Halla et al v. LikeZebra, LLC et al
ORDER ON MOTION TO DISMISS. The claims asserted against defendants Phillips and Rickard in the Amended Complaint are DISMISSED. Counts 1 & 2 of the Amended Complaint are DISMISSED IN PART consistent with this opinion. The defendant's motion to dismiss is otherwise DENIED. (Written Opinion) Signed by Judge Nancy E. Brasel on 9/14/2020. (KMW)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
DONALD E. HALLA and DONALD E.
HALLA ROTH IRA (Tradestation
Account No. 172‐78914),
LIKEZEBRA, LLC, KEITH PHILLIPS, and
Case No. 19‐CV‐2097 (NEB/KMM)
ORDER ON MOTION TO DISMISS
Plaintiffs Donald E. Halla and Donald E. Halla ROTH IRA (Tradestation Account
No. 172‐78914) have sued defendants LikeZebra, LLC (“LikeZebra”), Keith Phillips, and
Craig Rickard under various common law causes of action. (ECF No. 39 (“Amended
Complaint” or “Am. Compl.”).) The defendants move to dismiss the Amended
Complaint, arguing that this Court lacks personal jurisdiction over them and that the
claims asserted against them are untimely. (ECF No. 22.) For the reasons below, the Court
grants in part and denies in part the defendants’ motion to dismiss.
The Court draws the following background from the Amended Complaint,
accepting its factual allegations as true and drawing all reasonable inferences in the
plaintiffs’ favor. See Topchian v. JPMorgan Chase Bank, N.A., 760 F.3d 843, 848 (8th Cir.
2014). In so doing, the Court disregards any conclusory allegations or legal conclusions.
See Glick v. W. Power Sports, Inc., 944 F.3d 714, 717 (8th Cir. 2019).
Halla Invests in LikeZebra
Around 2010, LikeZebra and some of its members, including Phillips and Rickard,
sought financing in support of a proposed Business Plan that they presented to
prospective investors. (See Am. Compl. ¶¶ 43, 50.) Among other things, that Business
Plan envisioned using the funds raised from interested investors to “expand into the first
and only live‐streaming social media revenue generating platform for the music
industry,” partnering with various companies engaged in on‐line streaming. (See id. ¶
Halla received the marketing materials LikeZebra published in connection with its
attempts to raise funding for its proposed Business Plan. (Id. ¶ 53.) The defendants sought
a $300,000 investment from Halla. (Id. ¶ 55.) Rather than invest, Halla agreed to issue two
loans to LikeZebra. (Id. ¶¶ 58–59; see also Am. Compl., Exs. B, C (together, the “Loan
Agreements”).) Halla entered one Loan Agreement with LikeZebra for $61,000. (Am.
Compl., Ex. B.) Halla’s ROTH IRA entered another Loan Agreement with LikeZera for
$239,000. (Am. Compl., Ex. C.) The lender address on each Loan Agreement is the same
address in Edina, Minnesota. (See Loan Agreements at 1.) The Loan Agreements provide
The Borrower will repay the Loan to the Lender as follows:
(a) Interest on this Note shall accrue at the rate of Fifteen Percent (15%) per
annum for months one (1) through six (6) of the first year, and at a rate
of Twenty Percent (20%) per annum thereafter until Maturity.
(b) A payment representing outstanding interest only shall be payable
quarterly within thirty (30) days of the end of each fiscal quarter in cash
and/or wire transfer, due each quarter until Maturity.
(c) Upon Maturity, any outstanding interest and the entire outstanding
principal amount of the original loan amount . . . shall be due and
payable in one balloon payment on Friday August 30th, 2013; the end of
the second year of this Agreement.
(Loan Agreements § 2.3.) The Loans also define “Maturity” as “Friday August 30th,
2013.” (Loan Agreements § 1.7.)
The funds that Halla lent to LikeZebra were transferred to other ailing businesses
that were also managed by Phillips and Rickard, and to Phillips’s and Rickard’s personal
accounts, rather than being used to realize LikeZebra’s proposed Business Plan. (Id. ¶¶
159–161.) LikeZebra stopped making payments to Halla after June 2012. (Id. ¶¶ 90–102.)
