Hirsi v. ARCH Language Network, Inc.

Abdiaziz H. Hirsi, Appellant, v. ARCH Language Network, Inc. d/b/a ARCH Language, et al., Respondents.

A18-1076

STATE OF MINNESOTA IN COURT OF APPEALS

April 15, 2019

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2018).

Affirmed

Smith, Tracy M., Judge

Hennepin County District Court

File No. 27-CV-16-9944

Douglas J. Nill, Douglas J. Nill, PLLC, d/b/a Farmlaw, Minneapolis, Minnesota (for appellant)

William L. Davidson, Thomas D. Jensen, João C.J.G. de Medeiros, Lind, Jensen, Sullivan & Peterson, P.A., Minneapolis, Minnesota (for respondents)

Considered and decided by Larkin, Presiding Judge; Halbrooks, Judge; and Smith, Tracy M., Judge.

UNPUBLISHED OPINION

SMITH, TRACY M., Judge

Respondent ARCH Language Network Inc. provides interpreters, primarily for persons receiving health care, and receives payment for these interpretive services through contracts with health insurers. Appellant Abdiaziz Hirsi entered into a contract with ARCH to provide interpreter and billing services to ARCH. Nine years later, Hirsi sued ARCH and its owner and chief executive officer, respondent Russell Hastings, claiming under a variety of theories that the contract entitled him to half of ARCH's profits from 2007 to 2015. In a series of decisions, the district court dismissed some of Hirsi's claims on the pleadings, declined to permit Hirsi to amend his complaint a second time, limited discovery through a special master, awarded summary judgment in favor of ARCH and Hastings (collectively, respondents), and denied Hirsi's posttrial motions. In this appeal, Hirsi's primary contention is that respondents committed a fraud on the court. Hirsi also argues that each of the district court's orders was erroneous or an abuse of discretion. We affirm.

FACTS

On August 22, 2007, Hirsi and ARCH¹ entered into a contract. Hastings signed the contract on behalf of ARCH. Under the contract, Hirsi became a subvendor of ARCH, providing interpreters and billing services. The contract provided that Hirsi's payment rates would be "based on rates set forth in Schedule A" of the contract. Schedule A was entitled "Blue Plus Payment Rates," and it defined rates and stated that the parties "agree to split remaining revenue at 50% for each party after payment to billing service and interpreter." The core of the issues on appeal is whether ARCH's contract with Hirsi, or an unspecified subsequent oral contract, gave Hirsi the right to 50% of all of ARCH's profits since 2007,regardless of whether Blue Plus was the source of the revenue, and whether, in failing to pay Hirsi those funds, respondents committed one of several possible torts.

Early Litigation

In May 2016, Hirsi served a complaint on respondents. Hirsi filed an amended complaint in September 2016, asserting 12 counts.² Respondents answered and counterclaimed for breach of contract, tortious interference with contractual relationships, misappropriation of trade secrets, and abuse of process.

Throughout extensive pretrial litigation, respondents argued that the only serious dispute was a breach-of-contract claim by Hirsi and that all other claims were frivolous. On this basis, respondents opposed broad discovery. Hirsi, on the other hand, demanded broad discovery and contended that respondents' opposition to certain lines of discovery was fraudulent and constituted unprofessional conduct by respondents' counsel.

Orders of January 27, 2017

In the fall of 2016, both parties filed numerous discovery motions with the district court. Respondents also moved for partial judgment on the pleadings, seeking dismissal of counts 4 through 12 of the amended complaint and limitation of counts 1 through 3 to alleged breaches occurring after May 24, 2010. Hirsi moved for declaratory judgment as to the meaning of the contract and for dismissal of respondents' counterclaims. OnJanuary 27, 2017, the district court filed two orders—one resolving the dispositive motions, and the other resolving the discovery-related motions.

