Steven Nelson v. Nelson , 932 N.W.2d 386 ( 2019 )

Filed 8/22/19 by Clerk of Supreme Court
IN THE SUPREME COURT
STATE OF NORTH DAKOTA
2019 ND 221
Steven Nelson, individually, and in the
right of and for the benefit of J & S
Nelson Farms, LLP, Plaintiff and Appellant
v.
James Nelson, Brian Nelson,
David Nelson, and J & S Nelson Farms, LLP, Defendants and Appellees
No. 20180421
Appeal from the District Court of Grand Forks County, Northeast Central
Judicial District, the Honorable John A. Thelen, Judge.
AFFIRMED IN PART, AND REVERSED IN PART.
Opinion of the Court by VandeWalle, Chief Justice.
DeWayne A. Johnston (argued) and David C. Thompson (appeared), Grand
Forks, ND, for plaintiff and appellant.
Patrick J. Sinner (argued) and Kip M. Kaler (appeared), Fargo, ND, for
defendants and appellees.
Nelson v. Nelson
No. 20180421
VandeWalle, Chief Justice.
[¶1] Steven Nelson, individually and for the benefit of J&S Nelson Farms, LLP,
appealed from a judgment determining the value of his interest in the Nelson Farms
partnership and an order denying his post-judgment motions. Steven Nelson argues
the district court erred by ordering various sanctions and determining the value of the
partnership. We conclude the district court did not err by striking some of Steven
Nelson’s claims as a discovery sanction, awarding the defendants a portion of the
attorney’s fees they incurred in this action, or determining the value of Steven
Nelson’s interest in the partnership. However, we also conclude the district court
abused its discretion by ordering Steven Nelson reimburse the partnership for the
attorney’s fees and costs it incurred as a result of a separate action in federal court.
We affirm as well as we reverse.
I
[¶2] In 2015 in United States District Court for the district of Minnesota, Steven
Nelson sued James Nelson; AgCountry Farm Credit Services, ACA; and two of
AgCountry’s employees for claims under the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq. Steven Nelson alleged James
Nelson and the AgCountry defendants conspired and engaged in racketeering
activities through a pattern of false financial reporting, fictitious financial
transactions, tax evasion, and theft. The complaint was dismissed for failing to state
a claim upon which relief can be granted. Nelson v. Nelson, Civ. No. 14-4854, 2015
WL 4136339 (D. Minn. July 8, 2015). The dismissal was affirmed on appeal. See
Nelson v. Nelson, 833 F.3d 965 (8th Cir. 2016).
[¶3] In September 2015 in Grand Forks County District Court, Steven Nelson sued
James Nelson, Brian Nelson, David Nelson, and J&S Nelson Farms, LLP, seeking a
1
declaratory judgment and damages for numerous claims related to operation of the
Nelson Farms partnership. Steven Nelson alleged he was a partner of Nelson Farms,
the defendants were also partners, he was wrongfully dissociated from the partnership
through the defendants’ wrongful actions, and the defendants were responsible for the
improper diversion of approximately $2,000,000 in partnership funds for their
personal use.
[¶4] The defendants answered and counterclaimed requesting the district court
determine Steven Nelson had been dissociated from the partnership and determine the
extent to which he was entitled to a buy-out and all offsets the partnership or
individual partners were entitled to as a result of any damages caused to the
partnership. The defendants also requested the court dismiss Steven Nelson’s
complaint.
[¶5] In November 2015, the defendants moved to dissociate Steven Nelson from
the partnership under N.D.C.C. § 45-18-01, alleging he engaged in conduct relating
to the partnership which made it not reasonably practicable to carry on the business
in partnership with him. In December 2015, the district court granted the motion,
found reconciliation of the partners was not a realistic possibility and Steven Nelson
indicated he wanted a buy-out, and ordered Steven Nelson shall no longer be a partner
of Nelson Farms as of January 1, 2016.
