United States Court of Appeals

For the Eighth Circuit

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No. 12-2829

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InCompass IT, Inc.; HLI, L.L.C.

lllllllllllllllllllll Plaintiffs - Appellants

v.

XO Communications Services, Inc.; XO Communications, L.L.C.

lllllllllllllllllllll Defendants - Appellees

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No. 12-2868

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InCompass IT, Inc.; HLI, L.L.C.

lllllllllllllllllllll Plaintiffs - Appellees

v.

XO Communications Services, Inc.; XO Communications, L.L.C.

lllllllllllllllllllll Defendants - Appellants

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 Appeals from United States District Court 

for the District of Minnesota - Minneapolis

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 Submitted: May 15, 2013

 Filed: June 26, 2013 

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Before WOLLMAN, MURPHY, and SMITH, Circuit Judges.

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SMITH, Circuit Judge.

InCompass IT, Inc. and HLI, LLC (collectively, "InCompass") filed suit against

XO Communications Services, Inc. and XO Communications, LLC (collectively

"XO"), asserting a single claim of promissory estoppel based on a former XO

employee's alleged oral promise to enter into a multi-year lease with InCompass.

Following a bench trial, the district court1

 entered judgment in XO's favor. On appeal,

InCompass asserts that the district court erred in granting XO's motion to strike

InCompass's jury trial demand. We affirm the district court's grant of XO's motion to

strike InCompass's jury trial demand.2

I. Background

This promissory-estoppel action arises from "XO's then-General Manager John

Unger['s] verbal[ ] agree[ment] to sign a triple-net 20–25 year lease for approximately

20,000 square feet (including the construction of a 5,000 square foot addition) at a rate

1

The Honorable Susan Richard Nelson, United States District Judge for the

District of Minnesota. 

2

XO cross-appeals, arguing that the district court erred in denying its motion for

summary judgment and motion under Federal Rule of Civil Procedure 52(c) for

judgment on partial findings at the close of InCompass's case-in-chief. Because we

affirm the district court's grant of XO's motion to strike InCompass's jury trial

demand, we necessarily deny as moot the relief XO seeks in its conditional crossappeal.

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of $22 per square foot." InCompass, IT, Inc. v. XO Commc'ns Servs., Inc., Civil No.

10-3864 (SRN/JJG), 2012 WL 512401, at *1 (D. Minn. Feb. 15, 2012) (unpublished). 

In its first amended complaint, InCompass alleged that it was "looking to

relocate its office space." In turn, Unger informed Tim Lambrecht, InCompass CEO

and HLI co-owner, that XO needed additional space. "On learning that XO[ ] was

looking to buy or rent a building for expansion purposes, Lambrecht told Unger that

he had already looked at a 20,000-square-foot building at 300 2nd Street NW in New

Brighton that would meet XO['s] needs but had ruled it out as being too large and too

expensive for InCompass alone . . . ." Unger then suggested "that XO[ ] could rent

data center space in such a building." "Unger and Lambrecht discussed XO['s] data

center requirements such as where the building should be located within the Twin

Cities and environs and how big the building should be." Then,

[o]n June 9, 2006, HLI entered into an agreement to purchase the 300

2nd Street NW building for $1,600,000 with the knowledge that the

purchase agreement contained an out-clause called the "condition date"

of August 8, 2006, which permitted HLI to back out of the purchase

agreement for any reason and get a full refund of its $20,000 escrowed

down payment.

Over a week later, on June 19, 2006, Unger, Lambrecht, and HLI co-owner

Joseph Hanson toured the building. Then, on July 27, 2006, after touring three other

buildings, "Unger told Lambrecht and Hanson that the previously-toured 300 2nd

Street NW building was the best bet." 

The complaint then alleged that Unger agreed to lease 25,000 square feet of

HLI's building for a period of 25 years. The alleged agreement included provisions for

substantial renovation of a portion of the structure and assurances that the agreement

would be put in written form before the end of the year. According to InCompass, XO

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never followed through on Unger's alleged oral promise; as a result, InCompass filed

the instant suit for promissory estoppel, alleging that

37. XO[ ] made a clear and definite promise to rent data center

space in the 300 2nd Street NW building prior to its purchase by HLI

and, for all practical purposes, InCompass.

