Azarax, Inc. v. Wireless Communications Venture LLC et al
Filing
280
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT; denying as moot 207 Defendants' Motion to Exclude Expert Testimony of Jeffrey A. Johnston; granting 216 Defendants' Motion for Summary Judgment; Azarax, Inc.'s Amended Complaint [31} is dismissed with prejudice. LET JUDGMENT BE ENTERED ACCORDINGLY. (Written Opinion) Signed by Chief Judge John R. Tunheim on 8/15/2019. (JMK)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 16-3228 (JRT/LIB)
AZARAX, INC.,
Plaintiff,
v.
WILLIAM SYVERSON and STINSON
LEONARD STREET, LLP,
MEMORANDUM OPINION AND
ORDER GRANTING DEFENDANTS’
MOTION FOR SUMMARY
JUDGMENT
Defendants.
Michael D. Sydow, Sr., THE SYDOW FIRM, 3355 West Alabama, Suite
444, Houston, TX 77098, and V. John Ella, TREPANIER MACGILLIS
BATTINA P.A., 310 Fourth Avenue South, Suite 8000, Minneapolis,
MN 55415, for plaintiff.
Brooke D. Anthony, and Norman H. Pentelovitch, ANTHONY OSTLUND
BAER & LOUWAGIE PA, 90 South Seventh Street, Suite 3600,
Minneapolis, MN 55402, for defendants.
Plaintiff Azarax, Inc. (“Azarax”) alleges that Defendants William Syverson
(“Syverson”) and Stinson Leonard Street LLP (“SLS”) committed legal malpractice by
representing and undermining its predecessor in an international transaction. 1 Defendants
now move the Court for summary judgment. Because the Court finds both that Azarax
lacks standing to pursue this claim and that, even if it could show standing, no attorneyclient relationship existed between Defendants and Azarax’s predecessor, the Court will
1
Originally, Azarax brought eight counts against a number of defendants. (See generally
Am. Compl., Dec. 16, 2016, Docket No. 31.) Pursuant to the parties’ stipulation, the Court
dismissed all claims against all the other Defendants except the legal malpractice claim against
Syverson and SLS. (Order of Dismissal, Aug. 7, 2018, Docket No. 162.)
grant summary judgment for Defendants and dismiss the case in its entirety. 2
BACKGROUND
I.
2011 AND INITIAL AGREEMENTS
Azarax is the purported successor stemming from the merger of a Mexican
corporation named Convey Communications S.A. de C.V. (“Convey Mexico”) and a
Panamanian corporation named 14 Biz Holdings. (Am. Compl. at 2, 4, Dec. 16, 2016,
Docket No. 31.)
Syverson was a partner at the law firm of Leonard Street & Deinard and remained
a partner when Leonard Street & Deinard merged with Stinson Morrison Hecker in 2015
to become Stinson Leonard Street (“SLS”). (Pl.’s Mem. Opp. at 5, Jan. 21, 2019, Docket
No. 247.) 3 While working for Leonard Street & Deinard and SLS, Syverson represented a
company named Wireless Communications Ventures, LLC (“WCV”). (Decl. of Brooke
D. Anthony (“Anthony Decl.”) ¶ 2, Ex. 9 (“Syverson Dep.”) at 70, Dec. 21, 2018, Docket
No. 219-1.) WCV was formed to pursue telecommunications investment opportunities.
(Anthony Decl. ¶ 2, Ex. 8 (“Scapanski Dep.”) at 60, Docket No. 219-1.)
In early 2011, Syverson and WCV began negotiations with Convey Mexico in
pursuit of a joint telecommunications business venture. (Syverson Dep. at 74.) Convey
Mexico was represented in the negotiations by Nicolas Barrera, Guy Rosbrook, and Garry
2
Defendants also move the Court to exclude the expert testimony of Jeffrey A. Johnston.
Because the Court will grant Defendants’ motion for summary judgment, the Court will deny the
motion to exclude as moot.
3
Some facts cited by Azarax are not fully supported by their accompanying filings or are
supported only by exhibits the Court will not consider. But even taking the facts as stated in
Azarax’s opposition brief as true, summary judgment for Defendants is warranted.
