Ringdahl Architects, Inc. v. Swendsrud Construction, Inc. et al

Filing 61

MEMORANDUM OPINION AND ORDER. 1. Defendants' Motion for Summary Judgment (Doc. No. 30 ) is GRANTED IN PART and DENIED IN PART as follows: a. Plaintiff's MUDTPA claim (Count V) is DISMISSED. 2. Plaintiff's Motion for Summary Judgment (Doc. No. 36 ) is DENIED.(Written Opinion) Signed by Judge Donovan W. Frank on 11/6/2017. (BJS)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Ringdahl Architects, Inc.,
a Minnesota corporation,

Civil No. 16-1060 (DWF/LIB)

Plaintiff,
v.

MEMORANDUM
OPINION AND ORDER

Swendsrud Construction, Inc.,
a Minnesota corporation, and Hilltop
Lumber of Glenwood, Inc., a Minnesota
Corporation,
Defendants.
_______________________________________________________________________
Dwight G. Rabuse, Esq., and Holly J. Newman, Esq., DeWitt Mackall Counse & Moore,
S.C., counsel for Plaintiff.
Brock P. Alton, Esq., and Marissa K. Linden, Esq., Gislason & Hunter LLP, and
Jordan B. Weir, Esq., and Robert G. Manly, Esq., Vogel Law Firm, counsel for
Defendants.
_______________________________________________________________________

INTRODUCTION
This matter is before the Court on cross-motions for summary judgment brought
by Defendants Swendsrud Construction, Inc. (“Swendsrud”) and Hilltop Lumber of
Glenwood, Inc. (“Hilltop”) (together, “Defendants”) (Doc. No. 30) and Plaintiff Ringdahl
Architects, Inc. (“Ringdahl” or “Plaintiff”) (Doc. No. 36). For the reasons set forth
below, the Court denies Plaintiff’s motion and grants Defendants’ motion in part.

BACKGROUND
On August 7, 2012, Ringdahl and Dr. Hamid R. Abbasi entered into a contract for
the design and services related to the construction of a house and garage for Abbasi (the
“Project”). (Doc. No. 1 (“Compl.”) ¶ 10; Doc. No. 33 (“Alton Decl.”) ¶ III, Ex. 2 (the
“Ringdahl-Abbasi Contract”).) Pursuant to the Ringdahl-Abbasi Contract, Ringdahl was
to perform work described as “Design, Construction Documents and Construction
Administration Services” pursuant to the following relevant terms:
Fee The total fee, except stated lump sum, shall be understood to be an
estimate, based upon Scope of Services 1, and shall not be exceeded by
more than ten percent, without written approval of the Client. Where the
fee arrangement is to be on an hourly basis. [sic] The rates shall be those
that prevail at the time services are rendered. . . .
...
Termination of Services This agreement may be terminated upon 10 days
written notice by either party should the other fail to perform his
obligations hereunder. In the event of termination, the Client shall pay the
Design Professional for all services rendered to the date of termination, all
reimbursable expenses, and reasonable termination expenses.
Ownership of Documents All documents produced by the Design
Professional under this agreement shall remain the property of the Design
Professional and may not be used by the Client for any other endeavor
without the written consent of the Design Professional.
(Ringdahl-Abbasi Contract at 1-2 (emphasis added).) The parties agreed that the budget
for the project would not exceed $1,000,000. (Id. at Amendments.)

1

The “Scope of Services” is not defined. (Id.)

2

The Project consisted of two phases: Phase I (construction of a three story garage
with living quarters) and Phase II (construction of the main living quarters). After
multiple drafts, and input from Abbasi, Ringdahl completed the construction documents.
Ringdahl maintains that these plans are its copyrighted works and were marked as such.
Abbasi approved Phase I of the project in October 2012, including an estimated total cost
of $1,224,794 for both phases. (Alton Decl. ¶ XIV, Ex. 13.) Abbasi was invoiced for,
and paid, the full amount for Phase I.
In June 2013, the design process for Phase II began and Ringdahl solicited bids
from contractors. Ringdahl and Richard Hardine of Infinity Development 2 proposed a
budget of over $2,000,000 for Phase II. Abbasi rejected this bid, as well as additional
subsequent bids. Eventually, Abbasi asked Swendsrud to bid on the Project, after which
Abbasi and Swendsrud agreed to a total of $1,072,000 to construct Phase II. (Alton Decl.
¶ II, Ex. 1 (Findings of Fact, Conclusions of Law, Order for Judgment, and Judgment
(“Order in Initial Litigation”) at Findings of Fact ¶ 52.) According to Defendants, shortly
after submitting the bid, Mike Swendsrud, the principal of Swendsrud, received a phone
call from the owner of Tradesman Construction, Inc., offering him $30,000 to withdraw
his bid. 3 (Id. ¶ 53.) After learning of the call, Abbasi terminated his relationship with
Plaintiff. (Alton Decl. ¶ XIX, Ex. 18.) In his e-mail documenting the termination,
2

