This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2014).

STATE OF MINNESOTA

IN COURT OF APPEALS

A15-1902

Robert Allen Taylor Company, et al.,

Appellants,

vs.

United Credit Recovery, LLC,

a Delaware Limited Liability Company,

Respondent,

US Bancorp,

a Delaware corporation d/b/a U. S. Bank National Association,

Respondent,

Leonard G. Potillo, et al.,

Respondents.

Filed October 3, 2016

Affirmed

Bratvold, Judge

Hennepin County District Court

File No. 27-CV-13-11504

Steven L. Schechtman, Minnetonka, Minnesota (for appellants)

Thomas H. Boyd, Brooks F. Poley, Justin H. Jenkins, Kelly M. McBeain, Winthrop & 

Weinstine, P.A., Minneapolis, Minnesota (for respondents)

Considered and decided by Bratvold, Presiding Judge; Halbrooks, Judge; and 

Reyes, Judge. 
2

U N P U B L I S H E D O P I N I O N

BRATVOLD, Judge

Appellants Robert Allen Taylor Company (RATC) and RATC Lenders, LLC

(RATC Lenders), challenge the dismissal of their claims against respondents United Credit 

Recovery (UCR) and US Bank, asserting that they sufficiently pleaded claims in their 

amended complaint. Because appellants contracted with UCR subject to a valid forumselection clause, failed to state a claim against US Bank, and had the opportunity to amend 

their complaint, we affirm the district court’s decision to dismiss the complaint with 

prejudice under Minnesota Rule of Civil Procedure 12.02(e). 

FACTS

Between February and October 2009, RATC purchased three portfolios containing

direct deposit account consumer debt (DDA debt) from UCR, a secondary debt collector 

and broker. RATC’s goal was to collect upon the debt associated with the individual 

accounts in the portfolios and later resell any uncollected debt. RATC borrowed capital to 

purchase each portfolio from its network of lenders, to whom RATC marketed the 

transaction as an investment opportunity. RATC promised its investors “quarterly income 

payments targeted to equal 25% annually” and full payment within one year.

UCR purchased thousands of direct deposit accounts from US Bank and resold three 

DDA debt portfolios to RATC at a rate of approximately $.075 per $1 of consumer debt.

UCR and RATC documented their transactions in written “purchase and sales agreements.” 

Each sales agreement contained a forum-selection clause providing any dispute arising 

from the transaction would be resolved in a Delaware court under Delaware law. 
3

RATC was frustrated in its efforts to collect on the three debt portfolios. In 2013,

RATC and RATC Lenders1 sued six defendants: UCR; US Bank; UCR manager Leonard

Potillo; RATC founder Lionel Payne; Portfolio Management Group, LLC (PMG); and 

Regent Asset Management Solutions, Inc. (Regent). UCR and US Bank moved to dismiss 

the complaint, and the district court granted the motion without prejudice in December 

2013. Appellants filed their amended complaint in January 2014, and the district court 

again dismissed it as to UCR and US Bank, this time with prejudice. In October 2015, 

appellants obtained a default judgment against Potillo and voluntarily dismissed their 

claims against PMG, Payne, and Regent. Appellants appeal, challenging the dismissal of 

their claims against UCR and US Bank.

2

Appellants’ Amended Complaint

In their amended complaint, appellants allege that respondents misrepresented the 

characteristics and quality of the three consumer debt portfolios and committed other 

misconduct in connection with the purchase transactions. Appellants assert that they

learned in 2011 that respondents “wrongly failed to provide RATC with portfolios of ‘zero-

 1 In December 2010, individual lenders sued UCR and RATC founders Philip Gower, 

Brett Toyne, and Lionel Payne. In that action, the district court granted UCR’s motion to 

dismiss and dismissed the lenders’ claims without prejudice. After the lenders amended 

their complaint, the case was removed to federal court, where UCR again moved to dismiss. 

While the dismissal motion was pending, the lenders voluntarily dismissed their claims. 

The lenders then assigned their claims to a newly created limited liability company, RATC 

Lenders, an appellant in this matter.

2 Following oral argument, this appeal was submitted for decision, then stayed while 

appellants secured new counsel. The stay was dissolved, and the appeal again submitted 

for decision.
4

agency,’ ‘current’ US Bank DDA debt”3 and that, in some cases, UCR had held the 

accounts for more than two years before selling them to RATC. We address appellants’

claims of misrepresentation and misconduct against US Bank and UCR in three categories.