[¶6] On October 13, 2016, the defendants moved to compel discovery under
N.D.R.Civ.P. 37. The defendants alleged they served interrogatories and a request for
production of documents on Steven Nelson on May 3, 2016, responses were due on
June 16, 2016, Steven Nelson responded on June 21, 2016, and the responses were
significantly deficient. The defendants claimed they had several discussions and
meetings with Steven Nelson and he continued to fail to provide appropriate
discovery responses. The defendants requested the court issue an order compelling
Steven Nelson to answer interrogatory #7, requesting Steven Nelson identify and
provide certain information about every transaction for which he was seeking
recovery, and provide documentation in response to request for production of
2
documents #4, requiring Steven Nelson to produce all documents identified relating
to each transaction in interrogatory #7. The defendants claimed Steven Nelson’s
response was in the form of three documents, which at best was “a conclusory list of
transactions that have some issue.” The defendants asserted Steven Nelson simply
identified an entire series of transactions he apparently disputed but did not identify
what was wrong with the transactions, indicate whether he disputed the entire
transaction, explain how he calculated his damages as a result, or produce the
supporting documents. The defendants also requested the court award them
attorney’s fees and reasonable expenses for the motion. Steven Nelson opposed the
motion to compel and moved for a protective order.
[¶7] After a hearing, the district court ordered Steven Nelson to submit full and
complete responses to interrogatory #7 and produce all documents responsive to
request for production of documents #4 by December 8, 2016. The court also denied
Steven Nelson’s motion for a protective order and ordered Steven Nelson pay the
defendants $1,755 for their costs and attorney’s fees.
[¶8] In January 2017, the defendants moved to compel discovery and to hold Steven
Nelson in contempt. The defendants alleged Steven Nelson continued to fail to
produce any response to interrogatory #7 and did not produce any documents
responsive to request for production of documents #4. The defendants also alleged
Steven Nelson failed to pay the ordered costs and attorney’s fees. The defendants
requested the court sanction Steven Nelson for failing to comply with discovery by
striking all claims in his pleadings requesting damages.
[¶9] After a hearing, the district court granted the defendants’ motion. The court
found Steven Nelson failed to comply with the prior order compelling discovery, the
defendants made numerous informal requests for Steven Nelson to provide the
discovery and payment of the ordered costs and attorney’s fees, Steven Nelson never
fulfilled his promises to comply with discovery, and he disputed the need to comply
with the order. The court stated Steven Nelson continued to dispute during the
hearing that he needed to comply with the order to pay $1,755 in costs and attorney’s
3
fees, but it had been informed the fees had been paid. The court ordered that Steven
Nelson’s damage claims related to interrogatory #7 and request for production of
documents #4 were stricken from the complaint as a sanction for his failure to comply
with discovery and that he pay the defendants $1,320 as reimbursement for their legal
costs and attorney’s fees in bringing the second motion to compel.
[¶10] After a bench trial, the district court decided the remaining issues, including
the valuation of the partnership, sanctions, and attorney’s fees. The court found
Steven Nelson was dissociated from the partnership on December 31, 2015, the gross
value of his interest in the partnership was $544,397, the partnership previously paid
Steven Nelson $371,000, and the remaining balance of $173,397 would be paid in
accordance with the buyout provisions of the partnership agreement. The court
ordered Steven Nelson’s distribution from the partnership be reduced by $33,666.04
for the litigation costs the partnership paid as a result of the federal RICO action. The
court awarded the defendants 25 percent of their actual costs and attorney’s fees in
this case as a sanction for vexatious litigation. The court later calculated the actual
amount of the attorney’s fees and costs for the action based on the defendants’
affidavit and ordered $29,447.37 be deducted from the remaining amount owed to
Steven Nelson for his share of the partnership. Judgment was entered in favor of
Steven Nelson for $128,919.49 for the remaining value of his share of the partnership.
[¶11] Steven Nelson moved for a new trial or, alternatively, for relief from the
judgment. The district court denied his motions.
II
[¶12] Steven Nelson argues the district court erred by striking all claims related to
more than 2,000 improper transactions as a discovery sanction. He contends he
identified more than 2,000 transactions in which James Nelson improperly took
money from the partnership for personal use, James Nelson’s actions were
intrinsically improper, the defendants never described how additional explanation
4
about each transaction was necessary or possible, and the sanction for the alleged
discovery violation was too harsh.
[¶13] The district court has broad discretion to impose appropriate sanctions for
discovery abuses, and its decision will not be reversed on appeal unless the court
abused its discretion. Bertsch v. Bertsch, 2007 ND 168, ¶ 13, 740 N.W.2d 388. A
court abuses its discretion when it acts in an arbitrary, unreasonable, or
unconscionable manner, it misinterprets or misapplies the law, or when its decision
is not the product of a rational mental process leading to a reasoned determination.
Perius v. Nodak Mut. Ins. Co., 2012 ND 54, ¶ 8, 813 N.W.2d 580. “The appellant
who is contesting the district court’s choice of a sanction has the burden of showing
the abuse of discretion, and that burden is met only when it is clear that no reasonable
person would agree with the trial court’s assessment of what sanctions are
appropriate.” Ihli v. Lazzaretto, 2015 ND 151, ¶ 8, 864 N.W.2d 483 (quoting Fines
v. Ressler Enters., Inc., 2012 ND 175, ¶ 15, 820 N.W.2d 688). This Court has said
even when a party believes the district court’s discovery order is erroneous, the party
must comply as long as it remains in force. Bertsch, at ¶ 15.
[¶14] The district court has a wide spectrum of sanctions for discovery violations,
including striking pleadings and entry of default judgment against the disobedient
party. Vorachek v. Citizens State Bank of Lankin, 421 N.W.2d 45, 50 (N.D. 1988).
Rule 37(b), N.D.R.Civ.P., allows a court to impose sanctions on a party for failing to
comply with a discovery order, stating:
For Not Obeying a Discovery Order. If a party or a party’s officer,
director, or managing agent–or a witness designated under Rule
30(b)(6) or 31(a)(4)–fails to obey an order to provide or permit
discovery, including an order under Rule 26(f), 35, or 37(a), the court
where the action is pending may issue further just orders. They may
include the following:
(i) directing that the matters embraced in the order or other designated
facts be taken as established for purposes of the action, as the prevailing
party claims;
(ii) prohibiting the disobedient party from supporting or opposing
designated claims or defenses, or from introducing designated matters
in evidence;
5
(iii) striking pleadings in whole or in part;
(iv) staying further proceedings until the order is obeyed;
(v) dismissing the action or proceeding in whole or in part;
(vi) rendering a default judgment against the disobedient party; or
(vii) treating as contempt of court the failure to obey any order except
an order to submit to a physical or mental examination.
N.D.R.Civ.P. 37(b)(2)(A). This Court has explained that dismissal of a claim or
striking of pleadings is an available sanction:
Dismissal of an action or entry of a default judgment as a sanction for
discovery abuse should be imposed only if there is a deliberate or bad
faith non-compliance which constitutes a flagrant abuse of or disregard
for the discovery rules. . . . Although the law favors resolution of
disputes on the merits, that consideration must be balanced against the
need to deter discovery abuses, promote efficient litigation, and protect
the interests of all litigants. Therefore, the most severe sanctions must
be available, not only to penalize those whose conduct is deemed to
warrant those sanctions, but also to deter those who might be tempted
to abuse the discovery process.
Vorachek, at 50-51.
[¶15] The defendants claimed they initially requested discovery in May 2016, Steven
Nelson responded late and his responses were deficient, and he continued to fail to
provided appropriate responses after several meetings with the defendants. The
defendants moved to compel discovery in October 2016. In December 2016, the
district court granted the defendants’ motion and ordered Steven Nelson to submit full
and complete responses.
[¶16] In January 2017, the defendants moved to compel discovery again and
requested the court hold Steven Nelson in contempt. The defendants argued Steven
Nelson continued to fail to produce adequate response to interrogatory #7 and did not
produce any documents responsive to request for production of documents #4.
[¶17] The district court granted the defendants’ motion. The court found, “At this
point in time it’s clear to the court that plaintiff does not intend to comply with
defendants’ original discovery request or the court’s prior discovery directive . . . .”
The court found Steven Nelson was provided with a computer disk containing all
individual invoices/receipts of the partnership for 2009 through 2015; he had access
6
to all accounting documentation since mid-July 2016 and he identified hundreds of
transactions he claimed were improper; the discovery he provided in three documents
at best provided a conclusory list of some questionable transactions; but he failed to
identify what was wrong with each particular transaction, whether he disputed the
entire transaction, and how he equated the improper transaction to a damage amount.
The court noted Steven Nelson had put a lot of time into attempting to provide the
requested discovery and he acknowledged that he does not have the knowledge or
accounting background to follow transactions through various accounts and that he
is learning accounting practices as he goes, but the court found that was not a
justifiable excuse for noncompliance with discovery. The court said, “Six months
after being provided with all partnership records including accounting records, tax
returns, and business receipts, [Steven Nelson] is unable to provide details as to the
impropriety of certain transactions and his claim for damages connected to those
transactions.” The court concluded Steven Nelson’s failure or refusal to comply with
the discovery request was significant misconduct and disregard of the court’s prior
order, and striking all claims for damages connected to interrogatory #7 and
production of documents #4 was an appropriate sanction.
[¶18] Steven Nelson was given multiple opportunities to comply with the discovery
request. The defendants attempted to resolve the issue informally and eventually filed
two motions to compel. The district court ordered Steven Nelson to comply with the
discovery request. The court found Steven Nelson had all of the information
requested in his possession and he refused to comply with the court’s order. The
court found Steven Nelson’s failure to comply was significant misconduct and
significant disregard for the applicable Rules of Civil Procedure.
[¶19] Although striking all claims for damages related to the requested discovery is
a severe sanction, the district court gave Steven Nelson multiple opportunities to
comply and he refused. This Court has said, “[D]ismissal should be used sparingly
and only if ‘there is a deliberate or bad faith non-compliance which constitutes a
flagrant abuse of or disregard for the discovery rules.’” Richard B. Baer, P.C. v.
7
Bauch, 1999 ND 177, ¶ 11, 599 N.W.2d 306 (quoting Vorachek, 421 N.W.2d at 51).
The court did not act in an arbitrary, unreasonable, or unconscionable manner. We
conclude the court did not abuse it discretion by striking the claims related to
interrogatory #7 and production of documents #4.
III
[¶20] Steven Nelson argues the district court erred by offsetting the amount he was
awarded for his share of the partnership with $63,113.37 in sanctions and attorney’s
fees because there was no legal or factual basis for the court to impose the sanctions.
He contends the $33,666.04 sanction for the litigation costs the defendants incurred
as a result of the federal RICO litigation was improper because the defendants never
requested attorney’s fees and costs in the federal action, the federal courts never found
the RICO case was frivolous, and no evidence was presented in this case that the
RICO action was frivolous. Steven Nelson also claims the sanction of $29,447 for a
portion of the defendants’ costs and attorney’s fees in this action was also improper.
[¶21] The district court has broad discretion to award attorney’s fees. Lizakowski v.
Lizakowski, 2019 ND 177, ¶ 18, 930 N.W.2d 609. The court has inherent authority
to award attorney’s fees as a sanction for a litigant’s misconduct, and sanctions based
on this power will only be reversed on appeal if the court abused its discretion.
Heinle v. Heinle, 2010 ND 5, ¶ 30, 777 N.W.2d 590.
A
[¶22] The district court ordered the amount Steven Nelson was due for his interest
in the partnership be reduced by the amount of the defendants’ costs and attorney’s
fees from the federal RICO case. The court found:
The Complaint in that RICO action is virtually identical to the
complaint contained in this action, without the allegation of the federal
RICO violation claim. All of the fact scenarios described in that federal
litigation are repeated in this state court action.
The federal RICO action was dismissed on the pleadings without
the need of the defendants submitting an answer. In fact, the complaint
8
was amended and Defendants twice made motions to dismiss.
Ultimately, the federal district court dismissed the federal RICO action.
Thereafter, the plaintiff appealed that decision to the 8th Circuit Court
of Appeals, which affirmed the decision on a slightly different basis,
but ultimately, the same conclusion – the plaintiff has failed to state a
cause of action.
While the plaintiff himself may be unaware of the following
facts, they are material in the nature of the use of the federal RICO
action against James. DeWayne Johnston, the attorney for Steven, had
(in two prior cases) similarly commenced a federal RICO action against
other partners or other joint ventures in virtually identical litigation in
North Dakota federal district court. Both were dismissed by the North
Dakota federal court. There is an implication, if it did not actually
occur, that the plaintiff chose not to institute the federal RICO action
against James in North Dakota for the simple reason that the North
Dakota federal court was not going to countenance that type of action
in a partnership setting. It becomes all the more apparent that plaintiff
was forum shopping when he came before this Court alleging the
application of Minnesota law to a Minnesota partnership which happens
to operate in Minnesota and North Dakota, but initiates the action in
North Dakota. Plaintiff provides no further explanation as to why this
litigation was commenced in North Dakota, particularly given the fact
that he had previously chosen to bring the federal RICO action in
Minnesota, the fact that the Partnership is located in Minnesota along
with most of its assets, and then argues for the application of Minnesota
law to the case.
There is no doubt that the plaintiff has plotted a course of action
that has unnecessarily multiplied the cost of this litigation and,
ultimately, for no benefit substantially greater than was offered him or
what he could have obtained through fair and reasonable analysis of the
Partnership value and his entitlement to his share of that value.
. . . The court finds that the RICO action was an ill-advised
effort in lieu of an attempt at obtaining fair compensation for Steven’s
interest in the Partnership which is all his case really is about.
Had James not been a partner he would not have been a party to
the federal RICO action. . . . It is more than likely that the federal RICO
action was in fact an attempt to coerce from James a settlement of
Steven’s dissociation for an amount in excess of its fair value. The
court can see no other reasonable explanation for bringing such a
misguided action in federal court. James should not have to be
personally responsible for the defense of his actions as a partner in the
Partnership.
....
9
Given the baseless nature of the federal RICO action, to the
extent the law will allow it, James should be indemnified by the
Partnership for the costs and fees of defending himself. Further, the
Partnership agreement in paragraph 7 provides:
“Should any losses suffered by the Partnership be
occasioned by the willful neglect or default of a partner,
and not mere mistake or error of judgment of said
partner, losses so incurred shall be made good by the
partner committing the willful neglect or default.”
The Partnership’s contemplated losses occasioned by willful acts of a
partner should be the obligation of that partner. Steven hired Mr.
Johnston to represent him and as the client, Steven is financially
responsible for misdeeds of his legal counsel.
The court finds that Steven should reimburse the Partnership for
the fees and costs expended in defending James in the Minnesota RICO
action. Further, Steven should reimburse the Partnership the fees and
costs it incurred, post-dissociation, defending James in the Minnesota
federal court action. These expenses should be deducted from the sum
ultimately due Steven in this action.
The court concluded, “Steven has the obligation, pursuant to the [partnership
agreement] and the law, to ‘make good’ the losses incurred as a result of his actions.
Steven’s distribution from the Partnership shall be reduced by the litigation costs of
the Partnership in the amount of $33,666.04.”
[¶23] The defendants contend the district court did not err in ordering payment of the
attorney’s fees because Steven Nelson was required to reimburse the partnership
under paragraph 7 of the partnership agreement, which states, “Should any losses
suffered by the partnership be occasioned by the willful neglect or default of a
partner, and not mere mistake or error of judgment of said partner, losses so incurred
shall be made good by the partner committing the willful neglect or default.” The
plain language of the partnership agreement requires a partner to reimburse the
partnership for any loss it suffered as a result of a partner’s willful neglect or default.
The defendants do not explain why reimbursement was required under the terms of
this provision and how bringing the RICO suit constituted willful neglect or default.
The district court concluded Steven Nelson had an obligation to reimburse the
partnership for his willful acts that caused the partnership losses. The agreement
10
requires “willful neglect,” and willful acts alone are not sufficient. Steven Nelson is
not required to reimburse the partnership for the costs it incurred under this provision
of the partnership agreement.
[¶24] The defendants also cite Minn. Stat. § 323A.0401(c) in support of their
argument the attorney’s fees were appropriate. However, the cited statutory law does
not require Steven Nelson to reimburse the partnership for costs it incurred in the
federal RICO action. Section 323A.0401(c), Minn. Stat., states, “A partnership shall
reimburse a partner for payments made and indemnify a partner for liabilities incurred
by the partner in the ordinary course of the business of the partnership or for the
preservation of its business or property.” The partnership may be required to
reimburse James Nelson under that provision, but it does not require Steven Nelson
to reimburse the partnership for expenses it incurred as a result of the federal RICO
action. See also Moren ex rel. Moren v. JAX Restaurant, 679 N.W.2d 165, 167
(Minn. Ct. App. 2004) (holding a partner has a right to indemnity from the partnership
under Minnesota’s Uniform Partnership Act, but a partnership’s claim of indemnity
from a partner is not authorized or required).
[¶25] The district court did not cite any other authority that allows it to award
attorney’s fees incurred in a federal action as a sanction in a state action. The
defendants do not argue there is any other statute or rule that authorizes the district
court to award these attorney’s fees in this case. It is clear the court believes the
federal action was frivolous, but whether the federal RICO action was frivolous and
attorney’s fees should be awarded was an issue to be decided in the federal action.
We conclude the district court abused its discretion by ordering Steven Nelson
reimburse the partnership for the attorney’s fees and expenses it incurred as a result
of the federal RICO action.
B
[¶26] Steven Nelson argues the district court erred by reducing the amount of his
partnership distribution by $29,447 for the defendants’ attorney’s fees in this case.
11
[¶27] “The district court has authority to stem abuses of the judicial process, which
comes not only from applicable rules and statutes, such as N.D.R.Civ.P. 11, but ‘from
the court’s inherent power to control its docket and to protect its jurisdiction and
judgments, the integrity of the court, and the orderly and expeditious administration
of justice.’” Estate of Pedro v. Scheeler, 2014 ND 237, ¶ 14, 856 N.W.2d 775
(quoting Federal Land Bank v. Ziebarth, 520 N.W.2d 51, 58 (N.D. 1994)). The
district court has inherent authority to award attorney’s fees for a litigant’s
misconduct. Lizakowski, 2019 ND 177, ¶ 18, 930 N.W.2d 609. A district court has
discretion under N.D.C.C. § 28-26-01 to determine whether a claim is frivolous and
the amount and reasonableness of an award of attorney’s fees. See Estate of Pedro,
at ¶ 14. A claim is frivolous if there is “such a complete absence of actual facts or law
a reasonable person could not have expected a court would render a judgment in that
person’s favor.” Id.
[¶28] The district court ordered Steven Nelson to pay 25 percent of the defendants’
costs and attorney’s fees in this case as a sanction for vexatious litigation. The court
found, “[Steven Nelson’s] behavior in the conduct of this litigation was unnecessarily
expensive and detrimental to the defendants in its presentation and adversely and
significantly impacted defendants by having to repeatedly defend baseless
arguments.” The court gave several examples, including that Steven Nelson moved
to compel the partnership to pay the full amount of the value of his interest on April
1, 2016; the court denied the request; and Steven Nelson reasserted the demand in
subsequent pleadings and at trial, which were denied. The court also noted Steven
Nelson’s lack of discovery and preparation for trial increased the defendants’
expenses, explaining:
At one of the discovery enforcement hearings plaintiff/Johnston
warranted to the court that he had retained an expert to assist in the
accounting of partnership records. However, plaintiff had not hired
such an expert. . . . Plaintiff did no discovery, sent out no
interrogatories or request for production of documents and did no
depositions; highly unusual, considering plaintiff’s belief that his action
was a million/multimillion dollar lawsuit. The first three days of trial
showed the effects of plaintiff’s lack of discovery as the first three days
12
of trial appeared to be more like a discovery deposition than the
presentation of evidence. In fact, the first three days of trial produced
what amounted to about $1200-$1300 in damages, amounts defendants
were willing to stipulate to for the sake of conserving financial
resources. It was not until the last day of trial, and if the court recalls
correctly, the afternoon of the last day of trial, that plaintiff finally
covered the fact that defendant’s prior proposals for settlement did not
include a capital account entry accounting for Steven and James 79/80
shares of beet stock contribution. . . . Defendants immediately
acknowledged the error and agreed that Steven’s capital account should
be increased accordingly. Could such not have been addressed by
discovery? The lack of trial preparation by the plaintiff clearly
increased the expense for the defendants in defending the cause of
action and prevented the parties from engaging in any meaningful
settlement negotiations.
The court found Steven Nelson compounded the defendants’ costs of the litigation by
at least 25 percent. The court explained it has the inherent power to control its docket
and protect the integrity of the court and the orderly and expeditious administration
of judgment, and concluded:
The docket in this case is replete with numerous instances where
Steven made frivolous claims and motions, requested relief already
ruled on by the Court, failed to act in accordance with previous court
rulings, failed to abide by the court’s order for sanctions, and failed to
make a good faith effort to work with opposing parties or this court in
narrowing the real issues needed to be tried. The behavior exhibited by
the plaintiff ranged from simple unpreparedness to an abuse of the court
system (e.g. repeated challenges to orders previously issued, failed to
clarify the plaintiff’s claims (forcing the Court to define plaintiff’s
“factual scenarios” for trial and then professing a lack of understanding
of what was to be tried, but not offering an analysis of the issues for
trial), and employing tactics that could not be successful while
multiplying the proceedings (offering witnesses that produced no useful
testimony for plaintiff, and objections to evidence that had no basis,
etc.).
Therefore, the Court orders that the defendants be awarded 25%
of their actual costs and fees, as compensation for defending this action
in response to unnecessary and duplicitous proceedings in this matter.
Defendants shall submit to the Court their actual costs and fees of this
litigation via affidavit, within 10 days of issuance of this order.
13
[¶29] The district court did not act in an arbitrary, unreasonable, or unconscionable
manner by awarding the defendants attorney’s fees in this action as a sanction against
Steven Nelson for vexatious litigation. We conclude the court did not abuse its
discretion.
IV
[¶30] Steven Nelson argues the district court erred in finding the valuation of the
partnership. He claims the court was required to determine the value of the
partnership based upon a sale of the entire business as a going concern under Minn.
Stat. § 323A.0701 and should have determined the value based on evidence from a
gift tax return.
[¶31] Finding the value of a partnership is a finding of fact, which is reviewed under
the clearly erroneous standard on appeal. See Puklich v. Puklich, 2019 ND 154, ¶ 8,
930 N.W.2d 593. A finding is clearly erroneous if it is induced by an erroneous view
of the law, there is no evidence to support it, or if this Court is convinced, based on
the entire record, that a mistake has been made. Id. “A district court’s finding is not
clearly erroneous if it represents a choice between two permissible views of the
evidence and the finding is based either on physical or documentary evidence, or
inferences from other facts, or on credibility determinations.” Id. “A district court’s
valuations are presumed by this Court to be correct, and a valuation within the range
of evidence presented to the court is not clearly erroneous.” Id.
[¶32] Section 323A.0701(b), Minn. Stat., states, “The buyout price of a dissociated
partner’s interest is the amount that would have been distributable to the dissociating
partner under section 323A.0807(b), if, on the date of dissociation, the assets of the
partnership were sold at a price equal to the greater of the liquidation value or the
value based on a sale of the entire business as a going concern without the dissociated
partner and the partnership were wound up as of that date.” Assuming the Minnesota
statutory law applies, Steven Nelson did not present any evidence of the value of the
partnership on the date of dissociation. Steven Nelson argues the court should have
14
considered a gift tax return dated May 2014. Steven Nelson offered the gift tax return
as evidence of the valuation of the partnership, and the defendants objected, arguing
the gift tax return was irrelevant. The court sustained the objection and ruled the tax
return evidence was not relevant as to the value of the partnership at the time of
dissociation. The evidence the defendants produced was the only documentary
evidence about the valuation as of December 31, 2015, the date of Steven Nelson’s
dissociation.
[¶33] The district court found Steven Nelson failed to produce an alternative
accounting for the partnership or show what adjustments should be made to the
partnership’s accounting, and found the value should be determined based on the
defendants’ partnership accounting submitted in an April 4, 2016 letter to Johnston.
Steven Nelson failed to present evidence of the value of the partnership on the date
of dissociation based on a sale of the entire business as a going concern without the
dissociated partner. A district court’s choice between two permissible views of the
evidence is not clearly erroneous. Puklich, 2019 ND 154, ¶ 8, 930 N.W.2d 593. The
court’s valuation was within the range of the only evidence presented. The court’s
findings about the partnership valuation are not clearly erroneous.
V
[¶34] Steven Nelson argues the district court committed error by denying his post-
judgment motions under N.D.R.Civ.P. 52, 59, and 60. Other than stating he filed post-
judgment motions and asserting the district court committed error by denying these
motions, Steven Nelson failed to present any other argument identifying or explaining
the alleged error. Because he failed to adequately brief and provide supporting
argument on the issue, Steven Nelson waived any arguments on appeal about the post-
judgment motions. See Bearce v. Yellowstone Energy Dev., LLC, 2019 ND 89, ¶ 29,
924 N.W.2d 791.
VI
15
[¶35] We conclude the district court did not err by striking some of Steven Nelson’s
claims as a discovery sanction, awarding the defendants a portion of the attorney’s
fees they incurred in this action, or determining the value of Steven Nelson’s interest
in the partnership. But we also conclude the court erred by ordering the amount
Steven Nelson was due for his interest in the partnership be reduced by $33,666.04
for the partnership’s costs and attorney’s fees incurred as a result of the federal RICO
litigation. We affirm the judgment and order in part and reverse in part.
[¶36] Gerald W. VandeWalle, C.J.
Jon J. Jensen
Jerod E. Tufte
Daniel J. Crothers
Lisa Fair McEvers
16