A16-1146 May 9, 2017

STATE OF MINNESOTA IN SUPREME COURT ______________________________________________________ Staffing Specifix, Inc., Petitioner, v. TempWorks Management Services, Inc., individually and d/b/a TMS Staffing, et al., Respondents. ______________________________________________________ PETITION FOR REVIEW OF DECISION OF COURT OF APPEALS ______________________________________________________ Date of Filing of Court of Appeals Decision: April 10, 2017 ______________________________________________________

Kay Nord Hunt (#138289) Michael N. Leonard (#0395070) LOMMEN ABDO, P.A. 1000 International Centre 920 Second Avenue South Minneapolis, MN 55402 (612) 339-8131 Attorneys for Petitioner Staffing Specifix, Inc.

Daniel J. Cragg (#389888) Vince C. Reuter (#390874) Gregory Singleton (#395661) ECKLAND & BLANDO LLP 800 Lumber Exchange Building 10 South Fifth Street Minneapolis, MN 55402 (612) 236-0160 Attorneys for Respondents TempWorks Management Services, Inc., individually and d/b/a TMS Staffing, et al.

TO:

THE SUPREME COURT OF THE STATE OF MINNESOTA: Petitioner Staffing Specifix, Inc. requests Supreme Court review of the published

decision of the Court of Appeals upon the following grounds. 1.

Statement of Legal Issues and Their Resolution by the Court of Appeals. A.

After the trial court concludes a contract is ambiguous and if it is not one of adhesion, must the jury be instructed as to which term or terms are ambiguous and the jury is to construe ambiguous terms against the drafter only as a last resort if the parties’ mutual intent cannot be determined from the evidence and does the failure to so instruct constitute prejudicial error? The Court of Appeals granted Respondent a new trial, enunciating a new rule of law as to contract interpretation and how the jury must be instructed. (Add. 7-10, 13-14).

B.

Is a new trial warranted where the defendant was asked whether a judge had determined his testimony was not credible and he answered yes? The Court of Appeals ruled such evidence inadmissible under Minn. R. Evid. 608(b) but did not decide if the error warranted a new trial. (Add. 10-11).

C.

May a party maintain a Minn. Stat. § 604.14, subd. 1 civil theft claim where it is asserted the defendant had initially legally received funds but refused to turn them over to the rightful owner? The Court of Appeals held in the negative. (Add. 5).

D.

Does a litigant forfeit the right to challenge the denial of a motion to add a punitive damages claim where the motion is made during trial and the litigant does not move for a new trial? The Court of Appeals held Petitioner forfeited its right to appeal the denial because it did not move for a new trial. (Add. 6).

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2.

Statement of the Case (Facts and Procedural History). Petitioner Staffing Specifix, Inc. (Staffing) is primarily a temporary staffing agency.

(T. 465). Respondent TempWorks Management Services, Inc. (TMS) targets what it views to be startup staffing businesses to become their affiliate as a “Temporary Staffing Agency” under its TMS Services Agreement. (T. 61-63, 81-82; Section 1.1; Add. 47). TMS has about 20 affiliates. (T. 119). A TMS affiliate does sales and recruiting, and its recruited temporary workers, called “staffed consultants,” become TMS employees. (Section 2.2; Add. 47-48). The TMS Services Agreement (Add. 47) entered into by the parties was drafted by TMS’s general counsel Reid. TMS’s CEO David Dourgarian asserted its Agreement speaks for itself and is to be applied by its stated terms. (T. 136, 141, 164; Add. 79, 81). Under Services Agreement Section 7.2, entitled Responsibility to Pay, Staffing is responsible for the workers’ compensation cost of its Core Employees; TMS is responsible for the Staffed Consultants. (Add. 57; see also Section 4.1; Add. 53). TMS claims workers’ compensation costs for Staffed Consultants are part of its “Management Fees” (Section 3.5; Add. 50; Exhibit A; Add. 66), which it deducted in determining the commission TMS paid Staffing. (Section 3.6; Add. 50-51). Reid, the contract’s drafter, admitted “Management Fees” and “cost of payroll” as contractually defined do not include workers’ compensation. (T. 682-683; Add. 89-90). He left out workers’ compensation cost from the “cost of payroll,” asserting he did so to make the Agreement “purposefully expansive.” (Id.) In April 2014, Staffing informed TMS it would not renew the Agreement following its term expiration. TMS subsequently claimed its workers’ compensation insurance costs

