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Civ. No. 03-3641 (RHK/AJB)
February 2, 2004
Berry Willis, Brooklyn Park, Minnesota, pro se, for Plaintiff
John David Thompson and Jessica R. Wymore, Rider, Bennett, Egan Arundel, Minneapolis, Minnesota, for Defendants Centennial Mortgage Funding, Inc., Rider, Bennett, Egan Arundel, Sharon Denise Atkinson, Trent E. Bowman, Al Gelschus, Apex Appraisal Services, Inc., Forsythe Appraisal, Kathleen Midthun, and Tim Forsythe
Steven C. Eggimann and Erin M. Wessling, Meager Geer, Minneapolis, Minnesota, for Defendant RSKCO, a CNA Company of Minnesota
MEMORANDUM OPINION AND ORDER
Introduction
Defendant Sharon Denise Atkinson went to Plaintiff Berry Willis, a mortgage broker and Chief Executive Officer of BlackDiamond Mortgage Real Estate Consultants, Corp. ("BlackDiamond"), for a home mortgage. Displeased with Willis's inability to obtain the loan, Atkinson took her business to Defendant Centennial Mortgage Funding, Inc. ("Centennial"). BlackDiamond, represented by Willis, then sued Atkinson and Centennial for breach of contract in Minnesota state court. That action ended in a default judgment against BlackDiamond for failure to prosecute. The state court also determined that no valid contracts existed between BlackDiamond and Atkinson or Centennial.
Prior to and during that litigation, Atkinson complained about her experience with Willis to the Better Business Bureau ("BBB"), the Minnesota Attorney General, and the Minnesota Department of Commerce ("Department"). Her complaints to the Attorney General and Department were e-mailed using an account supplied by her employer, Defendant RSKCO, a CNA Company of Minnesota ("RSKCO"). Eventually, the Department instituted an administrative action against BlackDiamond to determine whether its alleged conduct violated Minnesota law.
Unrelated to Atkinson's situation, Defendant Kathleen Midthun, the owner of Defendant Apex Appraisal Services, Inc. ("Apex Appraisal"), also complained to the Department about Willis not paying her for an appraisal. During its investigation, the Department requested and received information from Defendant Tim Forsythe, owner of Defendant Forsythe Appraisal, about Willis not paying him for an appraisal.
In the wake of these events, Willis brings this action naming twenty defendants in a thirty-one count Complaint. Four allegations are relevant to the motions now before the Court. First, Willis alleges that Atkinson and Centennial have breached their contracts with him. Second, he alleges that statements made in state court by Atkinson, Centennial, and Centennial's counsel, Rider, Bennett, Egan Arundel ("Rider Bennett"), and the complaints by Atkinson, Kathleen Midthun, and Tim Forsythe, were fraudulent. Third, he alleges that Atkinson and Centennial's statements in state court and Atkinson's complaints, as well as other statements by Atkinson, were defamatory. Finally, he alleges that Centennial and RSKCO are vicariously liable for their employees' conduct and that they negligently retained and negligently supervised these employees.
Before the Court are three motions by the defendants — two to dismiss and one for summary judgment — and five motions by Willis. For the reasons set forth below, the Court will grant Centennial, Bowman, Gelschus, Atkinson, and Rider Bennett's Motion to Dismiss in part, grant Forsythe Appraisal, Forsythe, Apex Appraisal, and Midthun's Motion to Dismiss, grant RSKCO's Motion for Summary Judgment, and deny Willis's motions.
Background
I. Atkinson's Home Mortgage
Willis was a licensed mortgage broker and CEO of BlackDiamond. A mortgage broker solicits or negotiates residential mortgage loans on behalf of borrowers in exchange for consideration paid by the borrower, lender, or both. See Minn. Stat. § 58.02, subds. 14, 23. Atkinson is a former employee of RSKCO, a Minnesota insurance company, where she was a Senior Claims Adjuster for workers' compensation claims. Her duties included investigating claims and attending court proceedings, arbitrations, and mediations. (Rangel Aff. ¶¶ 2, 3.)
In early 2001, Atkinson approached Willis about obtaining a home mortgage. In April 2001, she signed a purchase agreement for a new home to be financed by a Veteran's Administration ("VA") loan. (Wymore Aff. to Centennial, Gelschus, Bowman, Atkinson, and Rider Bennett's Mot. to Dismiss Ex. 2A (Traxler Aff. Ex. B).) In June 2001, Willis spoke to Centennial, a Eden Prairie, Minnesota, mortgage lender, attempting to create a loan brokerage arrangement with respect to Atkinson's mortgage. (Id. Exs. 2B, 2C (Bowman Affs.).) Centennial declined because Willis was not an approved VA mortgage broker. Displeased with Willis's apparent inability to procure a VA loan, Atkinson took her business to Centennial. BlackDiamond assigned Atkinson's file to Centennial on June 13, 2001 and her loan successfully closed with Centennial's assistance on June 29, 2001. BlackDiamond provided a written memorialization of its assignment of Atkinson's file to Centennial on July 12, 2001. (Id.)
II. Willis's State Court Lawsuit
On August 23, 2001, BlackDiamond, represented by Willis, sued Atkinson in Minnesota state court for failing to pay for a VA home appraisal that it had commissioned; it also sued Centennial for Atkinson's loan origination fees. (Id. Ex. 2E (State Court Summons Compl.).) Represented by Rider Bennett, Centennial answered and asserted counterclaims seeking a determination that no contract existed between it and Black Diamond. (Id. Ex. 2 F. (State Court Answer Countercl.).) In April 2002, the state court dismissed BlackDiamond's Complaint against Centennial and Atkinson with prejudice for failing to prosecute and failing to reply to Centennial's counterclaims; it also dismissed Centennial's counterclaims without prejudice. See Protech Enterprise Investment Properties Trust, c/o BlackDiamond Mortgage Real Estate Consultants Corp. v. Atkinson, File No. CT. 01-15710, at 3-4 (Minn. Dist. Ct. April 12, 2002) (attached to Doc. No. 11).