Also on August 7, 2012, Abbasi entered into a separate agreement with Richard
Hardine to provide pre-construction and construction management services related to the
Project. (Alton Decl. ¶ V, Ex. 4.)
3

Tradesman bid in the first round of bidding for Phase II.

3

Abbasi offered to pay Ringdahl $20,000 for the rights to the plans and to separate on
“friendly terms” without having to involve lawyers. (Id.) The offer was not accepted. In
September 2013, Swendsrud began work on Phase II and hired Hilltop as a subcontractor,
and both used the Plans to complete Phase II.
After Abbasi terminated Ringdahl, Ringdahl demanded roughly $96,000 from
Abbasi. Abbasi refused the demand. Ringdahl sued Abbasi in Minnesota State Court for
Breach of Contract, Account Stated, Mechanic’s Lien Foreclosure, and Unjust
Enrichment (the “Initial Litigation”). In the Initial Litigation, Ringdahl alleged, among
other things, that after terminating the relationship with Ringdahl, Abbasi “proceeded
with construction of the new home upon the Real Estate and utilized architectural plans
prepared by [Ringdahl] in obtaining the building permit for construction of such home.”
(Alton Decl. ¶ XXIII, Ex. 22 at ¶ XIII.)
On May 19, 2014, Plaintiff registered its final copy of the Plans for the home with
the United States Copyright Office. (Id. ¶ XXIV, Ex. 23.) On July 14, 2014, counsel for
Plaintiff sent Swendsrud a cease and desist letter. (Id. ¶ XXV, Ex. 24.) Plaintiff did not
add Swendsrud or Hilltop to the Initial Litigation or assert a copyright infringement
claim.
In July 2015, the state court held a bench trial in the Initial Litigation, after which
the court found in Abbasi’s favor. (Order in Initial Litigation at Findings of Fact ¶ 9 &
Conclusions of Law ¶ 2.) Specifically, the state court made the following findings and
conclusions:

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• the Ringdahl-Abbasi Contract does not define “Scope of Services,”
contains incomplete sentences, does not define material terms and is
ambiguous;
• the terms of the Ringdahl-Abbasi Contract are construed against
Ringdahl as the drafter;
• Ringdahl breached the Ringdahl-Abbasi Contract by failing to
administer construction or complete Phase I;
• Ringdahl did not complete any “Construction Administration
Services” related to the design, construction documents, or bidding
related to Phase II.
(Id. at Findings of Fact ¶ 9 & Conclusions of Law ¶¶ 2-7.) In an attached Memorandum,
the judge in the Initial Litigation rejected Ringdahl’s assertion that Abbasi was obligated
to pay Ringdahl for Phase II under the contract, explaining that Ringdahl breached the
Contract, and that its breach precludes Ringdahl’s claim for any subsequent breach by
Abbasi.
On April 22, 2016, Plaintiff filed this action, asserting claims for copyright
infringement, unfair competition under the Lanham Act, violations of the Minnesota
Deceptive Trade Practices Act, Minn. Stat. § 325 D.44, et seq., (“MUDTPA”), and
conversion. In an agreement dated July 28, 2016, Abbasi agreed to fully defend and
indemnify Defendants against the claims in the lawsuit.
The parties filed cross-motions for summary judgment, the merits of which the
Court considers below.
DISCUSSION
I.

