Brian MacDonald, Appellant,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2016).

STATE OF MINNESOTA
IN COURT OF APPEALS
A16-1234

Brian MacDonald,
Appellant,

vs.

Joseph Mattioli, III, et al.,
Respondents,

Teresa S. Weber,
Defendant.

Filed April 3, 2017
Reversed and remanded
Jesson, Judge

Dakota County District Court
File No. 19HA-CV-16-1586

Steven Moore, Danielle K. Nellis, Watje & Moore, Ltd., Minneapolis, Minnesota (for
appellant)

Jon E. Paulson, Paulson Law Firm PLLC, Eagan, Minnesota (for respondents)

Considered and decided by Halbrooks, Presiding Judge; Worke, Judge; and Jesson,
Judge.
U N P U B L I S H E D O P I N I O N
JESSON, Judge
Appellant Brian MacDonald challenges the district court’s dismissal of his
shareholders’ and unjust -enrichment causes of action in Dakota County District Court,
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alleging that he was entitled to default judgment based on respondents’ failure to answer
the complaint and that the district court erred by dismissing the action as duplicative of a
previously filed action in Hennepin County District Court. Because the d istrict court did
not fully address the threshold issue of jurisdiction, we reverse and remand for further
proceedings.
FACTS
In early 2011, appellant Brian MacDonald became a member and a 50% owner in a
limited-liability company, The North Country Wood shop, LLC. Later that year, North
Country Woodshop engaged a firm owned by defendant Teresa Weber to provide
consulting services. MacDonald alleges, however, that Weber worked to dilute his interest
by creating ownership interests in, or preferential tre atment for, other persons and entities
with whom Weber had inside relationships, including respondents Joseph Mattioli III and
LJ&J Enterprises, Inc., of which Mattioli was president. MacDonald alleges that without
his knowledge, in 2012 -13, his membershi p interest in North Country was reduced, and
Mattioli or LJ&J gained an increased interest without making an investment. In 2012,
MacDonald also received tax notices stating that North Country owed approximately
$50,000 in unpaid payroll taxes, of which h e was unaware and for which he would be
personally liable. He asserts that after North Country sustained about $375,000 in ordinary
business losses for the 2012 tax year, those losses were allocated entirely to LJ&J, even
though he believed that neither Mattioli nor LJ&J had invested funds in North Country.
In November 2012, Mattioli and Weber formed American’s Workshop Corporation,
a competitor to North Country. In 2013, Mattioli and Weber arranged a stock -transfer
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agreement, through which MacDonald t ransferred his membership interest in North
Country and became a shareholder in America’s Workshop.
MacDonald alleges that in 2014, without informing him, Mattioli and Weber
approved a transaction in which America’s Workshop sold substantially all of it s assets to
another limited liability company, International Workshops, LLC. According to
MacDonald, America’s Workshop also failed to provide him with corporate documents
and financial records that he requested.
In 2015, MacDonald filed suit in Hennep in County District Court alleging breach -
of-contract and shareholders’ -rights actions against America’s Workshop, Weber, and
Mattioli. He also alleged a count of unjust enrichment against America’s Workshop.
MacDonald, however, was able to serve only America’s Workshop, not Mattioli or Weber,
in that action. In August 2015, America’s Workshop filed for bankruptcy, and the
Hennepin County case was stayed.
In November 2015, MacDonald initiated an action in Dakota County District Court,
alleging actions against Mattioli and Weber based on failure to furnish corporate records
