Eric Berg, et al., Respondents,

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A20-0587

Eric Berg, et al.,
Respondents,

vs.

Wendy Brown, et al.,
Appellants.

Filed April 26, 2021
Affirmed in part and reversed in part
Johnson, Judge

Hennepin County District Court
File No. 27-CV-18-19715

Scott Moriarity, Baillon Thome Jozwiak & Wa nta L.L.P., Minneapolis, Minnesota (for
respondents)

Joel O’Malley, Nilan Johnson Lewis P.A., Minneapolis, Minnesota; and

Alexander N. Loftus ( pro hac vice ), Loftus & Eisenberg, Ltd., Chicago, Illinois (for
appellants)

Considered and decided by Johnson, Presiding Judge; Hooten, Judge; and Slieter,
Judge.
NONPRECEDENTIAL OPINION
JOHNSON, Judge
A Hennepin County jury awarded the two plai ntiffs in this case a total of $117,431
on their fraud and breach-of-contract claims. We conclude that the evidence is sufficient
to support the jury’s verdic t on the breach-of-contract clai m but that the evidence is

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insufficient to allow a reasonable jury to find fraud. We also conclude that the district court
did not err in its ruling on a pre-trial motion in limine or in its jury instructions. Therefore,
we affirm in part and reverse in part.
FACTS
This appeal concerns the professional re lationships between Er ic Berg and Allan
Brown and Wendy Brown, who are married to each other. Between 2015 and 2017, Allan
and Berg worked together at AllStaff Recruiting, Inc. (ARI), a staffing company that
provided call-center services. Allan was ARI’s president and owned a minority stake in
the company. Berg was the vice president of ARI’s call-center operations. Berg’s
employment agreement provided him a base salary of $180,000; commissions; ten percent
of the profits of the call-center operations ; and a “phantom stock bonus payment,” which
would be payable at the termination of his em ployment in an amount equal to ten percent
of the value of ARI.
In the summer of 2017, the owners of ARI decided to sell the company to
Management Registry, Inc. (MRI), which was engaged in sta ffing and call-center
businesses in multiple states. Allan and We ndy discussed with MR I the possibility that,
after acquiring ARI, MRI might spin off part of its Minnesota operations and sell it to
Wendy. Wendy and Allan apparently understood that such a transaction would occur soon
after MRI closed on its acquisition of ARI in September 2017.
During a transitional period, the Browns expressed to Berg their hope that he would
continue his employment with the business af ter Wendy acquired it. Wendy encouraged
Berg to join the future company by offering terms that were equal to or better than what he

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had been receiving from ARI. Specifically, she offered to pay him a base salary of
$240,000 and 25 percent of the company’s profits after she acquired MRI’s Minnesota
operations. She also offered to pay him an additional $6,000 per month (or $72,000 per
year) as a consultant to another division of the company. With respect to phantom stock,
Wendy told Berg that he could choose to receive the phantom-stock-bonus payment to
which he was entitled from ARI, which would be equal to ten percent of the value of ARI
and then accrue a two-and-one-half-percent pha ntom-stock interest in the new company
each year thereafter for nine years. Or, she wrote, Berg could forgo a phantom-stock-bonus
payment from ARI and, in essence, roll over his 12.5-percent phantom-stock interest to the
new company and thereafter accrue an additional two-and-one-half-percent phantom-stock
interest each year for five years. Berg asked Wendy the value of his phantom-stock-bonus
interest in ARI. Allan answered the ques tion by writing that Berg ’s phantom stock was
worth $75,431. Berg responded that he would forgo a phantom-stock-bonus payment from
ARI and roll over his phantom-stock-bonus interest to the new company. Wendy provided
Berg with a written ARI employment agreement that reflected these terms, and Berg signed
the agreement.
After MRI acquired ARI in September 2017, Wendy began running its call-center
operations alongside Allan. But on October 27, 2017, MRI informed the Browns that it
would not sell the Minnesota call-center operati ons to Wendy. Shortly thereafter, MRI
terminated Allan’s and Wendy’s employment.
Wendy immediately took steps to form a new company called A.W. Companies,
Inc. On October 30, 2017, Wendy, Allan, and Berg exchanged group text messages about