Legal Standard
Summary judgment is appropriate if the “movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
5

Fed. R. Civ. P. 56(a). Courts must view the evidence and all reasonable inferences in the
light most favorable to the nonmoving party. Weitz Co., LLC v. Lloyd’s of London, 574
F.3d 885, 892 (8th Cir. 2009). However, “[s]ummary judgment procedure is properly
regarded not as a disfavored procedural shortcut, but rather as an integral part of the
Federal Rules as a whole, which are designed ‘to secure the just, speedy and inexpensive
determination of every action.’” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986)
(quoting Fed. R. Civ. P. 1).
The moving party bears the burden of showing that there is no genuine issue of
material fact and that it is entitled to judgment as a matter of law. Enter. Bank v. Magna
Bank of Mo., 92 F.3d 743, 747 (8th Cir. 1996). A party opposing a properly supported
motion for summary judgment “must set forth specific facts showing that there is a
genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); see
also Krenik v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).
II.

Copyright Infringement Claims Against Swendsrud and Hilltop
Plaintiff alleges that both Swendsrud and Hilltop infringed its copyright by using

the Plans to design and construct Phase II of the Project. In particular, Plaintiff argues
that: (1) Swendsrud directly infringed Ringdahl’s copyright by using the Plans and by
filing copies of the Plans to obtain permits; (2) Swendsrud is liable for vicarious and
contributory infringement because it used derivative infringing plans produced by
Hilltop; (3) Hilltop directly infringed Ringdahl’s copyright by making modifications to
the Plans, labeling the modified drawings as its own, and allowing the modified plans to

6

be used to complete Phase II; and (4) Hilltop is liable for vicarious and contributory
infringement because it received the Plans from Swendsrud, turned the Plans over to
subcontractors and suppliers, and directed the Plans to be modified. Defendants argue
that they are entitled to summary judgment on all of Plaintiff’s copyright claims because,
as a matter of law, Abbasi had both an express and implied license, as well as a statutory
right, to use the Plans to finish his home, and that the license extended to the use of the
Plans by Defendants. Plaintiff opposes Defendants’ motion on this claim and argues that
Plaintiff is entitled to summary judgment.
Architectural plans and drawings are protected by copyright law. 17 U.S.C.
§ 102(a). To prove copyright infringement, a plaintiff must demonstrate that it owns a
valid copyright and that the defendant engaged in unauthorized copying of the work
protected by the copyright. Feist Publ’ns. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 361
(1991). Even where direct infringement cannot be proven, a defendant can be held liable
for the infringing activities of another. See Sony Corp. of Am. v. Universal City Studios,
Inc., 464 U.S. 417, 432-36 (1984).
“Ownership of a copyright may be transferred in whole or in part by any means of
conveyance or by operation of law . . . .” 17 U.S.C. § 201(d)(1). The owner of a
copyright can transfer ownership interests to another in a signed writing. Id. § 204(a).
See also Effects Assocs., Inc. v. Cohen, 908 F.2d 555, 557 (9th Cir. 1990). The writing
need not contain any particular words to satisfy § 204(a)—the inquiry centers on giving
effect to the intent of the parties, which must demonstrate a transfer of the copyright. See

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Radio Television Espanola S.A. v. New World Entm’t, Ltd., 183 F.3d 922, 926 (9th Cir.
1999). When the plain language of a contract provides for a transfer, there is no claim for
infringement. Thomsen v. Famous Dave’s of Am., Inc., 640 F. Supp. 2d 1072, 1079-80
(D. Minn. 2009), aff’d 606 F.3d 905 (8th Cir. 2010).
The goal of contract interpretation is to determine and enforce the intent of the
parties. Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979). Absent
ambiguity, contract terms are to be given their plain and ordinary meaning. Brookfield
Trade Ctr., Inc. v. Cty. of Ramsey, 584 N.W.2d 390, 394 (Minn. 1998). Contract
provisions must be interpreted in the context of the entire contract. Id.
In this case, it is undisputed that Plaintiff owns a valid copyright related to the
Plans and that Defendants used the Plans to complete Phase II of the Project. The central
inquiry on Plaintiff’s copyright infringement claim is whether the Court can, as a matter
of law, determine that Abbasi had a license or statutory right to use the Plans, thereby
providing a defense to any copyright infringement claim.
Here, the Abbasi-Ringdahl Contract provides the following with respect to the
Plans:
Ownership Documents All documents produced by the Design
Professional under this Agreement shall remain the property of the Design
Professional and may not be used by the Client for any other endeavor
without the written consent of the Design Professional.
Defendants argue that this language unambiguously provides that Abbasi could use the
Plans to complete the construction of his home. This argument requires a finding that the
use of the language “any other endeavor” defines the current endeavor as the completion
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of the Project with or without the use of Ringdahl’s services. While that interpretation is
reasonable, looking at the contract as a whole, the Court concludes that this language is
susceptible to another reasonable interpretation—that the current endeavor is the
completion of the Project using Ringdahl’s services. Indeed, Plaintiff argues that
Defendants did not have a license to use the Plans because Plaintiff never intended that
the Plans would be used to build Phase II of the Project without his continued
participation.
The Court concludes that the contract is ambiguous as to whether the parties
intended to grant Abbasi an express license to use the Plans to complete the Project
without Ringdahl. Both parties’ reading of the contract is plausible. Because the contract
is ambiguous as to an express license, summary judgment is inappropriate. See
generally, Leisure Time Entm’t, Inc. v. Cal Vista, 79 F.3d 1153 (9th Cir. 1996)
(unpublished opinion).
Defendants also argue that Abbasi had an implied license to use the Plans to
finish the Project. “A nonexclusive license may be granted orally, or may even be
implied from conduct.” Evert Software, Inc. v. Extreme Recoveries, Inc.,
Civ. No. 01-1027, 2001 WL 1640116, at *3 (D. Minn. July 25, 2001) (citing 3
Melville B. Nimmer & David Nimmer, Nimmer on Copyright §10.03[A], at 10-40
(1997)). See also Pinkham v. Sara Lee Corp., 983 F.2d 824, 831 (8th Cir. 1992) (“unlike
an exclusive license, an authorization can be given orally or implied from conduct”).
“Proof of the existence of an implied license is an affirmative defense to a copyright