In the order on the dispositive motions, the district court granted Hirsi's motion for a declaration that the August 2007 contract was valid and that Schedule A of that agreement provided for sharing of 50% of "remaining revenue."³ It denied Hirsi's motion for a declaration to the extent that it sought to define the scope of the revenue to be shared, and denied Hirsi's motion seeking a declaration that any oral modification of the contract was precluded by the contract. The district court also dismissed respondents' counterclaims without prejudice. With respect to Hirsi's amended complaint, the district court dismissed with prejudice counts 5, 6, 7, 10, and 11—the claims sounding in tort. It also dismissed with prejudice count 4—breach of fiduciary duty—but allowed Hirsi to move to again amend his complaint to add a count of breach of fiduciary duty arising from an unspecified joint-venture agreement entered after the August 2007 contract. However, the district court conditioned permission to amend on certain requirements, among them that any new language in the proposed amendments be highlighted and be limited to a short and plain statement of the facts supporting the new claim. The district court denied respondents' motion to dismiss counts 8 and 9—the claims for equitable relief. It also denied the motion to dismiss count 12—seeking to pierce the corporate veil—but bifurcated the claim fromthe rest of the trial and stayed all further proceedings pending a determination of ARCH's liability.

In the order concerning discovery, the district court directed the parties to meet and confer about the appointment of a special master, required production of certain discovery within 14 days (allowing respondents to propose new terms for a protective order if it was concerned about confidentiality), denied Hirsi's request for attorney fees and costs, and granted Hirsi's motion to amend the scheduling order.

The "Sole Owner" Dispute

The same day the district court filed the two orders, the court held a telephone conference with the parties. Hirsi revealed that he had learned of an inaccurate answer provided by respondents in response to a request for admission. The request and answer were as follows:

REQUEST NO. 28: Admit that the President and sole owner of ARCH, the individual defendant in this Complaint, is Mr. Russell Hastings.

RESPONSE: Admitted.

Hirsi said that he had just learned that, from 2007 to 2009, ARCH was not solely owned by Hastings but had been jointly owned by Hastings and a partner. He asserted that respondents' answer to the admissions request was inaccurate because the instructions accompanying the requests had stated that, "[u]nless otherwise specified, these interrogatories and documents and admissions requests seek information from August 1, 2007 to the present." In that conference call and thereafter, Hirsi's counsel relied on this"deceit" as a basis to argue for reversing the district court's order of partial judgment on the pleadings as well as subsequent orders.

Respondents' counsel countered that (1) the use of the present tense in request 28 meant that the request had "otherwise specified" a different time period, i.e., the present, and (2) the information of a former co-owner was irrelevant to the surviving claims. As further discussed below, the district court concluded, as it did consistently throughout the remainder of the litigation, that the former partner's existence and any payments made to him by Hastings were immaterial to the case—that those facts did not permit Hirsi's tort claims to survive dismissal and that respondents' failure to reveal them immediately was not a "fraud upon the court."

Special Master Dispute

In the January 27 telephone conference, the district court declined to quash subpoenas served by Hirsi on third parties that sought ARCH's bank records and documents recording the sale of ARCH to Hastings. But the court also said that ARCH should first produce its records and, if those records were incomplete or insufficient, Hirsi could address getting a subpoena with the special master. Hirsi thereafter received records from the subpoenaed third parties. In February 2017, respondents moved the special master to compel discovery, quash subpoenas, and for discovery sanctions. Hirsi opposed respondents' motion and filed his own motion to compel.

In March 2017, the special master suspended Hirsi's outstanding subpoenas pending a hearing set for April 2017, forbade the use of additional subpoenas, and barred Hirsi fromusing ARCH's bank account records in any way. In the meantime, respondents moved for sanctions against Hirsi's attorney, and Hirsi moved to disqualify respondents' attorney.

Following the April hearing, in May 2017, the special master issued an order addressing three main issues. First, the special master stated that the district court had intended that Hirsi's subpoenas wait until after the special master had the opportunity to rule on them. Second, the special master stated that, while respondents' response to request for admission number 28 had been inaccurate, answering "deny" would also have been inaccurate, and concluded that the inaccuracy was irrelevant either way because it was about a matter outside the scope of the case. Finally, the special master quashed all outstanding subpoenas, ordered Hirsi to return ARCH's banking records, and ordered production of other documents by respondents. Both parties appealed to the district court, which affirmed the special master's order in September 2017.

Denial of Permission to File a Second Amended Complaint

In March 2017, Hirsi moved the district court for permission to file a second amended complaint, as had been suggested by the district court's January 2017 order. However, the proposed second amended complaint did not comply with the district court's instructions. Specifically, it did not highlight new material, it re-asserted counts that had been...