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Northstar Founders, LLC v. Hayden Capital USA, LLC

Supreme Court of North Dakota

October 31, 2014

Northstar Founders, LLC, f/k/a Northstar Agri Industries, LLC, Plaintiff, Appellee and Cross-Appellant
v.
Hayden Capital USA, LLC, Hayden Capital Corp., Irish Financial Group, Inc., MDL Consulting Group, LLC, Peter Williams, Stephen Hayden, Robert Liebig, and Andrew Zweig, Defendants; Hayden Capital USA, LLC, Irish Financial Group, Inc., MDL Consulting Group, LLC, Robert Liebig, and Andrew Zweig, Third-Party Plaintiffs
v.
PICO Northstar, LLC, and PICO Northstar Hallock, LLC Third-Party Defendants and Appellees, Hayden Capital USA, LLC, Hayden Capital Corp., MDL Consulting Group, LLC, Peter Williams, Stephen Hayden, and Andrew Zweig, Defendants, Appellants and Cross-Appellees

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Appeal from the District Court of Cass County, East Central Judicial District, the Honorable Steven L. Marquart, Judge.

Benjamin J. Hasbrouck (argued), Todd E. Zimmerman (on brief), and Aubrey J. Fiebelkorn-Zuger (on brief), Fargo, N.D., for plaintiff, appellee and cross-appellant..

John S. Craig (argued), Allegaert Berger & Vogel, LLP, New York, N.Y., and Ronald H. McLean (appeared), Fargo, N.D., for defendants, appellants and cross-appellees Hayden Capital Corp., Hayden Capital USA, LLC, Stephen Hayden and Peter Williams.

M. Ray Hartman (argued), and Shannon Sorrells (on brief), San Diego, Cal., and Robert J. Udland (appeared), and Vanessa L. Anderson (on brief), Fargo, N.D., for third-party defendants and appellees.

James K. Langdon (argued), and Shannon L. Bjorklund (on brief), Dorsey & Whitney LLP, Minneapolis Minn.; Sarah A. Herman (on brief), and Ross Allen Nilson (on brief), Fargo, N.D., for defendants, appellants and cross-appellees MDL Consulting Group LLC, and Andrew Zweig.

Dale V. Sandstrom, Lisa Fair McEvers, Allan L. Schmalenberger, Gerald W. VandeWalle, C.J. Opinion of the Court by Sandstrom, Justice. The Honorable Allan L. Schmalenberger, S.J., sitting in place of Kapsner, J., disqualified. Crothers, Justice, specially concurring.

OPINION

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Sandstrom, Justice.

[¶1] Hayden Capital USA, LLC, Hayden Capital Corp., Peter Williams, and Stephen Hayden (collectively " Hayden" ) and MDL Consulting Group, LLC and Andrew Zweig (collectively " MDL" ) appeal, and Northstar Founders, LLC cross-appeals from a district court judgment declaring that Northstar does not owe Hayden or MDL finder's fees for securing financing for a canola processing plant. We affirm.

I

[¶2] Northstar is a North Dakota company which was seeking financing to build a canola processing plant near Hallock, Minnesota. Northstar worked with several companies in an effort to raise funds for the project.

[¶3] In early April 2008, Northstar entered into a financial advisory agreement (" MDL Agreement" ) with MDL and Irish Financial Group, Inc. The agreement provided that MDL and Irish might act as a finder of potential sources of financing and required Northstar to pay various fees to MDL and Irish for their services, including success and equity fees if certain conditions were met.

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[¶4] In April 2008, MDL and Irish introduced Northstar to Peter Williams. Williams was an investment banker in the New York office of Oppenheimer & Co., Inc., and was also a member of the board of directors of Hayden Capital Corp. (" Hayden Capital" ).

[¶5] MDL and Irish suggested Northstar enter into a financial advisory agreement with Hayden Capital USA (" Hayden USA" ), a subsidiary of Hayden Capital. On May 2, 2008, Northstar signed a non-exclusive letter agreement with Hayden USA dated April 27, 2008 (" Hayden Agreement" ). Under the agreement, Northstar retained Hayden USA to act as a non-exclusive financial advisor and placement agent in connection with financing for the canola processing plant. Under the agreement, Hayden USA agreed to identify and introduce Northstar to potential purchasers or lenders and assist in structuring the financing and terms of the equity or debt financing. The agreement provided Northstar would pay Hayden USA a financing fee as compensation for its services if the conditions of the agreement were met. Stephen Hayden signed the agreement for Hayden USA.