and arbitrarily reducing his ownership interest in America’s Workshop, see Minn. Stat.
§ 302A.751 (2016), and violation of MacDonald’s rights to dissent from the sale to
America’s Wor kshop and receive fair value for his shares, see Minn. Stat. § 302A.471
(2016). MacDonald also alleged unjust enrichment by Mattioli and LJ&J based on failure
to allocate any of North Country’s tax losses to him. The record contains affidavits of
service of the complaint on Mattioli—both individually and as a representative of LJ&J—
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while he was present in Dakota County to attend a meeting of bankruptcy creditors. Weber
could not be personally served.
Mattioli and LJ&J did not file an answer to the comp laint, and MacDonald moved
for default judgment. Mattioli and LJ&J then filed a “Motion to Deny Default Judgment
and Dismiss Pleading,” arguing, inter alia, that the defendants had answered in the
Hennepin County lawsuit, which was still ongoing; that col lateral estoppel should apply
and that no jurisdiction existed because LJ&J lacked minimum contacts with Minnesota.
MacDonald responded that the only defendant served in the Hennepin County action was
America’s Workshop, which had filed bankruptcy, and th at collateral estoppel did not
apply because there had been no final judgment.
After a hearing, the district court issued an order denying the motion for a default
judgment and dismissing the matter without prejudice “for lack of jurisdiction.” The
district court found that motions had been filed and heard on the same facts in Hennepin
County and concluded that “[t]he matter is not properly before the Dakota County District
Court.” This appeal follows.
D E C I S I O N
MacDonald argues that the district court erred by dismissing the action and abused
its discretion by denying his motion for a hearing on default judgment. Respondents, on
the other hand, argue that the district court did not err by determining that it “lack[ed]
jurisdiction,” based on the fact that a similar action had been filed in Hennepin County
District Court.
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At the outset, to review the district court’s order, we must clarify the distinctions
between personal and subject -matter jurisdiction, and between jurisdiction and venue.
Subject-matter jurisdiction refers to the class of cases that a court is authorized to hear.
Kontrick v. Ryan, 540 U.S. 443, 124 S. Ct. 906, 915 (2004). Personal jurisdiction refers to
the court’s authority to bind the parties to the action. Id. Jurisdiction presents a threshold
issue that must be addressed before reaching the question of venue, which deals instead
with the location and convenience of trial. State v. Ebensteiner , 690 N.W.2d 140, 149
(Minn. App. 2004), review denied (Minn. Mar. 15, 2005). Thus, a court must be able to
exercise subject-matter jurisdiction over the controversy and personal jurisdiction over the
defendants before determining whether venue in a certain location is proper. See id.
Here, the district court’s order a ddressed respondents’ argument that, because a
similar action had been filed in another county, it was improper for the Dakota County
District Court to hold a default hearing on MacDonald’s claims. But this confuses the
concepts of jurisdiction and venue. See id. It also presupposes that the district court had
personal jurisdiction over all of the defendants in the Hennepin County action, including
Mattioli, which is not the case because Mattioli was not served in that action. Whether
personal jurisdiction exists presents a legal issue, which this court reviews de novo. Juelich
v. Yamazaki Mazak Optonics Corp., 682 N.W.2d 565, 569 (Minn. 2004).1