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had increased and took additional funds from Staffing’s carry-forward balance without Staffing’s approval. (T. 198-199). TMS insisted Staffing must pay a “buyout” fee to exit the Agreement at term end. Under Section 11.1’s general termination provision, there is no stated buyout fee for termination with consent. (Add. 59; T. 180; Add. 85). Section 11.2 describes the buyout. (Id.) TMS asserted Staffing was required to pay a “buyout” fee if it did not renew, even with TMS’s consent. (T. 180; Add. 85; T. 211, 289). The parties tried but failed to reach an agreement whereby, in part, TMS would receive a $65,000 buyout fee in exchange for accepting Staffing’s termination. TMS nonetheless took $65,000 from Staffing’s reserve account and never returned it. (T. 229). The Agreement was mutually terminated by executing the TriCom Agreement. (Add. 67). It makes no mention of a buyout fee; nonetheless, TMS asserted and took funds of Staffing, claiming a buyout fee was owed. (T. 239, 697; Add. 91). As relevant to this Petition, Staffing alleged TMS breached the parties’ contract and committed civil theft by wrongfully retaining funds belonging to Staffing. TMS was granted summary judgment on the civil theft claim (Doc. #108; Add. 34-35). The trial court found the parties’ Agreement ambiguous. (T. 25-26). At trial, Staffing was allowed to ask TMS’s CEO Dourgarian (T. 27-28, 155-160) if a judge had ever determined his testimony not credible. He answered in the affirmative. (T. 193; Add. 86).

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Based on trial testimony, Staffing moved to amend to assert punitive damages against Dourgarian in connection with its defamation claim against him. (T. 672-677). The motion was denied as untimely because it was made after the start of trial. (T. 677-678). Following arguments on the appropriate contract ambiguity jury instruction (T. 810811; Add. 92-93), the trial court instructed the jury: A contract is breached when there is a failure to perform a substantial part of the contract. If you find that the contract is ambiguous, you should determine the intent of the parties. When contract language is reasonably susceptible to more than one interpretation, the ambiguous contract terms are to be construed against the drafter. (T. 823). The jury found TMS had breached its contract with Staffing and awarded Staffing $451,732.77 in damages. (Doc. #157; Add. 24; Doc. #152; Add. 74). It found Dourgarian had defamed Staffing and with malice. (Add. 76). TMS’s motion for judgment and new trial was denied. (Doc. #187; Add. 15). The Court of Appeals reversed and remanded for a new trial on Staffing’s breach-ofcontract claims. (Add. 7-12). Although not raised as error, it found trial court error in permitting the jury to determine whether an ambiguity existed and in not identifying the ambiguous terms, although it acknowledged the trial court found ambiguity before jury submission and the disputed terms were clearly identifiable. (Add. 8). It agreed with TMS’s raised objection to the instruction, ruling the jury should have been instructed to construe the ambiguous terms against the drafter only as a last resort. It ruled TMS was “substantially prejudiced because the jury instructions allowed the jury to ignore the evidence submitted

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at trial on the parties’ intent.” (Add. 10). It then stated its view of the evidence in a light most favorable to TMS. (Id.) The 608(b) evidence was ruled inadmissible, but the Court of Appeals did not decide it warranted a new trial. (Add. 11). The Court of Appeals held there was no civil theft as a matter of law because TMS took possession of the funds without an initial wrongful act (Add. 5), and Staffing forfeited its right to appeal the denial to add punitive damages by failing to move for a new trial (Add. 6). 3.

Statement of the Criteria of the Rule Relied upon to Support the Petition and a Brief Argument in Support of the Petition. a.

The new rule of law on jury instructions for ambiguous contract terms mandates Supreme Court review.

The Court of Appeals’ decision is contrary to this Court’s longstanding directive that “[i]f a contract is ambiguous, it must be construed against its drafter.” Current Tech. Concepts, Inc. v. Irie Enterprises, Inc., 530 N.W.2d 539, 543 (Minn. 1995); see also Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979) (“Where there are ambiguous terms or the intent is doubtful, it is axiomatic that the contract will be construed against the drafter.”) (emphasis added). Rather, the Court of Appeals cited Econ. Premier Assur. Co. v. W. Nat. Mut. Ins. Co., 839 N.W.2d 749, 754 (Minn. Ct. App. 2013) (Add. 9), for the proposition that with non-adhesion contracts ambiguous contract terms can be construed against the drafter only as a measure of last resort. As acknowledged in Judge Ross’s concurring opinion, this Court has not hinted that construing against the drafter “is relegated to the bottom of the interpretive-tool kit.” (Add. 13). Indeed, in certain contexts it is often