[¶6] On April 28, 2008, Northstar entered into a confidentiality and non-disclosure agreement with Oppenheimer, which stated the purpose of the agreement was to facilitate business dealings between Northstar and Oppenheimer associated with the development of the canola processing plant. Williams signed the agreement for Oppenheimer.

[¶7] In July 2008, Williams introduced Northstar to PICO Holdings, Inc. In 2010, PICO Holdings and Northstar negotiated a transaction to build the canola processing plant. PICO Holdings contributed $60,000,000 to a new corporation, PICO Northstar Management, LLC, which was wholly owned by PICO Holdings. PICO Northstar Management contributed $60,000,000 to another new corporation, PICO Northstar, LLC, and owned 87.66 percent of PICO Northstar's shares. Northstar contributed $8,400,000 in assets to PICO Northstar, and owned 12.34 percent of PICO Northstar's shares. PICO Northstar formed a new corporation, PICO Northstar Hallock, LLC, and placed all of its assets into PICO Northstar Hallock. ING invested $100,000,000 in PICO Northstar Hallock, secured by a guarantee and equity pledge from PICO Northstar and a guarantee from PICO Holdings. The canola processing plant was built and began operating.

[¶8] Hayden USA demanded a finder's fee from Northstar under the Hayden Agreement, claiming Williams was working on behalf of Hayden USA when he introduced Northstar to PICO Holdings. Irish and MDL also sought a finder's fee from Northstar, claiming they satisfied the terms of the MDL Agreement when they introduced Northstar to Williams.

[¶9] In January 2011, Northstar brought a declaratory judgment action against Hayden, Irish, and MDL, requesting the district court declare that Northstar did not owe any fees or other compensation related to the construction of the canola processing plant to Hayden, Irish, and MDL. Hayden moved to dismiss the action on the basis of lack of personal jurisdiction and improper venue under N.D.R.Civ.P. 12(b)(2) and (3). Northstar responded to the motion to dismiss and moved to amend its complaint to add counts of constructive and actual fraud. Hayden opposed Northstar's motion. After a hearing on the motion, the district court granted Northstar's motion to amend its complaint and found it had personal jurisdiction over Hayden under N.D.R.Civ.P. 4(b)(2)(C), committing a tort within or outside this state causing injury

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to another person or property within the state, on the basis of Northstar's claim it was fraudulently induced to enter into the Hayden Agreement. Northstar filed an amended complaint requesting declaratory relief and asserting a claim of fraud against Hayden.

[¶10] Irish and MDL served and filed an answer and counterclaim against Northstar for breach of contract. Irish and MDL alleged Northstar failed to pay the fees it owes under the terms of the MDL Agreement related to their introduction of Williams to Northstar.

[¶11] Hayden served and filed an answer to the amended complaint and counterclaims against Northstar for breach of contract, unjust enrichment, and quantum meruit. Hayden alleged Northstar and Hayden USA had an agreement, Williams was working for Hayden USA when he introduced Northstar to PICO Holdings, and Northstar was required to pay Hayden USA certain fees under the Hayden Agreement for successfully introducing Northstar to a financing source for the canola processing plant.

[¶12] Hayden also served and filed a third party complaint against PICO Northstar and PICO Northstar Hallock (collectively " PICO Defendants" ), seeking damages for claims of breach of contract, unjust enrichment, and quantum meruit. Hayden alleged Northstar and the PICO Defendants breached the Hayden agreement by refusing to pay any part of the fees owed to Hayden USA under the agreement. Hayden also alleged Northstar and the PICO Defendants were enriched when Hayden USA successfully introduced Northstar to PICO Holdings and financing was obtained for the benefit of Northstar and the PICO Defendants.