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Donoghue (collectively referred to as the “Convey Group”). (Anthony Decl. ¶ 2, Ex. 47 at
62-66, Docket No. 219-6; Anthony Decl. ¶ 2, Ex. 27 at 40, Docket No. 219-2.) As a result
of these negotiations, WCV agreed to invest $1 million in Convey Mexico in exchange for
20% ownership. (Anthony Decl. ¶ 2, Ex. 17 (“Rosbrook Email”) at 164, Docket No. 2191; Anthony Decl. ¶ 2, Ex. 33 (“Dallas Agreement”) at 12, Docket No. 219-3.) The
negotiations leading to this agreement were adversarial, with both sides aware that
Syverson represented WCV. For instance, on February 25, 2011, Rosbrook sent an email
to the rest of the Convey Group informing them that Rosbrook had reached an agreement
with WCV but that “the negotiations had its moments, such as [Syverson] dressed in his
best clothes with his game face on for a tough negotiation.” (Rosbrook Email at 164.)
After the initial investment agreement, the two sides began negotiating the creation
of a new joint company for the purpose of pursuing Multi-ISMI Technology, a cell phone
technology that allows users to operate the same cell phone in different countries without
incurring roaming charges. (Pl.’s Mem. Opp. at 6.) Once again, negotiations were
adversarial. On May 20, 2011, Syverson sent Rosbrook and Donoghue an email outlining
WCV’s response to a proposed term sheet. (Anthony Decl. ¶ 2, Ex. 18 at 167, Docket No.
219-1.) In the email, Syverson details the problems WCV has with the term sheet and
outlines “our preferred position,” meaning WCV’s preferred position. (Id.) In response to
not being included on the email, Barrera explained to Rosbrook and Donoghue that “[t]his
is an excellent example of how [Syverson] divided us . . . he is not your friend and never
will be. He is not on our side and will never be.” (Id.) Rosbrook agreed and stated that
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“[Syverson] is an attorney and we shouldn’t have let an attorney get in so deep on this deal
or with us.” (Id.)
On May 27, 2011, Rosbrook sent an email to Barrera and Donoghue expressing
distrust of Syverson. (Anthony Decl. ¶ 2, Ex. 19 at 171, Docket No. 219-1.) In response,
Donoghue stated that “[Syverson] is an idiot, or extremely smart, now perhaps we know
why he was stalling on the Mexican agreements.” (Id. at 171.) Barrera explained that
Syverson had lied to him regarding an investment agreement. (Id. at 170.) On June 14,
Barrera sent the others an email stating: “I have patiently been waiting for [Syverson] to
send over a term sheet and [Shareholders Agreement] to then build a case and strategy. So
far I have not had any communication from WCV . . . the ball is on their side.” (Anthony
Decl. ¶ 2, Ex. 20 at 173, Docket No. 219-1.) On June 30, Rosbrook sent an email detailing
negotiation strategy, suggesting a unified front against WCV and Syverson, informing the
other two men of WCV’s positions, and referring to WCV and Syverson interchangeably.
(Anthony Decl. ¶ 2, Ex. 21 at 178, Docket No. 219-1.) Rosbrook also suggested that the
Convey Group have an attorney look at the proposed agreement before moving forward.
(Id.) The Convey Group did eventually have an attorney review the term sheet. (Anthony
Decl. ¶ 2, Ex. 47 at 63, Docket No. 219-6.)
Despite the tense back and forth, the negotiations were ultimately successful, and
resulted in the creation of AmRoam Holdings, LLC (“AmRoam”). (Dallas Agreement at
12.)
The Dallas Agreement was the first informal document to commemorate the
agreement and was signed by the parties on September 23, 2011. (Id. at 12-13.) Syverson
was the only attorney present at this meeting. (Decl. of Michael D. Sydow (“Sydow Decl.”)
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¶ 7, Ex. F (“2d Syverson Dep.”) at 82-83, Jan. 21, 2019, Docket No. 252.) On October 13,
2011, the parties formalized the Dallas Agreement and laid out the formation of the
company by signing the AmRoam Agreement. (Anthony Decl. ¶ 2, Ex. 43 (“AmRoam
Agreement”) at 5, Docket No. 219-6.) The AmRoam Agreement was drafted by Syverson.
(Syverson Dep. at 74.) Between the two agreements, the parties established that WCV
owned a 52% interest in AmRoam and 14 Biz Holdings owned a 48% interest, (Dallas
Agreement at 12); that Convey Mexico would use AmRoam as its exclusive service
provider in the United States, (id.); and that Barrera would act as the CEO/President of
AmRoam, (AmRoam Agreement at 49).
Subsequently, Convey Mexico created a new shareholder agreement (“SHA”) to
memorialize WCV’s agreed upon 20% interest. (Anthony Decl. ¶ 2, Ex. 24 (“Convey
SHA”), Dec. 21, 2018, Docket No. 220.) The new Convey SHA was drafted by Syverson.
(2d Syverson Dep. at 64.) Syverson claims that he drafted the Convey SHA as the legal
representative of WCV. (Id.)