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the new company and Wendy’s hope that Be rg would leave MRI and join A.W. On
November 1, 2017, Berg resigned from MRI and joined A.W. as president of the company.
In addition to Berg, A.W. hi red approximately 30 other persons who had been employed
by ARI and MRI. Berg persuaded his largest client to move its business from MRI to A.W.
Berg was compensated by A.W. according to the terms that he and Wendy previously had
negotiated. Wendy prepared a written A.W. employment agreement that was almost
identical to the ARI employment agreement that Berg had signed earlier. But Berg did not
sign and return it to Wendy.
Shortly after A.W. began operations, it was sued by MRI in federal district court.
For a period of time, A.W. was enjoined from doing business. A.W. experienced financial
difficulties. The professional relationships between Berg and the Browns began to
deteriorate. In March 2018, Wendy sent Berg another copy of the A.W. employment
agreement and asked him again to sign it, bu t he did not do so. Wendy and Berg also
exchanged e-mail messages about Berg’s $6, 000 monthly consulting fee. Wendy stated
that A.W. would continue to pay Berg’s consulting firm, Eric Berg Consulting, LLC
(EBC), $6,000 per month through June 1 but would do so after that date only if A.W. were
profitable. In May 2018, Wendy informed Berg that A.W. woul d pay EBC’s monthly
invoices after June 1 only if Berg signed the A.W. employment agreement that she
previously had sent to him, which included non-competition and non-solicitation clauses.
Berg did not ever sign an A.W. employment agreement.
The parties’ professional relationships co ntinued to deteriorate. In June 2018,
Wendy learned that Berg had approached some A.W. employees about joining him if he

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started a new call-center company. The next day, A.W. terminated Berg’s employment.
Berg later wrote to A.W. requesting repaymen t of a $12,000 loan a nd $30,000 in unpaid
consulting fees. As far as the record reveals, A.W. did not respond.
In December 2018, Berg and EBC commenced this action against the Browns and
A.W. The two plaintiffs assert ed nine causes of action: one count of fraud, one count of
promissory estoppel, three counts of breach of contract, and f our counts of unjust
enrichment. The Browns and A.W. answered and asserted three counter-claims of breach
of fiduciary duty, civil theft, and tortious interference with contract or prospective business
advantage.
In May 2019, the district court granted the defendants’ moti on to dismiss with
respect to two of the plaintiffs’ claims. In January 2020, the district court granted Berg’s
motion for summary judgment on parts of the defendants’ first and third counter-claims.
The remaining claims were tried to a jury on five days in February 2020. After the plaintiffs
rested, the defendants moved for judgment as a matter of law (JMOL) on the fraud and
breach-of-contract claims. The district court denied the motion with respect to the breach-
of-contract claims. With respect to the fraud claim, the dist rict court commented that the
plaintiffs had either “an incredibly weak case or . . . no case at all” and reserved ruling.
The jury found that the Browns and A.W. had engaged in fraud and awarded Berg
damages of $75,431 on his fraud claim. The jury also found that A.W. breached its contract
for consulting services with EBC and awarde d EBC $30,000. The jury next found that
A.W. breached a loan agreemen t with Berg and awarded him $12,000. With respect to
A.W.’s counter-claims, the jury found that Berg breached hi s fiduciary duty to A.W. but

6
that his breach did not cause A.W. any damages. The jury found in Berg’s favor on A.W.’s
counter-claims of civil theft and tortious interference.
Immediately after the jury returned its verdicts, the defendants asked for a ruling on
their motion for JMOL with resp ect to the fraud claim. In March 2020, the district court
denied the motion in a written order. The district court entered judgment in favor of Berg
for $87,431 and in favor of EBC for $30,000. The Browns and A.W. appeal.
DECISION
I. Breach-of-Contract Claim
A.W. argues that the district court erred by denying its mid-trial motion for
judgment as a matter of law on EBC’s breach-of-contract claim concerning the consulting
contract, for which the jury awarded $30,000.
A district court may grant a JMOL motion if “during a trial by jury a party has been
fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable
jury to find for that party on that issue.” Mi nn. R. Civ. P. 50.01(a). A district court may
grant such a motion “with resp ect to a claim or defense that cannot under the controlling
law be maintained or def eated without a favorable fi nding on that issue.” Id. “When
considering a motion for . . . judgme nt as a matter of law, the judge must ignore all the
evidence that points in favor of the moving party and focus solely on the evidence
supporting the nonmoving party’s position.” Peterson v. Western Nat’l Mutual Ins. Co. ,
946 N.W.2d 903, 910 (Minn. 2020). We apply a de novo standard of review to a district
court’s ruling on a motion for JMOL. Kaiser-Bauer v. Mullan, 609 N.W.2d 905, 909-10
(Minn. App. 2000), review denied (Minn. July 25, 2000).