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the first step, and relatively equal bargaining power does not preclude application of the doctrine. See Econ. Premier, 839 N.W.2d at 754-55; Minnesota Mining & Mfg. Co. v. Travelers Indem. Co., 457 N.W.2d 175, 180-81 (Minn.1990); Northwest Airlines, Inc. v. Globe Indem. Co., 303 Minn. 16, 26, n.2, 225 N.W.2d 831, 837 & n.2 (1975). The Court of Appeals’ broad holding threatens to upend long-settled law, with statewide implications. It has now directed how a jury must be instructed in every contract case of ambiguity. Here, TMS utilized its standard form contract, intentionally keeping key terms vague and admitting at trial its contract at times did not actually state what it asserted. Construing against the drafter discourages such ambiguity: drafters such as TMS will draft clearer contracts if they know ambiguous language will be construed against them. Review by this Court is necessary to harmonize, develop and clarify the law. Based on the record as a whole, TMS was not entitled to a new trial. There was no prejudicial error mandating a new trial on this record, as the Court of Appeals erroneously ruled. b.

The Court of Appeals’ construction of civil theft statute is an issue of first impression.

The Court of Appeals added a new element to a Minn. Stat. § 604.14, subd. 1 claim for civil theft. (Add. 5). This extra element—an initial wrongful act—cannot be inferred from the civil theft statute text and creates a disparity in the definitions of “theft” for purposes of the civil and criminal theft statutes. Minnesota courts have relied on the criminal theft statute to determine whether a defendant’s conduct amounts to theft, although filing of a criminal complaint is not a prerequisite to civil liability. Minn. Stat. § 604.14, subd. 4; see, e.g., Popp

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Telecom, Inc. v. Am. Sharecom, Inc., 361 F.3d 482, 493 (8th Cir. 2004); Prinzing v. Schwab, 2006 WL 538926, at *2 n.1 (Minn. Ct. App. 2006) (noting that trial court correctly used criminal jury instruction for claim of civil theft). The criminal theft statute specifically defines as “theft” the transfer, concealment, or retention of property without the owner’s consent and with the intent to deprive the owner permanently of possession of the property. See Minn. Stat.§ 609.52, subd. 2. Here, Staffing asserts TMS, without justification, retained, and refused to pay on demand, funds belonging to Staffing. The Court of Appeals’ divergence in definitions of theft for civil and criminal purposes violates the interpretive principle of in pari materia, without grounding in statute or precedent. See Christgau v. Woodlawn Cemetery Ass’n, Winona, 208 Minn. 263, 275, 293 N.W. 619, 624 (1940) (where same language is used in different statutory sections, it is presumed to have the same meaning until the contrary is shown). Clear standards for proving a statutory civil theft claim are of statewide importance. c.

Preservation of an appeal of denial of amendment necessitates review.

Under Minn. R. Civ. P. 15.02, a party may amend a pleading at any time by leave of the court, and leave is to be freely granted unless it results in prejudice. See Voicestream Minneapolis, Inc. v. RPC Properties, Inc., 743 N.W.2d 267, 272 (Minn. 2008). And this Court has held there is no abuse of discretion in granting leave to amend a pleading after trial has commenced. Schroeder v. Jesco, Inc., 296 Minn. 447, 455, 209 N.W.2d 414, 419 (1973) (allowing amendment to answer).

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Staffing asserts it was entitled to amend to add punitive damages, but the Court of Appeals held Staffing forfeited that issue on appeal because it failed to move for a new trial. (Add. 6). But all that is required is compliance with Minn. R. Civ. P. 15.01. The fact the motion is made after trial commences does not render it a “procedural” issue that must be preserved through a new trial motion, and this Court has never held to the contrary. Review is necessary to clarify and harmonize the law. WHEREFORE, Petitioner requests review. LOMMEN ABDO, P.A.

Dated: May 9, 2017

BY s/ Kay Nord Hunt Kay Nord Hunt (#138289) Michael N. Leonard (#0395070) 1000 International Centre 920 Second Avenue South Minneapolis, MN 55402 (612) 339-8131 [email protected] [email protected] Attorneys for Petitioner Staffing Specifix, Inc.

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CERTIFICATION OF LENGTH OF DOCUMENT I hereby certify that this document conforms to the requirements of the applicable rules, is produced with a proportional font, and the length of this document is 1,976 words. This document was prepared using Word Perfect 13. LOMMEN ABDO, P.A.

Dated: May 9, 2017

BY s/ Kay Nord Hunt Kay Nord Hunt (#138289) Michael N. Leonard (#0395070) 1000 International Centre 920 Second Avenue South Minneapolis, MN 55402 (612) 339-8131 [email protected] [email protected] Attorneys for Petitioner Staffing Specifix, Inc.

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