[¶13] In March 2012, Northstar served and filed a second amended complaint, naming Williams, Stephen Hayden, Robert Liebig, and Andrew Zweig as defendants in addition to the previously named defendants. Stephen Hayden is a shareholder and officer of Hayden Capital and an officer of Hayden USA, Robert Liebig is the president and sole shareholder of Irish, and Andrew Zweig is the managing partner of MDL. The complaint contained more detailed facts, requested declaratory relief, and included claims for fraudulent inducement, fraud, wrongful or tortious interference, piercing the corporate veil, punitive damages, and negligent misrepresentation.

[¶14] Irish and MDL served and filed an answer and breach of contract counterclaim against Northstar and a cross-claim for unjust enrichment and quantum meruit against PICO Northstar Hallock. Hayden filed an answer to the second amended complaint; a counterclaim against Northstar for breach of contract, unjust enrichment, and quantum meruit; and a third party complaint against the PICO Defendants for breach of contract, unjust enrichment, and quantum meruit.

[¶15] The PICO Defendants moved for summary judgment against Hayden, Irish, and MDL, arguing their claims were without merit. Northstar also moved for summary judgment against Hayden, Irish, and MDL, arguing their counterclaims should be dismissed and Northstar's request for declaratory relief should be granted. Irish and MDL moved for summary judgment against Northstar, requesting dismissal of Northstar's declaratory judgment claim and requesting judgment in their favor on their breach of contract counterclaim. Hayden moved for summary judgment, requesting the court dismiss all of Northstar's claims against Hayden and grant Hayden relief on their counterclaim.

[¶16] After a hearing on the motions, the district court denied Northstar's motions

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to dismiss Hayden, Irish, and MDL's breach of contract counterclaims, but granted Northstar's motion to dismiss Hayden's equitable counterclaims. The court also denied Hayden, Irish, and MDL's motions to dismiss Northstar's declaratory judgment claims, but granted Hayden's motion to dismiss Northstar's fraudulent inducement, fraud, wrongful or tortious interference, piercing the corporate veil, punitive damages, and negligent misrepresentation claims. The court granted the PICO Defendants' motion for summary judgment dismissing Hayden's breach of contract claim against the PICO Defendants, but denied its motion to dismiss Hayden, Irish, and MDL's unjust enrichment and quantum meruit claims.

[¶17] Hayden moved to dismiss for lack of jurisdiction, arguing that the court determined they were subject to personal jurisdiction under N.D.R.Civ.P. 4(b) solely on the basis of the allegations of tortious activity asserted by Northstar in its amended complaint and that the court's exercise of jurisdiction over Hayden was no longer appropriate, because those tort claims were dismissed. Northstar opposed Hayden's motion to dismiss. After a hearing, the district court denied Hayden's motion.

[¶18] A court trial was held on the remaining issues. After the trial, the court dismissed Hayden, Irish, and MDL's breach of contract counterclaims against Northstar, dismissed Hayden, Irish, and MDL's equitable claims against the PICO Defendants, and dismissed Northstar's claims of fraud and negligent misrepresentation against Irish and MDL. The court granted Northstar declaratory relief, declaring that Northstar did not owe finder's fees to Hayden, Irish, or MDL. The court found Hayden was not entitled to a finder's fee under the Hayden Agreement because Williams introduced PICO Holdings to Northstar, Williams was acting on behalf of Oppenheimer and not Hayden USA when he introduced PICO Holdings to Northstar, and Hayden USA did not make any introductions of potential purchasers that resulted in any financing to Northstar. The court interpreted the MDL Agreement and found Irish and MDL were not entitled to a finder's fee under the agreement because the agreement only required Northstar to pay a fee if Irish and MDL introduced Northstar to a potential source of financing, Irish and MDL introduced Williams to Northstar, Williams was not a source of financing, and Irish and MDL did not introduce a potential source of financing. The court awarded Northstar costs and disbursements.

[¶19] Northstar and the PICO Defendants submitted proposed costs and disbursements. Judgment was entered, awarding Northstar costs and disbursements in the amount of $15,945.02 and awarding the PICO Defendants $10,179.00 in costs and disbursements.

[¶20] Hayden and MDL appealed, and Northstar cross-appealed from the judgment. Irish and Liebig did not appeal the judgment.

[¶21] The district court had subject-matter jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 27-05-06. The appeals and cross-appeal were timely under N.D.R.App.P. 4(a). This Court has subject-matter jurisdiction under N.D. Const. art. ...


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