1. Marketing Presentation and Investment-Offering Documents

Appellants claim that US Bank and UCR were responsible for marketing materials 

used to attract potential lenders. Appellants allege that Payne and PMG prepared a

marketing presentation and a loan-offering document that misrepresented the quality of 

debt portfolios that RATC would purchase, the interest rate RATC would pay on the 

borrowed funds, the manner by which the loans would be secured, and the manner in which 

the loans would be repaid to the lenders.4 Relevant to this appeal, appellants assert that US 

Bank and UCR were responsible for the alleged misrepresentations because Payne and 

PMG were acting as “the undisclosed paid agents of UCR” and their misrepresentations 

were “made on behalf of, and with the prior knowledge and consent of US Bank Vice 

President Tate, UCR, and Potillo.”

 3 RATC explained that “zero-agency” refers to debt portfolios that have not previously 

been collected upon, and that “current” means an account transferred within 6 to 12 months 

of origination. 

4 Specifically, appellants allege that the marketing materials contained the following 

misrepresentations: (1) that RATC would purchase “zero agency” consumer debt; (2) that 

the consumer debt would be purchased at a below-market price of 7.5%; (3) that UCR sold 

the US Bank accounts on a “pass-through basis”; (4) that a diversified group of collection 

agencies would be used to collect the debt and they would charge a fee of between 25 and 

30% of collections; and (5) that all monies collected relative to the debt accounts would be 

transferred to RATC, less any collection fees owed. Regarding the investment-offering 

documents, appellants allege that they misrepresented each loan’s interest term, interest 

rate, and the security provided to each lender.
5

2. Affidavits of Correctness

Appellants additionally allege that US Bank and UCR falsified thousands5 of 

“affidavits of correctness,” which verified the details of each individual account within the 

portfolios. Following the sale of each portfolio, UCR provided RATC with one affidavit 

of correctness per account. The affidavit documented the transfer of interest from US Bank 

to UCR and listed the US Bank direct deposit account number, borrower name, open date, 

charge-off date, and gross balance. Each affidavit was dated and appeared to be signed by 

a US Bank assistant vice president and notarized by a US Bank employee. 

Appellants allege that the affidavits of correctness misrepresented the date on which 

US Bank transferred the accounts, the balances owed by the individual debtors, and the 

charge-off dates of the individual accounts. Appellants further claim that US Bank 

participated in creating the affidavits by assisting UCR to artificially insert a US Bank 

officer’s signature and a US Bank employee’s notarization into thousands of unsigned 

affidavits through a mail-merge program. 

RATC sought to use the affidavits of correctness to verify the debts it owned and 

intended to collect upon, but could not do so because the Minnesota Attorney General 

obtained an order barring their use. Without the affidavits, RATC had to procure bank 

statements or other media to verify account details during the collections process, for which 

US Bank charged between $12 and $15 per account. 

 5 RATC claims it received 9,947 affidavits of correctness following its purchase of 

Portfolio 1; 8,670 affidavits of correctness following its purchase of Portfolio 2; and 9,056 

affidavits of correctness following its purchase of Portfolio 3.
6

3. Direct Pays

“Direct Pays” are defined by appellants as “monies voluntarily paid directly to 

creditors and collectors by debtors who are attempting to resolve their outstanding 

obligations.” Appellants allege that respondents “received and wrongly retained monies 

collected and/or ‘Direct Pays’ received relative to the debt accounts contained in Portfolios 

1, 2 and 3—said collections occurring both prior to and subsequent to the transfer of 

Portfolios 1, 2 and 3 to RATC.” Appellants contend that all “direct-pay” payments should 

have been passed on to RATC. While the amended complaint does not state a specific 

amount of direct pays withheld, appellants allege that a “conservative industry estimate of 

revenue generated from ‘Direct Pays’ relative to Zero-Agency US Bank DDA Debt” was

“more than $1,000,000” from 2009 to the present.

D E C I S I O N

I. Forum-Selection Clause

Appellants argue that the district court abused its discretion by dismissing their 

claims against UCR pursuant to the forum-selection clauses in the purchase agreements for 

all three consumer debt portfolios.

6 We review the district court’s decision to enforce a

contract’s forum-selection clause for abuse of discretion. Hauenstein & Bermeister, Inc. v. 

Met-Fab Indus., Inc., 320 N.W.2d 886, 889–90 (Minn. 1982); Alpha Sys. Integ., Inc. v. 

Silicon Graphics, Inc., 646 N.W.2d 904, 909 (Minn. App. 2002), review denied (Minn. 

 6 We note that UCR did not file a brief on appeal. Minnesota Rule of Civil Appellate 

Procedure 142.03 provides that “[i]f the respondent fails or neglects to serve and file its 

brief, the case shall be determined on the merits.”
7

Oct. 15, 2002). But we review the district court’s decision on whether a plaintiff’s claim is 

encompassed within the terms of a forum-selection clause as a question of law. Alpha Sys., 

646 N.W.2d at 907. “When the trial court has enforced a forum selection clause, this court 

will affirm unless the forum selection clause is ‘so unreasonable that its enforcement would 

be clearly erroneous and against both logic and the facts on record.’” Interfund Corp. v. 