Prior to the Dallas Agreement, AmRoam Agreement, and SHA being signed, WCV
asked Syverson to serve as AmRoam’s attorney, and Syverson executed an engagement
letter which stated that he was hired for the purpose of facilitating AmRoam’s formation,
that his “sole client will be AmRoam Holdings,” and that he would “not be representing
any other person or entity in the matter.” (Anthony Decl. ¶ 2, Ex. 36 at 7, Dec. 21, 2018,
Docket No. 222.) He executed a similar engagement letter after the Dallas Agreement was
signed, stating that he would function as AmRoam’s attorney for its “general business
matters” and that AmRoam would be Syverson’s only client “in the matter.” (Id. at 3.)
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II.
THE ENSUING YEARS AND FAILURE OF THE JOINT VENTURE
After the creation of AmRoam and installation of Barrera as its CEO, AmRoam
began looking for telecommunications investment opportunities. In early 2013, Barrera
negotiated a preliminary contract on behalf of Convey Mexico (the “Convey-Nextel
Agreement”), in which Convey Mexico and Nextel, a Mexican telecommunications
company, would jointly provide cellular services in the U.S. and Mexico to allow users to
make cross border calls without incurring roaming charges. (Anthony Decl. ¶ 2, Ex. 48 at
69-91, Docket No. 219-6.)
The Convey-Nextel agreement was executed in Spanish and was not written or
negotiated by Syverson. (See Anthony Decl. ¶ 2, Ex. 46 at 59, Docket No. 219-6; Syverson
Dep. at 76.) Syverson took issue with the contract, because he believed that the agreement
should have been between AmRoam (or one of its subsidiaries) and Nextel, given that
AmRoam was established for the purpose of pursuing these types of opportunities.
(Anthony Decl. ¶ 2, Ex. 29, Docket No. 221; Syverson Dep. at 76-77.) Accordingly,
Syverson asked Barrera to send him the contract and to ensure that the contract belonged
to AmRoam, or at least that AmRoam would be the benefactor. (Anthony Decl. ¶ 2, Ex.
29.) Barrera confirmed that the contract would end up belonging to AmRoam. (Id.) In
response, Syverson reiterated to Barrera and Donoghue that “[i]t is going to be extremely
important that from here on out that we, meaning WCV, be involved in the process of
finalizing contracts,” and asked that WCV be included in the future so that its input would
be taken into account. (Anthony Decl. ¶ 2, Ex. 46 at 59 (emphasis added).)
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The parties disagree substantially over what happened next. Both sides agree that
Convey and Nextel spent the next year and a half working towards the introduction of the
cross-border technology. However, the joint venture between Nextel and Convey fell apart
in August 2014.
Azarax contends that Syverson covertly met with Nextel and essentially sabotaged
the Convey-Nextel project by telling Nextel that Convey Mexico was failing to keep up its
end of the agreement, by trying to convince Nextel to terminate that contract, and by trying
to convince Nextel to sign with another company owned by WCV. (Pl.’s Mem. Opp. at
12-13.) These actions, Azarax contends, were in violation of the duties Syverson owed
Convey Mexico due to the attorney-client relationship.
Defendants, on the other hand, contend that Nextel had grown disenchanted with
Convey Mexico and that Syverson intervened in an attempt to save the joint venture.
(Defs.’ Mem. Supp. at 16-18, Dec. 12, 2018, Docket No. 230.) In the end, the ConveyNextel agreement did not come to fruition.
DISCUSSION
I.
EVIDENTIARY CHALLENGES
In response to Defendants’ Motion for Summary Judgment, Azarax submitted
declarations from Garry Donoghue, Roger Maddock, Chris White, and Michael Amissah.
(See Sydow Decl. ¶¶ 4-6, 8, Exs. C, D, E, G.) As noted above, Donoghue was one of the
original members of the Convey Group. Maddock, White, and Amissah, however, were
individuals that did not work for Convey Mexico but became involved with Convey
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Mexico at various points before 2015. (See generally id.; Pl.’s Mem. Opp. at 26.) Each of
these individuals states, with no ambiguity, that Syverson acted as Convey Mexico’s
attorney at some point during the years following the 2011 Dallas Agreement.