Defendant Trent Bowman, a Centennial employee, filed an affidavit stating, inter alia, that Willis was not licensed to broker VA loans. (Wymore Aff. to Centennial, Gelschus, Bowman, Atkinson, and Rider Bennett's Mot. to Dismiss Ex. 2B).)
Despite the state court's order dismissing BlackDiamond's Complaint, Atkinson received invoices from collection agencies attempting to collect payments on BlackDiamond's behalf. (Wymore Aff. to Centennial, Gelschus, Bowman, Atkinson, and Rider Bennett's Mot. to Dismiss Ex. 2D (Atkinson Aff. Exs. B, E).) In addition, Willis filed a Mechanic's Lien for the purported improvements BlackDiamond made to Atkinson's property. (Id. Ex. 2D (Atkinson Aff. Ex. G).)
In response to these events, the state court reinstated Centennial's counterclaims against BlackDiamond and allowed Atkinson to join Centennial's second default motion. In November 2003, the state court entered a second default judgment in favor of Centennial and Atkinson against BlackDiamond. In its order, the state court determined that no contracts existed between BlackDiamond and Centennial or Atkinson, that Centennial did not owe loan origination fees, and that Atkinson did not owe appraisal fees. The state court also determined that Centennial and Atkinson were not liable to BlackDiamond "under any other theory at law or equity for any amount relating to the matters and subject matter of BlackDiamond's Complaint." (Id. Ex. 2F (Protech Enterprise Investment Properties Trust, c/o BlackDiamond Mortgage Real Estate Consultants Corp. v. Atkinson, File No. CT. 01-15710, at 5-6 (Minn. Dist. Ct. Nov. 7, 2003).)
III. Complaints About Willis
In August 2001, both prior to and during the state court lawsuit, Atkinson complained to the BBB, the Attorney General, and the Department about Willis's inability to process a VA loan and his continued pursuit of payment for the VA appraisal. (See Compl. at 14, ¶ 18.) Atkinson e-mailed her complaints to the Attorney General and the Department through an e-mail account supplied by her employer, RSKCO. (Id.) In that complaint, she stated, in part:
Dear Sir/Madam;
I [would] like for you to investigate the procedures and practices of Black Diamond Mortgage Consultants.
On 4/30/01 I signed a purchase agreement for a new home. The purchase agreement clearly states that this was a VA GI purchase. . . .
No where was there any mention that this was to be a conventional Loan. I was not advised by Black Diamond that the[y] were neither qualified [nor] licensed to handle VA or FHA loans. It should be noted that they took an application from the buyer of my old home, this was to be a FHA loan. Mine was a VA loan. They are not licensed to perform either of these types of Loans. The purchaser of my old home was a Ms. Vicki Willis.
Black Diamond went on their merry way [and] set up both of the loans as conventional, they went as far as ordering a conventional appraisal on both my new home and the one that I was selling. There was never any doubt or question that I was going to go VA and there was never any question or doubt that the purchaser of my old home wanted to go FHA. (it should be noted that Vicki Willis is the sister of the Berry Willis owner of Black Diamond Mortgage. He also took her loan application for a FHA Loan.)
On or about 6/14/01, Black Diamond Mortgage referred [my] file with a release of all rights and obligations to a Mr. Trent Bowman at Centennial Mortgage Company. Mr. Bowman advised Mr. Willis that the appraisal that was performed on the homes [were] done incorrectly and another appraisal one VA and one FHA had to be done. Centennial Mortgage had to assign someone to perform the correct type of appraisals.
There was never any discussion with Black Diamond Mortgage that this would be anything other than a VA loan. This is clearly reinforced in the fact that Black Diamond . . . requested a copy of my discharge DD2-14 and Certificate of Eligibility. These are not needed if you are to go with a conventional loan.
Closing was scheduled for 6/30/01, Black Diamond had waited for almost two months before they assigned it to Centennial Mortgage Company. I do not understand the delay when Black Diamond knew full well they were not licensed to handle a VA or a FHA loan. This caused undue stress.
At the time of closing, Black Diamond Mortgage asked Centennial Mortgage to put the charge for the conventional appraisal of $350.00 on the closing papers as some sort of fee. Centennial Mortgage advised Black Diamond that they could not pass this on to the buyer as this was unethical and illegal. On 8/13/01, I then received a bill for [a] conventional appraisal, this was almost two months late. It was not presented at the time of closing which it should have been. Which would have been the correct forum for this. I would have had my attorney argue this at the time of closing as not my responsibility.
When I attempted to discuss this with Mr. Willis, I was told that just because the purchase agreement states that this was to be a VA loan, he did not have to pay attention to it and that his job was to get [me] qualified for the best loan possible. I was unable to get a word in, to try to correct him that he was wrong. When it states VA it means VA, he does not have carte-blanch to do what he wants with my life and my loan.
I did discuss with Mr. Bowman at Centennial as to whether he had any question as to [what] type of loan I was applying for and he stated that when he gets a purchase agreement, he can immediately tell what type of loan the buyer has requested. I also asked him if there were any problems with [me] qualifying for a loan, and the answer was no. He was concerned that he did not receive the papers in a timely and correct manner and had two weeks to get everything in place. Mr. Bowman did a wonderful job in repairing the mess that Black Diamond had created.
I am [now] being threatened with a law suit for the $350.00 for the conventional appraisal which was ordered by Black Diamond. . . .
I am requesting assistance and guidance into having someone advise Black Diamond . . . that I am not responsible for a bill [of] $350.00 for an appraisal that they performed in error.
Sincerely,
Sharon D. Atkinson
(Id. Ex. 2A (Traxler Aff. Ex. F).)
