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Qwinstar Corp. v. Anthony

United States District Court, D. Minnesota

August 14, 2019

Qwinstar Corporation, Plaintiff,
v.
Curtis Anthony and Pro Logistics, LLC, Defendants.

          MEMORANDUM AND ORDER

          Paul A. Magnuson United States District Court Judge

         This matter is before the Court on Plaintiff’s Motion for Partial Summary Judgment, Motion for Rule 11 Sanctions, and Renewed Motion for Discovery Sanctions. For the following reasons, the Motion for Partial Summary Judgment is granted and the Motions for sanctions are denied.

         BACKGROUND

         Plaintiff Qwinstar Corporation (“Qwinstar”) is a Minnesota corporation in the business of repairing and maintaining IBM 3890 check-processing machines. When the facts surrounding this dispute began, Defendant Pro Logistics, LLC (“Pro Logistics”) was in the same business. At that time, Defendant Curtis Anthony claimed to be Pro Logistics’ sole owner and employee. In 2012, the parties began negotiations for Qwinstar to acquire Pro Logistics.

         In 2013, the parties entered into two separate but related contracts. First, Qwinstar and Anthony signed an Asset Purchase Agreement (“APA”) in which Qwinstar agreed to purchase all of Pro Logistics’ inventory and assets for $50,000.

         Together with the APA, the parties also executed an Employment Agreement (“EA”), whereby Qwinstar agreed to hire Anthony for five years at a salary of $200,000 per year. The two contracts are allegedly related because “the employment agreement was really the vehicle to pay for [Pro Logistics’] parts.” (Grunberg Dep. (Docket No. 61-1) at 90.) The parties executed both agreements and Qwinstar began performance, paying for Pro Logistics’ inventory and employing Anthony. In 2014, Qwinstar became concerned that Anthony was misrepresenting the contents of Pro Logistics’ inventory and that he was selling some of that inventory to third parties. When Anthony failed to explain the matter, Qwinstar fired him in January 2015 pursuant to a section in his employment agreement allowing for termination for “misappropriation or other material act of dishonesty against the company.” (Defs.’ Opp’n Mem. (Docket No. 276) at 8.)

         The procedural history of this case is long and contentious. In May 2015, Qwinstar sued Defendants for fraud, conversion, and breach of contract, claiming that Anthony’s actions constituted a breach of the APA. Defendants counterclaimed that Qwinstar breached the EA by wrongfully firing Anthony and failing to continue paying his base salary for the entire five-year term. Defendants’ other counterclaims allege that Qwinstar was unjustly enriched by retaining Anthony’s inventory and customers, and that Qwinstar committed fraud by executing the EA with no intent to perform.

         On Defendants’ first Motion for Summary Judgment (Docket No. 42), Judge Richard H. Kyle granted summary judgment in favor of Defendants, dismissing Plaintiff’s Amended Complaint and awarding Defendants the remaining balance due under the EA, $800,000. (Docket No. 109.) The Eighth Circuit thereafter affirmed summary judgment as to the dismissal of Qwinstar’s claims but held that “[s]ummary judgment was inappropriate on Anthony’s counterclaim because the contract provisions are ambiguous and reasonably susceptible to more than one interpretation. As such, interpretation becomes a question of fact precluding summary judgment.” Qwinstar Corp. v. Anthony, 882 F.3d 748, 757 (2018).

         Qwinstar later filed a Motion to Amend its answer on September 14, 2018, after learning that a court had convicted Anthony of child sex trafficking in June 2017 and that he was not the sole owner of Pro Logistics as he had previously represented. (Docket No. 164.) Defendants filed a Second Motion for Summary Judgment on the same day. (Docket No. 168.) This Court granted Qwinstar’s Motion to Amend and re-opened discovery to allow the parties time to determine the scope and materiality of that new information, and denied Defendants’ Motion for Summary Judgment because there were still questions of fact regarding the provisions of the EA. (Docket No. 201.)

         Thereafter, an extensive discovery dispute ensued in which the parties could not agree on a date, time, or manner by which to take Anthony’s deposition. Defendants’ counsel repeatedly failed to cooperate in scheduling and attending the deposition, which prompted Qwinstar to file a Motion to Compel and for Sanctions. (Docket No. 210.) Magistrate Judge Becky R. Thorson granted Qwinstar’s Motion to Compel Anthony’s deposition, but denied the Motion for Sanctions without prejudice. (See Docket No. 221.) After a plethora of motions and objections, directed at both this Court and Magistrate Judge Thorson, Judge Thorson ordered Defendants’ counsel to pay the costs and fees associated with a second rescheduling of the deposition, and this Court affirmed that order over Defendants’ objections. (See Docket Nos. 247, 255.) The parties thereafter took Anthony’s deposition on March 28 and 29, 2019.

         On April 1, 2019, Qwinstar filed the instant Motion for Partial Summary Judgment and Motion for Rule 11 Sanctions. A Renewed Motion for Discovery Sanctions followed on May 23, 2019.

         DISCUSSION

         A. Motion for Partial Summary Judgment

         Qwinstar contends that partial summary judgment is proper because there is no factual support for Defendants’ fraud claim and no legal support for Defendants’ unjust ...


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