The Plaintiffs sue LikeZebra and its Members
On August 2, 2019, the plaintiffs sued LikeZebra, Phillips, and Rickard, asserting
claims for breach of contract, fraudulent inducement, and corporate veil‐piercing. (ECF
No. 1.) The defendants filed their motion to dismiss on April 3, 2020. (ECF No. 22.) After
hearing oral argument on the defendants’ motion, the Court issued an order concluding
that plaintiffs had failed to sufficiently allege the diversity of the parties and granting
plaintiffs leave to amend their complaint for the limited purpose of clarifying LikeZebra’s
citizenship. (ECF No. 38 (the “June 3 Order”).) The plaintiffs did so, the defendants rested
on the previous motion papers, and the motion came under advisement.1
Motion to Dismiss/Amended Complaint
As a threshold matter, the Court notes that filing an amended complaint ordinarily
moots a defendant’s motion to dismiss. Onyiah v. St. Cloud State Univ., 655 F. Supp. 2d
948, 958 (D. Minn. 2009). But “a defendant need not file a new Rule 12 motion merely
because the plaintiff amended his pleading while the defendantʹs motion was pending.”
DeVary v. Countrywide Home Loans, Inc., 701 F. Supp. 2d 1096, 1100 (D. Minn. 2010). “If
some of the defects raised in the original motion remain in the new pleading, the court
simply may consider the motion as being addressed to the amended pleading.” Bishop v.
Abbott Labs., No. 19‐CV‐420 (NEB/ECW), 2019 WL 6975449, at *3 (D. Minn. Dec. 20, 2019)
(quoting 6 Charles Alan Wright, et al., Federal Practice and Procedure § 1476 (3d ed.
2019)). The defendants have made clear that the arguments they made for dismissal of
the original complaint apply with equal force to the Amended Complaint. (See ECF No.
40.) The Court will thus treat the defendants’ motion to dismiss the original complaint as
a motion to dismiss the Amended Complaint.
Based on the new allegations, the Court is satisfied diversity jurisdiction exists, and
asserts jurisdiction over the case.
The defendants argue that this Court lacks personal jurisdiction over them. Rule
12(b)(2) of the Federal Rules of Civil Procedure permits a party to move to dismiss a claim
asserted against it for lack of personal jurisdiction. See Fed. R. Civ. P. 12(b)(2). The parties
have submitted declarations to bolster their positions with respect to personal
jurisdiction. (See, e.g., ECF No. 26 (“Phillips Decl.”), ECF No. 27 (“Rickards Decl.”).) The
motion is therefore “in substance one for summary judgment” on the narrow issue of the
Court’s authority to exercise jurisdiction over the defendants. Creative Calling Solutions,
Inc. v. LF Beauty Ltd., 799 F.3d 975, 979 (8th Cir. 2015).
“The plaintiff bears the burden of proof on the issue of personal jurisdiction.” Id.
The claims should not be dismissed if the evidence, viewed in the light most favorable to
the plaintiffs, is sufficient to support the exercise of jurisdiction over the defendants. Id.
“A federal court in a diversity action may assume jurisdiction over nonresident
defendants only to the extent permitted by the long‐arm statute of the forum state and by
the Due Process Clause.” Dever v. Hentzen Coatings, Inc., 380 F.3d 1070, 1073 (8th Cir. 2004)
(quoting Morris v. Barkbuster, Inc., 923 F.2d 1277, 1280 (8th Cir. 1991)). And “Minnesota’s
long‐arm statute extends as far as the Constitution allows.” Federated Mut. Ins. Co. v.