Unrelated to Atkinson's experience, Kathleen Midthun, the owner of Defendant Apex Appraisal, also complained to the Department that BlackDiamond had paid her for an appraisal with a check that was returned for non-sufficient funds. Midthun sued BlackDiamond in Hennepin County Conciliation Court and obtained a judgment for the unpaid appraisals in May 2002. During the course of the Department's investigation of Midthun's complaint, it discovered that the Conciliation Court had previously entered a judgment against BlackDiamond in April 2002 in favor of Defendant Forsythe Appraisals, owned by Tim Forsythe. When the Department contacted Forsythe about that judgment, he said that BlackDiamond had also paid him for appraisals with checks returned for non-sufficient funds. (See Wymore Aff. to Forsythe Appraisal, Forsythe, Apex Appraisal, and Midthun's Mot. to Dismiss Exs. 2A, 2B, 2C.)
In response to Atkinson and Midthun's complaints, along with the information provided by Forsythe, the Department initiated an administrative action against BlackDiamond in December 2002 in an attempt to determine whether BlackDiamond's alleged conduct had violated Minnesota law. (Id. Ex. 2A.)
Standards of Review
I. Motion to Dismiss
Under Rule 12(b)(6), all factual allegations must be accepted as true and every reasonable inference must be made in favor of the complainant. Fed.R.Civ.P. 12(b)(6); see Midwestern Mach., Inc. v. Northwest Airlines. Inc., 167 F.3d 439, 441 (8th Cir. 1999); Carney v. Houston, 33 F.3d 893, 894 (8th Cir. 1994). "[D]ismissal under Rule 12(b)(6) serves to eliminate actions which are fatally flawed in their legal premises and destined to fail, thereby sparing litigants the burden of unnecessary pretrial and trial activity." Young v. City of St. Charles. Mo., 244 F.3d 623, 627 (8th Cir. 2001) (citation omitted). A cause of action "should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff cannot prove any set of facts in support of his claim that would entitle him to relief."Schaller Tel. Co. v. Golden Sky Sys., Inc., 298 F.3d 736, 740 (8th Cir. 2002) (citations omitted). Said another way, "dismissal under Rule 12(b)(6) is likely to be granted only in the unusual case in which a plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief."Gebhardt v. ConAgra Foods. Inc., 335 F.3d 824, 829 (8th Cir. 2003) (citation and internal quotations omitted).
II. Summary Judgment
Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56. It is to be granted only where the evidence is such that no reasonable jury could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby, 477 U.S. 242, 250 (1986). The Court views the evidence, as well as all reasonable inferences, in a light most favorable to the nonmoving party. See Enterprise Bank v. Magna Bank, 92 F.3d 743, 747 (8th Cir. 1996);see Adkinson v. G.D. Searle Co., 971 F.2d 132, 134 (8th Cir. 1992). The moving party carries the burden of showing that there is no genuine issue of material fact. See Celotex Corp. v. Catrett. 477 U.S. 317, 322 (1986); Mems v. City of St. Paul. Dep't of Fire Safety Servs., 224 F.3d 735, 738 (8th Cir. 2000). The nonmoving party, however, may not rest upon the allegations or denials of its pleadings. Rather, the nonmovant must establish the existence of specific facts that create a genuine issue for trial. Neither mere allegations nor denials are sufficient. See Liberty Lobby, 477 U.S. at 256.
Analysis
Before the Court are eight motions: (1) Defendants Centennial, Bowman, Gelschus, Atkinson, and Rider Bennett's Motion to Dismiss; (2) Defendants Forsythe Appraisal, Tim Forsythe, Apex Appraisal Services, Inc., and Kathleen Midthun's Motion to Dismiss; (3) Willis's Motion for a Continuance of the motions to dismiss; (4) Defendant RSKCO's Motion for Summary Judgment; (5) Willis's Motion for a Continuance of RSKCO's motion; (6) Willis's Motions to Amend; (7) Willis's Motion for a Default Judgment against the Hennepin County District Court, James B. Bernstein, and Holly Hollister; and (8) Willis's Motion to Convene a three-judge panel pursuant to 28 U.S.C. § 2284. Oral argument on these motions was heard on January 5, 2004.
I. Centennial, Bowman, Gelschus, Atkinson, and Rider Bennett's Motion to Dismiss
Centennial, Bowman, Gelschus, Atkinson, and Rider Bennett have moved to dismiss all of Willis's claims against them. Willis had made four main claims: (1) Atkinson and Centennial have breached their contracts with him; (2) certain statements made by Atkinson, Centennial, and Rider Bennett are fraudulent; (3) certain statements by Centennial and Atkinson were defamatory; and (4) Centennial is liable for negligently retaining and negligently supervising its employees. The Court will examine each claim in turn.
A. Breach of Contract
In Counts 11 and 16, Willis alleges that Atkinson and Centennial breached their mortgage broker contracts with him. (Compl. at 26, ¶¶ 47-49; id. at 30, ¶¶ 65-67; see id. at 14-15, ¶¶ 18-19.) Defendants argue that Willis is seeking review of the previous state court judgments and have moved to dismiss these claims as barred by the Rooker-Feldman doctrine.
Rooker-Feldman recognizes that lower federal courts lack subject matter jurisdiction over challenges to state court judgments.Lemonds v. St. Louis County, 222 F.3d 488, 492 (8th Cir. 2000); see Yeazizw v. City of Edina, Civ. No. 02-524 (RHK/AJB), 2003 WL 1966285, at *11 (D. Minn. Apr. 28, 2003). "Rooker-Feldman is based squarely on federal law and is concerned with federalism and the proper delineation of the power of the lower federal courts. Such courts are simply without authority to review most state court judgments — regardless of who might request them to do so." Lemonds, 222 F.3d at 495 (citations omitted). Thus, Rooker-Feldman forecloses appeals of state court judgments in federal district court.Id. at 492. Determining whether Rooker-Feldman deprives the district court of subject matter jurisdiction in a given case "requires determining exactly what the state court held to ascertain whether granting the requested federal relief would either void the state court's judgment or effectively amount to a reversal of its holding."Id. at 493 (citations and internal quotation omitted).