38. It was reasonably foreseeable to XO[ ] that HLI and

InCompass would rely on XO['s] promise.

39. In making that promise, XO[ ] intended to induce HLI and

InCompass to rely on that promise and proceed to purchase the 300 2nd

Street NW building.

40. In reliance on XO['s] promise, HLI and InCompass purchased

and guaranteed the purchase of the 300 2nd Street NW building even

though InCompass' business required a building of only about 4,000

square feet and either costing about $500,000 or renting for about $5,500

per month.

41. As a direct and proximate result of their reliance on XO['s]

promise, HLI and InCompass suffered and continue to suffer severe

damages well in excess of $75,000.

In response, XO "assert[ed] that the statute of frauds bars the alleged oral

agreement because, under Minnesota law, contracts that are for a lease of more than

one year must be in writing." InCompass IT, Inc., 2012 WL 512401, at *1. It is

undisputed that the "alleged lease agreement was never reduced to a finalized

writing." Id. 

In its complaint, InCompass "demand[ed] a jury trial on all issues in this case

which are triable to a jury." XO moved to strike InCompass's jury trial demand,

"argu[ing] that because [Incompass] [was] using promissory estoppel to avoid

application of the statute of frauds, [its] claim sound[ed] in equity." InCompass IT,

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Inc., 2012 WL 512401, at *1. Therefore, XO asserted that InCompass "ha[d] no right

to a jury trial in this action." Id. In response, InCompass claimed that it was "not using

promissory estoppel to avoid application of the statute of frauds." Id. Instead,

InCompass argued that its "promissory estoppel claim is a matter of detrimental

reliance, calling for a legal remedy, for which [it] ha[s] a right to a trial by jury." Id. 

The district court granted XO's motion to strike InCompass's jury trial demand.

First, the court found that the Minnesota statute of frauds applied because "to the

extent that there was a lease agreement between [InCompass] and [XO], it should have

been reduced to writing, consistent with Minnesota law." Id. at *4. The court then

followed the "general principle that a promissory estoppel claim used to avoid the

statute of frauds sounds in equity." Id. (citing Merex A.G. v. Fairchild Weston Sys.,

Inc., 29 F.3d 821 (2d Cir. 1994); Geneva Pharm. Tech. Corp. v. Barr Labs., Inc., No.

98 Civ.861 RWS, 99 Civ.3687 RWS, 2003 WL 1345136 (S.D.N.Y. Mar. 19, 2003)

(unpublished); 9 Charles Alan Wright & Arthur R. Miller, Federal Practice and

Procedure § 2316 (3d ed. 2008)). 

Second, the court considered the type of remedy that InCompass sought. See

id. "Without ruling on the type of damages that [could] be available to [InCompass]

at trial," the court determined that "the essence of [InCompass's] damages are for

expenses incurred in reliance on the alleged promise made by Mr. Unger." Id. at *5.

The court concluded that "these reliance damages place the promissory estoppel claim

in the province of equity" and that InCompass was "not using the theory of promissory

estoppel to salvage an agreement lacking in adequate consideration, which would

. . . sound in law." Id. Therefore, the court held that InCompass's promissory-estoppel

claim sounded in equity, and, as a result, InCompass had no Seventh Amendment

right to a jury trial. 

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II. Discussion

On appeal, InCompass argues that review "of the nature of the right and remedy

sought" demonstrates that its promissory-estoppel claim "is in the nature of law, not

equity." According to InCompass, "[t]he initial agreement between the parties was not

the 25[-]year lease agreement itself, but [InCompass's] purchase of a certain building

in the first instance, upon the promise of XO['s] . . . delivery of the lease agreement

as consideration." InCompass contends that it is using promissory estoppel as an

independent claim for detrimental reliance, not to avoid the statute of frauds.

InCompass also maintains that it is seeking expectation damages, which are "legal in

nature." 