9

infringement claim.” Evert Software, 2001 WL 1640116 at *3. An implied license may
arise when: “(1) a person requests the creation of a work; (2) the creator makes the
particular work and delivers it to the person who requested it; and (3) the licensor intends
that the licensee-requestor copy and distribute the work.” Id.
For the same reasons discussed above, the Court concludes that the record is not
clear as to whether Ringdahl intended for Abbasi to be able to copy and distribute the
Plans to complete the Project without using Ringdahl’s services. Therefore, summary
judgment is not appropriate on the issue of whether Abbasi had an implied license.
Finally, Defendants argue that they are entitled to a statutory right to use the Plans
under 17 U.S.C. § 120, which provides in relevant part:
(b) Alterations to and destruction of buildings.--Notwithstanding the
provisions of section 106(2), the owners of a building embodying an
architectural work may, without the consent of the author or copyright
owner of the architectural work, make or authorize the making of
alterations to such building, and destroy or authorize the destruction of such
building.
This statute is directed at preventing a copyright owner “from interfering with alterations
to habitable architectural works.” Javelin Investments, LLC v. McGinnis,
Civ. No. H-05-3379, 2007 WL 781190, *6 (S.D. Tex. Jan. 23, 2007) (discussing
legislative history). The Court finds that Defendants have not established that this statute
applies to their use of the Plans in this case. Section 120(b) specifically provides that the
owners of “a building embodying an architectural work” may make alterations “to such
building.” Here, the Project was separated into two distinct phases, the garage (Phase I)
and the separate home (Phase II). Phase II was not built at the time that Ringdahl was
10

terminated, and it is not clear that the statute applies to a building that has not yet been
built. Moreover, § 120(b) distinguishes between a “building embodying an architectural
work” and “architectural work”—the latter being, among other things, architectural plans.
17 U.S.C. § 101. Here, because the Plans are an architectural work, and not a “building
embodying an architectural work,” the Court concludes that § 120(b) simply does not
apply. 4
Because the Court concludes that fact issues exist as to whether Defendants had
either an express or implied license to use the Plans, the Court denies the motions for
summary judgment on Plaintiff’s copyright infringement claim. 5
III.

Unfair Competition Under the Lanham Act
Plaintiff also asserts a claim for unfair competition under Section 43 of the

Lanham Act. In support, Plaintiff alleges that Defendants’ activities “in infringing
4

The Court is aware that Defendants rely on Javelin Investments for the proposition
that the § 120(b) gives Abbasi (and by extension the Defendants) the right to copy and
modify the Plans for the limited purpose of finishing Phase II of the Project. See Javelin
Investments, 2007 WL 781190, at *8 (explaining that §120(b) places no limits on the
means by which the owner of a building may alter that building without fear of copyright
infringement). The Court notes, however, that this case is distinguishable from the facts
of Javelin Investments. In Javelin Investments, construction of the building at issue had
begun and, therefore, there was an existing building that the homeowners were entitled to
complete. Here, construction of Phase II had not begun and, therefore, there was no
“building embodying an architectural work” to alter. In addition, the Javelin Investment
case is an unpublished decision in a different district and is not controlling here.
5

As to Plaintiff’s motion for summary judgment on its copyright infringement
claim, the Court concludes that fact issues exist, including but not limited to whether
Defendants knowingly and intentionally infringed Plaintiff’s copyright to establish
vicarious or contributory infringement. In addition, the question of damages, if any, is
properly determined at trial.