1 We note that respondents also assert on appeal that the district court lacked subject-matter
jurisdiction over the controversy. The substance of their argument, however, relates only
to personal jurisdiction. See Kontrick, 540 U.S. at 455, 124 S . Ct. at 915) (clarifying
difference between subject-matter and personal jurisdiction).
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As the Minnesota Supreme Court “ha[s] long held, service of process is the means
by which a court obtains personal jurisdiction over a defendant.” McCullough & Sons, Inc.
v. City of Vadnais Heights , 883 N.W.2d 580, 590 (Minn. 2016). Service of process may
be made on an individual by delivering a copy of the summons to the individual personally,
and as to a corporation by delivering a copy to an officer or agent of the corporation. Minn.
R. Civ. P. 4.03(a), (c). Here, it is undisputed that Mattioli, a defendant in both actions, was
not personally served in the Hennepin County matter. Therefore, with respect t o the
Hennepin County action, the district court had no personal jurisdiction over him, and any
result in that action would not operate to bind him personally. See Kontrick, 540 U.S. at
455, 124 S. Ct. at 915. Further, because there was no final judgment on the merits in the
Hennepin County matter, any issue raised in that action would have no preclusive effect
on this action in Dakota County. See Hauschildt v. Beckingham , 686 N.W.2d 829, 840
(Minn. 2004) (stating requirements for the application of coll ateral estoppel, including a
final judgment on the merits in prior action).
Respondents argue that the district court’s order on jurisdiction was not in error
because MacDonald made no affirmative showing that Mattioli, who is not a Minnesota
resident, or LJ&J, which is not a Minnesota corporation, maintained sufficient minimum
contacts with Minnesota to support personal jurisdiction. Minnesota courts may exercise
personal jurisdiction over a nonresident corporation only if that corporation has sufficien t
minimum contacts with the state so that maintaining suit in the state “does not offend
‘traditional notions of fair play and substantial justice.’” Viking Eng’g & Dev., Inc. v.
R.S.B. Enters., Inc. , 608 N.W.2d 166, 169 (Minn. App. 2000) (quoting Int’l Shoe Co. v.
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Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158 (1945)), review denied (Minn. May 23,
2000). If a nonresident has purposefully directed activities to residents of the forum state,
and litigation results from injuries that arose from those activities, the nonresident has “fair
warning” that it might be sued in the forum state. Id. In examining whether sufficient
minimum contacts exist, Minnesota courts employ a five -factor test, examining the
quantity of contacts, the nature and quality of co ntacts, the connection or relationship
between the cause of action and the contacts, the state’s interest in providing a forum and
the parties’ convenience. Id. at 169.
We agree that the issue of whether Minnesota courts may exercise jurisdiction over
LJ&J, a nonresident corporation, implicates a minimum -contacts analysis. See id. But as
discussed above, the exercise of personal jurisdiction over an individual, such as Mattioli,
is subject to different requirements. See Minn. R. Civ. P. 4.03(a) (disc ussing personal
service on an individual). A state court may generally exercise personal jurisdiction over
any individual who may be “personally served within the territorial boundaries of the
state.” Shamrock Dev,. Inc. v. Smith, 754 N.W.2d 377, 383 (Minn. 2008).
Here, the complaint alleges a claim of unjust enrichment against LJ&J relating to
the allocation of tax losses. Even if the summons and complaint was properly served on
Mattioli as a corporate officer, whether the exercise of personal jurisdiction is proper as to
the claim against LJ&J requires an examination of minimum contacts. See Viking Eng’g,
608 N.W.2d at 169. But the complaint also alleges claims against Mattioli individually
relating to unjust enrichment and violations of Minnesota Statutes sections 302A.471 and
302A.751. See Minn. Stat. § 302A.467 (2016) (allowing for equitable relief if a
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corporation, officer, or director violates a provision of the Minnesota Business Corporation
Act). Therefore, if service was properly effected on Mattioli as an individual while he was
in this state, the Minnesota court may exercise personal jurisdiction over him with respect
to these claims without regard for minimum contacts. See Shamrock, 754 N.W.2d at 383.2
In its brief order, the district court made no findings as to whether minimum contacts
existed with Minnesota as a forum state to determine if the exercise of personal jurisdiction
over LJ&J was proper. Nor did the district court make findings on whether personal service
was properly effected on Mattioli as an individual or as an officer of LJ&J to commence
the action in Dakota County. These threshold issues must be resolved in order to reach
additional issues, such as whether the defendants were required to file an answer and
whether a hearing on the issue of default is warranted. We therefore remand to the district
court to determine whether it had personal jurisdiction: (1) over Mattioli as an individual
with respect to the section 302A counts and unju st-enrichment counts, based on personal
service; and (2) over LJ&J as a corporation with respect to the unjust enrichment count,
based on a minimum -contacts analysis and personal service on Mattioli as a corporate
officer. The district court may reopen the record as necessary to address these issues. State
v. Perkins, 582 N.W.2d 876, 879 (Minn. 1999) (permitting district courts to reopen the
record to make fact findings on remanded issues). Should the district court determine that

2 Respondents argue that MacDonald waived the argument that the district court had
personal jurisdiction over the defendants by failing to present it below. But the record
shows that MacDonald’s attorney argued to the district court that Mattioli had been
properly served in the Dakota County action, sufficiently preserving the issue for appellate
review.
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jurisdiction exists, further proceedings are appropriate to address additional issues raised,
including whether MacDonald is entitled to default judgment.
Reversed and remanded.