The Seventh Amendment preserves, "[i]n Suits at common law,

. . . the right of trial by jury." U.S. Const. amend. VII. The Supreme

Court has established a two-prong test for determining whether a party

enforcing a statutory right is entitled to a jury trial under the Seventh

Amendment. Tull v. United States, 481 U.S. 412, 417–18, 107 S. Ct.

1831, 95 L. Ed. 2d 365 (1987). First, we must "compare the statutory

action to 18th-century actions brought in the courts of England prior to

the merger of the courts of law and equity. Second, we examine the

remedy sought and determine whether it is legal or equitable in nature."

Id. (citations omitted). The Supreme Court has stressed the second

inquiry of this test is the more important of the two. See Chauffeurs,

Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558, 565, 110 S.

Ct. 1339, 108 L. Ed. 2d 519 (1990).

Taylor Corp. v. Four Seasons Greetings, LLC, 403 F.3d 958, 968 (8th Cir. 2005). 

Under Minnesota law, "[p]romissory estoppel is an equitable doctrine that

'impl[ies] a contract in law where none exists in fact.'" Martens v. Minn. Mining &

Mfg. Co., 616 N.W.2d 732, 746 (Minn. 2000) (second alteration in original) (quoting

Grouse v. Grp. Health Plan, Inc., 306 N.W.2d 114, 116 (Minn. 1981)). But "the right 

to a jury trial in the federal courts is to be determined as a matter of federal law in

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diversity as well as other actions." Simler v. Conner, 372 U.S. 221, 222 (1963). "[T]he

characterization of [a] state-created claim as legal or equitable for purposes of whether

a right to jury trial is indicated must be made by recourse to federal law." Id. Thus, for

Seventh Amendment purposes, a promissory-estoppel claim may be considered

equitable or legal, depending on the context: 

The doctrine of promissory estoppel can be classified as legal or

equitable depending on the context in which it appears. If promissory

estoppel is being used to avoid the statute of frauds, for example, the

claim should be considered equitable. If the claim for relief is money

damages, however, the remedy is legal in nature and the right to a trial

by jury must be preserved.

Wright & Miller, supra (citing Merex, 29 F.3d 821; Geneva, 2003 WL 1345136;

Roberts v. Karimi, 204 F. Supp. 2d 523 (E.D.N.Y. 2002)). 

Thus, to determine whether InCompass is entitled to a jury trial, we must

determine whether its promissory-estoppel claim sounds in law or equity by

examining the nature of the right and the remedy sought. See Merex, 29 F.3d at

824–26. 

A. Nature of the Right

Promissory estoppel has a dual nature that historically gives it both equitable

and legal features. If the claim is for relief traditionally found at law, such as contract

damages, then the availability of a trial by jury would seem to be at its zenith. On the

other hand, if the claim is to provide relief unavailable at law, then the claim clearly

sounds in equity, and the right to jury trial is at its nadir. The history and significance

of this duality is discussed extensively in Merex. Id. at 824–25.

 In the present case, InCompass maintains that its promissory-estoppel claim

sounds in law, contending:

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The facts of the underlying action involve two oral agreements.

The first involves a contract between HLI and XO Communications

regarding HLI's purchase of the 2nd Street building. In simple terms,

HLI offered to purchase the building if XO leased up to 25,000 square

feet starting at $21 per square foot, and XO Communications accepted

the offer. The oral lease agreement was the consideration.

The second agreement was the long-term lease agreement itself.

The district court mistakenly believed the underlying lease agreement

was the basis of the InCompass claim for promissory estoppel. But the

claim for promissory estoppel in the InCompass First-Amended

Complaint reflects the loss of its consideration from XO

Communications in the first agreement noted above where InCompass

was induced to purchase the 2nd Street building . . . .

But we conclude that a plain reading of InCompass's complaint demonstrates

that its promissory-estoppel claim sounds in equity, not law. Contrary to InCompass's

contention, it is not "su[ing]for contract damages and us[ing] detrimental reliance as

a substitute for consideration." See Merex, 29 F.3d at 825. As XO correctly observes,

InCompass "do[es] not allege that XO made a unilateral, gratuitous promise that must

be enforced. Rather, [it] allege[s] an exchange of promises: [InCompass] promised to

buy the Property in exchange for XO's alleged promise to lease space there."