Defendants argue that the Court should refuse to consider these declarations as
evidence to defeat summary judgment because the four individuals’ information was never
provided to them during discovery. In Defendants’ initial request for admission, Azarax
stated that, while there was no formal retainer agreement between Syverson and Convey
Mexico, “Syverson’s representation of [Convey Mexico] was communicated to [Convey
Mexico] verbally, via overt actions, and stated in emails.” (Anthony Decl. ¶ 2, Ex. 22 at
182-83, Docket No. 219-1.) In the corresponding interrogatory, Azarax provided to
Defendants “nineteen specific documents” showing how the attorney-client relationship
was formed. (Anthony Decl. ¶ 2, Ex. 23 at 188, Docket No. 219-1.) In a supplemental
interrogatory response, Azarax explained that the attorney-client relationship arose from
the Convey-Nextel agreement, provided two additional documents relevant to this
relationship, and informed Defendants that it expected to receive additional information in
this regard and would supplement its responses when it did. (Id. at 188-89.)
Defendants argue that the revelations contained in the four declarations submitted
after filing of a summary judgment motion and after discovery amount to an ambush and
an attempt by Azarax to change the facts to fit its argument. Defendants argue, therefore,
that the declarations should not be considered.
The Court agrees. The scheduling order in this case warns that “[a]ny evidence
responsive to a discovery request which has not been disclosed on or before the discovery
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cutoff . . . shall be excluded from trial.” (2nd Am. Scheduling Order at 6, May 25, 2018,
Docket No. 145.) Azarax was well aware that a central part of its attorney malpractice
claim was establishing an attorney-client relationship, and was well aware that Defendants
were seeking the basis for Azarax’s belief that such a relationship existed. After all, Azarax
informed Defendants that the relationship was established through verbal communications,
overt actions, and emails. It then produced nineteen documents in support of that
statement, but never produced the information it now relies on to survive summary
judgment on this issue.
One of the purposes of discovery “is to enable parties to obtain the factual
information needed to prepare their cases for disposition.” Alpern v. UtiliCorp United,
Inc., 84 F.3d 1525, 1536 (8th Cir. 1996). Another is to “narrow the issues before the court
in preparation for trial.” Owens v. SunTrust Bank, Inc., No. 1:12-CV-2899-WBH, 2014
WL 12776505, at *10 (N.D. Ga. Oct. 7, 2014). By delaying disclosure of the information
contained in these four declarations, Azarax has undercut both purposes. Azarax not only
deprived the Defendants of crucial information that may have changed the way Defendants
approached this case, they also “force[d] the court to double its efforts and review nearly
all of the discovery in this case.” Id. Instead of properly using discovery to present the
facts, thereby narrowing and clarifying the points of dispute, Azarax abused the process in
what was either an attempt to keep Defendants in the dark for as long as possible or an
attempt to introduce new facts to keep this case going. Either way, the Court finds the lastsecond disclosure of potentially vital information improper, and thus refuses to consider it
at this stage.
-9-
II.
STANDARD OF REVIEW
Summary judgment is appropriate when there are no genuine issues of material fact
and the moving party can demonstrate that it is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56(a). A fact is material if it might affect the outcome of the suit, and a
dispute is genuine if the evidence is such that it could lead a reasonable jury to return a
verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A
court considering a motion for summary judgment must view the facts in a light most
favorable to the nonmoving party and give that party the benefit of all reasonable inferences
to be drawn from those facts. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475
U.S. 574, 587 (1986). Summary judgment is appropriate if the nonmoving party “fails to
make a showing sufficient to establish the existence of an element essential to that party's
case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986).
Azarax alleges that Defendants committed legal malpractice stemming from the
various transactions that took place. It asserts that “Syverson and SLS had a duty to inform
Plaintiff of their conflicts of interest, detail the disadvantages of them representing multiple
parties with conflicts of interest, and disqualify themselves as counsel for Plaintiff.” (Am.
Compl. ¶ 80.) Defendants now move for summary judgment of Azarax’s legal malpractice
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claim, arguing that Azarax lacks standing and that the legal malpractice claim fails on the
merits. 4
III.
STANDING
“In order to have standing, a party must have a ‘case or controversy’ under Article
III of the Constitution.” Hodak v. City of St. Peters, 535 F.3d 899, 903 (8th Cir. 2008)
(citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). Constitutionally, “a
party must have [1] suffered an ‘injury in fact,’ an actual or imminent concrete and
particularized invasion to a legally protected interest; [2] the injury must be fairly traceable
to the challenged action of the defendant; and [3] the injury must be redressable by a
favorable decision.” Id. (citing Lujan, 504 U.S. at 560).
However, “[e]ven if a plaintiff meets the minimal constitutional requirements for
standing, there are prudential limits on a court's exercise of jurisdiction.” Ben Oehrleins
& Sons & Daughter, Inc. v. Hennepin County, 115 F.3d 1372, 1378 (8th Cir. 1997). For
instance, “a plaintiff may only assert his own injury in fact and ‘cannot rest his claim to
relief on the legal rights or interests of third parties.’” Hodak, 535 F.3d at 904 (quoting
Warth v. Seldin, 422 U.S. 490, 498-99 (1975)).
