conversion.         The parties filed cross-motions for summary judgment in May and June 2005.  After characterizing the statutes of limitations as substantive law and analyzing whether Minnesota or California law should apply under the choice-of-law analysis described in Milkovich v. Saari, 295 Minn. 155, 203 N.W.2d 408 (1973), the district court concluded that California law should apply and that California's statutes of limitations barred ACRO and Commandeur's claims.  The district court dismissed the case, and this appeal follows.

D E C I S I O N

            Appellants argue that the district court erred by applying California's statutes of limitations.  California has a two-year limitations period for actions based on oral contracts, and a three-year limitations period for actions for conversion and negligence as they relate to goods.  See Cal. Civ. Pro. Code §§ 339, 338(c) (Supp. 2005).  Under California law, therefore, all of appellants' claims are untimely.  Minnesota, however, has a six-year statute of limitations for breach-of-contract, conversion, and negligence claims.  Minn. Stat. § 541.05, subd. 1(1), (4), (5) (2004).  If Minnesota's limitations period applies, appellants' claims are timely. 

            On appeal from summary judgment, appellate courts ask two questions: (1) whether there are any genuine issues of material fact in dispute and (2) whether the district court erred in applying the law.  Jorgensen v. Knutson, 662 N.W.2d 893, 897 (Minn. 2003).  This court views the facts in the light most favorable to the party against whom judgment was granted.  River Valley Truck Ctr., Inc. v. Interstate Cos., 680 N.W.2d 99, 103 (Minn. App. 2004), aff'd 704 N.W.2d 154 (Minn. 2005).  Choice-of-law questions are questions of law, which we review de novo.  Schumacher v. Schumacher, 676 N.W.2d 685, 690 (Minn. App. 2004).  Additionally, the construction and applicability of the relevant statute of limitations is a question of law, which we also review de novo.  State Farm Fire & Cas. v. Aquila, Inc., 718 N.W.2d 879, 883 (Minn. 2006). 

            The legal issue before us is whether statutes of limitations are procedural or substantive for purposes of a choice-of-law analysis.  In determining whether to apply a Minnesota law or the law of another jurisdiction, we have recognized that if the "matter is one of substantive law, Minnesota applies a multi-step choice of law analysis, which includes application of five choice-influencing considerations [from Milkovich], to determine which state's law applies."  Danielson v. Nat'l Supply Co., 670 N.W.2d 1, 5 (Minn. App. 2003), review denied (Minn. Dec. 16, 2003).  See also Davis v. Furlong, 328 N.W.2d 150, 153 (Minn. 1983) ("The Milkovich [choice-influencing] methodology is applicable only to conflicts of substantive law.").  But if the matter is one of procedural law, then Minnesota follows "the almost universal rule that matters of procedure and remedies [are] governed by the law of the forum state."  Danielson, 670 N.W.2d at 5 (alteration in original) (quotation omitted).  See also Davis, 328 N.W.2d at 153 ("We hold that when conflicts of procedure arise, the lex fori is to be applied."); Anderson v. State Farm Mut. Auto Ins. Co., 222 Minn. 428, 432, 24 N.W.2d 836, 839 (1946) ("[M]atters of procedure [are governed] by the law of the place where the action is brought . . . ."). 

            Hartry argues that statutes of limitations are substantive and that the district court properly analyzed the issue under the Milkovich choice-influencing factors in determining to apply California's statutes of limitations.  We disagree.  Generally, statutes of limitations relate to the remedy and are procedural for purposes of conflicts-of-law analysis in Minnesota courts.  See, e.g., Am. Mut. Liab. Ins. Co. v. Reed Cleaners, 265 Minn. 503, 506 n.1, 122 N.W.2d 178, 180 n.1 (1963); In re Daniel's Estate, 208 Minn. 420, 429, 294 N.W. 465, 469 (1940); Danielson, 670 N.W.2d at 6; U.S. Leasing Corp. v. Biba Info. Processing Servs., Inc., 436 N.W.2d 823, 825-26 (Minn. App. 1989), review denied (Minn. May 24, 1989).  And we note that while the dissent cites Danielson for the proposition that the choice-influencing-factors analysis should apply here, it overlooks the express determination in that case that statutes of limitations are matters of procedural law in Minnesota.  See Danielson, 670 N.W.2d at 6 (describing Minnesota's statute of limitations as procedural and applying Minnesota's statute because the law of the forum governs procedural issues).

            But appellants overstate the law by claiming that "a statute of limitations is always a procedural issue" in conflicts-of-law cases.  While the general rule is that statutes of limitations are procedural for conflicts-of-law purposes, Minnesota courts have recognized an exception to that general rule.  In Danielson, this court stated that "[a] limitation period is substantive when it applies to a right created by statute, as opposed to a right recognized at common law."  670 N.W.2d at 6 n.2 (citing Daniel's Estate, 208 Minn. at 430, 294 N.W. at 470).  The limitations period is substantive if it relates to a statutory right because "the limitation period [acts as] a condition of the right rather than as an actual statute of limitations."  Id.  But here appellants' complaint seeks only common-law relief for breach of contract, conversion, and negligence. 