Paragraph 24 of InCompass's complaint specifically alleges that XO promised to lease

the building at issue for 25 years. Under Minnesota's statute of frauds, a long-term

lease agreement must be in writing. See Minn. Stat. § 513.05.3

3

Section 513.05 provides:

Every contract for the leasing for a longer period than one year or for the

sale of any lands, or any interest in lands, shall be void unless the

contract, or some note or memorandum thereof, expressing the

consideration, is in writing and subscribed by the party by whom the

lease or sale is to be made, or by the party's lawful agent thereunto

authorized in writing; and no such contract, when made by an agent,

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Neither party disputes that the lease agreement was not in writing; therefore,

given the contract's subject matter, the district court correctly concluded that the

statute of frauds was implicated. The doctrine of promissory estoppel "may

. . . function to take an agreement outside of the statute of frauds." Hovey v. Rooney,

No. A07-0917, 2008 WL 933529, at *5 (Minn. Ct. App. Apr. 8, 2008) (unpublished)

(citing Norwest Bank Minn., N.A. v. Midwestern Mach. Co., 481 N.W.2d 875, 880

(Minn. Ct. App. 1992)). Because InCompass is using promissory estoppel to avoid the

statute of frauds, the claim is equitable in nature. See Merex, 29 F.3d at 825 ("Merex

is seeking to use promissory estoppel to circumvent New York's Statute of Frauds.

When promissory estoppel is utilized in this manner, the claim is more equitable than

promissory in nature."). 

Having concluded that the nature of InCompass's promissory-estoppel claim is

equitable in nature, we next address the nature of the remedy. See id.

B. Nature of the Remedy

As explained supra, the nature of the remedy sought is "the more important of

the two" inquiries in determining whether a right to a jury trial exists under the

Seventh Amendment. Taylor, 403 F.3d at 968; see also Geneva, 2003 WL 1345136,

at *4 ("[I]t is the second prong—the type of remedy sought—that is most important

in determining whether a right to jury trial should obtain."). 

A claim for money damages . . . constitutes "legal" relief, for such

relief was "the traditional form of relief offered in the courts of law."

Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558,

570, 110 S. Ct. 1339, 1347, 108 L. Ed. 2d 519 (1990) (quoting Curtis [v.

Loether], 415 U.S. [189,] 196, 94 S. Ct. [1005,] 1009 [(1974)]). But this

is not always true. Id. Restitution damages, for example, and money

shall be entitled to record unless the authority of such agent be also

recorded.

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awarded incidental to the grant of equitable relief are not legal in nature.

Id. at 570, 110 S. Ct. at 1347–48. Furthermore, money damages may

constitute equitable relief where "the court is not awarding damages to

which the plaintiff is legally entitled but is exercising the chancellor's

discretion to prevent unjust enrichment." SEC v. Commonwealth Chem.

Sec., Inc., 574 F.2d 90, 95 (2d Cir. 1978) (Friendly, J.) (disgorgement of

profits is equitable).

Merex, 29 F.3d at 825. Additionally, money "damages . . . to be awarded for [a

plaintiff's] reliance . . . are equitable in nature." Geneva, 2003 WL 1345136, at *4. 

By contrast, "[b]ecause expectation damages for breach of contract are

traditionally legal in nature, the pull of law with its attendant right to a jury trial is

distinctly felt." Merex, 29 F.3d at 825 (citing Atlas Roofing Co. v. Occupational Safety

& Health Review Comm'n, 430 U.S. 442, 459 (1977) ("[S]uits for damages for breach

of contract, for example, were suits at common law . . . ."); Dairy Queen, Inc. v.

Wood, 369 U.S. 469, 477 (1962) ("As an action on a debt allegedly due under a

contract, it would be difficult to conceive of an action of a more traditionally legal

character.")).

