Tony Flattum, Respondent,

This opinion will be unpublished and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

STATE OF MINNESOTA
IN COURT OF APPEALS
A19-0630

Tony Flattum,
Respondent,

vs.

Pro Tech Restoration, Inc.,
Defendant,

Brian Jovan,
Appellant.

Filed December 16, 2019
Affirmed
Hooten, Judge

Wright County District Court
File No. 86-CV-17-3247

Arthur G. Boylan, Philip J. Kaplan, Peter J. McElligott, Anthony Ostlund Baer & Louwagie
P.A., Minneapolis, Minnesota (for respondent)

Scott Wilson, Scott Wilson Law Firm, PLLC, Minneapolis, Minnesota; and

Courtney J. Ernston, William Gschwind, Minnesota C onstruction Law Services, PLLC,
Vadnais Heights, Minnesota (for appellant)

Considered and decided by Cochran, Presiding Judge; Johnson, Judge; and Hooten,
Judge.

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U N P U B L I S H E D O P I N I O N
HOOTEN, Judge
In this d ispute arising from the termination of a business relationship, appellant
challenges the district court’s denial of a motion for judgment as a matter of law (JMOL)
and a motion for a new trial. Appellant argues that Minnesota law should be read to relieve
corporate promoters from personal liability after a corporation is formed and therefore the
district court erred when it denied his motion for JMOL. Appellant also argues in the
alternative that the district court abused its discretion when it deni ed a motion for a new
trial on his breach of contract and promissory estoppel claim s and in denying his motion
for a new trial as to damages because the methodology used by respondent’s expert lacked
foundational reliability. Because the issue of promoter liability was not properly preserved
for appeal and because the expert witness’s methodology had sufficient foundation to be
presented to the jury, we affirm.
FACTS
In the autumn of 2013, respondent Tony Flattum was winding down his s torm
restoration company. Flattum and appellant Brian Jovan, then an employee of Flattum’s,
discussed going into business together as co -owners of a new storm restoration company
called Pro Tech Restoration, Inc. But because Flattum had three outstanding consent orders
entered against him by the Minnesota Department of Labor and I ndustry, the pair orally
agreed before Pro Tech’s incorporation that Jovan would be the sole owner of Pro Tech
and Flattum would be an employee entitled to one-half of Pro Tech’s profits . In reliance
on this agreement, Flattum brought his existing sales team to Pro Tech, used his contacts

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with vendors to obtain materials on credit for Pro Tech, and personally contributed one-
half of the company’s start -up capital. As agreed, when Pro Te ch incorporated in early
2014, Jovan was the sole owner.
The company did very well for the first few years of its existence in part due to
Flattum’s guidance and experience. And yet, Jovan terminated Flattum’s employment in
mid-2016. Flattum claimed that after his termination, he did not receive his one-half share
of the profits to which he was entitled under his contract with the parties.
Flattum sued Jovan and Pro Tech for breach of contract and promissory estoppel ,
among other claims. In September 2018, the jury found Jovan personally liable for breach
of contract and promissory estoppel and awarded Flattum $734,141. This figure was
approximately the same figure calculated by Flattum’s damage s expert, Allan Chermak,
based on the estimated accrued profit owed to Flattum at the time he was terminated . No
damages were awarded against Pro Tech.
In response, Jovan filed a motion for JMOL, or in the alternative, a motion for a
new trial. The district court denied both motions finding “ample evidence in the record
justifying the jury’s ve rdict” and that a proper foundation was laid for Chermak’s profit-
calculation method. This appeal followed.
D E C I S I O N
I. Jovan did not preserve the issue of promoter liability for appeal.
Jovan argues that the district court erred as a matter of law when it denied his motion
for JMOL after a jury found him to be pe rsonally liable to Flattum for breach of contract
and promissory estoppel. Jovan argues that he was a pre -incorporation promoter and for