As noted above, Azarax’s legal malpractice claim and the attorney-client
relationship on which the claim is based do not relate to Syverson’s representation of
Azarax. Instead, Azarax’s claim is based on Syverson’s alleged wrongdoing as Convey
4
Defendants also argue that Azarax failed to comply with expert disclosure requirements.
Because the Court concludes that Azarax has not shown standing and that—even if they had—no
attorney-client relationship existed, the Court will not discuss these arguments.
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Mexico’s attorney. Nevertheless, Azarax asserts that it has standing to bring the legal
malpractice claim because it is the valid successor-in-interest of Convey Mexico.
Defendants argue Azarax has not adequately shown that it is the successor-ininterest to Convey Mexico. They point out that Convey Mexico’s SHA required that any
merger involving Convey Mexico be approved by a unanimous vote of Convey Mexico’s
shareholders, and that no such shareholder vote took place. Accordingly, Defendants argue
that the purported merger between 14 Biz Holdings and Convey Mexico was invalid and
that Azarax is not the legal successor-in-interest to Convey Mexico.
Because Azarax is invoking federal jurisdiction, it “bears the burden of
establishing” standing. Lujan, 504 U.S. at 561. Standing is “not [a] mere pleading
requirement[] but rather an indispensable part of the plaintiff’s case.” Id. At summary
judgment, “the plaintiff can no longer rest on . . . mere allegations, but must set forth by
affidavit or other evidence specific facts, . . . which for purposes of the summary judgment
motion will be taken to be true.” Id. (quotation omitted.)
Although Azarax does not contest the fact that a unanimous vote including WCV
never took place, it puts forth several arguments in an attempt to show that the lack of a
shareholder vote is not determinative of standing.
First, Azarax contends that WCV was not a valid shareholder and that its vote to
merge was therefore unnecessary. This new assertion directly contradicts several previous
admissions that WCV was a shareholder. For instance, in response to an interrogatory,
Azarax identified WCV as a shareholder of Convey Mexico. (2d Decl. of Brooke Anthony
(“2d Anthony Decl.”) ¶ 2, Ex. 6 at 22, Feb. 4, 2019, Docket No. 263-1.) Azarax has never
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before challenged WCV’s status as a shareholder of Convey Mexico and has submitted
documents to the Court showing that it was. The Court finds this last-second argument
fundamentally incorrect and directly contradictory to Azarax’s prior assertions.
Second, Azarax argues that, even if the SHA was valid and WCV was a shareholder,
Mexican law would invalidate the unanimous vote provision. Again, this argument was
first raised in response to Defendants’ summary judgment motion. In support, Azarax
submits the declaration of John Hannan, a professor at Rice University who is licensed to
practice law in both the U.S. and Mexico. Hannan concludes that the unanimous vote
provision would be invalid under the Ley General de Sociedades Mercantiles, the
corporation law of the Republic of Mexico. Azarax additionally invokes Federal Rule of
Civil Procedure 44.1 to inform Defendants that it intends to rely on this foreign law.
The Court finds these last second submissions improper. Rule 44.1 requires “[a]
party who intends to raise an issue about a foreign country’s law” to “give notice by a
pleading or other writing.” “Congress passed Rule 44.1 in 1966 to avoid unfair surprise.”
Rationis Enterprises Inc. of Panama v. Hyundai Mipo Dockyard Co., Ltd., 426 F.3d 580,
585 (2d Cir. 2005).
“Where the applicability of foreign law is not obvious at the
outset . . . notice . . . may come at any time sufficient to give the court and the defendants
adequate notice of the need to research the foreign rules.” Hodson v. A.H. Robins Co., 528
F. Supp. 809, 824 (E.D. Va. 1981).
Factors to be considered in determining the reasonableness of notice include “[t]he
stage which the case had reached at the time of the notice, the reason proffered by the party
for his failure to give earlier notice, and the importance to the case as a whole of the issue
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of foreign law sought to be raised.” Rule 44.1 Advisory Notes. In the present case,
Azarax’s notice is insufficient.
This case has been ongoing for over three years and has
reached summary judgment. Azarax provides no reason for its late notice. Furthermore,
Defendants have contested standing since their initial answer, yet Azarax has never before
made this argument, thus depriving Defendants of timely notice of the importance of
Mexican law to the standing issue. Azarax’s standing is a central question and has been
since the beginning. Thus, Azarax’s delay in putting Defendants—and the Court—on
notice under Rule 44.1 is not reasonable and the Court will not consider the Ley General’s
effect on the SHA. Accordingly, Azarax’s argument that the Ley General invalidates the
unanimous vote requirement fails.