FedNat Holding Co., 928 F.3d 718, 720 (8th Cir. 2019). Thus, the two prongs of the
analysis—whether jurisdiction is permitted by Minnesota’s long‐arm statute and the Due
Process Clause—are collapsed into a single due process inquiry. Pederson v. Frost, 951 F.3d
977, 980 (8th Cir. 2020). To comport with due process, a non‐resident defendant must
have sufficient contacts with the forum state such that exercising jurisdiction over him
does not offend traditional notions of fair play and substantial justice. Wells Dairy, Inc. v.
Food Movers Intʹl, Inc., 607 F.3d 515, 518 (8th Cir. 2010).
The Eighth Circuit has set forth the following five‐factor test to guide the due
(1) the nature and quality of the contacts with the forum state; (2) the
quantity of those contacts; (3) the relation of the cause of action to the
contacts; (4) the interest of the forum state in providing a forum for its
residents; and (5) the convenience of the parties.
Id. (citation omitted). Of these, the first three are afforded greater weight. Datalink Corp.
v. Perkins Eastman Architects, P.C., 33 F. Supp. 3d 1068, 1073 (D. Minn. 2014).
There are two types of personal jurisdiction: general jurisdiction and specific
jurisdiction. Bristol‐Myers Squibb Co. v. Sup. Ct. of Cal., San Francisco Cty., 137 S. Ct. 1773,
1780 (2017). Specific jurisdiction, unlike general jurisdiction, may only be exercised where
the suit arises out of or relates to the defendant’s contacts with the forum. Id. at 1780;
Myers v. Casino Queen, Inc., 689 F.3d 904, 912 (8th Cir. 2012) (“Specific personal
jurisdiction, unlike general jurisdiction, requires a relationship between the forum, the
cause of action, and the defendant.”). The plaintiffs invoke specific jurisdiction in this
case.2 For the reasons discussed below, the Court concludes that the plaintiffs have
2 It is unclear whether plaintiffs also assert that this Court has general jurisdiction over
the defendants, but in any event the record falls far short of establishing it. See Goodyear
Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 924 (2011) (explaining that “[f]or an
established sufficient suit‐related contacts between LikeZebra and Minnesota to satisfy
the Eighth Circuit’s due process inquiry. However, the plaintiffs have not met their
burden with respect to Phillips and Rickard.
The Defendants’ Contacts with Minnesota
LikeZebra. LikeZebra is a limited liability company organized under the laws of
Nevada. (Am. Compl. ¶ 36; Phillips Decl. ¶ 5.) It maintains its principal place of business
in California. (Am. Compl. ¶ 37; Phillips Decl. ¶ 5.) LikeZebra has not done business with
anyone in Minnesota other than Halla. (Phillips Decl. ¶ 4; Rickard Decl. ¶ 4.)
In 2011, LikeZebra entered into one loan agreement with Halla and another with
Halla’s ROTH IRA. (Loan Agreements at 1.) LikeZebra discussed the terms of the Loan
Agreements with an investment broker, Franco Porporino, Jr., rather than with Halla.
(Phillips Decl. ¶ 6.) Porporino communicated with LikeZebra from California, New
Jersey, and New York. (Phillips Decl. ¶ 11.) He initially indicated to LikeZebra that he
might be able to secure funding for LikeZebra from many investors, but by early 2011
explained that Halla would be the only investor he could find. (Id.) Porporino told
LikeZebra that he had total control over Halla’s money. (Id.)
Each Loan Agreement provides a Minnesota address for the lender. (Loan
Agreements at 1.) The Loan Agreements also state that any notice LikeZebra must give
individual, the paradigm forum for the exercise of general jurisdiction is the individual’s
domicile”). There is no basis for the exercise of general jurisdiction over the defendants.
to the lender under the terms of the Loan Agreement shall be mailed to Halla’s address
in Minnesota. (Id. § 8.4.) Finally, the Loan Agreements contain a choice‐of‐law provision
stating that the rights and obligations of the parties under the Loan Agreements “SHALL
BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF MINNESOTA AND APPLICABLE FEDERAL
LAW.” (Id. § 8.8.)