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the first time on appeal, requests that we change existing Minnesota promoter liability law
to provide that even without an explicit agreement between the parties, any liability for a
breach of the promoter contract belongs to the corporation, not the promoter. “We review
de novo a district court’s decision to deny a motion for judgment as a matter of law,
applying the same standard used by the district court and viewing the evidence in the light
most favorable to [the non-moving party].” Christie v. Estate of Christie, 911 N.W.2d 833,
838 n.5 (Minn. 2018) (quotation omitted).
A promoter of a yet -to-be-formed corporation may make contracts on the
corporation’s behalf. Veigel v. O’Toole , 236 N.W. 710, 711 ( Minn. 1931). Once the
corporation comes into existence, the corporation becomes liable on any pre-incorporation
contract it expressly or implicitly adopts. Id. However, even if a corporation adopts a
contract made by a promoter on the corporation’s behalf, a promoter remains individually
liable for the contract absent an explicit agreement between the parties to relieve the
promoter of all liability. Almac, Inc. v. JRH Dev., Inc., 391 N.W.2d 919, 924 (Minn. App.
1986) (superseded by statute on other grounds), review denied (Minn. Oct. 17, 1986); see,
e.g., State v. Indus. Tool & Die Works, Inc., 21 N.W.2d 31, 37 (Minn. 1945).
Jovan’s theory could only be successful if we expand the state’ s existing pre-
incorporation promoter liability law to allow a promoter to escape liability when a contract
is entered into by the promoter on the credit of the future corporation, or when the
corporation subsequently adopts the promoter’s contract after its incorporation. Jovan
points to the law of a small minority of siste r states who have adopted some form of this
exception and urges us to adopt this law in Minnesota. See, e.g., Coopers & Lybrand v.

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Fox, 758 P.2d 683, 685 (Colo. App. 1988) (noting that a formal agreement to release a
promoter from liability is not necessary when one is shown by the circumstances); Blue
Paper, Inc. v. Provost, 914 So.2d 1048, 1051 (Fla. Dist. Ct. App. 2005) (holding where a
promoter contracts in the name of a corporation to be formed later, but does not intend to
be personally liable on the contract, and the other party knows this, the promoter is not
personally liable); Marconi’s Wireless Tel. Co. v. Cross , 16 Haw. 390, 3 94 (Haw. 1905)
(stating a promoter is not personally liable on a contract that expressly or impliedly limits
liability to the corporation); Schwedtman v. Burns, 11 S.W.2d 348, 349–50 (Tex. Civ. App.
1928) (limiting promoter liability when contracts are mad e on the credit of a corporation
and later adopted).
Because Jovan did not properly preserve this issue for appeal, we decline to examine
the expansion of Min nesota’s promoter liability law. Generally, we will not consider
matters not argued to, or considered by, the district court. Thiele v. Stich, 425 N.W.2d 580,
582 (Minn. 1988). A party may neither raise a new issue on appeal nor “obtain review by
raising the same general issue litigated below but under a different theory.” Id.; see also
Crowley v. Meyer, 897 N.W.2d 288, 293 (Minn. 2017).
Although we may base our decision upon a theory not presented to the district court
where justice requires, Minn. R. Civ. App. P. 103.04, or “where the question . . . is plainly
decisive of the entire controversy on its merits,” Watson v. United Servs. Auto. Ass’n, 566
N.W.2d 683, 687 (Minn. 1997) (quotation omitted), absent those circumstances, parties are
“bound . . . by the theory or theories, however erroneous or improvident, upon which the
action was actually tried below.” Annis v. Annis, 84 N.W.2d 256, 261 (Minn. 1957).

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In Watson, the Minnesota Supreme Court articulated an exception to the general
rule that an issue not argued before the district court was not properly preserved for review.
566 N.W.2d at 687. The exception allows us to hear issues otherwise not properly
preserved when the issue is decisive over the suit and would not unjustly benefit one party.
Id. Factors in support of the application of this exception are: (1) the issue is a novel legal
issue of first impression; (2) the issue was raised prominently during briefing; (3) the issue
was “implicit in” or “closely akin to” other arguments made at trial; and (4) the issue is not
dependent on any new or controverted facts. Id. at 688.
The parties agree that the issue of pre-incorporation promoter liability was not
specifically presented to the district court during the jury trial. The jury instructions, to
which both parties agreed, lacked any instruction on pre -incorporation promoter liability.
Once the jury instructions are presented to the jury, the instructions become the law of the
case. See Wolner v. Mahaska Indus. Inc. , 325 N.W.2d 39, 42 (Minn. 1982) (noting that
“where a party makes no objections to jury instructions bef ore the jury retires . . . the
instructions are the law of the case”); Coenen v. Buckman Bldg. Corp. , 153 N.W.2d 329,
334 (Minn. 1967) (noting that unobjected-to jury instructions become the law of the case
after the district court charges the jury). The first time the issue of promoter liability was
raised in general terms was during the post-trial hearing on Jovan’s motion for JMOL or a
new trial. And, even then, Jovan made no request that the district court adopt an exception
to the law in Minnesota that a promoter remains individually liable for the contract absent
an explicit agreement between the parties to relieve the promoter of all liability.

