Hoyt Properties, Inc. v. Production Resource Group, L.L.C.
736 N.W.2d 313 (2007)
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Rule of Law:
A statement of legal opinion is actionable as a fraudulent misrepresentation if it amounts to an implied assertion that facts exist to justify the opinion expressed.
Facts:
- Hoyt Properties, Inc. and Hoyt/Winnetka, L.L.C. (collectively, Hoyt), owned by attorney Steve Hoyt, leased commercial space to Haas Multiples Environmental Marketing and Design, Inc.
- Haas assigned the lease to its successor, Entolo, Inc., which was a subsidiary of Production Resource Group, L.L.C. (PRG).
- Entolo defaulted on the lease, and Hoyt initiated eviction proceedings.
- On the day of the hearing, the parties negotiated a settlement agreement.
- During negotiations, PRG's counsel requested that PRG be released from any future liability under the lease.
- In response, Steve Hoyt asked PRG's attorney, 'I don’t know of any reason how we could pierce the veil, do you?'
- PRG's attorney allegedly replied, 'There isn’t anything. PRG and Entolo are totally separate.'
- Relying on this representation, Hoyt agreed to the provision releasing PRG from liability.
- After executing the settlement, Hoyt discovered a separate lawsuit against PRG which alleged facts supporting a veil-piercing claim against PRG for Entolo's debts, such as failure to observe corporate formalities and undercapitalization.
Procedural Posture:
- Hoyt Properties, Inc. and Hoyt/Winnetka, L.L.C. (collectively, Hoyt) filed a lawsuit against Production Resource Group, L.L.C. and its affiliates (collectively, appellants) in district court (trial court) to rescind the settlement agreement.
- The appellants moved for summary judgment.
- The district court granted summary judgment in favor of the appellants, ruling that the attorney's statement was a non-actionable legal opinion and Hoyt's reliance was unreasonable as a matter of law.
- Hoyt (as appellant) appealed this decision to the Minnesota Court of Appeals.
- The court of appeals reversed the district court's summary judgment, holding that the representations were actionable and that the reasonableness of Hoyt's reliance was a genuine issue of material fact for trial.
- PRG and its affiliates (as appellants) appealed to the Supreme Court of Minnesota for review.
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Issue:
Does an attorney's statement that there is no basis for a veil-piercing claim and that two corporations are 'totally separate' constitute an actionable fraudulent misrepresentation rather than a non-actionable legal opinion?
Opinions:
Majority - Page, J.
Yes, an attorney's statement that there is no basis for a veil-piercing claim can be an actionable fraudulent misrepresentation. While pure legal opinions are not actionable, a mixed statement of law and fact is actionable if it implies the existence of facts that justify the legal conclusion. The statement 'There isn’t anything' implies that no facts exist to support a veil-piercing claim, and the statement 'PRG and Entolo are totally separate' is a direct factual assertion. Whether reliance on such statements was reasonable, even by a sophisticated attorney like Steve Hoyt, is a question of fact for a jury to decide and cannot be dismissed on summary judgment unless the falsity of the representation was known or obvious.
Dissenting - Anderson, Paul H., J.
No, the attorney's statements constitute a non-actionable legal opinion. The viability of a veil-piercing claim is a subjective legal determination based on indeterminate factors and an assessment of fairness, not a 'fact susceptible of knowledge.' Therefore, the attorney's opinion could not be a representation of existing fact. Furthermore, any reliance by Steve Hoyt—an experienced attorney and sophisticated businessman—on the legal opinion of opposing counsel during settlement negotiations was unreasonable as a matter of law.
Analysis:
This decision clarifies the scope of the 'legal opinion' exception in fraud claims, establishing that an attorney's opinion during negotiations can be treated as an actionable assertion of fact if it implies a factual basis. The ruling makes it more difficult for defendants to win on summary judgment by claiming their statements were mere opinion, shifting the focus to the reasonableness of the plaintiff's reliance, which is typically a jury question. This precedent may increase the level of caution attorneys must exercise in settlement discussions, as their legal characterizations can be scrutinized as implied factual representations, potentially exposing settlement agreements to rescission.
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