O’Byrne, 462 N.W.2d 86, 88 (Minn. App. 1990) (quoting Personalized Mktg. Serv., Inc. v. 

Stotler & Co., 447 N.W.2d 447, 451 (Minn. App. 1989), review denied (Minn. Jan. 12, 

1990)).

Forum-selection clauses are enforceable unless a party can show that enforcement 

would be unfair or unreasonable. Hauenstein, 320 N.W.2d at 890. The Minnesota Supreme 

Court has set forth three factors to determine whether a forum-selection clause is 

unreasonable: (1) “the chosen forum is a seriously inconvenient place for trial;” (2) the 

underlying agreement is one of adhesion; or (3) the underlying agreement is otherwise 

unreasonable. Id.

Each of the three purchase agreements, which were attached to the amended 

complaint,7 contain the same forum-selection language: “This agreement is entered into, 

 7 UCR and RATC filed different versions of the three purchase agreements. In ruling on 

the motion to dismiss, the district court relied in part on the contracts UCR filed with its 

first motion to dismiss, which was extrinsic to the complaint. “Generally, the court may 

not consider extrinsic evidence on a motion to dismiss pursuant to Minn. R. Civ. P. 

12.02(e). . . . [H]owever, the court may consider the entire written contract when the 

complaint refers to the contract and the contract is central to the claims alleged.” In re 

Hennepin 1986 Recycling Bond Litig., 540 N.W.2d 494, 497 (Minn. 1995). Because the 

contracts were central to appellants’ claims, the district court was permitted to consider 

them without converting the motion to dismiss into a summary-judgment motion. Id.
8

and shall be governed in accordance with the laws of the State of Delaware. Any action 

arising out of, or pertaining to this Agreement shall be commenced only in a court of 

competent jurisdiction in the State of Delaware.” Applying the three-factor test, the district 

court concluded that Delaware is not a seriously inconvenient place for trial, the purchase 

agreements are not contracts of adhesion, and the purchase agreements are not otherwise 

unreasonable. 

Before addressing the three-factor test, appellants assert that there is no valid written 

contract between UCR and RATC because UCR repudiated the purchase agreements with 

handwritten notations, and UCR did not affirm the validity of its written documents. The 

district court determined that at least one representative for each party had signed the 

contracts8 and that appellants asserted the validity of the contracts by alleging that they 

relied upon representations and promises contained in the contracts. 

We agree with the district court’s analysis. First, appellants expressly assert the 

validity of the UCR purchase agreements because they claim that UCR is liable for 

numerous misrepresentations in the contracts. Second, the district court found that UCR’s 

position in this litigation was that the DDA debt portfolios are governed by the written 

contracts; in other words, UCR affirmed the validity of the purchase agreements. Third, a 

comparison of the contracts appellants filed with the contracts UCR filed shows that each 

contract bears the signature of at least one principal of RATC. We agree with the district 

 8 The contracts UCR filed with its motion to dismiss are signed, but much of the language 

is blocked out. Of the contracts filed by appellants with their amended complaint, the first 

is signed only by Payne, Toyne, and Gower; the second is signed only by a UCR 

representative; and the third is signed by representatives of both parties. 
9

court that appellants do not raise a disputed fact question on the validity of the UCR 

contracts. 

Turning to the three-factor test, appellants do not challenge the district court’s 

analysis of two of the three factors. Regarding the third factor, appellants argue that the 

forum-selection clause is otherwise unreasonable because UCR has engaged in fraudulent 

conduct. Relevant case law suggests, however, that the fraud must be directly related to the 

forum-selection clause in order to be deemed unenforceable. In M/S Bremen v. Zapata OffShore Co., which held a forum-selection clause enforceable, the Supreme Court noted that 

“[t]he correct approach would have been to enforce the forum clause specifically unless 

[the plaintiff] could clearly show that enforcement would be unreasonable or unjust, or that 

the clause was invalid for such reasons as fraud or overreaching.” 407 U.S. 1, 15, 92 S. Ct. 

1907, 1916 (1972) (emphasis added). 

This view was indirectly confirmed by the Supreme Court in Rent-A-Center, West, 

Inc. v. Jackson, 561 U.S. 63, 130 S. Ct. 2772 (2010). Rent-A-Center concerned an 

employment contract that included a clause requiring arbitration of any enforceability 

dispute; the plaintiff argued that the contract was unconscionable and, therefore, the 

mandatory-arbitration clause should not be enforced. Rent-A-Center, 561 U.S. at 66, 130 

S. Ct. at 2775. The Supreme Court noted that “arbitration is a matter of contract . . . on an 

equal footing with other contracts . . . [that] may be invalidated by generally applicable 

contract defenses such as fraud, duress or unconscionability.” 561 U.S. at 67–68, 130 S. 