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Applying the Watson factors, the issue of promoter liability was not preserved so as
to be heard by thi s court. Though this issue was prominently argue d in the parties’
appellate briefs, such devotion to this issue in briefing alone is insufficient for us to
consider the issue on appeal. And although Jovan did argue that he is not personally liable
to Fla ttum before the district court ––an argument with the same consequence as his
promoter liability argument––Jovan only raised the issue of the bounds of promoter
liability law in his appeal. Two arguments resulting in the same outcome are not, by virtue
of that outcome, sufficiently akin so as to be functionally the same argument. Finally,
justice would not be served by allowing Jovan to raise this issue for the first time on appeal
in that the parties undoubtedly would have adjusted their litigation strategies before the
jury if the issue had been raised during the proceedings before the district court.
Even if Jovan were able to show that we should consider this issue under the Watson
factors, we, as an error -correcting court, would not have the authority to create a new
exception to promoter liability which is contrary to existing Minnesota law. See Sefkow v.
Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (stating that “[t] he function of the court of
appeals is limited to identifying err ors and then c orrecting them ”); Lake George Park,
L.L.C. v. IBM Mid-America Emps. Fed. Credit Union, 576 N.W.2d 463, 466 (Minn. App.
1998) (stating that “[t]his court, as an error correcting court, is without authority to change
the law”), review denied (Minn. June 17, 1998).
Even though pre -incorporation liability for promoters may be a relatively obscure
area of law, it is still the law and must be presented before the district court to be preserved
on appeal absent specific exceptions not present here. Therefore, the district court did not

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err when it denied Jovan’s motion for JMOL under Jovan’s subsequent theory of promoter
liability as the issue was never presented to the district court during the trial.
II. The district court did not abuse its discretion when it denied Jovan’s motion
for a new trial.

Jovan argues that the district court abused its discretion when it denied his motion
for a new trial on breach of contract and promissory estoppel claims because there was
insufficient evidence for a jury to find that a contract existed between Jovan and Flattum.
Flattum asserts that the district court did not abuse its discretion as the record contains
sufficient, if not ample, evidence to support the finding of a contract. “We review a district
court’s decision to grant or deny a new trial for an abuse of discretion.” Christie, 911
N.W.2d at 838.
A party may be granted a new trial based on a trial irregularity, a legal error, or a
jury verdict unjustified on the evidence or the controlling law. Minn. R. Civ. P. 59.01.
“On appeal from a denial of a motion for a new trial, an appellate court should not set aside
a jury verdict unless it is manifestly and palpably contrary to the evidence viewed as a
whole and in the light most favorable to the verdict.” Raze v. Mueller, 587 N.W.2d 645,
648 (Minn. 1999) (quotation omitted).
“A contract is formed when two or more parties exchange bargained -for promises,
manifest mutual assent to the exchange, and support their promises with consideration .”
Med. Staff of Avera Marshall Reg’l Med. Ctr. v. Avera Marshall , 857 N.W.2d 695, 701
(Minn. 2014). Furthermore, a claim for promissory estoppel requires there to be a clear
and definite promise upon which the promisor intended to induce reliance, the promisee

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relied on the promise, and the promise must be enforced to prevent injustice. Hous. &
Redevelopment Auth. of Chisholm v. Norman, 696 N.W.2d 329, 336 (Minn. 2005).
Here, both parties testified in detail about the timing and the nature of the pre -
incorporation contract. During this testimony, Jovan stated that he agreed to share the
profits of his new business with Flattum before the corporation was formed. In reliance on
this agreement, Flattum brought his sales team to Pro Tech, used his contacts with vendors
to obtain materials on credit for Pro Tech, and contributed one-half of the company’s start-
up capital. The jury found that this interaction bound Jovan to F lattum either through a n
oral contract or through promissory estoppel.
Therefore, we conclude that the district court did not abuse its discretion when it
denied Jovan’s motion for a new trial because there was sufficient evidence in the record
for a reasonable jury to find that a binding agreement existed between Jovan and Flattum.
III. The district court did not abuse its discretion when it denied Jovan’s motion
for a new trial due to the admission of expert testimony.

Flattum argues that Jovan’s objection to the foundational reliability of Flattum’s
expert, Chermak, was not properly preserved for appeal because Jovan failed to object to
the foundational reliability at a pre-trial motion in limine hearing and at trial. We agree.
Nevertheless, were we to ex amine the objection, “[w]e review evidentiary rulings,
including those related to the admissibility of expert testimony, for an abuse of discretion.”
State v. Thao, 875 N.W.2d 834, 840 (Minn. 2016).
Minnesota Rule of Evidence 702 provides that an expert may testify in the form of
an opinion if his or her scientific, technical, or other specialized knowledge will assist the