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To establish a breach-of-contract claim, a plaintiff must prove three elements:
“(1) formation of a contract, (2) performance by plaintiff of any co nditions precedent to
his right to demand performance by the defenda nt, and (3) breach of the contract by
defendant.” Park Nicollet Clinic v. Hamann , 808 N.W.2d 828, 83 3 (Minn. 2011). The
district court’s jury instructions in this case conform to the cas elaw concerning these
essential elements.
EBC sought to prove that A.W. committed a breach of contract by not paying five
monthly consulting invoices, in the amount of $6,000 each, for the months of January
through May 2018. The district court orally denied A.W.’s mid-trial motion for JMOL.
The jury later found in favor of EBC and awarded it $30,000. On appeal, A.W. argues that
the district court erred in its ruling on the mid-trial motion for JMOL for three reasons.
First, A.W. argues that E BC did not prove the second element of its claim on the
ground that Berg did not actually provide cons ulting services. We not e that it is unclear
whether actual performance is required; the or al agreement is refl ected in the unsigned
proposed employment agreement, which provides that Berg “s hall be entitled to invoice
A.W. Companies, Inc. Clerical and Accoun ting Division a consulti ng fee of $6,000 per
month from [EBC] for consulting support of these divisions,” without specifying the nature
or quantity of consulting serv ices that must be performed . In any event, there was
conflicting evidence about Berg ’s performance of consulting services, some of which
supports the verdict. Berg testified that he provided consulting services to A.W.’s clerical-
and-accounting division by bringing in new clients. He also testified that A.W. paid him
$12,000 for consulting duties performed in November and December 2017. Viewed in the

8
light most favorable to EBC, the evidence is suffi cient to prove that EBC performed its
contractual obligations.
Second, A.W. argues that EBC did not prove the third element of its claim on the
ground that EBC was not entitled to payment for consulting services unless and until A.W.
became profitable, which never occurred. In response, Berg points to his own testimony
that there was no such condition for the period of January through May of 2018. Indeed,
the evidence on which A.W. relies is part of an exchange of e-mail messages in which
Wendy proposed to discontinue the $6,000 m onthly payments on June 1, 2018, if A.W.
was not yet profitable. Viewed in the light most favorable to EB C, the evidence is
sufficient to prove that, between January a nd May of 2018, EBC’s right to $6,000 per
month was not dependent on A.W.’s profitability.
Third, A.W. argues that the oral agreement violates the statute of frauds on the
ground that it could not have been performed within one year. EBC responds initially by
arguing that A.W. did not preser ve this argument. Indeed, A. W. did not ask the district
court to instruct the jury on the statute of frauds, and the district court did not do so. The
instructions that were given “are the law of the case,” Wolner v. Mahaska Indus., Inc., 325
N.W.2d 39, 42 (Minn. 1982), and the sufficiency of the evidence is “determined by
application of the rules of law laid down in the charge,” Coenen v. Buckman Bldg. Corp.,
153 N.W.2d 329, 334 (Minn. 1967). Furtherm ore, A.W. did not mention the issue in
closing argument. In light of the instructions that were given, A.W. cannot establish that
it is entitled to JMOL because of the statute of frauds.

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Thus, the district court did not err by denying A.W.’s mid-trial motion for JMOL
on EBC’s breach-of-contract claim.
II. Fraud Claim
Appellants argue that the district court e rred by denying their motion for JMOL with
respect to Berg’s fraud claim.
If a district court does not grant a motion fo r JMOL “made during trial, the court is
considered to have submitted the action to the jury subject to the court’s later deciding the
legal questions raised by the motion.” Minn. R. Civ. P. 50.02. “[W]e construe the evidence
in the light most favorable to the prevailing party.” Kidwell v. Sybaritic, Inc., 784 N.W.2d
220, 229 (Minn. 2010). We apply a de novo standard of review to a district court’s ruling
on a motion for JMOL. Kaiser-Bauer, 609 N.W.2d at 909-10.
The district court instructed the jury th at Berg was required to prove the following
five elements of a fraud claim:
One, defendants falsely represented a past or present
material fact to Plaintiff Eric Be rg. A fact is material if it
would have influenced the other person’s judgment or decision
had he known about it.