Finally, Azarax contends that, even if the unanimous vote provision was valid,
WCV tacitly endorsed the merger of Convey Mexico into Azarax when WCV agreed to
transfer its shares of Convey Mexico into an entity called Convey Jersey. Azarax contends
that “[t]he Convey Jersey agreement requires that Convey Mexico be merged into Azarax
Holdings as part of the organization of Convey Jersey.” (Mem. Opp. at 17.) This
contention is not supported by the evidence provided, which says nothing about Convey
Mexico being merged into Azarax. (See Sydow Decl. ¶ 19, Ex. R at 42, Jan. 21, 2019,
Docket No. 249.)
Defendants have challenged Azarax’s standing as the successor-in-interest of
Convey Mexico since the beginning of this case. Instead of providing Defendants with the
information on which it based its legitimacy, Azarax chose to wait until summary judgment
to present new facts and theories to defeat Defendants’ arguments. But the evidence
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presented by Azarax does not show that it is the successor-in-interest of Convey Mexico.
Azarax has failed to create a genuine dispute of material fact on standing, and the Court
will therefore grant Defendants’ motion for summary judgment.
IV.
LEGAL MALPRACTICE
Even if Azarax could demonstrate standing, the Court would not find a genuine
dispute of material facts on Azarax’s legal malpractice claim.
In Minnesota, to succeed on a claim “for legal malpractice arising out of
representation in a transactional matter” based on professional negligence or breach of
contract, Azarax must prove: “(1) an attorney-client relationship; (2) acts constituting
negligence or breach of contract; (3) that such acts proximately caused the plaintiff's
damages; and (4) that but for the defendant’s conduct, the plaintiff would have obtained a
more favorable result in the underlying transaction than the result obtained.” Schmitz v.
Rinke, Noonan, Smoley, Deter, Colombo, Wiant, Von Korff & Hobbs, Ltd., 783 N.W.2d
733, 738–39 (Minn. Ct. App. 2010) (citing Jerry’s Enters., Inc. v. Larkin, Hoffman, Daly
& Lindgren, Ltd., 711 N.W.2d 811, 816, 819 (Minn. 2006)). “If the plaintiff does not
provide sufficient evidence to meet all of these elements, the claim fails.” Jerry’s, 711
N.W.2d at 816.
Defendants argue that summary judgment is warranted because Azarax fails to
create a genuine dispute of material fact as to whether an attorney-client relationship
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existed. 5 Under Minnesota law, an attorney-client relationship may be found to exist under
either a contract theory or a tort theory. Admiral Merchants Motor Freight, Inc. v.
O’Connor & Hannan, 494 N.W.2d 261, 265 (Minn. 1992). Azarax argues that a genuine
dispute of material fact exists to support the existence of an attorney-client relationship
under either theory.
A.
Contract Theory
A contract for legal services can be express or implied and can be “deduced from
the circumstances, relationship, and conduct of the parties.” McIntosh Cty. Bank v. Dorsey
& Whitney, LLP, 745 N.W.2d 538, 549 (Minn. 2008) (quoting High v. Supreme Lodge of
World, Loyal Order of Moose, 298 N.W. 723, 725 (Minn. 1941)).
There is no indication, nor does Azarax argue, that an attorney-client relationship
was created via an express contract. Azarax instead argues that an implied contract arose
between Syverson/SLS and Convey Mexico. In an implied contract situation, “‘it is not
expected that the elements of a contract will be as vividly portrayed by the evidence as
where an express contract has been pleaded,’ [but] reliance on an implied contract ‘does
not relieve [a] plaintiff from his burden of establishing all essential contractual
ingredients.’” Id. (quoting High, 745 N.W.2d at 549). Therefore, while “[a] contract
implied in fact is in all respects a true contract,” Azarax still has the burden to show mutual
5
They also argue that Azarax fails to create a genuine issue of material fact as to whether
Defendants were the but-for cause of Plaintiff’s damages and argue that Azarax cannot show
damages sufficient to survive summary judgment. Because the Court concludes that no attorneyclient relationship existed, the Court need not consider these alternate grounds for granting the
motion.
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assent from both sides. George E. Antrim, III, PLLC v. Sabri, No. A13-2174, 2014 WL
4798922, at *3 (Minn. Ct. App. Sept. 29, 2014) (quoting Roberge v. Cambridge Coop.
Creamery, 79 N.W.2d 142, 145-46 (Minn. 1956)). “‘Mutual assent entails a meeting of
the minds concerning a contract’s essential elements,’ and ‘[w]hether mutual assent exists
is tested under an objective standard.’”