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trier of fact to understand the evidence or to determine a fact in issue. To be admissible,
expert testimony “must have foundational r eliability.” Minn. R. Evid. 702 ; see also
Kedrowski v. Lycoming Engines, 933 N.W.2d 45, 56 (Minn. 2019).
To determine if foundational reliability exists, the district court must “(1) analyze
the proffered testimony in light of the purpose for which it is being offered, (2) consider
the underlying reliability, consistency, and accuracy of the subject about whi ch the expert
is testifying, and (3) determine if the proffered evidence is reliable.” Pfeiffer ex rel. Pfeiffer
v. Allina Health Sys., 851 N.W.2d 626, 638 (Minn. App. 2014) (citing Doe v. Archdiocese
of St. Paul & Minneapolis, 817 N.W.2d 150, 167–68 (Minn. 2012)), review denied (Minn.
Oct. 14, 2014). “ The factual foundation of an exp ert’s opinion is inadequate if (1) the
opinion does not include the facts and/or data upon which the expert relied in forming the
opinion, (2) it does not explain the basis f or the opinion, or (3) the facts assumed by the
expert in rendering an opinion are not supported by the evidence.” Kedrowski, 933 N.W.2d
at 56.
However, an expert “need not be provided with every possible fact, but must have
enough facts to form a reasona ble opinion that is not based in speculation or conjecture.”
Gianotti v. Indep. Sch. Dist. , 889 N.W.2d 796, 802 (Minn. 2017). Furthermore, it is the
jury, and not the district court, who determines the weight and the credibility of an expert’s
testimony. Knuth v. Emergency Care Consultants, P.A., 644 N.W.2d 106, 112 (Minn. App.
2002), review denied (Minn. Aug. 6, 2002) . And we will not reverse a district court’s
decision regarding sufficiency of foundation absent a clear abuse of discretion. Doe, 817
N.W.2d at 176.

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Jovan argues that : (1) the figure calculated by expert witness Chermak was based
on “accrual-based” accounting while Pro Tech used “cash-based” accounting, and (2) the
actual method for calculating the profits to which Flattum is entitled is not the most precise
method possible and therefore lacks foundational reliability.
Chermak’s calculated profit figure was determined using an accrual-based method
of accounting , meaning income is recognized by the corporation when earned even if
accounts have yet to be received. However, Pro Tech operated on a cash-based method of
accounting where income is not recognized until the money is actually received. Under
the accrual-based method of accounting, profits are recognized by the corporation when
incurred or payable as opposed to the cash -based method of accounting where profits are
not recognized until the money is actually in the bank.
Jovan argues that the problems with using the accrual-based accounting method to
calculate the profit to which Flattum was entitled are compounded by the imprecise
methodology used by Chermak to calculate expected profits. Accordingly, Jovan suggests
that under the first prong of the foundational reliability analysis, this lack of precision
renders the figure reached unfit for the purpose for which it is being offered.
Although a more precise method would certainly lead to a more accurate figure,
caselaw suggests a perfect result is not required for an expert’s opinion to be foundationally
reliable. See, e.g., Sandhofer v. Abbott -Nw. Hosp., 283 N.W.2d 362, 367 (Minn. 1979)
(finding the opinion of a medical expert need only have a reasonable basis in fact to meet
the standard for foundational reliability). Indeed, all that is necessary for a district court to

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find foundational reliability is that the expert have sufficient facts to create a reasonable
opinion not based on speculation. Gianotti, 889 N.W.2d at 802.
At trial, Chermak explained that he chose the accrual -based method of accounting
based on financial information made available to him by Pro Tech , and that it was his
explicit intention to determine how much profit Flattum would be entitled to receive for
the jobs that had been commenced or completed with his help but which had not been paid
as of the date of his termination. Jovan had the opportunity to cross-examine Chermak on
his decision to use an accrual-based accounting method but failed to so. Jovan claims that
Chermak’s methodology was inadequate because it was based on his use of a job tracking
list to approximate the profit to which Flattum would be entitled under an accrual -based
system. Yet, Chermak noted that he received this job tracking list from Pro Tech and
acknowledged that while his methodology was not perfect, it was reasonable under the
circumstances based upon the information provided. Jovan cross-examined Chermak on
his use of various financial records provided by Pro Tech a nd had every opportunity, but
failed, to present an alternative figure that was based on a cash-based accounting method.
The jury considered Chermak’s methodological deficiencies, assessed the weight
and credibility of the figures and methods presented and still decided to award Flattum the
amount calculated using Chermak’s method. As the district court noted, the accounting
problems Jovan claims are prejudicial speak to the weight of the evidence, not foundation,
and should have been thoroughly explored during cross-examination.
Accordingly, we conclude that the district court did not abuse its discretion when it
denied Jovan’s motion for a new trial. Chermak’s methodological flaws were for the jury

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to weigh, as they did, and do not form the basis of an unreasonable opinion so as to lack
foundational reliability.
Affirmed.