            Minnesota decisions dealing with issues other than the resolution of conflicts of law have concluded that statutes of limitations are procedural.  See, e.g., Kennecott Holdings Corp. v. Liberty Mut. Ins. Co., 578 N.W.2d 358, 361 n.7 (Minn. 1998) (noting that "we have consistently regarded statutes of limitation as primarily procedural laws"); City of Willmar v. Short-Elliott-Hendrickson, Inc., 512 N.W.2d 872, 875 (Minn. 1994) (describing the statute of limitations as a "procedural device" in an indemnity case); Calder v. City of Crystal, 318 N.W.2d 838, 844 (Minn. 1982) (same); Klimmek v. Indep. Sch. Dist. No. 487, 299 N.W.2d 501, 502 (Minn. 1980) ("A statute of limitation [in a worker's-compensation case] is not a matter of substantive right but of remedy.").

            Hartry argues that the district court correctly applied the California limitations periods because "Minnesota no longer characterizes statute[s] of limitations as ipso facto procedural."  But the cases on which the district court relied to apply California law are legally and factually distinguishable from this case.  In both State v. Johnson, 514 N.W.2d 551, 555 (Minn. 1994), and State v. Burns, 524 N.W.2d 516, 520 (Minn. App. 1994), review denied (Minn. Jan. 3, 1995), Minnesota courts acknowledged that statutes of limitations have both procedural and substantive qualities.  We note, however, that these cases (1) were criminal cases; (2) referred to the substantive aspect of a statute of limitations only in dictum; and (3) did not involve a conflict-of-law question.  This court has also characterized statutes of limitations as substantive in deciding whether to apply a rule of civil procedure or a statutory provision.  See DeGrande v. Demby, 529 N.W.2d 340, 342 (Minn. App. 1995) (holding that an adjudication of paternity based on a declaration of parentage could not be vacated, as authorized by the rules of civil procedure, after the expiration of the statutory limitations period to challenge such an adjudication), review denied (Minn. May 16, 1995) and appeal dismissed (Minn. July 27, 1995).  But even if DeGrandea case that did not involve a choice-of-law issuecould be construed as relevant to these facts, it is distinguishable because the statute of limitations at issue in DeGrande applied to a right created by statute, not a right recognized at common law.  See Danielson, 670 N.W.2d at 6 n.2 (noting that statutes of limitations are substantive when they apply to a right created by statute). 

            Hartry also cites Myers v. Gov't Employees Ins. Co., 302 Minn. 359, 363, 225 N.W.2d 238, 241 (1974), to support its argument.  In Myers, Minnesota residents were injured in Louisiana by a car driven by a Louisiana resident.  Id. at 360-61, 225 N.W.2d at 240.  The Minnesota plaintiffs sued the defendants' insurance company in Minnesota, seeking to apply a Louisiana statute that allowed accident victims to sue the tortfeasor's insurance company directly without first obtaining a judgment against the tortfeasor.  Id., 225 N.W.2d at 240-41.  Minnesota law did not allow for direct actions against insurers.  Id. at 362, 225 N.W.2d at 240.  Additionally, under Minnesota's statute of limitations, the claim was timely, but had the plaintiffs brought their claim in Louisiana, it would have been barred by Louisiana's shorter limitations period.  Id. at 361, 225 N.W.2d at 240.

            But the Myers court analyzed both the direct-action statute and the statute-of-limitations issues together under the Milkovich choice-influencing factors without even mentioning the long-standing rule in Minnesota that statutes of limitations are matters of procedural law.  See 302 Minn. at 364-66, 225 N.W.2d at 241-43.  And Myers did not describe the statute of limitations there as involving substantive, rather than procedural, law.  The Myers court did not distinguish between the direct-action-statute and the statute-of-limitations questions, and analyzed both by using the choice-influencing factors. 

            Moreover, the analysis in Myers conflicts with both earlier and later supreme-court statements on the issue of whether statutes of limitations are procedural for purposes of resolving conflicts of law.  Myers "did not cite, much less purport to overrule" earlier cases such as Daniel's Estate and Reed Cleaners, in which the supreme court had described statutes of limitations as procedural.  Danielson, 670 N.W.2d at 5.  And nine years after Myers, the supreme court, in affirming the rule that the law of the forum governs procedural matters, discussed Myers in a footnote, but did not acknowledge that Myers involved a statute-of-limitations question.  See Davis, 328 N.W.2d at 152 n.2 (stating that the court in Myers had examined only "whether the Louisiana direct action statute creates substantive or procedural rights").  And Davis, although not itself involving a statute-of-limitations issue, cited with approval a federal case, Cuthbertson v. Uhley, 509 F.2d 225, 226 (8th Cir. 1975), in which the Eighth Circuit characterized a statute of limitations as procedural under Minnesota law and applied the law of the forum.  See id. (stating that Cuthbertson, although not precedential, was "undoubtedly correct").  For all of the above reasons, we reject Hartry's argument that Myers tacitly overruled the long-standing rule in Minnesota that statutes of limitations are procedural for purposes of a conflicts-of-law analysis. 