Id. (quoting SCI Minn. Funeral Servs. v.
Washburn–McReavy Funeral Corp., 795 N.W.2d 855, 864 (Minn. 2011)).
Without considering the declarations discussed above, Azarax relies on the
following facts as evidence that an implied contract existed: (1) Syverson provided legal
immigration advice to Barbosa, an associate of Barrera’s and part owner of Convey
Mexico; (2) Syverson drafted the new Convey Mexico SHA subsequent to the Dallas
Agreement; and (3) Barrera sent an email to Roberto Carballo, Convey Mexico’s Mexico
attorney, which introduced Syverson as the “company lawyer,” a characterization that
Syverson did not correct.
The “determination of the existence of an implied contract for legal services
involves an examination of the communications and circumstances surrounding a
transaction.” McIntosh Cty. Bank v. Dorsey & Whitney, LLP, 726 N.W.2d 108, 117 (Minn.
Ct. App. 2007). While the determination is therefore done on a case-by-case basis,
Minnesota courts have provided useful analysis of this issue. For example, in TJD
Dissolution Corp. v. Savoie Supply Co., the Minnesota Court of Appeals found that an
implied contract had not been created in part because the alleged client “did not request
[the attorney] to represent him, [the attorney] never promised to represent him, and [the
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attorney] sent no bills . . . for services rendered on his behalf.” 460 N.W.2d 59, 62 (Minn.
Ct. App. 1990).
The same is true here. Azarax provides no evidence that would support an inference
of mutual assent. It has not provided any communications between the parties which show
that Syverson intended to serve as Convey Mexico’s attorney, has not provided any
evidence that Syverson was ever paid by Convey to serve as its attorney, and has not
provided evidence that Convey requested Syverson to serve as its attorney. Without
evidence of this nature, there are no grounds on which the Court could find that an implied
contract was created at some point after the 2011 Dallas Agreement.
B.
Tort Theory
Azarax also asserts that an attorney-client relationship arose under the tort theory.
Under the tort theory, “an attorney-client relationship is created whenever an individual
seeks and receives legal advice from an attorney in circumstances in which a reasonable
person would rely on such advice.” Admiral Merchants, 494 N.W.2d at 265-66. “Although
reasonableness depends on the circumstances, courts have generally focused on the
interactions between the plaintiff and the attorney to determine whether the plaintiff's
reliance was reasonable.” McIntosh Cty. Bank, 726 N.W.2d at 119 (citations omitted).
As an initial matter, it is unclear to the Court that Convey Mexico sought or received
legal advice from Syverson. The root of Azarax’s claim is not that Syverson gave incorrect
legal advice to Convey Mexico which caused it harm, but that Syverson betrayed Convey
Mexico in violation of an already established attorney-client relationship. Accordingly,
Azarax must highlight some previous instance of “advice” being sought out by Convey
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Mexico and provided by Syverson in order to establish that an attorney-client relationship
existed at the time of the betrayal. See Schuler v. Meschke, 435 N.W.2d 156, 162 (Minn.
Ct. App. 1989) (stating that “[t]he requirement under this theory is that an attorney must
have provided legal advice or service”); Gramling v. Mem’l Blood Centers of Minn., 601
N.W.2d 457, 460 (Minn. Ct. App. 1999) (“Absent a request for legal advice, we cannot
conclude an attorney-client relationship existed under the tort theory of representation.”)
To do so, Azarax again relies on the same three pieces of evidence discussed above.
However, none of this evidence indicates that Convey Mexico sought advice from
Syverson or that Syverson provided advice to Convey Mexico. It is true that Syverson
gave legal immigration advice to Barbosa, but it is also true that, while Barbosa worked
for Convey Mexico, he also worked for AmRoam. Syverson testified that he provided the
immigration advice to Barbosa because Barbosa was seeking a U.S. work permit to do
work for AmRoam. (Syverson Dep. at 73.) Similarly, while Barrera once introduced
Syverson as the “company lawyer,” Barrera was AmRoam’s CEO. Not only does this
email introduction fail to establish that Convey Mexico sought advice and that Syverson
ever provided legal advice, it is plausible that Barrera was introducing Syverson as
AmRoam’s company lawyer.
Even the fact that Syverson drafted the Convey Mexico SHA does not establish that
Convey Mexico asked for legal advice or that Syverson gave legal advice. The SHA was
created in 2011 as a result of the agreements between WCV and Convey Mexico. The
various agreements of that year established that WCV would take a 20% interest in Convey
Mexico. Accordingly, Syverson testified that he created the SHA draft for WCV as a new
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minority shareholder and that Convey Mexico told him that it had its own lawyers. (2d
Syverson Dep. at 64.) Azarax puts forth no evidence suggesting that Convey Mexico asked
Syverson to draft the SHA for it.