Ct. at 2776 (quotation and citations omitted). But the Supreme Court differentiated between 

a challenge to the validity of the mandatory-arbitration clause and a challenge to the entire 
10

agreement on grounds of fraudulent inducement: “a party’s challenge to another provision 

of the contract, or to the contract as a whole, does not prevent a court from enforcing a 

specific agreement to arbitrate.” 561 U.S. at 70, 130 S. Ct. at 2778. The Supreme Court 

stated that the challenge must allege fraudulent inducement of the specific clause requiring 

arbitration in order for a court to deem it unenforceable. 561 U.S. at 71, 130 S. Ct. at 2778. 

Read together, Rent-A-Center and M/S Bremen suggest that for fraud to invalidate

a forum-selection clause or mandatory-arbitration clause, the party must establish fraud 

related to the clause that designates the forum. Here, appellants have not asserted that 

RATC’s agreement to the forum-selection clause was fraudulently induced, only that the 

contract contains false representations.

Appellants’ final argument is that enforcing the forum-selection clause is otherwise 

unreasonable because it would contravene judicial economy. Case law does not support 

appellants’ position. In Hauenstein, the appellant sued Met-Fab, the Florida broker of 

industrial equipment from whom it purchased a press brake that did not operate as 

expected, seeking to revoke acceptance of the contract or rescind the contract and claiming

damages for breach of warranty and misrepresentation. 320 N.W.2d at 887–88. The 

appellant obtained a default judgment against three defendants who failed to appear; MetFab, however, moved to dismiss the case based on a forum-selection clause in the parties’ 

contract. Id. at 888. After the district court granted Met-Fab’s motion, the appellant 

appealed, urging the supreme court to permit litigation of the claims in Minnesota, “either 

by invalidating the forum selection clause as against public policy or by striking down the 

clause as unreasonable under the facts of [the] case.” Id. 
11

After adopting the three-factor approach to forum-selection clauses, the supreme 

court addressed the appellant’s argument that enforcement of the clause would be 

unreasonable because it contravened the public policy favoring the plaintiff’s choice of 

forum. Id. at 891.9 The supreme court reasoned that the case involved “a freely negotiated 

commercial contract between a Minnesota corporation and a Florida corporation” and that 

the selection of a Florida forum was “a reasonable effort to bring certainty to the transaction 

and to provide a presumably neutral forum experienced and capable in the resolution of 

commercial sales litigation.” Id. It also noted that any inconvenience the appellant would 

suffer by litigating in Florida, as it contracted to do, “was certainly foreseeable at the time 

of contracting.” Id. Accordingly, the court held that the appellant had failed to show that 

enforcement of the forum-selection clause was unreasonable. Id. 

Similar to Hauenstein, enforcement of the forum-selection clause here affects only 

appellant RATC and respondent UCR. Appellants sued six defendants, but only two remain 

engaged in the action. Although the district court dismissed appellant RATC Lenders’ 

claims against UCR, this decision is not challenged on appeal. Because this court affirms 

 9 The appellant in Hauenstein urged the supreme court to extend the rule of Prestressed 

Concrete, Inc. v. Adolfson & Peterson, Inc., 308 Minn. 20, 240 N.W.2d 551 (1976), which 

held that “in complex multiparty litigation the policies supporting arbitration will be 

balanced against the interests of parties not subject to the arbitration agreement and the 

policies supporting joinder of all related parties and claims.” 308 Minn. at 22, 240 N.W.2d 

at 552. The supreme court declined to extend Prestressed, concluding that the Prestressed 

rule “seeks to protect the interests of parties who are not signatories to the arbitration 

agreement; the parties in this case, who are situated similarly to the nonsignatory parties in 

Prestressed, have defaulted and are no longer part of the litigation . . . Moreover, the 

Prestressed rule is not intended to accord the party to an agreement a means of avoiding it, 

which is how appellant seeks to have it applied here.” Hauenstein, 320 N.W.2d at 891.
12

the district court’s decision to grant US Bank’s motion to dismiss, no other litigants remain 

in this action. Further, any potential inconvenience of litigating in Delaware was 

foreseeable when RATC contracted with UCR for the debt portfolios. Thus, there is no 

support in this record to find the forum-selection clause unreasonable.

In sum, the district court did not abuse its discretion by giving effect to the forumselection clause in dismissing appellants’ claims against UCR without prejudice.

II. Claims Against US Bank 

Appellants next assert that the district court erred in dismissing their claims against 

US Bank. We review de novo whether a party’s complaint sets forth a legally sufficient 

claim. Bodah v. Lakeville Motor Express, Inc., 663 N.W.2d 550, 553 (Minn. 2003). In 

reviewing the complaint, we consider only the facts alleged in the complaint. Id. We accept 

those facts as true and construe all reasonable inferences in favor of the nonmoving party. 