In connection with its obligations under the Loan Agreements, LikeZebra made
payments by check or by wire to Halla’s account at a Minnesota bank. (Phillips Decl. ¶ 18;
see also Phillips Decl., Ex. 1 at 2.) Halla once e‐mailed LikeZebra directly to follow up on
payments that he considered to be late and for an incorrect amount. (Phillips Decl., Ex. 1
at 2–3.) Otherwise, Porporino, and not Halla, would call, text, or e‐mail LikeZebra when
such issues arose. (Phillips Decl. ¶¶ 14, 19.) Sometimes, Halla would be copied on
Porporino’s e‐mail correspondence with LikeZebra. (Phillips Decl., Ex. 1.)
Phillips. Phillips resides in California. (Am. Compl. ¶ 10; Phillips Decl. ¶ 2.) He is
a member of LikeZebra and, among other things, its Chief Executive Officer. (Am. Compl.
¶¶ 15–18.) Phillips has never traveled to Minnesota and he cannot recall conducting
business with anyone in Minnesota other than Halla. (Phillips Decl. ¶¶ 2–3.). He signed
the Loan Agreements on LikeZebra’s behalf. (Loan Agreements at 9.) After the parties
executed the Loan Agreements, he had a brief phone call with Halla in August 2011.
(Phillips Decl. ¶ 13.) He once received an e‐mail from Halla, but otherwise can only recall
communicating about LikeZebra’s payments with Porporino. (Id. ¶¶ 11–14.)
Rickard. Rickard resides in California. (Am. Compl. ¶ 20; Rickard Decl. ¶ 2.) He is
a member, officer, and director of LikeZebra. (Am. Compl. ¶¶ 24–26.) Rickard has never
traveled to Minnesota and he cannot recall conducting business with anyone in
Minnesota other than Halla. (Rickard Decl. ¶¶ 2–3, 5.) The only time he recalls speaking
with Halla is in mid‐2018, when Porporino called Halla during a meeting and insisted
that Rickard speak with him. (Id. ¶ 6.)
Company Defendant: LikeZebra
LikeZebra contends that the five‐factor test that Eighth Circuit courts use to guide
the due process inquiry weighs against the exercise of specific jurisdiction over it. The
Court disagrees. True, Phillips submitted a signed declaration attesting that LikeZebra
did not originally know that the funds Porporino intended to secure for LikeZebra would
come from a Minnesota resident. (See Phillips Decl. ¶¶ 6–12.) But the Loan Agreements
make plain that LikeZebra contracted to obtain the $300,000 it sought from a Minnesota
resident and his ROTH IRA. Among other things, LikeZebra agreed to a Minnesota
choice‐of‐law provision in the Loan Agreements and agreed to mail any required notice
to Halla in Minnesota. Finally, to the extent LikeZebra performed its obligations under
the Loan Agreements, it did so by making payments by check or by wire to Halla’s
account at a Minnesota bank.
Under these facts, LikeZebra’s performance under these agreements occurred in
Minnesota. LikeZebra chose to enter into loan agreements (governed by Minnesota law)
according to which it would borrow funds from a Minnesota resident and, as a
foreseeable consequence of that choice, regularly made interest payments under those
agreements to that Minnesota resident’s account at a Minnesota bank. Although
LikeZebra does not have many contacts with Minnesota, its contacts with the forum are
strongly related to the loan agreements that are at the heart of this action. In these
circumstances, the first three factors—(1) the nature and quality of the contacts with the
forum state, (2) the quantity of the contacts with the forum state, and (3) the relation of
the cause of action to the contacts—weigh strongly in favor of exercising specific
jurisdiction over LikeZebra. See, e.g., BPI Dev. Grp., L.C. v. Grange, 181 F. Supp. 3d 604,
611–13 (S.D. Iowa 2016) (finding personal jurisdiction over the defendant and the first
three factors satisfied where non‐resident defendants entered into a loan agreement with
residents and made one interest payment to those residents in the forum); Marquette Bus.
Credit, Inc. v. Intʹl Wood, Inc., No. CIV 08‐CV‐1383 (JNE/FLN), 2009 WL 825800, at *7 (D.