Rooker-Feldman bars Willis's breach of contract claims. In August 2001, BlackDiamond, represented by Willis, sued both Atkinson and Centennial in state court. It sued Atkinson for appraisal fees and it sued Centennial for Atkinson's loan origination fees. In April 2002, and again in November 2003, the state court dismissed BlackDiamond's complaint with prejudice for failure to prosecute. The Court also held that no contracts existed between BlackDiamond and Centennial or Atkinson. It is clear from his federal Complaint, however, that Willis is asserting the same claims that were dismissed by the state court. (Compl. at 11, ¶¶ 7, 8; id. at 14-15, ¶¶ 18, 19.) Consequently, the federal relief he requests would either void the state court's judgment or effectively overrule its holding. Accordingly, the Court lacks subject matter jurisdiction over Willis's transparent challenge to the state court judgment and will dismiss Counts 11 and 16. See Lemonds. 222 F.3d at 492.
Willis also alleges that Centennial, Bowman, and Gelschus tortiously interfered with his contract with Atkinson (Compl. at 29, ¶ 62) and violated the Minnesota Deceptive Trade Practices Act by "creating a fraudulent contract" (id. at 30, ¶ 67). These claims, which are based on the existence of such contracts, are also barred by Rooker-Feldman. See Lemonds, 222 F.3d at 492-93 (holding that where federal relief can only be predicated upon a decision that the state court was wrong, that is, in substance, a prohibited appeal of the state court judgment).
B. Fraud
In Count 10, Willis asserts that Atkinson's complaints to the BBB, the Attorney General, and the Department, as well as her affidavits filed in the state court and Department actions, were fraudulent. (Compl. at 25, ¶¶ 44, 45.) In Count 15, Willis similarly alleges that Centennial, Bowman, Gelschus, and Rider Bennett made fraudulent statements in their affidavits filed in the state court. (See id. at 29, ¶ 62.) Additionally, Willis alleges that this conduct obstructed justice in violation of 42 U.S.C. § 1985. (See id. at 25, 30, ¶¶ 46, 64.) Defendants respond that the these claims should be dismissed because the alleged fraudulent complaints and affidavits were not directed at Willis, but at the BBB, the Department, the Attorney General, and the state court.
In addition to his common law fraud claims against all these defendants, Willis alleges that the false statements violated 18 U.S.C. § 1006 — a criminal statute that prohibits the making of false statements in the records of certain lending institutions. See 18 U.S.C. § 1006; United States v. Pettigrew, 77 F.3d 1500, 1510 (5th Cir. 1996). This section, however, does not support a private right of action. See Fed. Sav. Loan Ins. Corp. v. Reeves, 816 F.2d 130, 137-38 (4th Cir. 1987.) Accordingly, Willis's claims predicated on this provision will be dismissed.
The Court will dismiss Willis's fraud claims. To state a claim for fraud under Minnesota law, the false statement must be made "with the intention to induce the person to whom it was made to act in reliance upon it. . . ." Children's Broad. Corp. v. Walt Disney Co., 245 F.3d 1008, 1020 (8th Cir. 2001) (quoting Berryman v. Riegert, 175 N.W.2d 438, 442 (Minn. 1970)) (emphasis added). None of the alleged fraudulent complaints or affidavits was made to Willis to induce him to act; rather, they were made to third parties.
In addition, the Court will dismiss Willis's § 1985 claims. Generally, § 1985 proscribes five different types of conspiracies, but only two apply to the facts here: (1) conspiracies to interfere with the administration of justice in state courts (second clause of 42 U.S.C. § 1985(2)); and (2) private conspiracies to deny any person enjoyment of "equal protection of the laws" and "equal privileges and immunities under the laws" (first clause of 42 U.S.C. § 1985(3)). Harrison v. Springdale Water Sewer Comm'n, 780 F.2d 1422, 1429 (8th Cir. 1986) (affirming dismissal of a § 1985 allegation for failure to state a claim). To state a claim under these provisions, the plaintiff must allege that the conspiracy was based on a class-based, invidiously discriminatory animus. See id. at 1429: see also Kush v. Rutledge, 460 U.S. 719, 724-26 (1983); Griffin v. Breckenridge, 403 U.S. 88, 102 (1971). Although Willis is an African-American, he does not allege that the defendants' actions were motivated by a class-based, invidiously discriminatory animus. Accordingly, the Court will dismiss Counts 10 and 15.
C. Defamation
Centennial, Bowman, Gelschus, and Atkinson argue that Willis's defamation claims must be dismissed. The essential elements of a defamation claim in Minnesota are that (1) a false statement about the plaintiff was made, (2) in an unprivileged publication to a third party, and (3) it harmed the Plaintiff's reputation in the community.Weinberger v. Maplewood Review, 668 N.W.2d 667, 673 (Minn. 2003). The Court will begin with Willis's claim against Centennial, Bowman, and Gelschus.
1. Defamation Claims Against Centennial, Bowman, and Gelschus
In Count 18, Willis alleges that these defendants defamed him by falsely stating in the state court and Department proceedings that he did not have a VA broker licence, that he had told Atkinson that he could get her a VA loan, and that he knew that Centennial had denied his brokerage application. (Compl. at 31-32, ¶¶ 71-76.) Defendants assert that these alleged statements are protected by an absolute privilege because they were made during the course of the state court and Department proceedings.