Id.

A complaint must “contain a short and plain statement of the claim” demonstrating 

that the plaintiff is entitled to relief. Minn. R. Civ. P. 8.01. While every averment in the 

complaint must be “simple, concise, and direct,” no specific or technical form of pleading 

is required. Minn. R. Civ. P. 8.05(a). But parties alleging fraud must meet a heightened 

pleading standard. Hardin Cty. Sav. Bank v. Hous. & Redevelopment Auth. of City of 

Brainerd, 821 N.W.2d 184, 191 (Minn. 2012). “In all averments of fraud, . . . the 

circumstances constituting fraud . . . shall be stated with particularity. Malice, intent,

knowledge, and other condition of mind of a person may be averred generally.” Minn. R. 

Civ. P. 9.02. “[A] pleading will be dismissed only if it appears to a certainty that no facts, 
13

which could be introduced consistent with the pleading, exist which would support granting 

the relief demanded.” Bahr v. Capella Univ., 788 N.W.2d 76, 80 (Minn. 2010) (quotation 

omitted); see also Walsh v. U.S. Bank, N.A., 851 N.W.2d 598, 603 (Minn. 2014) (declining 

to adopt the federal plausibility pleading standard).

A. Fraudulent-Misrepresentation Claim 

The Minnesota Supreme Court has equated fraudulent misrepresentation with fraud

and applied rule 9.02. Martens v. Minn. Mining & Mfg. Co., 616 N.W.2d 732, 747 (Minn. 

2000) (“Our case law establishes a high threshold of proof for such a claim.”). Accordingly,

appellants were required to plead their fraudulent-misrepresentation claim against US Bank 

with particularity. Appellants must have pleaded the ultimate facts amounting to fraud. 

Hardin Cty. Sav. Bank, 821 N.W.2d at 191. “A party pleads the ‘ultimate facts’ of a fraud 

claim when it pleads facts underlying each element of the fraud claim.” Id. 

“General allegations of fraud are insufficient to meet the requirements of Rule 

9.02.” Stubblefield v. Gruenberg, 426 N.W.2d 912, 914–15 (Minn. 1988). Although rule 

9.02 does not specify what constitutes sufficient particularity, the Eighth Circuit has 

interpreted rule 9.02’s federal counterpart, Fed. R. Civ. P. 9(b), to require parties to plead 

the circumstances constituting fraud with particularity; those circumstances “include such 

matters as the time, place and contents of false representations, as well as the identity of 

the person making the misrepresentation and what was obtained or given up thereby.” Murr 

Plumbing, Inc. v. Scherer Bros. Fin. Servs. Co., 48 F.3d 1066, 1069 (8th Cir. 1995). Simply 

reciting the elements of a claim is insufficient. Stubblefield, 426 N.W.2d at 914–15. 
14

This court has articulated eleven specific elements for fraudulent 

misrepresentation.10 Comparing the allegations of the amended complaint to these eleven

elements, the district court concluded that appellants’ allegations regarding the marketing 

presentation, the investment-offering document, and the affidavits of correctness lacked 

the requisite particularity.

On appeal, appellants highlight the pertinent paragraphs in the amended complaint 

that they contend establish their fraudulent-misrepresentation claim with sufficient 

particularity. They maintain that particularity is required only with regard to fraud claims,

as stated in rule 9.02, and does not apply to appellants’ claims for violation of the 

Minnesota Securities Act, conversion, theft, conspiracy, and promissory estoppel, even 

 10 The eleven elements are:

(1) There must be a representation[;] 

(2) That representation must be false[;]

(3) It must have to do with a past or present fact[;]

(4) That fact must be material[;]

(5) It must be susceptible of knowledge[;]

(6) The representer must know it to be false or, in the 

alternative, must assert it as of his own knowledge without 

knowing whether it is true or false[;]

(7) The representer must intend to have the other person 

induced to act or justified in acting upon it[;]

(8) That person must be so induced to act or so justified in 

acting[;]

(9) That person’s action must be in reliance upon the 

representation[;]

(10) That person must suffer damage[;]

(11) That damage must be attributable to the 

misrepresentation, that is, the statement must be the 

proximate cause of the injury.

Nave v. Dovolos, 395 N.W.2d 393, 397 (Minn. App. 1986) (citing Weise v. Red Owl 

Stores, Inc., 286 Minn. 199, 175 N.W.2d 184 (1970)). 
15

though the factual allegations for these claims overlap. They also assert that the district 

court relied on “federal case law from jurisdictions outside the Minnesota District and the 

8th Circuit.” 

Appellants’ arguments fail. First, the particularity requirement applies not only to 

claims of fraud, but to all averments of fraud under the plain language of rule 9.02. 