11

Ringdahl’s copyright, including by passing off copyrighted plans prepared by Ringdahl
as Hilltop’s, are likely to cause confusion, mistake or deception regarding Ringdahl’s
rights to or in the [P]lans.” (Compl. ¶¶ 52-53.) As a remedy, Plaintiff seeks lost profits,
treble damages, and attorney fees. (Doc. No. 39 at 26-27.)
The Lanham Act creates a federal tort of unfair competition based on false
designation of origin or other false representation used in connection with the sale of a
product. 15 U.S.C. § 1125(a). The key factor in determining if there has been a violation
under § 43(a) is whether defendant’s products create a likelihood of confusion, deception
or mistake on the part of the consuming public. See Toro Co. v. R & R Products Co.,
787 F.2d 1208, 1214 (8th Cir. 1986). Plaintiff argues that Defendants engaged in
“reverse passing off” by creating modified versions of the Plans, marking them as their
own, and supplying them to others.
The Court concludes that because fact issues remain with respect to whether
Abbasi had a license to use the Plans, Plaintiff’s motion for summary judgment on the
Lanham Act is properly denied. If a fact-finder determines that Abbasi had a license to
use the Plans to complete the construction of the Project, then that determination could
preclude any liability under the Lanham Act, as licensed use is a defense to a claim for
false designation of origin. See A.Hak Indus. Servs. BV v. TechCorr USA, LLC,
Civ. No. 3:11-74, 2014 WL 7243191, at *9 (N.D. W. Va. Dec. 19, 2014) (collecting
cases and explaining that courts have recognized that a license can be a defense to a false
designation of origin claim).

12

In support of their motion, Defendants make the additional argument that any
claim for monetary damages under the Lanham Act fails as a matter of law because
Plaintiff cannot establish actual confusion. A plaintiff seeking injunctive relief under the
Lanham Act need only establish a likelihood of confusion. See Porous Media Corp. v.
Pall Corp., 110 F.3d 1329, 1335 (8th Cir. 1997). A claim for money damages under the
Lanham Act, however, requires proof of “both actual damages and a causal link between
defendant’s violation and those damages.” Blue Dane Simmental Corp. v. Am. Simmental
Ass’n, 178 F.3d 1035, 1042 (8th Cir. 1999) (citation omitted). This requires a showing
“that the defendant’s violation caused actual confusion among the consumers of the
plaintiff’s product and, as a result of this consumer confusion, the plaintiff suffered actual
injury, such as a loss of sales, profits, or of present value.” LensCrafters, Inc. v. Vision
World, Inc., 943 F. Supp. 1481, 1489 (D. Minn. 1996). Plaintiff argues that this case
involves “reverse passing off” (falsely attributing the Plans to itself or a third party) and
that in such cases, consumer confusion is presumed. See, e.g., Johnson v. Jones, 149
F.3d 494, 503-04 (6th Cir. 1998) (finding liability for false designation of origin and
awarding attorney fees in a “reverse passing off” case). Plaintiff also argues that it need
not demonstrate actual confusion because this case is “exceptional” and involved willful
infringement. See Masters v. UHS of Delaware, Inc., 631 F.3d 464, 474 (8th Cir. 2011)
(explaining that a finding of willful infringement may justify an accounting of profits).
While the Court acknowledges that the record appears to have scant, if any,
evidence of actual consumer confusion and that a lack of such evidence could impact any

13

claim for damages under the Lanham Act, the Court declines to decide this issue on
summary judgment, particularly in light of the allegations that Defendants attributed
Plaintiff’s Plans to themselves. The Court concludes that the issue of whether damages
are ultimately available based on evidence of confusion or “reverse passing off” is more
appropriately addressed at trial or in a pre-trial motion in limine.
IV.