Minn. Mar. 27, 2009) (finding first three factors satisfied with respect to non‐resident
borrower, thus establishing specific personal jurisdiction over the non‐resident
The final two factors, which are less important, do not weigh against exercising
specific jurisdiction over LikeZebra. As to the fourth factor, Minnesota has an interest in
providing a forum for its residents, and this factor therefore weighs in favor of
jurisdiction. See LOL Fin. Co. v. Roberts, No. 09‐CV‐01587 (MJD/SRN), 2010 WL 11646576,
at *6 (D. Minn. Mar. 23, 2010). As to the fifth factor, although defendants claim that
Minnesota is an inconvenient forum because many relevant witnesses will be found
outside of Minnesota, “[w]here witnesses are in both Minnesota and a foreign state,
however, the convenience of the parties favors neither side.” Id. The Court concludes that
the Eighth Circuit’s five‐factor test weighs in favor of exercising specific jurisdiction over
The defendants contend that the Eighth Circuit’s decision in Fastpath, Inc. v. Arbela
Technologies Corp., 760 F.3d 816 (8th Cir. 2014), and this Court’s decision in Fredin Brothers
v. Anderson, No. 19‐CV‐1679 (NEB/HB), 2019 WL 7037674 (D. Minn. Dec. 20, 2019), compel
the opposite conclusion. In several key respects, those decisions considered different
circumstances from the ones presented here. The Eighth Circuit in Fastpath considered a
breach‐of‐contract action brought in Iowa by an Iowa corporation against a California
corporation. 760 F.3d at 819–20. The contract at issue was a mutual confidentiality
agreement with a covenant not to compete that “did not require performance or
contemplate future consequences specifically in Iowa.” Id. at 819, 822. The Eighth Circuit
explained that exercising specific jurisdiction over the California corporation would not
comport with due process because, among other things, the agreement did not
contemplate performance in Iowa, there was in fact no performance in Iowa, and the
alleged breach also occurred outside of Iowa. Id. at 824–25. Here, by contrast,
performance occurred in Minnesota. And unlike the California corporation in Fastpath,
on this record, LikeZebra purposefully availed itself of the privilege of conducting
activities in Minnesota—that is, borrowing money from a Minnesota resident and making
interest payments in connection with its obligation to repay the borrowed money to an
account at a Minnesota bank.
This Court in Fredin Brothers considered a breach‐of‐contract action brought
against Texas and South Dakota residents. 2019 WL 7037674, at *1. The contracts at issue
were invoices for the delivery of cattle, which were sourced from South Carolina or Texas,
to locations in Texas. Id. at *1, *3. The Fredin Brothers defendants never contemplated
performance in Minnesota. As the Court has stated, the same is not true here. LikeZebra’s
cases do not compel the conclusion it urges.
Individual Defendants: Phillips and Rickard
Phillips and Rickard also argue against the exercise of specific jurisdiction over
them. This Court agrees. The record reveals insufficient suit‐related contacts to establish
specific jurisdiction over Phillips and Rickard. With respect to Phillips, he recalls once
calling Halla in August 2011 after the Loan Agreements were executed and once receiving
an e‐mail from Halla in mid‐2012. (Phillips Decl. ¶¶ 13–14; Phillips Decl., Ex. 1.) With
respect to Rickard, Rickard spoke to Halla once in mid‐2018, when Porporino called Halla
during a meeting and insisted that Rickard speak with him. (Rickard Decl. ¶ 6.) These
few instances of communicating with Halla in Minnesota, which took place after the Loan
Agreements were executed and appear to be at best loosely related to the claims asserted
in the Amended Complaint, are not of the nature and quality that support the exercise of
specific jurisdiction over Phillips or Rickard. See, e.g., Digi‐Tel Holdings, Inc. v. Proteq
Telecomm. (PTE), Ltd., 89 F.3d 519, 523 (8th Cir. 1996) (“Although letters and faxes may be
used to support the exercise of personal jurisdiction, they do not themselves establish
jurisdiction.”). The Court concludes that the first three factors decisively weigh against
exercising specific jurisdiction over Phillips and Rickard.3
The plaintiffs argue that all of the defendants, including Phillips and Rickard,
consented to jurisdiction in this District by way of section 8.8 of the Loan Agreements.
