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Orion Investments Edina, LLC v. Fresenius Management Services, Inc.

United States District Court, D. Minnesota

April 19, 2017

ORION INVESTMENTS EDINA, LLC, Plaintiff,
v.
FRESENIUS MANAGEMENT SERVICES, INC. and FRESENIUS MEDICAL CARE HOLDINGS, INC., Defendants.

          Eric A. O. Ruzicka, Elizabeth A. Sellers, and Caitlin Hull, DORSEY & WHITNEY LLP, for plaintiff.

          Alana K. Bassin, Michael R. Carey, and Roxanna V. Gonzalez, BOWMAN AND BROOKE LLP, for defendants.

          ORDER

          Patrick J. Schiltz United States District Judge

         Plaintiff Orion Investments Edina, LLC (“Orion”), leased office space to defendant Fresenius Management Services, Inc. (“Fresenius”). ECF No. 1-1 at 12-24, 28-29. Orion then started a construction project near the office space that allegedly created so much noise that Fresenius could not conduct its business. ECF No. 14 at 8. After complaining about the noise, Fresenius purported to terminate the lease effective November 21, 2016. ECF No. 1-1 at 31.

         Orion brought this action against Fresenius, alleging that Fresenius had no right to terminate the lease and seeking to recover almost $300, 000 in rent.[1] ECF No. 1-1 at 3-9. Fresenius counterclaimed, alleging that Orion breached the lease agreement and thereby relieved Fresenius of its obligation to pay rent. ECF No. 14 at 8-9. This matter is before the Court on two motions: (1) Orion's motion to dismiss Fresenius's counterclaim, ECF No. 8, and (2) Fresenius's motion to sanction Orion for moving to dismiss Fresenius's counterclaim, ECF No. 18.

         I. MOTION TO DISMISS

         To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a counterclaim must “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Although the factual allegations in the counterclaim need not be detailed, they must be sufficient to “raise a right to relief above the speculative level.” Id. at 555. In assessing the sufficiency of the counterclaim, the Court may disregard legal conclusions that are couched as factual allegations. See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). The Court must, however, accept as true all of the factual allegations in the counterclaim and draw all reasonable inferences in the counterclaimant's favor. See Id. at 678. The Court may consider materials that are necessarily embraced by the counterclaim as well as any exhibits attached to the counterclaim (such as the lease agreement between Orion and Fresenius) without converting the motion into one for summary judgment. Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003).

         Fresenius's counterclaim alleges that Orion breached the lease in two ways:

First, Fresenius alleges that Orion breached the lease by “commencing a major construction project at the location of the [leased] Premises”-a construction project that generated so much noise that Fresenius's employees could not do their work. ECF No. 14 at 8. According to Fresenius, Orion thereby “deprived [Fresenius] from its use of the Premises.” Id.

         Under Minnesota law, a tenant may terminate a lease if the landlord commits a material breach of that lease. See Maple Bank v. St. Louis Park Pub. Sch. Dist. No. 283, No. A13-2102, 2014 WL 2921941, at *3 (Minn.Ct.App. June 30, 2014).

A breach is material if “one of the primary purposes” of the contract is violated. Steller v. Thomas, 232 Minn. 275, 282, 45 N.W.2d 537, 542 (1950). A breach is also material if it “goes to the root or essence of the contract.” BOB Acres, LLC v. Schumacher Farms, LLC, 797 N.W.2d 723, 728 (Minn.App. 2011) (quotation omitted). When a material breach has occurred, the non-breaching party is excused from further performance and may sue for damages. Id.

Maple Bank, 2014 WL 2921941, at *3. The “primary purpose” of the lease agreement was obviously to provide space for Fresenius to conduct its business, as the first numbered paragraph of the lease reflects. ECF No. 1-1 at 12.

         Fresenius has adequately pleaded a breach-of-contract claim by pleading that Orion created so much noise in the course of its construction project that Fresenius could not use the leased premises to conduct its business. Fresenius has also adequately pleaded a claim of constructive eviction, which “occur[s] when the beneficial enjoyment of [leased premises] by the lessee is so interfered with by the landlord as to justify an abandonment.” Colonial Court Apartments, Inc. v. Kern, 163 N.W.2d 770, 771 (Minn. 1968). In fact, in Colonial Court Apartments, the Minnesota Supreme Court affirmed a trial court's finding that a tenant had been constructively evicted from her apartment after she repeatedly complained about noisy neighbors and the landlord failed to abate the noise. Id. at 770-72. Fresenius need not use the precise term “constructive eviction” (which, after all, is merely a type of breach of contract) or allege precise decibel levels in order to plead a plausible constructive-eviction claim.[2]

         Second, Fresenius alleges that Orion breached the lease “by not providing adequate parking in direct contravention of the lease terms.” ECF No. 14 at 8. The Court agrees with Orion that this claim is not adequately pleaded, given that nothing on the face of the lease obligates Orion to provide a particular number of parking spots to Fresenius. The lease requires Orion to provide some parking-and the lease requires that “[s]uch parking . . . be provided in accordance with all applicable federal, state and local laws, ordinances and regulations.” ECF No. 1-1 at 22. But the counterclaim does not ...


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