Two, at the time the false representation was made,
defendants either knew the repr esentation was false or they
made representations without knowing whether they were true
or false.

Three, defendants made the false representations
intending that Plaintiff Eric Berg would rely on them.

Four, Eric Berg relied and acted on the false
representations.

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Five, Plaintiff Eric Berg was harmed as a direct result
of relying on the false representations.

The district court’s jury instructions conf orm to the caselaw conc erning the essential
elements of a claim for fraud ulent misrepresentation. See Hoyt Props., Inc. v. Prod. Res.
Group, L.L.C., 736 N.W.2d 313, 318 (Minn. 2007).
We begin by identifying the specific mi srepresentation on which Berg’s fraud claim
is based. At trial, Berg’s attorney argued to the jury that the Browns engaged in fraud by
representing to Berg that “he would receive profit sharing and phantom stock benefits from
A.W.” but not actually conveying such benefits to him. In his appellate brief, Berg
similarly argued that the Brow ns defrauded him by representi ng that he would receive a
phantom-stock interest in A.W. but not actua lly delivering such an interest. At oral
argument, Berg’s attorney explained that the Browns denied Berg a phantom-stock interest
in A.W. because they did not memorialize it in writing and never made a payment to him
representing a phantom-stock interest in A.W.
Appellants argue that Berg was not de nied a phantom-stock payment from A.W.
because he was not entitled to such a payment. Appellants contend that Berg was entitled
to a profit-sharing payment and a phantom- stock-bonus payment only if A.W. was
profitable but that A.W. was not profitable. We construe this argument to be a challenge
to Berg’s evidence on the first and fifth elements of his fraud claim.
Appellants’ representations to Berg conc erning his right to receive profit-sharing
and a phantom-stock interest from A.W. ar e reflected in the two proposed employment
agreements that Wendy sent to him in November of 2017 and March 2018, which he never

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signed. The proposed employment agreement that Wendy sent to Berg states that Berg
would be entitled to “25% of the net profits” of A.W. But A.W.’s financial records show
that, in 2017, A.W. had a net loss of approximately $290,000 and, in the first five months
of 2018, had a year-to-date net loss of approximately $40,000. The proposed employment
agreement also states that, if Berg resigns his employment with A.W. or is terminated, he
would be entitled to a phantom-stock-bonus payment equal to a certain percentage of “the
company value.” The agreem ent provides that the valu e of the company must be
determined by the company’s prior earnings befo re interest, taxes, and amortization. But
there is no evidence in the reco rd that A.W. had positive earn ings at the time of Berg’s
termination.
Berg does not argue that A.W. was prof itable or that it had positive earnings.
Rather, he argues that A.W. pr omised to pay him something and that his damages for the
alleged fraud may be determined by the value of his phantom-stock interest in ARI, which
he relinquished. But there is no evidence that the Browns re presented to Berg that A.W.
would pay him that amount or any other fixed amount. The evidence shows that the
Browns represented to Berg th at he would receive a phantom-s tock interest in A.W. But
at the time of Berg’s termination from A.W ., his phantom-stock interest in A.W. was
worthless. Berg’s phantom-st ock interest in A.W. could have been worth more than his
phantom-stock interest in ARI if A.W. had become a successful company. But A.W. was
not successful in its first seven months of operations.
Given the evidence introduced at trial, Berg’s evidence is insufficient to prove that
the Browns made a false representation to him concerning a then-past or then-present fact,

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as required to prove the first element of a claim of fraudulent misrepresentation. See Hoyt
Properties, 736 N.W.2d at 318. The Browns’ representation concerned a future event,
specifically, the payments of profit-shari ng and a phantom-stock-bonus based on the
profitability of the company at a later date. See Vandeputte v. Soderholm , 216 N.W.2d
144, 147 (Minn. 1974) (stating that “representation or expectation as to future acts is not a
sufficient basis to support an action for fraud merely because the represented act or event
did not take place”). The Browns’ representa tion, which was made in the context of
negotiating an employment agreement, accura tely described the terms of the written
proposed employment agreement that the Browns in fact gave to Berg on two occasions.
The Browns’ representation was based on the assumption that Berg would sign the
proposed employment agreement. The Brow ns honored the terms of the proposed
employment agreement in other ways by paying Berg the stated salary and by making two
monthly payments to his consulting firm. But it turned out that Berg was not entitled to
any profit-sharing payment or any phantom-stock-bonus payment because the calculation
of those payments depended on the company’s profitability and the company was not
profitable during Berg’s employment.
Thus, the district court erred by denying the Browns’ motion fo r JMOL on Berg’s
fraud claim.
III. Motion in Limine
Appellants also argue that the district court erred by excl uding evidence of a
settlement agreement between Be rg and the former majority owners of ARI. The issue
arose before trial, when Berg moved in limine for a ruling that the Browns could not present