The defendants are correct. "[D]efamatory matter published in the due course of a judicial proceeding is absolutely privileged and will not support a civil action for defamation although made maliciously and with knowledge of its falsehood." Matthis v. Kennedy, 67 N.W.2d 413, 417 (Minn. 1954). The absolute privilege protects "the party or parties, counsel, and witnesses" and encompasses "anything that may possibly be pertinent." Id. at 417, 418. The privilege has been "extended to statements made in quasi-judicial proceedings." Kellar v. VonHoltum, 568 N.W.2d 186, 192 (Minn.Ct.App. 1997), rev. denied (Minn. Oct. 31, 1997) (citations omitted). In this case, Centennial, Bowman, and Gelschus's allegedly defamatory statements are absolutely privileged because they are relevant, made as a party or witness, and published during the course of the state court or Department proceedings. See Matthis, 67 N.W.2d at 417;Kellar, 568 N.W.2d at 192 (finding statements made during, or incident to, Department of Commerce proceedings are absolutely privileged); see also Robb Gass Constr., Inc. v. Dropps, No. C5-00-1570, 2001 WL 436182, at *7 (Minn.Ct.App. May 1, 2001) (stating that complaints made to the Department of Commerce are absolutely privileged). Accordingly, Count 18 will be dismissed.
Because the Court will dismiss Willis's fraud and defamation claims against Centennial, Bowman, and Gelschus, the Court will also dismiss Willis's RICO and vicarious liability claims against them, in Counts 17 and 19, respectively, because they were based upon the existence of the fraud and defamation claims. (See Compl. at 30-31, ¶ 69; Compl. at 32, ¶¶ 77-79.)
2. Defamation Claims Against Atkinson
In Count 9, Willis alleges that Atkinson made several defamatory statements. (See Compl. at 24, ¶¶ 38-42.) It appears from the Complaint that some statements were made either during the state court or Department proceedings, and some were not. Atkinson responds that these claims must be dismissed on two alternative grounds: (1) theRooker-Feldman doctrine deprives this Court of subject matter jurisdiction, and (2) the alleged defamatory statements are privileged. The Court will begin with Atkinson's Rooker-Feldman argument.
a. Rooker-Feldman Rooker-Feldman does not deprive this Court of subject matter jurisdiction over these claims. In the state court proceeding, Willis did not raise, nor did the court consider, any defamation allegations. Therefore, Willis is not making a prohibited appeal of the state court judgment. While Rooker-Feldman also "prohibits federal district courts from exercising jurisdiction over general constitutional claims that are `inextricably intertwined' with specific claims already adjudicated in state court," Lemonds, 222 F.3d at 492-93 (citations omitted) (emphasis added), Willis does not raise constitutional claims. Moreover, although "[a] general federal claim is inextricably intertwined with a state court judgment `if the federal claim succeeds only to the extent that the state court wrongly decided the issue before it,'" id. at 493 (citations omitted), Willis could succeed on his defamation claims without a determination that the state court wrongly decided his breach of contract claims.
b. Privilege
Atkinson's second argument is privilege. Willis alleges that Atkinson defamed him by making false statements: (1) in her complaints to the Department, BBB, and Attorney General (Compl. at 24, ¶¶ 38, 39); (2) in a restraining order petition (id. ¶ 41); (3) about Willis representing himself as an attorney and about their business relationship (id. at 40); and (4) about Willis threatening to destroy her credit rating and about Willis taking her to the breaking point because she is under medical attention (id. ¶ 42). The Court will address each allegation in turn.
(i) Complaints to the Department, BBB, and Attorney General
Although the same complaint was apparently made to each entity, the Court will examine each separately. First, Atkinson argues that her complaint to the Department is absolutely privileged. She is correct. Her statements were relevant, made as a witness, and published during the course of the Department's proceedings.See Kellar, 568 N.W.2d at 192; Robb Gass, 2001 WL 436182, at *7.
Second, although Atkinson conceded at oral argument that her complaint to the BBB is not absolutely privileged, she argued that it may have a qualified privilege. "For a defamatory statement to be protected by a qualified privilege, the statement must be made in good faith and must be made upon a proper occasion, from a proper motive, and must be based upon reasonable or probable cause." Bol v. Cole, 561 N.W.2d 143, 149 (Minn. 1997) (citations and internal quotations omitted). Unlike the absolute privilege, however, "[a] qualified privilege may be lost if it is abused. The burden is on the plaintiff to show that the privilege has been abused." Lewis v. Equitable Life Assurance Soc'y of the United States, 389 N.W.2d 876, 890 (Minn. 1986) (citation omitted). A qualified privilege is "abused and therefore lost if the plaintiff demonstrates that the defendant acted with actual malice." Id. (citation omitted). "While the initial determination of whether a communication is privileged is a question of law for the court to decide, the question of whether the privilege was abused is a jury question."Id. (citation omitted).
The Court cannot determine at this early stage whether Atkinson's complaint to the BBB is protected by a qualified privilege. Assuming that her complaint is defamatory, she has not yet established that it was made in good faith, from a proper motive, and was based upon reasonable or probable cause. See Bol, 561 N.W.2d at 149. Likewise, the Court cannot determine from the face of Willis's Complaint whether he can rebut a qualified privilege defense by showing malice. See Lewis, 389 N.W.2d at 890. These questions are more appropriate for the summary judgment stage when the facts will be more developed.