Unfair Competition Under the MUDTPA
Plaintiff also asserts claims for unfair competition under the MUDTPA, alleging

that “Defendants’ unauthorized use of Ringdahl’s copyrighted plans is likely to cause
confusion, mistake or deception to the consuming public as to Ringdahl’s affiliation,
sponsorship or approval of Defendant’s [sic] commercial activities.” (Compl. ¶ 57.)
Under the MUDTPA, “[a] person likely to be damaged by a deceptive trade
practice of another may be granted an injunction against it under the principles of equity
and on terms that the court considers reasonable.” Minn. Stat. § 325D.45. “Proof of
monetary damage, loss of profits, or intent to deceive is not required.” Id. Because
MUDTPA provides for only injunctive relief, the plaintiff must show the risk of future
harm. See, e.g., Hudock v. LG Elecs. U.S.A., Inc., Civ. No. 16-1220, 2017 WL 1157098,
at *6 (D. Minn. Mar. 27, 2017); Klinge v. Gem Shopping Network, Inc.,
Civ. No. 12-2392, 2014 WL 7409580, at *2 (D. Minn. Dec. 31, 2014); Jaskulske v. State
Farm Mut. Auto. Ins. Co., Civ. No. 14-869, 2014 WL 5530758, at *6 (D. Minn. Nov. 3,
2014) (collecting cases). Here, Plaintiff has not pointed to any facts suggesting that
Defendants are likely to use the Plans again or that Plaintiffs are likely to suffer any

14

future harm that can be remedied through injunctive relief. Thus, the Court concludes
that Defendants are entitled to summary judgment on Plaintiff’s MUDTPA claim. See
Klinge, 2014 WL 7409580 at *2 (granting summary judgment on the MUDTPA claim
because the plaintiff did not assert an ongoing relationship or intent to purchase gems
from the defendants in the future).
V.

Conversion
Plaintiff argues that Defendants converted Plaintiff’s copyrighted plans by

copying the Plans, supplying the Plans to others, making derivative versions of the Plans,
and by helping build Abbasi’s residence using the Plans. Plaintiff argues that it is entitled
to actual damages in the form of an unpaid fee for producing the Plans to be used to build
Abbasi’s home. Under Minnesota law, a claim for conversion “occurs where one
willfully interferes with the personal property of another without lawful justification,
depriving the lawful possessor of use and possession.” Williamson v. Prasciunas, 661
N.W.2d 645, 649 (Minn. Ct. App. 2003) (emphasis added) (internal quotations omitted).
Here, because fact issues remain regarding whether Abbasi and Defendants had a license
to use the Plans, fact issues also exist as to whether Defendants used the Plans without
legal justification so as to support a claim of conversion. Therefore, the Court denies
summary judgment on Plaintiff’s conversion claim.
VI.

Res Judicata
Finally, Defendants argue that all of Plaintiff’s claims are barred by res judicata

based on the Initial Litigation. Again, in July 2015, the Initial Litigation was tried in

15

state court on Plaintiff’s claims of breach of contract, account stated, and mechanic’s lien
foreclosure against Abbasi.
The doctrine of res judicata bars a claim when “(1) the earlier claim involved the
same set of factual circumstances; (2) the earlier claim involved the same parties or their
privies; (3) there was a final judgment on the merits; [and] (4) the estopped party had a
full and fair opportunity to litigate the matter.” Hauschildt v. Beckingham, 686 N.W.2d
829, 840 (Minn. 2004). Here, there is no dispute that a court of competent jurisdiction
rendered a prior judgment in the Initial Litigation. In addition, the Court concludes that
the claims brought in the Initial Litigation and the present lawsuit all arise out of the same
set of factual circumstances—namely those related to the construction of Abbasi’s home
by Swendsrud and Hilltop, and the extent to which Plaintiff was entitled to compensation
under the Ringdahl-Abbasi Contract for Defendants’ completion of the Project. In
particular, in the Initial Litigation, Ringdahl sued Abbasi after Abbasi proceeded with the
construction of Phase II of the Project using the Plans prepared by Plaintiff and
Swendsrud and Hilltop to complete the Project. Here, while the claims are asserted
against different defendants, the same set of operative facts applies and the allegations in
the Initial Litigation involved the actions of both Swendsrud and Hilltop.
The Court therefore turns to the questions of whether the parties were the same in
the Initial Litigation and as in this action. Plaintiff in both cases is Ringdahl. The named
defendants, however, are different. Even so, res judicata may be invoked against
Ringdahl if Swendsrud and Hilltop are in privity with Abbasi. See Global Maintech