But neither Phillips nor Rickard is a party to the Loan Agreements, so section 8.8 provides
no basis to exercise specific jurisdiction over either of them.
Statute of Limitations
The defendants also contend that the claims are time‐barred.4 When it appears
from the pleadings that the limitations period has run, dismissal under Rule 12(b)(6) is
“Given [the] conclusion that the defendants do not have sufficient minimum contacts
with Minnesota, the last two factors—the forum state’s interest and the convenience of
the parties—cannot themselves create personal jurisdiction.” Pederson v. Frost, 951 F.3d
977, 981 n.4 (8th Cir. 2020).
4 The parties have presented other matters outside the pleadings in connection with the
defendants’ motion. The Court excludes the matters outside the pleadings in its
consideration of the defendants’ Rule 12(b)(6) motion. See Fed. R. Civ. P. 12(d) (“If, on a
motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and
proper. See Varner v. Peterson Farms, 371 F.3d 1011, 1016, 1020 (8th Cir. 2004) (affirming
Rule 12(b)(6) dismissal of claims that were not timely asserted). Having concluded that it
lacks personal jurisdiction over Phillips and Rickard, the Court considers whether the
defendants have met their burden to show that the claims asserted against LikeZebra, the
only remaining defendant, should be dismissed under Rule 12(b)(6) because they are
Counts One and Two: Breach of Contract
Under Minnesota law, which undisputedly applies, there is a six‐year statute of
limitations for breach‐of‐contract claims. See Minn. Stat. Ann. § 541.05, subd. 1. The
defendants raise two arguments to challenge the timeliness of the breach‐of‐contract
claims: (1) that the plaintiffs invoked their right to accelerate the debts LikeZebra owed
under the Loan Agreements and therefore the plaintiffs’ breach‐of‐contract claims
accrued outside of the relevant six‐year window and, (2) in the alternative, even if the
plaintiffs did not accelerate, the statute of limitations ran on payments due outside the
relevant six‐year window.
In support of their first argument, the defendants rely on matters outside the
pleadings that they claim show that the plaintiffs invoked their right to accelerate the
debts in 2012, more than six years before they brought suit in August 2019. As a result,
not excluded by the court, the motion must be treated as one for summary judgment
under Rule 56.”).
they argue, the plaintiffs’ breach‐of‐contract claims must be dismissed as untimely. The
Court excludes matters outside the pleadings from its consideration of the defendants’
Rule 12(b)(6) motion. And the defendants have not met their burden to show that, on the
face of the pleadings, the plaintiffs accelerated the debts owed to them outside the
relevant six‐year window.
In support of their second argument, the defendants point to the language of the
Loan Agreements, arguing that the Loan Agreements contemplate payment in
installments. Under governing Minnesota law, plaintiffs cannot now recover on
payments due outside the relevant six‐year window. They do not dispute that, if the
plaintiffs did not accelerate payment, then the statute of limitations has not run on the
payment due August 30, 2013. The Court agrees. As the Minnesota Supreme Court
explained in Honn v National Computer Systems, Inc., “[w]here a money obligation is
payable in installments, the general rule is that a separate cause of action arises on each
installment and the statute of limitations begins to run against each installment when it
becomes due.” 311 N.W.2d 1, 2 (Minn. 1981). This rule applies even when the agreement
contains a final “balloon payment” provision. Honn, 311 N.W.2d at 3; Windschitl v.
Windschitl, 579 N.W.2d 499, 502 (Minn. Ct. App. 1998). Applying the rule set forth in
Honn, the statute of limitations ran on payments due outside the relevant six‐year
window (but not on the payment due August 30, 2013). As in Honn, the “balloon
payment” provision in Section 2.3(c) does not save the payments due before the relevant
six‐year window from Minn. Stat. Ann. § 541.05, subd. 1. The plaintiffs’ various attempts
to distinguish Honn are unavailing. The Court concludes that the defendants have met
their burden to show that the statute of limitations ran on payments due under the Loan
Agreements outside the relevant six‐year window.