Third, Atkinson argues that her complaint to the Attorney General, like her complaint to the Department, is absolutely privileged. The Court disagrees. The Minnesota Supreme Court has stated that "the doctrine of absolute privilege should be `confined within narrow limits.'"Bol, 561 N.W.2d at 149 (quoting Matthis, 67 N.W.2d at 417). Statements are absolutely privileged only when they are published in the due course of judicial or quasi-judicial proceedings. See Matthis, 67 N.W.2d at 417;Kellar, 568 N.W.2d at 192. Unlike her statements to the Department, it appears from the Complaint that her statements to the Attorney General were not published during the course of any judicial or quasi-judicial proceeding. Similar to reporting a crime to the police, Atkinson simply reported Willis's behavior to the Attorney General. Defamatory statements made to law enforcement personnel, however, are not absolutely privileged. Rather, such statements may have a qualified privilege. See Smits v. Wal-Mart Stores. Inc., 525 N.W.2d 554, 557 (Minn.Ct.App. 1994) ("[A] qualified privilege may exist when an individual makes a good faith report of suspected criminal activity to law enforcement officials.");Davisson v. Engelke, No. CO-97-265, 1997 WL 585818, at *4 (Minn.Ct.App. Sept. 23, 1997 (unpublished) ("[A] qualified privilege exists for statements made to law enforcement personnel."); see also Humphrey ex rel. State v. McLaren, 402 N.W.2d 535, 539 (Minn. 1987) (observing that the Minnesota Attorney General is "the chief law officer of the state"). Therefore, given the facts of this case, the Court cannot conclude that Atkinson's complaint to the Attorney General is absolutely privileged. While she may be protected by a qualified privilege, that issue, as noted above, is more appropriate for summary judgment when the facts will be more developed.
(ii) Restraining Order Petition
Willis also alleges that Atkinson defamed him by making false statements in a restraining order petition to the state court. Atkinson argues that these statements are absolutely privileged. The Court agrees.See Matthis, 67 N.W.2d at 417: Kellar, 568 N.W.2d at 192.
(iii) Other Statements
Finally, Willis asserts that Atkinson defamed him by making false statements about Willis representing himself as an attorney, about their business relationship, about Willis threatening to destroy her credit rating, and about Willis taking her to the breaking point because she is under medical attention. (Compl. ¶¶ 40, 42) Again, Atkinson asserts an absolute privilege. The Court cannot determine from the face of the Complaint, however, whether these statements were made during judicial or quasi-judicial proceedings and are protected by an absolute privilege. Nor can it determine whether a qualified privilege applies. Accordingly, the Court will deny Atkinson's motion on these defamation claims.
The Court expresses no opinion as to whether any of these statements were defamatory under Minnesota law.
In sum, the Court will grant Atkinson's motion in part and dismiss Willis's defamation allegations concerning statements made in judicial or quasi-judicial proceedings.
D. Negligent Retention and Negligent Supervision
In Counts 20 and 21, Willis alleges that Centennial negligently retained and supervised Bowman and Gelschus. (Compl. at 33-34, ¶¶ 80-87.) Under Minnesota law, a viable claim of negligent retention or negligent supervision requires the infliction, or threat, of a physical injury. See Semrad v. Edina Realty, Inc., 493 N.W.2d 528, 534 (Minn. 1992); Bruchas v. Preventative Care. Inc., 553 N.W.2d 440, 443 (Minn.Ct.App. 1996); Cook v. Domino's Pizza. L.L.C., Civ. No. 01-500 (RHK/JMM), 2001 WL 821952, at *3 (D. Minn. July 17, 2001). In his Complaint, however, Willis does not allege that any Centennial employee caused, or threatened, physical harm. Rather, his claims are limited to defamation and fraud. Accordingly, the Court will grant Centennial's motion and dismiss Counts 20 and 21. II. Forsythe Appraisal, Forsythe, Apex, and Midthun's Motion to Dismiss
Defendants Forsythe Appraisal, Tim Forsythe, Apex Appraisal Services, Inc., and Kathleen Midthun have moved to dismiss the sole count against them. In Count 28, Willis alleges that these defendants made fraudulent statements to the Department and to the Hennepin County Conciliation Court. (Compl. at 39, ¶¶ 107, 108.) The Court will grant defendants' Motion to Dismiss because the alleged fraud was directed at third parties, not Willis. See Children's Broad. Corp., 245 F.3d at 1020 (applying Minnesota law). III. Willis's Motion for a Continuance of the Motions to Dismiss
Willis apparently asserts a breach of contract claim against Forsythe Appraisal (see Compl. at 7), but he provides no details as to the subject of the contract, when it was entered, how it was breached, or what damages he suffered. To the extent that he challenges the April 2002 decision of the Hennepin County Conciliation Court, which held that Willis was liable to Forsythe Appraisal for unpaid appraisals, this Court lacks subject matter jurisdiction over that claim under Rooker-Feldman. (See supra Analysis LA.)
Willis also claims that Apex Appraisal and Forsythe Appraisal violated the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601-2617, by "falsely alleg[ing] [a] debt . . . of a third party." (See Compl. at 39, ¶ 108.) From the facts contained in the Complaint, however, the only debts involving Apex and Forsythe were those Willis owed for the payment of certain appraisals. (Id. at 10, ¶ 15; id. at 15 ¶ 20.) But the Hennepin County Conciliation Court has previously found Willis liable for those debts. Therefore, the relief he requests from this Court would either void the state court's judgment or effectively overrule its holding. Accordingly, the Court will dismiss these claims for lack of subject matter jurisdiction underRooker-Feldman. See Lemonds, 222 F.3d at 493.
In response to the two motions to dismiss, Willis has moved under Rule 56(f) for a six-month continuance. Willis states that he needs additional time to depose the defendants, secure affidavits, and obtain Atkinson's employment file and RSKCO's employment procedure manual.
Under Rule 56(f), the party faced with a summary judgment motion may request the court to postpone ruling on the motion until he conducts discovery. Duffy v. Wolle, 123 F.3d 1026, 1040 (8th Cir. 1997); see Fed.R.Civ.P. 56(f). Rule 56(f), however, "is not a shield that can be raised to block a motion for summary judgment without even the slightest showing by the opposing party that his opposition is meritorious." Duffy, 123 F.3d at 1040 (citation and internal quotations omitted). Rather, a party invoking the protections of Rule 56(f) "must do so in good faith by affirmatively demonstrating why he cannot respond to a movant's affidavits . . . and how postponement of a ruling on the motion will enable him, by discovery or otherwise, to rebut the movant's showing of the absence of a genuine issue of fact." Id. (citations and internal quotations omitted); see Bruzer v. Danek Medical Inc., Civ. No. 3-95-971 (RHK/JMM), Civ. No. 4-95-645 (RHK/JMM), 1998 WL 1048225, at *8 (D. Minn. Oct. 1, 1998).
The Court will deny Willis's motion. Even if Rule 56(f) applied to motions to dismiss, Willis has not demonstrated why he cannot respond to the motions or how postponement would enable him to cure the flaws contained on the face of his Complaint. See Duffy, 123 F.3d at 1040. Additional discovery will not remedy the lack of subject matter jurisdiction over the contract claims or fix the defects existing in his fraud, defamation, and negligent supervision and retention claims.See Young, 244 F.3d at 627 (dismissal "serves to eliminate actions which are fatally flawed in their legal premises and destined to fail").
IV. RSKCO's Motion for Summary Judgment
RSKCO has moved for summary judgment on all of Willis's claims against it. Willis alleges that RSKCO is vicariously liable for Atkinson's breach of contract, fraud, and defamation. He also alleges that RSKCO negligently retained and supervised Atkinson. (Compl. at 26-28, ¶¶ 50-60.) The Court will begin with vicarious liability.
A. Vicarious Liability
In Count 12, Willis alleges that RSKCO is vicariously liable for Atkinson's alleged defamation. (Compl. at 26, ¶ 52.) An employer may be held liable for the intentional torts of its employees when the tort: (1) is related to the employee's duties; and (2) occurs within work-related limits of time and space. Hagen v. Burmeister Assocs., Inc., 633 N.W.2d 497, 504 (Minn. 2001); seeFahrendorff v. North Homes. Inc., 597 N.W.2d 905, 910 (Minn. 1999). Assuming that Atkinson's allegedly defamatory complaints to the BBB and Attorney General were made within work-related limits of time and space, the question is whether they were related to her duties as an employee. Whether an act is related to the duties of employment depends on foreseeability. Hagen, 633 N.W.2d at 504. Foreseeability is a question of fact and "is commonly proven, or a question of fact is raised, when a party establishes that the type of tortious conduct involved is a well-known industry hazard."Id. at 505 (citation omitted).
Having previously determined that Willis's contract and fraud claims will be dismissed, defamation is the only remaining claim against Atkinson for which RSKCO could be vicariously liable.
RSKCO argues that Willis has not carried his burden to establish that Atkinson's alleged defamatory statements were well-known industry hazards in the insurance industry. (Def.'s Mem. in Supp. at 5, 7; Def.'s Reply Mem. in Supp. at 3.) Willis responds that RSKCO failed to prevent Atkinson's foreseeable misuse of RSKCO's company e-mail to defame him. (See Pl.'s Mem. in Opp'n at 3, ¶ 2.) RSKCO is correct.
To establish a well-known hazard, Willis must come forward with expert testimony or affidavits regarding Atkinson's potential for making defamatory statements about him in relation to her duties as an employee.See Fahrendorff, 597 N.W.2d at 911, 912; P.L. v. Aubert, 545 N.W.2d 666, 668 (Minn. 1996); see also Grozdanich v. Leisure Hills Health Ctr., Inc., 25 F. Supp.2d 953, 979-80 (D. Minn. 1998) (Erickson, Mag. J.). Willis offers no evidence, expert or otherwise, suggesting Atkinson's alleged defamation was such a hazard. In contrast, Atkinson offers an uncontradicted affidavit establishing that her employment duties were limited to investigating workers' compensation claims. (Rangel Aff. ¶¶ 2, 3.) She also asserts that Willis was neither a RSKCO customer nor part of a RSKCO investigation or claim. (Def.'s Mem. in Supp. at 7.) Given the scope of Atkinson's duties, and absent contrary evidence, the Court will not assume that her alleged defamatory statements constitute hazards for which RSKCO can be vicariously liable. See Hagen, 633 N.W.2d at 505;P.L., 545 N.W.2d at 668.
Although foreseeability is a question of fact, Hagen, 633 N.W.2d at 505, this matter comes before the Court upon RSKCO's Motion for Summary Judgment and Willis has not established the existence of specific facts of foreseeability that create a genuine issue for trial, see Liberty Lobby, 477 U.S. at 256. Accordingly, the Court will grant RSKCO's motion and dismiss Count 12.
B. Negligent Retention Negligent Supervision
In Counts 13 and 14, Willis alleges that RSKCO negligently retained and supervised Atkinson. As noted above, claims of negligent retention or negligent supervision require the infliction, or threat, of a physical injury. See supra Analysis I.D.; Semrad, 493 N.W.2d at 534. Because Willis has not established the existence of any facts that Atkinson caused or threatened physical harm to him, the Court will grant RSKCO's Motion for Summary Judgment on both claims.
V. Willis's Motion for a Continuance of RSKCO's Motion
Willis has moved under Rule 56(f) to continue RSKCO's summary judgment motion for six months. Similar to his previous motions for continuances, he argues that he has not had enough time to depose Atkinson, her former supervisor at RSKCO, Daniel Gallatin (a Department investigator), and Rider Bennett in preparation for this motion. He also requests time to secure unidentified affidavits and documents, and serve interrogatories.
