Loophole Prevented: Selling a Business During a Divorce

In Marital Dissolution, Minnesota Appellate Decisions, Supreme Court by Joseph Pull

Stacking together two major life events – a divorce and the sale of a multi-million-dollar business – can be a recipe for major headaches and complex interacting consequences.  In the recent Minnesota Gill case, a business sale during a divorce revealed a potential loophole through which an owner-executive tried to avoid sharing assets with a soon-to-be ex-spouse – but the state supreme court blocked the maneuver. On October 24, 2018, the Minnesota Supreme Court issued a decision requiring an ex-husband to split the proceeds of an “earn-out” provision with his ex-wife, notwithstanding that the contract granting the earn-out was signed after the valuation date in the marital dissolution case. The earn-out was part of the purchase agreement for a valuable company. The case presented a question of the boundary between two fundamental principles of Minnesota marital dissolution law: All property acquired during the marriage is subject to division between the ex-spouses.[1] Property acquired by a spouse after the valuation date in the dissolution is not subject to division between the ex-spouses.[2]

One Month of Summer; Two Employment Contracts; Three Levels of Application

In Employment Contracts, Minnesota Appellate Decisions, Supreme Court by Joseph Pull

The Minnesota Supreme Court decided two unrelated disputes about the enforcement of employment contracts within the space of thirty days this summer. Both decisions allowed the employee to elude, at least temporarily, the plain language of a contractual obligation. An employee who failed to timely return his employer’s property after leaving the company was allowed to seek a contractual payment of funds from the company, even though his employment agreement stated that failure to timely return the property allowed the employer to cancel the payment. Capistrant v. Lifetouch Nat. Sch. Studios, Inc., no. A16-1829 (July 25, 2018). An employee who left his employer to work for a competitor avoided an injunction against him continuing to work for the competitor, even though his employment contract stated that the employer was entitled to an injunction if he left the company work for a competitor. St. Jude Med., Inc. v. Carter, no. A16-2015 (June 27, 2018). This pair of decisions is educational on at least three levels. In general terms, the pair highlights the quandary of attempting to apply contractual obligations to the real world. As legal doctrine, the pair expressly resolves some basic questions of Minnesota contract law. Finally, the pair emphasize that an employer must show actual, not speculative, damage caused by the employee if the employer wishes to enforce a harsh term of the agreement against the employee.

Elements of Fraud: The I-Stole-from-Her-But-Lied-to-Him Defense

In Claims, Fraud, Legal Interpretation, Supreme Court by Joseph Pull

An elementary principle of litigation is keeping an eye on the elements. A federal appellate court decided in August that the federal mail and wire fraud statutes allow a defendant to be convicted for engaging in a “scheme to defraud” even if the defendant’s deceptive statements were made to different people than the victims who actually lost their money.[1] The defendant had argued that the conduct he was accused of engaging in – lying to banks and credit card processors about unauthorized credit card charges, and using unauthorized credit card charges to obtain money from customers – was not wire fraud because he lied to different people than he stole from. The court’s decision to reject the I-stole-from-her-but-lied-to-him defense may seem obvious, but it’s a little more complicated than it looks. The reason requires an understanding of the legal principle of “elements.”

Mining “or” for Grammatical Immunity

In Legal Interpretation, Minnesota Appellate Decisions, Supreme Court by Joseph Pull

In a dispute over whether a defendant could claim immunity from being sued, the Minnesota Supreme Court recently relied upon a principle of grammar to determine the meaning of the word “or” in the applicable statute.[1]  The Court deployed the terms “conjunctively” and “disjunctively” to explain its decision, and the cases cited in the Court’s opinion show that legal disputes concerning the meaning of “or” arise with some frequency — which means “conjunctively” and “disjunctively” are apt to recur as well.[2] What, exactly, do these grammar terms mean?

Abstention amid the dust of Pfeil

In Minnesota Appellate Decisions, Supreme Court by Joseph Pull

The Minnesota Supreme Court ruled on April 6, 2016, that a parishioner could not sue her former church and pastors for defamation in statements made within church disciplinary proceedings to excommunicate the parishioner from the church.[1] The explosive mix of high-profile issues present in the case obscures a smaller technical point which may prove crucial in a completely different context when some future litigant advances an abstention argument.