Assuming, for the sake of argument, that there was evidence that Convey Mexico
sought and received legal advice from Syverson, Azarax fails to establish that Convey
Mexico’s reliance on Syverson’s advice would have been reasonable. Like an implied
contract theory, whether an attorney-client relationship exists under a tort theory “is usually
a question of fact dependent upon the communications and circumstances” specific to the
case. Admiral Merchants, 494 N.W.2d at 265. Nevertheless, Minnesota courts provide
guidance about when reliance may be reasonable. For instance, in McIntosh County Bank,
the court found that a plaintiff’s reliance on a law firm was unreasonable where the law
firm made the plaintiff “affirm that [the plaintiff] had made an ‘independent and informed
judgment’” regarding the loan agreement at issue. 726 N.W.2d at 119. Likewise, in TJD
Dissolution Corp., the court found a plaintiff’s reliance unreasonable where: (1) the
plaintiff knew that the attorney represented a party that was adverse to him; (2) the plaintiff
was aware that the attorney “had represented the [adverse party] for a number of years and
owed allegiance to” the party; and (3) the attorney had “advised [plaintiff] at least once,
and possibly twice, to retain his own counsel.” 460 N.W.2d at 62.
Similar facts are present here. It is undisputed that WCV (represented by Syverson)
and Convey Mexico were, for most of 2011, adversaries as they negotiated an agreement.
Convey Mexico and its officers were clearly aware of that fact, as demonstrated by the
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emails sent between them. Likewise, Convey Mexico was aware that Syverson was
intricately intertwined with WCV and had been for some time.
Nevertheless, Convey Mexico contends that this adversarial relationship
extinguished after the two parties came to an agreement and formed AmRoam, such that it
would not have been unreasonable for them to rely on legal advice provided by Syverson.
However, this contention is belied by the overall record. It may be true that Syverson and
WCV were no longer actively negotiating against one another, but it also remained true
that WCV and Syverson viewed themselves as separate from Convey Mexico, and Convey
Mexico was aware of that fact. For example, Syverson’s engagement agreements with
AmRoam specified that AmRoam would be Syverson’s only client. There is no evidence
that a similar agreement was contemplated with Convey Mexico, despite Convey Mexico
entering into an engagement agreement with a Mexican law firm in 2013.
Additionally, after Barrera negotiated the Convey-Nextel Agreement in 2013,
Syverson objected and argued that AmRoam, not Convey Mexico, was the party who
should own that contract. He then chastised Barrera for going through with the agreement
without seeking WCV’s input and demanded that Barrera seek WCV’s input before signing
such contracts. He also reemphasized that this had always been WCV’s position. There is
no similar evidence showing that Syverson ever represented himself as protecting Convey
Mexico’s interests.
Given these facts, the Court finds that Azarax has not created a genuine factual
dispute regarding whether it would have been reasonable for Convey Mexico to rely on
Syverson’s advice. The question is, of course, somewhat muddied by the fact that Azarax
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fails to identify when exactly Convey Mexico sought and received advice from Syverson
or what advice it received. Regardless, Convey Mexico—at all relevant periods—knew
that Syverson and WCV were aligned and had a long history together. Further, Convey
Mexico was aware that, while it and WCV had a more cordial relationship following the
2011 agreements, Convey Mexico and WCV were never completely unified. Syverson
made clear that Convey Mexico’s successes were not necessarily WCV’s successes, and
that Syverson would continue to fight for WCV’s interests. Further, Convey Mexico was
aware that attorney engagement letters were commonplace but never approached Syverson
about signing one. There is simply nothing in the record that would lead the Court to find
that a reasonable company in Convey Mexico’s position would have relied on what it
believed was Syverson’s legal advice. Azarax has therefore failed to create a genuine
dispute as to whether an attorney-client relationship existed.
ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1.
Defendants Stinson Leonard Street, LLP, and William Syverson’s Motion
for Summary Judgment [Docket No. 216] is GRANTED.
2.
Defendants’ Motion to Exclude the Expert Testimony of Jeffrey A. Johnston
[Docket No 207] is DENIED as moot.
3.
Azarax, Inc.’s Amended Complaint [Docket No. 31] is DISMISSED with
prejudice.
LET JUDGMENT BE ENTERED ACCORDINGLY.
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DATED: August 15, 2019
at Minneapolis, Minnesota.
________s/John R. Tunheim_______
JOHN R. TUNHEIM
Chief Judge
United States District Court
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