Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Appliance Recycling Centers of America, Inc. v. Protiviti Inc.

United States District Court, D. Minnesota

July 18, 2018

APPLIANCE RECYCLING CENTERS OF AMERICA, INC., Plaintiff,
v.
PROTIVITI, INC., Defendant.

          Scott A. Benson, BRIOL & ASSOCIATES, for plaintiff.

          Christopher J. Harristhal and John A. Kvinge, LARKIN HOFFMAN DALY & LINDGREN, LTD., for defendant.

          MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

          JOHN R. TUNHEIM CHIEF JUDGE

         Appliance Recycling Centers of America, Inc. (“ARCA”), brings this diversity action against its former consulting firm, Protiviti, Inc., for negligence and breach of contract relating to Protiviti's alleged failure to identify gaps in ARCA's accounting methods that allegedly caused ARCA to fail to pay $4.6 million in California sales tax. Protiviti moves to dismiss the entire action as barred by a state-court judgment in a related shareholder-derivative action involving ARCA. Because the plain language of the state-court judgment bars this action, the Court will grant Protiviti's motion. But because it is possible that ARCA could obtain an amended judgment or relief from the state-court judgment, the Court will dismiss this action without prejudice.

         BACKGROUND

         This is a diversity action alleging several business torts. (See Not. of Removal ¶ 2, Ex. A (“Compl.”), Mar. 13, 2018, Docket No. 1.) In 2012, ARCA and Protiviti entered into a consulting agreement. (Compl. ¶ 7, Ex. A.) Pursuant to that agreement, Protiviti provided consulting services to ARCA in 2012 and 2013 to help ARCA improve its “operating effectiveness of [ARCA's] system of internal controls over financial reporting in response to the requirements of Section 404 of the Sarbanes-Oxley Act.” (Id. ¶ 7, Ex. A at 8, 11, 14.) ARCA alleges that it “retained Protiviti specifically to identify gaps in ARCA's accounting controls, including in the area of tax.” (Id. ¶ 21.)

         In 2014, the State of California began an audit of ARCA for unpaid sales tax from 2011-2013. (Id. ¶ 12.) Ultimately, California hit ARCA with an unpaidtaxes bill for over $4.6 million. (Id. ¶ 20.) In 2015, a shareholder-derivative action was filed in Minnesota state court against ARCA's directors and officers, alleging breach of fiduciary duties and unjust enrichment for ARCA's failure to pay California sales tax. (Decl. of John A. Kvinge (“Kvinge Decl.”) ¶ 4, Ex. C, Mar. 20, 2018, Docket No. 8.) ARCA was a nominal defendant in that action. (Id.)

         The 2015 shareholder-derivative action settled. The parties there, including ARCA, entered into a “Stipulation and Agreement of Settlement, ” (id. ¶ 6, Ex. E (“Stipulation”)), and the state court entered final judgment, (id. ¶ 9, Ex. H). The state-court judgment provides:

4. The Action, all claims contained therein, and any other Released Claims, are hereby ordered as fully, finally, and forever compromised, settled, released, discharged and dismissed on the merits and with prejudice by virtue of the proceedings herein and this Judgment .....
5. Upon the Effective Date, ARCA . . . shall be deemed to have, and by operation of this Judgment shall have, fully, finally, and forever released, relinquished, and discharged all Released Claims (including Unknown Claims) against the Released Persons and any and all claims arising out of, relating to, or in connection with the defense, settlement or resolution of the Action against the Released Persons. ARCA . . . shall be deemed to have, and by operation of this Judgment shall have, covenanted not to sue any Released Person with respect to any Released Claims, and shall be permanently barred and enjoined from instituting, commencing or prosecuting the Released Claims against the Released Persons. . . .

(Id. ¶ 9, Ex. H at ¶¶ 4-5.) The final judgment “incorporates by reference the definitions in the Stipulation.” (Id. ¶ 9, Ex. H at ¶ 1.)

         The Stipulation defines “Released Claims” in § 1.17 to mean

any and all manner of claims . . . brought or that could be brought derivatively or otherwise by or on behalf of ARCA against any of the Released Persons, which . . . are based upon, arise out of, relate in any way to, or involve . . . any of the actions, transactions, occurrences, . . . or any other matters, . . . that are, were, could have been, or in the future can or might be alleged, asserted . . . or referred to in the Action.

(Id. ¶ 6, Ex. E at 10-11.) The Stipulation defines “Released Person(s)” to mean “collectively, each and all of the Defendants and their Related Persons.” (Id. at 12.) The Stipulation defines “Defendants” to mean “collectively, the Individual Defendants and nominal defendant ARCA.” (Id. at 7.) And the Stipulation defines “Related Persons” to mean “each and all of a Person's past, present, or future . . . consultants . . . [or] advisors.” (Id. at 10.) ARCA's outside auditing firm of Baker, ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.