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evidence that Berg sought and obtained a payment in settlement of a claim against ARI for
the phantom-stock-bonus paym ent described in his written employment agreement with
ARI. The Browns opposed the motion on the ground that it was relevant to his request for
damages for the alleged fraud. The district court ruled that the evidence could not be
introduced at trial but that, if Berg prevailed on his fraud claim, the matter could be
addressed in a post-trial motion to ensure that there was no double payment. Nonetheless,
in light of our resolution of appellants’ challenge to the sufficiency of the evidence of fraud,
the issue now is moot.
IV. Jury Instruction
Appellants also argue that the district cour t erred by denying their request for a jury
instruction concerning the measure of damage s on A.W.’s counter-claim for breach of
fiduciary duty.
In its first counter-claim, A.W. alleged th at Berg breached his fiduciary duty to the
company by hiring his mother to work fo r A.W. without giving her meaningful
responsibilities and by soliciting A. W. customers and employees in an attempt to start a
competing business while still employed by A.W. Appellants sought an instruction that, if
the jury found such a breach, the jury should award A.W. the compensation that it had paid
Berg during the period in wh ich the breach occurred. Speci fically, A.W. requested the
following language: “Faithful and honest service is a condition of an employee’s right to
compensation. If the employee breaches hi s duty of loyalty, the employer owes him
nothing, and the employee’s compensation is forfeited for the peri od during which his
breach of duty occurred.” The district court declined to give the requested instruction on

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the ground that A.W.’s theory does not apply. Instead, the district court instructed the jury
that, if it found that Berg breached his fiduc iary duty to A.W., the jury should determine
the “amount of money, if any, that will fairly and adequately compensate A.W. Companies
for the losses directly caused by the breach of fiduciary duty.”
A party is entitled to a specif ic instruction on its theory of the case “if there is
evidence to support the instruction and it is in accordance with applicable law.” Sandhofer
v. Abbott-Northwestern Hosp., 283 N.W.2d 362, 367 (Minn. 1979). A district court has
“considerable latitude in selec ting language used in the jury charge and determining the
propriety of a specific instruction.” Morlock v. St. Paul Guardian Ins. Co. , 650 N.W.2d
154, 159 (Minn. 2002). This court applies an abuse-of-discretion standard of review to a
district court’s decision about how to instruct the jury. See Hilligoss v. Cargill, Inc., 649
N.W.2d 142, 147 (Minn. 2002).
A.W. cites several opinions in support of its argument, but none of them is a close
fit with this case. For example, in Peterson v. Mayer , 49 N.W. 245 (Minn. 1891), the
plaintiff sought to recover seven months of salary from his former employer, and the
defendant argued in response that the plai ntiff had embezzled funds from the employer.
Id. at 468-69. The supreme court recognized th e validity of the defendant’s defense but
noted that it would not “be extended so far as to forfeit wages already earned on a contract
already fully performed and at an end.” Id. at 470; see also Hlubeck v. Beeler, 9 N.W.2d
252, 254 (Minn. 1943) (rejecting defense to counter-claim because former employee did
not breach fiduciary duty). Similarly, in Stiff v. Associated Sewing Supply Co., 436 N.W.2d
777 (Minn. 1989), the plaintiffs commenced an action against thei r former employer to

15
collect unpaid commissions, and the defendant alleged that the plaintiffs had breached their
duties of honesty and loyalty to their employer. Id. at 778, 780. The supreme court
reasoned that an employee’s breach of duties toward his employer “results in the employer
owing the employee nothing.” Id. at 780. This case is di stinguishable because A.W. has
alleged breach of fiduciary duty as a free-st anding cause of action. Only one of the
opinions cited by A.W. concerned a former em ployer’s free-standing claim of breach of
fiduciary duty against a former employee. See Marsh v. Minne apolis Herald, Inc. , 134
N.W.2d 18 (Minn. 1965). But the supreme court in Marsh reversed the trial court’s finding
that the former employee had breached his duties to his employer, so it was unnecessary
for the supreme court to discuss an appropriate remedy. