Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-07-01264/USCOURTS-ca8-07-01264-0/pdf.json

Parties Involved:
Jane Bertsch
Appellee
Leland Bertsch
Appellee
Eagle Eye Development
Appellee
Bruce Roemmich
Appellant
Jon Wagner
Appellee

Document Text:

1

The Honorable A. Wallace Tashima, United States Circuit Judge for the Ninth

Circuit, sitting by designation.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 07-1264

___________

Bruce Roemmich, * 

* 

Plaintiff-Appellant, * 

* Appeal from the United States

v. * District Court for the 

* District of North Dakota.

Eagle Eye Development, LLC; *

Leland Bertsch; Jane Bertsch; and *

Jon Wagner, * 

* 

Defendants-Appellees. *

___________

Submitted: November 16, 2007

Filed: May 13, 2008

___________

Before RILEY, TASHIMA,1

 and SMITH, Circuit Judges.

___________

TASHIMA, Circuit Judge.

Plaintiff Bruce Roemmich brought an action against defendants Eagle Eye

Development, LLC (“Eagle Eye”), Leland Bertsch, Jane Bertsch, and Jon Wagner,

alleging various violations of his rights as an Eagle Eye minority shareholder. He

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The Honorable Daniel L. Hovland, Chief United States District Judge for the

District of North Dakota.

3

The Honorable Charles S. Miller, Jr., United States Magistrate Judge for the

District of North Dakota.

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now appeals the district court’s2

 partial grant of summary judgment in favor of the

defendants on their statute of limitations defense, as well as the district court’s3

resolution of most of the issues against him following a bench trial. We have

jurisdiction under 28 U.S.C. § 1291, and we affirm.

I. Background

In early 1995, Leland and Jane Bertsch, husband and wife, began to bid on

projects to construct and lease three post office buildings to the United States Postal

Service (“USPS”), one in Minnesota and the other two in Cocoa Beach and Mims,

Florida. During the Spring of 1995, after Leland secured the bids on the Florida

projects, the Bertschs and Jane’s brother, Roemmich, agreed that Roemmich would

oversee the construction and development of the Florida projects in exchange for a 30

percent ownership interest in those projects, as well as a $400 per week salary.

The Bertschs formed Eagle Eye on June 12, 1995. According to the Member

Control Agreement signed on that date, Leland made a 95 percent capital contribution

and therefore retained a 95 percent financial and voting interest. Jane made the

remaining contribution and retained a 5 percent financial and voting interest in Eagle

Eye. Shortly thereafter, on June 28, 1995, Jane assigned her interest in Eagle Eye to

Roemmich. Leland also conveyed a 25 percent ownership interest to Roemmich “for

value added,” namely, the current and future performance of his job duties, resulting

in 70 percent ownership by Leland and 30 percent ownership by Roemmich.

Roemmich also became a Secretary, Treasurer, and Governor of Eagle Eye. Later that

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year, the parties agreed to name Wagner as Secretary of Eagle Eye in place of

Roemmich.

Around this time, Roemmich was aware that Eagle Eye planned to rely on

another of the Bertschs’ companies, Bertsch Construction, Inc. (“Bertsch

Construction”) to provide support services including accounting, secretarial support,

and office space and equipment. Further, although it is undisputed that Leland told

Roemmich that he had made arrangements for interim financing, Leland never

represented that he would cover costs beyond what was originally contemplated as

being necessary for financing the projects. Financing became an issue for the Cocoa

Beach project when the city refused to approve initial plans submitted by the USPS,

resulting in project delays and change orders that drove up the cost. As a result, the

Berstchs and Roemmich secured additional financing through personal loans, which

were eventually satisfied. These financial difficulties contributed to Roemmich’s

decision to leave the Florida projects in June of 1996.

When Roemmich left Florida, physical construction of the Mims site was

virtually complete, and the USPS was scheduled to conduct a walk-through inspection

the following week. The Cocoa Beach project was about a month behind the Mims

project, and required further construction, resolution of claims with contractors,

preparation and negotiation of change orders with the USPS, and amendment of the

lease agreement. After Roemmich left, Leland hired Donald Haynes, the contractor

of record for both the Mims and Cocoa Beach projects, to complete Roemmich’s

tasks. 

Although relations between Roemmich and the other officers of Eagle Eye had

already begun to decline prior to Roemmich’s decision to leave Florida, they dropped

precipitously after that point. During a June 12, 1996, meeting, Roemmich 

became upset with Wagner and physically and verbally threatened him. After the June

12 meeting, Leland scheduled a special meeting of the members, board of governors,

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and officers of Eagle Eye concerning the removal and election of governors and

officers. That meeting was held on June 24, 1996. Because Roemmich did not attend

the meeting in person, or through his attorney, Leland was the only member in

attendance. As a 70 percent shareholder, he removed Roemmich as Governor, and

appointed Jane as Roemmich’s replacement. The Bertschs, in their capacity as

Governors, then removed Roemmich as Treasurer, although Roemmich remained the

Executive Vice President and retained his ownership interest in Eagle Eye.

Throughout the remainder of 1996, Roemmich received Eagle Eye’s financial

statements. In late November 1996, Roemmich began expressing his view that Leland

and Eagle Eye were committing fraud, tax violations, and other criminal conduct.

Roemmich contacted Eagle Eye’s bank, suggesting that litigation would be imminent

if the bank did not place a freeze on Eagle Eye’s accounts and only allow withdrawals

accompanied by his signature. The acrimony carried over to an annual meeting held

on May 17, 1997. At that meeting, Roemmich had the opportunity to inspect the 1995

and 1996 financial reports, review mortgage and lease information concerning the post

office properties, and ask about certain payables and compensation to Leland. The

parties again squabbled over Roemmich’s threatened legal challenges. 

Although Roemmich was provided with notice of a February 23, 1998, annual

meeting, he did not attend. Thereafter, the string of meetings came to a stop, and

Eagle Eye’s documentation of corporate decisionmaking grew sparse. The February

23, 1998, meeting was the last members’ meeting held, and there has not been a

formal meeting of the board of governors since March 1999. Aside from repairs

occasioned by hurricanes in 2004, the primary activity of Eagle Eye after 1999 has

been to collect rents, pay bills, file tax returns, and perform necessary maintenance

and repairs. Moreover, starting in 1999, at Leland’s instruction, Wagner stopped

forwarding any financial information to Roemmich, except for Schedule K-1 tax

information forms. Although Roemmich has the right to request regular and special

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member meetings under Eagle Eye’s Operating Agreement, he has never exercised it.

Similarly, since 1999, he has not requested detailed financial information.

In the meantime, several events occurred that anchor Roemmich’s claims of

self-dealing against defendants. In April 1997, Eagle Eye received $152,247.35 from

the USPS as part of the renegotiation of the Cocoa Beach lease agreement. Most of

the money was paid to Bertsch Construction as reimbursement for various expenses,

and Roemmich learned about that disbursement at the May 17, 1997, annual meeting.

Bertsch Construction also charged Eagle Eye approximately 3 percent of project costs

to provide support services including accounting and secretarial support. Although

there is no evidence that the 3 percent management fee was formally approved by

Eagle Eye’s board of governors or members, Roemmich knew of this expenditure by

the May 17, 1997, meeting. Sometime after Roemmich was removed as Governor,

Leland instructed Wagner to retroactively compensate him (Leland) for his services

beginning in April 1995, at the rate of $400 a week. These payments ended in April

1997, and totaled $41,600. Roemmich asked about these payments to Leland at the

May 17, 1997, meeting, and therefore had notice of them. Eagle Eye also hired

Bertsch Construction to do repair work on the Florida project caused by hurricanes

that hit the state in 2004, at a rate of a 10 percent markup for profit and 10 percent for

overhead expenses. Finally, the Eagle Eye made payments on behalf of the Bertschs

for non-Eagle Eye expenses, although these payments were always credited against

payables owed to the Bertschs.

Based on this conduct, Roemmich filed suit against defendants on April 13,

2004, claiming that their actions were unfairly prejudicial, breached fiduciary duties

and a duty to act in good faith owed to Roemmich in his capacity as a member and

minority shareholder, and denied his right to vote as a member of Eagle Eye.

Roemmich sought damages, dissenter’s rights, equitable remedies including a buy-out

of his share of the LLC, and costs and attorney’s fees. Defendants brought a

counterclaim based on Roemmich’s decision to leave the Florida projects.

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Considering the parties’ cross-motions for summary judgment, the district court held

that North Dakota’s six-year statute of limitations for tort, contract, and statutory

causes of action barred Roemmich’s claims accruing prior to April 13, 1998, as well

as defendants’ counterclaim. It also allowed Roemmich’s suit against defendants in

their individual capacity to go forward. See Roemmich v. Eagle Eye Dev., LLC, 386

F. Supp. 2d 1089 (D.N.D. 2005). The parties stipulated to a bench trial, which

resulted in dismissal of most of Roemmich’s claims. See Roemmich v. Eagle Eye

Dev., LLC, 2006 WL 2433410 (D.N.D. 2006); 2006 WL 2620373 (D.N.D. 2006). The

district court later awarded attorney’s fees to defendants, see Roemmich v. Eagle Eye

Dev., LLC, 2006 WL 3833433 (D.N.D. 2006), a decision which Roemmich also

appeals.

II. Discussion

The district court had jurisdiction based on the complete diversity of the parties.

See 28 U.S.C. § 1332. “In diversity cases, we apply the substantive law of the state

in which the district court sits.” Gen. Elec. Capital Corp. v. Union Planters Bank, NA,

409 F.3d 1049, 1053 (8th Cir. 2005). We therefore look to North Dakota law to

resolve Roemmich’s claims, and review de novo the district court’s interpretation of

state law. See id.

A. Statute of Limitations

We review de novo the district court’s grant of partial summary judgment in

favor of the defendants on the issue whether Roemmich’s claims accruing prior to

April 13, 1998, were barred by the statute of limitations. See Angelo Iafrate Constr.,

LLC v. Potashnick Constr., Inc., 370 F.3d 715, 719 (8th Cir. 2004). Summary

judgment is only warranted if the evidence, construed in the light most favorable to

the non-moving party, establishes that no genuine issue of material fact exists and that

the moving party is entitled to judgment as a matter of law. See Gen. Elec. Capital,

409 F.3d at 1053.

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The North Dakota Limited Liability Company Act, N.D. Cent. Code §§ 10-32-

01–156, imposes a duty to act in good faith on members, see id. § 10-32-69,

governors, see id. § 10-32-86, and managers, see id. § 10-32-96. Further, it empowers

the court to fashion equitable remedies when “[t]he governors or those in control of

the limited liability company have acted fraudulently, illegally, or in a manner unfairly

(continued...)

-7-

Roemmich contends that the district court erred in treating defendants’

allegedly wrongful conduct as a series of discrete acts, rather than as a continuing

violation. Because some of the conduct occurred after April 13, 1998, he argues that

none of it is time-barred. He argues in the alternative that defendants’ conduct

amounted to a shareholder freeze-out and, as such, falls under the ten-year statute of

limitations applicable to claims of relief otherwise not provided for in North Dakota’s

statute of limitations chapter. See N.D. Cent. Code § 28-01-22. We disagree with

both contentions.

We must first identify the appropriate statute of limitations for the causes of

action Roemmich pleads, and then, if necessary, determine whether the underlying

acts complained of constitute a continuing wrong, thus tolling the statute of limitations

as to those acts that would otherwise be time-barred. Although Roemmich variously

describes his action as one for breach of fiduciary duty or freeze-out, the North Dakota

Supreme Court has suggested that they are essentially the same. See Schumacher v.

Schumacher, 469 N.W.2d 793, 797 (N.D. 1991) (noting that “[a]lthough [the

plaintiffs’] action is premised upon numerous theories of recovery, including claims

of breach of contract, fraud, deceit, and negligence, the gravamen of their action is

breach of fiduciary duty by a majority or controlling shareholder of a closely held

corporation”); Balvik v. Sylvester, 411 N.W.2d 383, 387 (N.D. 1987) (“Because of the

predicament in which minority shareholders in a close corporation are placed by a

‘freeze out’ situation, courts have analyzed alleged ‘oppressive’ conduct by those in

control in terms of ‘fiduciary duties’ owed by the majority shareholders to the

minority . . . .”).4

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(...continued)

prejudicial toward one or more members . . . .” Id. §§ 10-32-119(1)(b)(2), (4). The

North Dakota Supreme Court has previously interpreted similar language in the North

Dakota Business Corporation Act as creating an action for breach of fiduciary duty.

See Brandt v. Somerville, 692 N.W.2d 144, 149 (N.D. 2005).

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The North Dakota Limited Liability Company Act (the “Act”) does not

establish a limitations period for claims arising thereunder, and, to our knowledge, no

reported North Dakota case has yet determined the appropriate statute of limitations

to apply to a breach of fiduciary duty claim arising under the Act. For the reasons that

follow, we conclude that the district court correctly applied the six-year limitations

period laid out in Title 28 of the Century Code, see N.D. Cent. Code § 28-01-16,

rather than the ten-year provision. See § 28-01-22. First, an action for breach of

fiduciary duty falls within the plain language of § 28-01-16. That provision requires

the following actions to be commenced within six years after the claim for relief has

accrued:

. . . 

2. An action upon a liability created by statute, other than a penalty or

forfeiture, when not otherwise expressly provided.

. . . 

5. An action for criminal conversation or for any other injury to the

person or rights of another not arising upon contract, when not otherwise

expressly provided.

N.D. Cent. Code § 28-01-16.

Roemmich’s breach of fiduciary duty claim appears to fall within both of these

provisions. He grounds his breach of fiduciary duty claim in the provisions of the Act

creating both the duty of good faith on the part of defendants, as well as the equitable

remedies he seeks. See N.D. Cent. Code § 10-32-119. Further, the Act does not

expressly provide a separate statute of limitations to govern claims arising thereunder.

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The only detailed discussion of this subsection can be found in Sheets v.

Graco, Inc., 292 N.W.2d 63 (N.D. 1980), where Justice Sand, specially concurring

and dissenting, interpreted the provision to require that the liability be exclusively

created by statute, in other words, not available at common law. Id. at 69. The parties

do not argue this point, and it is doubtful that a cause of action for breach of fiduciary

duty existed independent any statutory scheme, because the limited liability company

is a relatively recent creation.

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Therefore, his claim meets the requirements of subsection (2) above.5

 See Brandt, 692

N.W.2d at 149 (grounding an action for a freeze-out in the Business Corporation Act);

Balvik, 411 N.W.2d at 388 (tracing the action for freeze-out or breach of fiduciary

duty to a prior version of the Business Corporation Act proscribing “oppressive”

conduct).

An action for breach of fiduciary duty also falls within subsection (5), because

it involves an alleged injury to Roemmich not arising from contract, and also not

provided for in the alternative by any other provision. Although there is no North

Dakota case on point, the Missouri Supreme Court interpreted a similar provision to

encompass breach of fiduciary duty claims. See Creative Mktg. Assocs. v. AT & T,

476 F.3d 536, 539 (8th Cir. 2007) (citing Mo. Rev. Stat. § 516.120(4), and Klemme

v. Best, 941 S.W.2d 493, 497 (Mo. 1997)). Our interpretation is bolstered by the fact

that breaches of fiduciary duty are sometimes conceptualized as sounding in tort. See,

e.g., Restatement (Second) of Torts § 897 & cmt. b (1979) (“A fiduciary who commits

a breach of his duty as a fiduciary is guilty of tortious conduct to the person for whom

he should act.”); Houle v. Low, 556 N.E.2d 51, 53 (Mass. 1990) (“[C]orporate ‘freeze

out’ is a tort claim . . . .”). And Roemmich primarily argues that the actions of

defendants constituted a continuing tort for the purpose of the statute of limitations.

Therefore, we conclude that the district court properly applied the six-year statute of

limitations to Roemmich’s claims. Concomitantly, we conclude that § 28-01-22,

providing a ten-year limitations period for “relief not otherwise provided for,” is

simply inapplicable.

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We now turn to the question whether the district court should have applied the

continuing wrong doctrine to the conduct established by Roemmich at the summary

judgment stage. Under North Dakota law, “[t]he statute of limitations for a continuing

tort does not begin to run until the tortious acts cease.” Beavers v. Walters, 537

N.W.2d 647, 650 (N.D. 1995) (citing 54 C.J.S. Limitations of Actions § 177 (1987)).

A series of wrongs is only continuous for the purposes of this doctrine, however,

“when no single incident in a chain of tort[i]ous activity can fairly or realistically be

identified as the cause of significant harm.” 54 C.J.S. Limitations of Actions § 194

(2008). For this reason, the Seventh Circuit has recently observed that instead of

continuity, the doctrine really focuses on cumulativeness: “The office of the

misnamed doctrine is to allow suit to be delayed until a series of wrongful acts

blossoms into an injury on which suit can be brought.” Limestone Dev. Corp. v.

Village of Lemont, 2008 WL 852586, at *3 (7th Cir. Apr. 1, 2008). A paradigmatic

example of such a series of violations is workplace sexual harassment, where “[t]he

first instance of a coworker’s offensive words or actions may be too trivial to count

as actionable harassment, but if they continue they may eventually reach that level and

then the entire series is actionable.” Id. In contrast, in cases presenting transactions

that are “separate, distinct, and could have been challenged by a plaintiff” when they

occurred, we have found that the continuing wrong doctrine does not apply. Hope v.

Klabal, 457 F.3d 784, 793 (8th Cir. 2006) (finding the doctrine inapplicable under

Minnesota law in an action for fraud based on separate sales of multiple paintings

spanning the course of many years); Davies v. West Publ’g Co., 622 N.W.2d 836,

841–42 (Minn. Ct. App. 2001) (applying a six-year statute of limitations to breach of

fiduciary duty claims based on financial distributions from the same fund occurring

over a period beginning in 1967).

Roemmich has failed to point to any case identifying freeze-out, or a series of

breaches of fiduciary duties, as a continuing wrong. In fact, several decisions have

held the opposite. In Thorndike v. Thorndike, 910 A.2d 1224 (N.H. 2006), the New

Hampshire Supreme Court considered a freeze-out claim based on conduct taking

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Because the statute of limitations issue was decided on summary judgment,

these facts are taken from the record available to the district court when ruling on the

cross-motions.

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place both in and outside of the limitations period. Specifically, the plaintiff

contended that in 1995, after his brother gained control of management of the family

business, his brother, inter alia, added new board members, removed him from his

position as director, eliminated his salary, and diluted his voting powers. Id. at 1226.

Based on these events, he filed suit ten years later, in 2005. Id. Applying a three-year

statute of limitations to bar his claims, the court rejected his contention that the

continuing wrong doctrine applied, even assuming the following wrongs persisted: his

brother continued to exclude him from employment; continued to deprive him of a

salary; continued to prevent him from participation in the management of the

company; and continued to ban him from the premises. Id. at 1228. Because all of

the ongoing harm resulted from decisions made in 1995, the statute of limitations

began to run at that time. Id. The Massachusetts Supreme Judicial Court applied the

same reasoning in Houle. In that case, a minority shareholder in an ophthalmology

practice sued his colleagues and the practice itself after they formed a new surgical

center and voted to exclude him from sharing in the opportunity. 556 N.E.2d at 52.

Considering his allegation that he was frozen out by the other shareholders, the court

simply stated that harm to the plaintiff occurred when he was notified of the decision,

and, as such, the statute of limitations barred the cause of action. Id. at 53. 

Thorndike and Houle do not necessarily settle this matter, however, because

myriad wrongful acts may trigger a freeze-out claim, and some could conceivably be

continuing wrongs. Cf. Schumacher, 469 N.W.2d at 797 (describing various types of

majority shareholder tactics falling under the umbrella of a freeze-out). Many of the

wrongful acts described by Roemmich occurring prior to April 13, 1998, were

separate, distinct, and themselves the cause of significant harm, thus triggering a

running of the limitations period6

: Roemmich’s removal as governor in 1996; loans

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7

Roemmich also identifies two other actions that he alleges constitute a

continuing violation: (1) he claims that the defendants continually obtained

refinancing before and after April 13, 1998, with the goal of using the money to make

preferential payments to Bertsch Construction or the Bertschs; and (2) he raised the

possibility that Leland improperly used loans for a separate post office project in

Hawaii to pay some of Eagle Eye’s debt, causing Eagle Eye to owe the Hawaii project

up to $20,000 in interest. Roemmich fails to cite to the record to support the first

assertion; thus, he does not show that he raised it as an issue of material fact before

the district court. See Fed. R. App. P. 28(a)(9)(A) (requiring the appellant to provide

“citations to the . . . parts of the record on which the appellant relies”); Racicky v.

Farmland Indus., Inc., 328 F.3d 389, 398 & n.9 (8th Cir. 2003). As for the second

assertion, the citations he provides do not indicate when the event took place, making

it impossible for us to review the district court’s ruling.

8

Again, Roemmich’s brief suffers from its failure to point to specific facts in

the record that might support his claims. The most our search discloses is deposition

testimony by Wagner that Leland wrote checks from Eagle Eye accounts for his

personal expenses. We cannot conclude that these events took place after the April

13, 1998, cutoff, however, because the only date discussed in this line of questioning

(continued...)

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made to Eagle Eye by the Bertschs at a 10 percent interest rate as of December 31,

1997; execution of an agreement on January 2, 1997, giving Bertsch Construction the

right to manage Eagle Eye’s affairs at a rate of 10 percent profit; levying of a

construction fee of 3 percent of the total project cost in 1997; and payment to Leland

of a salary during 1996 and 1997.7

 In each case, continuing harm to Roemmich’s

interests was caused by a discrete act that would give rise to a breach of fiduciary duty

claim at the time the allegedly wrongful act was committed.

Although it is possible that the district court erred in rejecting the continuing

wrong doctrine as applied to Roemmich’s claim that defendants engaged in

commingling of personal and Eagle Eye funds, we need not reach that question

because Roemmich failed to provide any evidence establishing that the conduct

occurred after April 13, 1998.8

 Therefore, the continuing wrong doctrine would not

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8

(...continued)

was 1996. The only reasonable inference to be drawn is that these transactions took

place that year.

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toll the statute of limitations as to this series of actions. For the foregoing reasons, we

conclude that the district court correctly barred recovery based on acts and events

occurring before April 13, 1998.

B. Limitations Period and the Availability of Equitable Relief

Roemmich contends that the district court erred in barring his claims for

equitable relief based on actions occurring outside the six-year limitations period, then

turning around and considering pre-April 13, 1998, conduct when determining an

appropriate remedy under N.D. Cent. Code § 10-32-119. We review these legal issues

de novo. See Pritchett v. Cottrell, Inc., 512 F.3d 1057, 1062 (8th Cir. 2008).

As to the first part of Roemmich’s contention, we agree with the district court

that the six-year statute of limitations applies to Roemmich’s causes of action,

regardless of whether the relief requested is legal or equitable. The North Dakota

Supreme Court has previously applied a similar statute of limitations to claims for

equitable relief arising out of actions falling within the statute. See Diocese of

Bismarck Trust v. Ramada, Inc., 553 N.W.2d 760, 765 (N.D. 1996) (applying a tenyear limitations period for “‘an action upon a contract contained in any conveyance

[of land]’” to an action seeking reformation of a ground lease). Indeed, “where a legal

and equitable remedy exist for the same cause of action, equity will generally follow

the limitations statute.” Estate of Nicolas v. Ocean Plaza Condo. Ass’n, 909 A.2d

1144, 1152–52 (N.J. Super. Ct. App. Div. 2006). To put it simply, parties who sleep

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Roemmich relies on Musto v. Vidas, 658 A.2d 1305 (N.J. Super. Ct. App. Div.

1995), to support his contention that the district court should have considered conduct

occurring far before the statute of limitations cut-off. Although the Musto court

considered evidence dating back over 20 years before the filing of the complaint, it

did so to establish the predicate factual issue of whether the parties had an agreement

to make unanimous management decisions. Id. at 1308–09. The events giving rise

to the action, however, occurred during the same month that Musto filed his

complaint: the majority shareholders decided at a meeting to remove Musto as a

director of the company and adopted new bylaws, both in violation of the unanimity

agreement. See id. Because Musto filed the lawsuit almost contemporaneously with

the harm caused, no statute of limitations dispute arose. To the extent that

Roemmich’s argument is simply that the district court should consider conduct

occurring during the course of the relationship of the parties in fashioning an equitable

remedy, we agree, as our ensuing discussion of that point makes clear.

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on their rights cannot resuscitate time-barred causes of action by seeking equitable

remedies.9

 

Although the statute of limitations precludes liability based on stale claims, the

Act envisions that evidence of conduct from as far back as the beginning of the

business relationship might be relevant in fashioning an equitable remedy once

liability is established. The Act provides:

[I]n determining whether to order relief under this section and in

determining what particular relief to order, the court shall take into

consideration the duty that all members in a closely held limited liability

company owe one another to act in an honest, fair, and reasonable

manner in the operation of the limited liability company and the

reasonable expectations of the members as they exist at the inception and

develop during the course of the members’ relationship with the limited

liability company and with each other.

N.D. Cent. Code § 10-32-119(4). Based on the language of the statute, the district

court correctly allowed both parties to present evidence of events occurring prior to

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10Although Roemmich argues that the district court made a substantive

determination that Leland and Wagner did not submit fraudulent change orders to the

USPS prior to April 13, 1998, even assuming the truth of his observations, we fail to

see how this finding of no liability harmed him, given that claims based on these

change orders were barred by the statute of limitations.

11Roemmich contends that the district court improperly excluded evidence that

Leland and Wagner submitted fraudulent change orders to the USPS. Such evidence,

he argues, would have further established the wrongfulness of defendants’ conduct.

By implication, defendants’ conduct might have justified more favorable relief.

However, he fails to cite any instance in the record where the district court prevented

him from introducing evidence for this purpose.

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April 13, 1998, for the purpose of crafting a remedy. Roemmich fails to point to any

pre-April 13, 1998, evidence that was either admitted for some improper purpose,

such as determining liability,10 or excluded despite its relevance under § 10-32-119.11

Therefore, the district court did not err in its treatment of pre-April 13, 1998,

evidence.

C. District Court’s Findings of Fact and Conclusions of Law

“When the district court conducts a bench trial as it did here, we review the

district court’s fact finding for clear error, and we review legal conclusions and mixed

questions of law and fact de novo.” Eckert v. Titan Tire Corp., 514 F.3d 801, 804 (8th

Cir. 2008). Under the clearly erroneous standard, “we will overturn a factual finding

only if it is not supported by substantial evidence in the record, if it is based on an

erroneous view of the law, or if we are left with the definite and firm conviction that

an error was made.” Richardson v. Sugg, 448 F.3d 1046, 1052 (8th Cir. 2006).

Roemmich contends that the district court erred by looking at each alleged

violation as a separate act, rather than considering the totality of the conduct and

asking whether it constituted a freeze-out. The record, however, does not support

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Roemmich’s characterization of the district court’s decision. It is true that the district

court made factual findings regarding each instance of misconduct alleged by

Roemmich, finding in most instances that the particular acts did not amount to a

breach of fiduciary duties. After doing so, however, the district court then considered

the totality of defendants’, as well as Roemmich’s, conduct, in order to determine

whether the conduct amounted to a freeze-out of the minority, a breach of fiduciary

obligations imposed by the Act, or an unfair deprivation of Roemmich’s reasonable

expectations. See Roemmich, 2006 WL 2433410, at *27, *29. 

For example, the district court found that Roemmich had no reasonable

expectation of continued employment beyond the development of the Florida projects,

and that his abandonment of those projects justified the cessation of his salary; he had

no reasonable expectation of immediate or regular financial distributions; the Bertschs

did not engage in improper self-dealing; and that he never had a reasonable

expectation of an equal say in the decisionmaking of Eagle Eye. Id. at *29. Further,

the district court found that although there was a mutual understanding that Roemmich

would be actively involved in managing Eagle Eye, and that he had a reasonable

expectation that he would be provided with Eagle Eye’s financial information, his own

inequitable conduct justified his removal as governor. Id. at *29-*30.

The district court’s order provides ample indication that the court considered

the totality of the conduct. Moreover, we are unaware of case law prohibiting the

district court from first ascertaining what happened in given instances before drawing

conclusions about their cumulative effect. In fact, the case law suggests that the

district court proceeded properly. See, e.g., Brandt, 692 N.W.2d at 150–51

(describing a trial court’s separate analysis of various claims allegedly giving rise to

a general freeze-out action); Balvik, 411 N.W.2d at 388 (noting various incidents

found by the trial court justifying its conclusion that the defendant’s cumulative

actions were “oppressive” under a former version of the Business Corporation Act).

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Roemmich also contends that the district court’s findings of fact are contrary

to the weight of the evidence presented at trial. However, the trial transcripts and

exhibits indicate at least some support for every challenged material finding. Because

we must give ample regard to the district court’s credibility determinations, as well

as its choice between two permissible views of the evidence, we hold that the district

court’s findings of fact were not clearly erroneous. See Richardson, 448 F.3d at 1052.

D. Attorney’s Fees and Expenses

Roemmich appeals the district court’s decision to award defendants reasonable

expenses, including attorney’s fees, under § 10-32-119(8) of the Act. The Act

provides that “[i]f a court finds that a party to a proceeding brought under this section

has acted arbitrarily, vexatiously, or otherwise not in good faith, it may in its

discretion award reasonable expenses, including attorney’s fees and disbursements,

to any of the other parties.” N.D. Cent. Code § 10-32-119(8). The district court based

its decision on Roemmich’s pre-litigation conduct, specifically emphasizing his use

of allegations of fraud and illegal conduct against Leland and Wagner as a sword in

his dealings with them and Eagle Eye’s banks. “We review de novo the legal issues

related to the award of attorney’s fees and costs and review for abuse of discretion the

actual award of attorney’s fees and costs.” Sturgill v. United Parcel Serv., Inc., 512

F.3d 1024, 1036 (8th Cir. 2008) (citation and quotation marks omitted).

North Dakota case law has not yet delineated what types of acts are arbitrary,

vexatious, or not otherwise in good faith for purposes of the statute. Roemmich

contends that because he prevailed on portions of his claim, and he did not engage in

bad faith litigation conduct, he could not have “acted” in bad faith under the statute.

Yet, the authorities he cites do not create a per se rule that prevailing on some portion

of the claim prevents the district from finding that he acted arbitrarily, vexatiously, or

in bad faith. Bloom v. Northern Pacific Beneficial Association, for example, involved

interpretation of a statute allowing the court to award fees for the refusal of an

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insurance company to provide coverage to an insured if “it appears to the court that

such refusal was vexatious and without reasonable cause . . . .” Bloom v. N. Pac.

Beneficial Ass’n, 193 N.W.2d 244, 253 (N.D. 1971) (citation omitted). The court

there held that the defendant’s refusal could not have been vexatious where no

evidence presented indicated that the defendant acted in bad faith, and the court

determined that the defendant correctly denied coverage for certain medical claims.

Id. In that situation, a finding that the defendant’s denial was proper strongly implied

that denials of other claims were not made in bad faith. Nowhere does the decision

state, however, that good faith denial of some claims would immunize a bad faith

denial of others. Further, the language of § 10-32-119(8) does not restrict the scope

of actions available for consideration by the trial court to the same extent as the statute

in Bloom.

Belfer v. Merling, 730 A.2d 434 (N.J. Super. Ct. App. Div. 1999), also relied

on by Roemmich, is distinguishable because the only bad faith alleged in that case was

the bringing of suit itself. Id. at 446. That is simply not the case here, where the

district court found that Roemmich leveled baseless accusations of fraud and illegality

at defendants, and attempted to use those accusations to disrupt Eagle Eye’s business

relations. Roemmich does not challenge the district court’s conclusion that his

accusations of fraud and illegal conduct were vexatious or in bad faith. Thus, we

cannot say that the district court abused its discretion in determining that the identified

conduct fit the definition of “vexatious” that Roemmich provides: “lacking

justification and intending to harass.” Bloom, 193 N.W.2d at 253 (citing Webster’s

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12Roemmich does not contend in his opening brief that relief under § 10-32-

119(8) is limited to arbitrary, vexatious, or bad faith litigation conduct, nor does he

provide any authority that suggests this interpretation of the statute. Therefore, we

have no occasion to decide whether the district court erred in basing its award on prelitigation conduct. See United States v. McAdory, 501 F.3d 868, 870 n.3 (8th Cir.

2007) (requiring the appellant to support claims of error with specific reasons,

citations to the record, or relevant legal authority); Am. River Transp. Co., Inc. v.

Paragon Marine Servs., Inc., 329 F.3d 946, 948 (8th Cir. 2003) (noting that appellants

must raise issues in their opening briefs).

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Third New International Dictionary).12 We therefore affirm the district court’s award

of attorney’s fees and expenses to defendants.

III. Conclusion

Based on the foregoing, we affirm the judgment of the district court. 

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