Here, InCompass is seeking money damages. But it has been, at best, imprecise

on the measure of those damages. In its complaint, InCompass alleged that it had

"suffered and continue[d] to suffer severe damages well in excess of $75,000." In its

prayer for relief, it asked the court to award it, among other things, "such other and

further relief as the court may deem just and equitable." Thus, the complaint does not

specify a measure of damages. But, as the district court recognized, InCompass's

interrogatory answers state that its "damages claims are based on, inter alia, the

difference between the contemplated monthly rent and [InCompass's] mortgage, taxes

and utility payment, as well as any decline in the market value of the building at

issue." InCompass IT, Inc., 2012 WL 512401, at *4. These damages appear to be

reliance damages, which "reimburse losses arising from a party's change in its position

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in reliance on a contract." Logan v. Norwest Bank Minn., N.A., 603 N.W.2d 659, 663

(Minn. Ct. App. 1999). "In determining reliance damages, a court attempts to place

the non-breaching party in the position it would be in had the contract not been made."

Id. Reliance damages "are equitable in nature." Geneva, 2003 WL 1345136, at *5.

By contrast, InCompass's "expert report shows that [InCompass] apparently

seek[s] some element of expectation damages." InCompass IT, Inc., 2012 WL 512401,

at *4. That is, InCompass claims to seek the amount of rental income it would have

received from XO had XO actually made an enforceable promise to lease the building

at issue. 

Like the district court, we need not definitively determine "the type of damages

that [might have been] available to [InCompass] at trial." Id. at *5. Because the subject

contract clearly comes within the statute of frauds, InCompass seeks to avoid its

operation through the equitable application of promissory estoppel. InCompass "falls

back upon the doctrine of promissory estoppel because the Statute of Frauds renders

the [purported] oral . . . agreement unenforceable." Merex, 29 F.3d at 825. InCompass

is asking the court to apply promissory estoppel as a legal remedy to form a contract

and establish its damage, while at the same time asserting that the promissory-estoppel

doctrine applies equitably to remove the same contract from the operation of the

statute of frauds. We decline to do so. 

"Relief in cases within [the Statute of Frauds], therefore, as in all others

of this nature, is not predicated upon enforcing the contract in the teeth

of the statute, but preventing its use to defeat this ulterior equity. . . . This

use of one of equity's favorite weapons, estoppel, to prevent this

particular injustice is well established." [Fred F.] Lawrence, [Equity

Jurisprudence] § 786, at 876 [(1929)].

In short, [InCompass's] reach exceeds its grasp by invoking an

equitable theory (estoppel) to give it the legal relief (expectation

damages) that is denied to it by the Statute of Frauds. This it may not do.

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To invoke the power that equity possesses to trump the Statute of Frauds,

[InCompass] must demonstrate "unconscionable" injury, i.e., injury

beyond that which flows naturally (expectation damages) from the

non-performance of the unenforceable agreement. See Philo Smith [&

Co., v. USLIFE Corp.], 554 F.2d [34,] 36 [(2d Cir. 1977) (per curiam)].

If successful, [InCompass] is not entitled, as of right, to expectation

damages; the court retains the discretion to award relief to avoid

"injustice," and can mold that relief "as justice requires." Restatement

(Second) of Contracts § 139; see, e.g., Arcadian Phosphates, Inc. v.

Arcadian Corp., 884 F.2d 69, 73 (2d Cir. 1989) . . . .

Id. at 825–26 (emphasis added) (first and second alterations in original). 

In light of InCompass's inconsistency as to the precise measure of damages that

it seeks, and in light of the "undeniably equitable nature of the promissory estoppel

claim as a whole, . . . . we hold that [InCompass's] claim is properly regarded as

equitable rather than legal and, consequently, that [InCompass] was not entitled to a

jury trial on its claim for promissory estoppel." See id. at 826; see also Geneva, 2003

WL 1345136, at *5 ("Given the 'protean' nature of promissory estoppel (and the

confusing variances in potential claims that may be considered 'promissory estoppel')

and the equitable remedy sought here in the form of reliance damages, the cause of

action is more equitable than legal and a right to jury trial does not attach."). 

III. Conclusion

Accordingly, we affirm the judgment of the district court. 

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