Averment is defined as “a positive declaration or affirmation of fact.” Black’s Law 

Dictionary 163 (10th ed. 2014). Therefore, even factual allegations sounding in fraud, such 

as appellants’ claims against US Bank, must be pleaded with particularity because they are

“averments.” Cf. Hardin Cty. Sav. Bank, 821 N.W.2d at 191 (extending rule 9.02 

particularity requirement to negligent-misrepresentation claim). 

Next, we specifically address the sufficiency of appellants’ allegations in each of 

the two categories relating to fraud—the marketing materials and the affidavits of 

correctness. First, the amended complaint alleges that US Bank is connected to the actions 

of Payne and PMG in drafting the marketing materials because they are “undisclosed 

agents” of US Bank, US Bank “indirectly compensated” Payne and PMG, and, “at all times 

relevant hereto,” Payne acted with “prior knowledge, support and consent of US Bank.” 

The amended complaint additionally alleges that Payne received compensation—which 

they refer to as “juice” or “flavor”—for enticing entities to purchase the consumer debt 

portfolios. 

Fatal to appellants’ claims, however, the amended complaint fails to allege that US 

Bank played a role in creating the marketing materials. The amended complaint instead

states that Payne and PMG created the materials. Appellants further omit any factual 
16

averments regarding the alleged agency between US Bank and Payne, the alleged “indirect 

compensation” of Payne, and how US Bank possessed “prior knowledge” of, supported,

and consented to Payne’s actions. The amended complaint alleges that US Bank gave its

agents preferential pricing, but this allegation does not amount to fraud because US Bank’s 

sale of the debt portfolios to UCR was legal. Further, the amended complaint states that 

UCR compensated Payne with “juice” or “flavor” for his role in inducing the sale but fails 

to allege any payment by US Bank. In other words, appellants’ amended complaint only 

“vaguely attributes” the alleged fraud to US Bank and thus does not satisfy pleading 

requirements. Moua v. Jani-King of Minn., Inc., 613 F. Supp. 2d 1103, 1111 (D. Minn. 

2009); see also Juster Steel v. Carlson Cos., 366 N.W.2d 616, 619 (Minn. App. 1985)

(upholding the district court’s determination that the appellant did not meet the rule 9.02 

particularity standard because the complaint “facially assert[s] false representations” and 

only “vaguely refers to the content of the misrepresentations”).

Second, regarding the affidavits of correctness, the amended complaint asserts that 

“US Bank Vice President Wilbur Tate provided his signature for, and participated in and 

consented to [their] creation.” The complaint alleges that the affidavits specifically 

misrepresented the date the accounts were transferred from US Bank to UCR, the balances 

owed by the account holders, and the charge-off dates of the accounts. 

As the district court noted, however, the amended complaint fails to state which 

defendant made the misrepresentations or how US Bank was responsible for providing 

Tate’s notarized digital signature. As such, the amended complaint fails to identify “the 

who, what, where, when, and how of the alleged fraud.” U.S. ex rel. Joshi v. St. Luke’s 
17

Hosp., Inc., 441 F.3d 552, 556 (8th Cir. 2006) (quotation omitted). Specifically missing is 

a description of how, when, or to whom Tate allegedly provided his signature. While the 

amended complaint asserts that US Bank provided one notarized signature with which to 

create an affidavit and asserts UCR’s use of a mail-merge system, the amended complaint 

does not allege US Bank’s participation or consent with specificity. 

In sum, appellants have failed to specify US Bank’s role in the alleged fraudulent 

misrepresentation by UCR. Appellants rely on what the district court referred to as 

“rhetorical devices” and conclusory accusations, attempting to link US Bank to any 

misrepresentations. These attempts are “general allegations of fraud,” which are

insufficient to meet the rule 9.02 heightened pleading standard. Stubblefield, 426 N.W.2d 

at 914. 

B. The Minnesota Securities Act Claim

The amended complaint appears to invoke subsection 2 of Minnesota Statutes 

section 80A.6811 and subsection b of section 80A.76. Section 80A.76(b) imposes civil

liability for the conduct prohibited by section 80A.68(2): selling a security “by means of 

an untrue statement of a material fact or an omission to state a material fact necessary in 

order to make the statement made . . . not misleading.” “Federal and Minnesota state courts 

have held that § 80A.01 (now §80A.68) is the state analogue to federal rule 10b-5 and 

 11 The Minnesota Securities Act has been revised over time. Section 80A.68 became 

effective in 2007, replacing section 80A.01, under which a “substantially similar action 

could be brought.” Merry v. Prestige Capital Markets, Ltd., 944 F. Supp. 2d 702, 709 (D. 