Count Three: Fraudulent Inducement
The defendants also argue that the plaintiffs’ fraudulent inducement claim (Count
three) is time‐barred. A six‐year statute of limitations applies. See, e.g., Abarca v. Little, 54
F. Supp. 3d 1064, 1070 (D. Minn. 2014) (citing Minn. Stat. § 541.05(6) for proposition that
six‐year limitations period applies to fraudulent inducement claims). Again relying on
matters outside the pleadings, the defendants contend that plaintiffs knew or should have
known of the fraud by 2012 and therefore their fraudulent inducement claim accrued
outside the relevant six‐year window.
True, the statute of limitations on a fraudulent inducement claim begins to run
when the party knew or should have known of the alleged fraud. See Progressive Techs.,
Inc. v. Shupe, No. A04‐1110, 2005 WL 832059, at *6 (Minn. Ct. App. Apr. 12, 2005)
(affirming order dismissing fraudulent inducement to contract claim as time‐barred). But,
as noted above, the Court excludes matters outside the pleadings from its consideration
of the defendants’ Rule 12(b)(6) motion. And, as courts have repeatedly held, when the
plaintiff knew or should have known of the alleged fraud is a fact‐intensive inquiry. See,
e.g., Barry v. Barry, 78 F.3d 375, 380 (8th Cir. 1996) (“The question of when discovery [of
the fraud] could or should have reasonably been made is one of fact”); In re Petters Co.,
495 B.R. 887, 903 (Bankr. D. Minn. 2013), as amended (Aug. 30, 2013) (“For the Minnesota
law of limitations and fraud actions, the discovery of fraud and the reasonable prospect
of such discovery are questions of fact.” (collecting cases)). Thus, even if the materials the
defendants cite in their briefing as to what plaintiffs knew or should have known were
somehow “necessarily embraced by the pleadings”5 these materials do not, as a matter of
law, show that the plaintiffs’ fraudulent inducement claim accrued outside the relevant
six‐year window. The Court concludes that the defendants have not met their burden to
show that, on the face of the pleadings, the plaintiffs’ fraudulent inducement claim is
Count Four: Corporate Veil‐Piercing
Finally, the defendants argue that because the plaintiffs’ breach‐of‐contract and
fraudulent inducement claims should be dismissed as untimely under Rule 12(b)(6), the
veil‐piercing claim should also be dismissed. Assuming without deciding that this is a
correct statement of law, the Court denies the motion to dismiss because not all of the
claims asserted in the Amended Complaint are dismissed as time‐barred.
In the Court’s view they are not.
6 The Court disregards any arguments raised by the defendants for the first time on reply.
A district court need not entertain arguments that were not raised in a movant’s initial
papers and that the non‐movant has had no opportunity to address. See, e.g., Swanda v.
Choi, No. 10‐CV‐970 (MJD/JSM), 2012 WL 3839334, at *3 n.9 (D. Minn. Aug. 3, 2012), report
and recommendation adopted, No. 10‐CV‐970 (MJD/JSM), 2012 WL 3839245 (D. Minn.
Sept. 4, 2012) (declining to address arguments raised for the first time in reply).
Based on the foregoing and on all the files, records, and proceedings herein, the
defendants’ motion to dismiss (ECF No. 22) is GRANTED IN PART AND DENIED IN
The claims asserted against defendants Phillips and Rickard in the Amended
Complaint are DISMISSED;
Counts 1 & 2 of the Amended Complaint are DISMISSED IN PART consistent
with this opinion; and
The defendant’s motion to dismiss is otherwise DENIED.
Dated: September 14, 2020
s/Nancy E. Brasel
Nancy E. Brasel
United States District Judge
BY THE COURT:
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