            Hartry also invites us to forgo the "substantive v. procedural" distinction in favor of the choice-influencing analysis in statute-of-limitations cases.  We recognize that, in 1988, the Restatement described an "emerging trend" to analyze statutes of limitations under the choice-influencing factors.  Restatement (Second) of Conflict of Laws § 142, cmt. e (1988 revision).  But we must decline Hartry's invitation.  Any change in the method by which Minnesota courts resolve statute-of-limitations issues in cases involving conflicts of law is beyond this court's authority.  See Terault v. Palmer, 413 N.W.2d 283, 286 (Minn. App. 1987) ("[T]he task of extending existing law falls to the supreme court or the legislature, but it does not fall to this court."), review denied (Minn. Dec. 18, 1987). 

            Reversed and remanded.

MINGE, Judge (dissenting)

            I respectfully dissent. 

The question is whether California or Minnesota law determines the time limit for appellant to initiate this lawsuit.

            Confusion developed in Minnesota over whether general statutes of limitation are presumptively procedural and governed by Minnesota law or, because they are often outcome determinative, further considerations are necessary before choosing what law to apply.  See Danielson v. Nat'l Supply Co., 670 N.W.2d 1, 5-6 (Minn. App. 2003).  To minimize that confusion, this court provided the following guidance to the district courts on this issue:

Because our supreme court generally favors use of the choice-influencing consideration analysis and because of the shift to this choice of law approach, we follow § 142 of the Restatement, which applies the choice-influencing consideration analysis to statute of limitations conflicts.

 

Id. at 9. 

Although its analysis was somewhat different, the United States District Court for Minnesota in a personal-injury-diversity action analyzed Minnesota caselaw as follows:

In Myers [v. Gov't Employees Ins. Co., 302 Minn. 359, 225 N.W.2d 238 (Minn. 1974)], the Minnesota Supreme Court was faced with a conflict between Louisiana and Minnesota statutes of limitations.  The court determined that the Louisiana statute of limitations, at least as it related to the cause of action at issue, was substantive.  Id. [at 363-4, 225 N.W.2d at 241-2].  The court therefore applied the five-factor Milkovich [v. Saari, 295 Minn. 155, 161, 203 N.W.2d 408, 412 (Minn. 1973)] test in its choice-of-law analysis.  Id. [at 365, 225 N.W.2d] at 242-43.  Although the [Myers] court did not discuss the reason behind its decision to apply the Milkovich factors to the choice of a statute of limitations, it is clear that the determinative fact was that Louisiana characterized the law at issue as substantive.  Myers thus stands for the proposition that when one state characterizes its law as procedural and another state characterizes its law as substantive, courts should engage in the Milkovich analysis when determining which law to apply.

 

Moreover, as the court noted in Danielson, the trend is for courts to apply the choice-of-law analysis when evaluating which state's statute of limitations should apply.  Danielson, 670 N.W.2d at 5 (quoting Restatement (Second) of Conflict of Laws sec. 142 cmt. E (stating that courts "no longer characterize the issue of limitations as ipso facto procedural and hence governed by the law of the forum")).  The Danielson court engaged in the choice-of-law analysis to determine that Minnesota's statute of limitations, rather than the statutes of limitations from Arizona or Texas, should apply.  Id. at 6-7.

 

The distinction between cases in which both states' laws are procedural or both are substantive and cases in which one state's law is procedural and one state's law is substantive makes both logical and practical sense.  Because Wisconsin regards its statues of limitations as substantive, comity dictates that this Court treat the law as substantive and engage in the choice-of-law analysis to determine whether Wisconsin's substantive law should apply.

 

Fee v. Great Bear Lodge of Wis. Dells, LLC, 2004 WL 898916 at *2. (D. Minn. Apr. 9, 2004).  The federal district court, in an attempt to handle the litigation as if it were a Minnesota state court, then heard the matter under a longer Wisconsin statute of limitations despite the fact that the Minnesota (forum) statute of limitations would bar the claim.  Id. at *3.

California treats statute of limitations issues as a matter of substantive law.  See N. Am. Asbestos Corp. v. Super. Ct., 180 Cal. App. 3d 902, 905-08, 225, 181 Cal. Rptr. 877, 879-81 (Cal. Ct. App. 1986) (applying choice influencing considerations to select California law).  As a result, the district court in the case before us applied the Milkovich analysis of five factors, determined that the statute of limitations of California should apply, and dismissed the action.  I would not reverse the district court, return to the unsettled, pre-Danielson approach, and use the procedural label.  Rather, I would affirm the district court's approach.  This would be consistent with this court's decision in Danielson, with the Restatement determination that this reflects a preferable choice-of-law approach, and with the United States district court's determination in Fee that the Milkovich analysis should be used.  The application of the Milkovich analysis requires a weighing of five factors.  Because I conclude the district court did not err in evaluation of those factors, I would affirm its dismissal.