Minn. 2013). Thus, case law discussing section 80A.01 applies to a discussion of section 

80A.68. Id.
18

therefore requires the same substantive elements of proof.” Merry, 944 F. Supp. 2d at 709; 

see also Minneapolis Emp. Ret. Fund v. Allison-Williams Co., 519 N.W.2d 176, 179–80 

(Minn. 1994) (“The Minnesota Securities Act is patterned after federal law. The Act is to 

be construed so as to coordinate the interpretation of sections 80A.01 to 80A.31 with the 

related federal regulation.” (quotations omitted)).

“At the pleading stage, a plaintiff asserting liability under Minn. Stat. § 80A.68(2) 

must allege: (1) a material misrepresentation or omission by the defendant; (2) negligence; 

(3) a connection between the misrepresentation or omission and the purchase or sale of a 

security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and 

(6) loss causation.” Merry, 944 F. Supp. 2d at 709. Section 80A.68 “imposes a heightened 

pleading standard with respect to certain elements of proof. Specifically, while a plaintiff 

must plead falsity with particularity, the heightened pleading standard does not apply to 

the issues of materiality and loss causation.” Id. (quotation omitted). Critically, “allegations 

must specifically identify each defendant alleged to have engaged in fraudulent activity,” 

and “[a]llegations that do not specify which [d]efendant violated the law are not sufficiently 

particular.” Id. at 710. 

Here, the amended complaint alleges violations of the Minnesota Securities Act by

“the actions of US Bank” in providing the affidavits of correctness, which fraudulently 

represented characteristics of each individual account in the debt portfolios. The district 

court concluded that the amended complaint did not meet the heightened pleading standard 

for the same reason that the allegations were deficient in alleging fraudulent 

misrepresentation. On appeal, appellants argue that “fraudulent conduct and/or malicious 
19

intent are not requisite elements of a claim under the Act,” and only “the negligent making 

of an untrue statement and/or the negligent omission of a material fact” is required. 

Appellants’ argument fails for at least three reasons. First, appellants have shifted 

from alleging fraudulent misrepresentation in the district court to alleging negligence in

this court. Such a change in position is impermissible, because litigants are “bound [on 

appeal] by the theory or theories, however erroneous or improvident,” they assert before 

the district court. Annis v. Annis, 250 Minn. 256, 262–63, 84 N.W.2d 256, 261 (1957). 

Second, because appellants seek to establish their Minnesota Securities Act claim using the 

same allegations found legally insufficient to support their fraud-based claims, the statutory

claim also fails. See Merry, 944 F. Supp. 2d at 712 (“Under Minnesota law, any allegation 

of misrepresentation is considered an allegation of fraud that must be pled with 

particularity.”). Third, even if we were to credit appellants’ assertion that mere negligence 

is sufficient to establish a claim under the Minnesota Securities Act, the amended 

complaint fails because negligent misrepresentation also must be pleaded with 

particularity.12 Id.; Hardin Cty. Sav. Bank, 821 N.W.2d at 191. Critically, appellants fail to 

cite legal authority to the contrary. Consequently, the district court properly dismissed 

appellants’ claim under the Minnesota Securities Act.

 12 Minnesota law recognizes distinct claims for fraudulent misrepresentation and negligent 

misrepresentation. Florenzano v. Olson, 387 N.W.2d 168, 173 (Minn. 1986). “Fraud is 

distinguished from negligence by the element of scienter required.” Id. (footnote omitted). 

But a misrepresentation, “whether negligent or fraudulent, constitutes fraud under 

Minnesota law.” Juster Steel, 366 N.W.2d at 618.
20

C. Conversion and Theft Claims

“Conversion is an act of willful interference with the personal property of another 

that is without justification or that is inconsistent with the rights of the person entitled to 

the use, possession, or ownership of the property.” Fawcett v. Heimbach, 591 N.W.2d 516, 

519–20 (Minn. App. 1999). 

The amended complaint asserts two theories of conversion. First, it contends that 

US Bank refused to return the investment capital with which RATC purchased the 

consumer debt portfolios. Second, it asserts that US Bank retained “direct pays” related to 

the accounts contained in the consumer debt portfolios. Regarding the second theory, the 

amended complaint alleges that appellants received only ten percent of the expected

amount of direct pays, and appellants “reasonably anticipate[d] that Defendants have 

received, and wrongly retained, more than $1,000,000 due and owing RATC.” The 

complaint also alleges “based on industry experience” that US Bank, UCR, and Regent 

wrongfully received and converted “the majority” of the funds. 

In challenging the district court’s dismissal of its conversion claim, appellants argue 

that they have met the rule 8.01 notice pleading requirement. They assert that the district 

court improperly held their conversion claim to the rule 9.02 heightened pleading standard. 

The district court’s order and applicable case law do not support appellants’ view.

First, the district court dismissed both conversion theories under the rule 8.01 notice 

pleading standard because both theories rest on labels and legal conclusions in the amended 

complaint. As the district court noted: “The prohibition against pleading ‘labels and 

conclusions’ is not the heightened pleading standard; rather it is part of the lower pleading 
21

standard under Rule 8.01.” This is an accurate discussion of Minnesota case law. Bahr, 788 

N.W.2d at 80 (applying rule 8.01 and stating that “a legal conclusion in the complaint is 

not binding on us. A plaintiff must provide more than labels and conclusions.” (citations 

omitted)). Second, the amended complaint falls short of the heightened standard required 

for averments sounding in fraud, which is an apt description of appellants’ first theory that 

the purchase price was wrongfully held because the amended complaint alleges that the 

purchase arose from fraudulent misrepresentations. Accordingly, dismissal of appellants’ 

conversion claim was proper.

For the same reasons, the district court properly dismissed appellants’ theft claim.

“A person who steals personal property from another” is civilly liable for theft. Minn. Stat. 

§ 604.14, subd. 1 (2014). The amended complaint alleges that respondents “have 

intentionally diverted, misused, and misappropriated” RATC assets “provided in exchange 

for the Portfolios, together with the assets collected in relation to said Portfolios, including 

but not limited to ‘Direct Pays.’” Because appellants rely entirely on the facts alleged in 

their conversion claim to support their theft claim, the theft claim also fails.

D. Unjust-Enrichment Claim

“Unjust enrichment is an equitable doctrine that allows a plaintiff to recover a

benefit conferred upon a defendant when retention of the benefit is not legally justifiable.”

Caldas v. Affordable Granite & Stone, Inc., 820 N.W.2d 826, 838 (Minn. 2012). The 

claimant must show more than the defendant’s mere retention of a benefit at the claimant’s 

expense; the claimant must show that the defendant has wrongfully retained the benefit. Id.
22

In challenging the district court’s determination that they had not sufficiently 

pleaded this claim, appellants point to the allegations that US Bank “unjustly refused to 

return” the purchase price of the three debt portfolios, “unjustly withheld” direct pays, and 

“unjustly refused to return any portion of the monies received by them in exchange for the 

27,500 worthless Affidavits of Correctness.” Again, as with their conversion and theft 

claims, appellants’ allegations are merely labels and conclusions. Because the allegations

are legally insufficient to state a claim for which relief may be granted, the unjustenrichment claim was properly dismissed. 

E. Promissory-Estoppel Claim

Promissory estoppel “implies a contract in law where no contract exists in fact.” 

Deli v. Univ. of Minn., 578 N.W.2d 779, 781 (Minn. App. 1998), review denied (Minn. 

July 16, 1998). Such a claim “requires: (1) a clear and definite promise; (2) that the 

promisor intended to induce the promisee’s reliance; (3) that the promisee relied on the 

promise to his or her detriment; and (4) that enforcement of the promise is necessary to 

prevent injustice.” Zinter v. Univ. of Minn., 799 N.W.2d 243, 246 (Minn. App. 2011), 

review denied (Minn. Aug. 16, 2011). 

Appellants’ amended complaint alleges that “defendants have made numerous 

specific promises,” followed by the same labels and conclusions supporting their claim 

under the Minnesota Securities Act. On appeal, appellants assert that the district court 

improperly applied the rule 9.02 heightened pleading standard. 

This argument misstates the district court’s analysis because appellants’ 

promissory-estoppel claim does not survive even the rule 8.01 notice pleading standard. 
23

As the district court noted, appellants allege that Payne and PMG made specific promises. 

But appellants do not allege that US Bank made any “clear and definite” promises, a fatal 

flaw in their promissory-estoppel claim. This claim therefore fails and the district court did 

not err in dismissing it. 

F. Conspiracy Claim

To establish civil conspiracy, a claimant must show that two or more people worked 

together to accomplish (1) an unlawful purpose or (2) a lawful act by unlawful means. 

Harding v. Ohio Cas. Ins. Co., 230 Minn. 327, 337, 41 N.W.2d 818, 824 (1950). A 

conspiracy claim is properly dismissed when not supported by an underlying tort. D.A.B. 

v. Brown, 570 N.W.2d 168, 172 (Minn. App. 1997). The district court dismissed appellants’ 

conspiracy claim because appellants had failed to state a claim for any underlying torts. 

Before this court, appellants first argue that their pleading was sufficient to state an 

underlying tort claim. As discussed above, we disagree. Second, appellants assert that the 

district court “ignored the fact that, at the time of dismissal, allegations of tortious conduct 

against Potillo and the other defendants remained and served to support the conspiracy 

claims.” This argument fails because the facts pleaded do not sufficiently link US Bank to 

any conduct for which a tort claim could be proven. The district court properly dismissed 

appellants’ conspiracy claim against US Bank for failure to state a claim. 

Affirmed.