16

Corp. v. AIG Techs., Inc., Civ. No. 04-4638, 2006 WL 354224, at *3 (D. Minn. Feb. 15,
2006). The Minnesota Supreme Court has explained that:
Privity expresses the idea that as to certain matters and in certain
circumstances persons who are not parties to an action but who are
connected with it in their interests are affected by the judgment with
reference to interests involved in the action, as if they were parties . . . .
[c]ourts will find privity to exist for those who control an action although
not parties to it, those whose interests are represented by a party to the
action, and successors in interest to those having derivative claims.
However, privity may also be found in other circumstances . . . when a
person is otherwise so identified in interest with another that he represents
the same legal right.
Rucker v. Schmidt, 794 N.W.2d 114, 118 (Minn. 2011) (citations omitted) (internal
quotations omitted).
Defendants argue that privity exists by virtue of the indemnity agreement between
Defendants and Abbasi and because the relationship between Abbasi and Defendants is
akin to a principal-agent relationship. In particular, Defendants assert that Swendsrud
agreed to act on Abbasi’s behalf, and subject to his control, in the building of the Project.
In addition, Defendants assert that Hilltop agreed to move forward with the Project after
receiving assurances that Abbasi believed that he had the right to use the Plans and after
Abbasi promised to indemnify Hilltop.
The dispositive question on privity is whether Swendsrud and Hilltop are so
identified in interest with Abbasi that they represent the same legal right. In Rucker, the
plaintiff successfully sued her ex-husband for intentionally misrepresenting the value of
his business during divorce proceedings. Id. at 115. The plaintiff then sued her
ex-husband’s attorney and his law firm based on the same misconduct. Id. The attorney
17

and the law firm moved to dismiss on the grounds that the claims were barred by the
doctrine of res judicata. Id. The Supreme Court concluded that res judicata did not apply
because the attorney-client privilege did not create privity. Id. at 120.
In reaching this conclusion, the Minnesota Supreme Court examined whether the
client and his attorney had an identity of interest in the outcome of the first litigation such
that the client represented the attorney’s and law firm’s legal interests. Id. at 118. The
court noted that such an interest must be more than a common objective of a favorable
outcome. Id. at 119. Instead, they must be “similarly affected by the outcome of a legal
proceeding.” Id. at 120. The Court noted that the attorney and his firm did not have a
“controlling participation” or “active self-interest” in the first fraud action, were not
successors in interest to a derivative claim of a party in the first fraud action, and that
there was no claim that any party represented the interests of the attorney and his firm in
the first action. Id. at 118.
Here, the Court cannot conclude on the current record that Defendants are in
privity with Abbasi. It is not evident that Defendants had any active self-interest or
controlling participation in the Initial Litigation, which was primarily a contract dispute
between Plaintiff and Abbasi and did not involve claims for copyright infringement. Nor
is it evident that Defendants’ interests were represented by Abbasi in the Initial Action or
that those interests were “so identified” with Abbasi’s that they represented the same
legal right because Defendants would have been unaffected by the outcome of the Initial
Action. Moreover, while Abbasi agreed to indemnify Defendants in the present action,

18

this agreement was not entered into until July 2016, which was roughly one year after the
conclusion of the Initial Litigation and three months after commencement of the present
action. Thus, this agreement (and Abbasi’s alleged power to control this lawsuit) does
not speak to whether Abbasi was acting with accountability to Defendants in the Initial
Litigation.
Because Defendants have failed to establish that they are in privity with Abbasi,
the Court concludes that Defendants are not entitled to the application of res judicata.
CONCLUSION
While this case survives both parties’ motions for summary judgment, the Court
cautions the parties not to equate a victory at this stage of the litigation as a guarantee that
they will prevail at trial. The Court believes that settlement would serve the interests of
all parties.
ORDER
Based upon the foregoing, and the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1.

Defendants’ Motion for Summary Judgment (Doc. No. [30]) is GRANTED

IN PART and DENIED IN PART as follows:
a.
2.

Plaintiff’s MUDTPA claim (Count V) is DISMISSED.

Plaintiff’s Motion for Summary Judgment (Doc. No. [36]) is DENIED.

Dated: November 6, 2017

s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
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