Willis has not met his burden to obtain a continuance of this matter.See Puffy, 123 F.3d at 1040. He has not demonstrated why he cannot respond to RSKCO's arguments that he has not shown a well-known industry hazard and no one he wishes to depose are identified as experts who can provide such evidence. Moreover, further discovery would not enable him to remedy his defective negligent retention and supervision claims. See Bruchas, 553 N.W.2d at 443. Accordingly, the Court will deny Willis's request for a continuance. VI. Willis's Motion to Amend Complaint
Although Willis also argues that RSKCO has failed to make required disclosures under Rule 26(a)(1) (Def.'s Mem. in Opp'n at 7, ¶ 12), RSKCO's uncontroverted affidavit indicates that it has timely served these disclosures upon Willis (see Wessling Aff. to Def.'s Reply Mem. in Supp. Ex. 1). Accordingly, the Court considers this argument moot.
Willis has filed two motions for leave to amend his Complaint. The Court will deny both requests. First, neither motion attached a proposed amended complaint. (See Doc. Nos. 58, 67.) Local Rule 15.1, however, requires Willis to "attach a copy of the amended pleading to the original motion and to each copy of the motion" to amend. D. Minn. L.R. 15.1. Second, his motion to add punitive damages does not "allege the applicable legal basis under section 549.20 or other law for awarding punitive damages in the action" and is not "accompanied by one or more affidavits showing the factual basis for the claim" as required. Minn. Stat. 549.191 (footnote added); see Swanlund v. Shimano Indus. Corp., Ltd., 459 N.W.2d 151, 154 (Minn.Ct.App. 1990) (stating that a court "may not allow an amendment where the motion and supporting affidavits do not reasonably allow a conclusion that clear and convincing evidence will establish the defendant acted with willful indifference" (citation and internal quotations omitted)).
Under § 549.20, Willis must demonstrate "upon clear and convincing evidence that the acts of the defendant[s] show deliberate disregard for the rights or safety of others." Minn. Stat. § 549.20, subd. 1.
VII. Willis's Motion for Default Judgment
Willis has moved for a default judgment against Defendants Hennepin County District Court, James B. Bernstein, and Holly Hollister. At oral argument, however, Willis withdrew his motions against Hennepin County District Court and Bernstein and agreed to hold his motion against Hollister in abeyance.
VIII. Willis's Motion for a Three-Judge Panel
Finally, Willis has moved to convene a three-judge panel under 28 U.S.C. § 2284 to hear his claims. The Court will deny his request. A three-judge panel is convened in limited circumstances: "A district court of three judges shall be convened when otherwise required by Act of Congress, or when an action is filed challenging the constitutionality of the apportionment of congressional districts or the apportionment of any statewide legislative body." 28 U.S.C. § 2284(a). Willis's claims do not fit within the limited purview of § 2284(a) and he has not provided any authority suggesting otherwise. Accordingly, the Court will deny his motion.
Conclusion
As a result of this Order, all counts against the following moving defendants have been dismissed: Centennial Mortgage Funding, Inc.; Rider, Bennett, Egan Arundel; RSKCO, a CNA Company of Minnesota; Trent E. Bowman; Al Gelschus; Apex Appraisal Services, Inc., c/o Kathleen A. Midthun; Forsythe Appraisal, c/o Tim Forsythe; Kathleen A. Midthun; and Tim Forsythe.
In addition, Counts 10 (fraud) and 11 (breach of contract) against moving defendant Sharon Denise Atkinson have also been dismissed. Count 9 (defamation) against Atkinson, however, has been dismissed only in part — with regard to those defamation allegations concerning statements published during the course of judicial or quasi-judicial proceedings. (See Compl. at 24, ¶¶ 38, 39.) Defamation allegations that remain are: (1) alleged false statements contained in complaints to the Better Business Bureau and Attorney General (see id. ¶¶ 38, 39); (2) falsely "stating that [Willis] misrepresented himself as an attorney to other parties . . .[f]alsely stating her business contract and relationship with [Willis] (id. ¶ 40); and (3) "[f]alsely stating that there have been numerous phone calls at the defendant[']s place of work and at home . . .[f]alsely alleging that the phone calls have threatened to destroy defendant[']s credit rating . . . falsely stating that she is under medical attention and [Willis] had taken her to the breaking point, where she had to seek medical attention for her headaches that was caused by [Willis]" (id. ¶ 42).
1. Defendants Centennial, Bowman, Gelschus, Atkinson, and Rider Bennett's Motion to Dismiss (Doc. No. 51) is GRANTED IN PART and DENIED IN PART and Counts 9, to the extent it alleges defamation in the context of judicial or quasi-judicial proceedings, 10, 11, 15, 16, 17, 18, 19, 20, 21 of the Complaint (Doc. No. 1) are DISMISSED WITH PREJUDICE;
2. Defendants Forsythe Appraisal, Tim Forsythe, Apex Appraisal Services, and Kathleen Midthun's Motion to Dismiss (Doc. No. 54) is GRANTED and Count 28 and the breach of contract claim against Forsythe Appraisal and Tim Forsythe set forth on page 7 of the Complaint (Doc. No. 1) are DISMISSED WITH PREJUDICE;
3. Plaintiff's Motion for a Continuance of the motions to dismiss (Doc. No. 65) is DENIED;
4. Defendant RSKCO's Motion for Summary Judgment (Doc. No. 35) is GRANTED and Counts 12, 13, and 14 of the Complaint (Doc. No. 1) are DISMISSED WITH PREJUDICE;
5. Plaintiff's Motion for a Continuance of the summary judgment motion (Doc. No. 45) is DENIED;
6. Plaintiff's Motions to Amend Complaint (Doc. Nos. 58, 67) are DENIED;
7. Plaintiff's Motion for Default Judgment against Hennepin County District Court and James B. Bernstein (Doc. No. 34) are DENIED AS MOOT;
8. Plaintiff's Motion for Default Judgment against and Holly Hollister (Doc. No. 34) is CONTINUED UNDER ADVISEMENT; and
9. Plaintiff's Motion to Convene a Three-Judge Panel (Doc. No. 59) is DENIED.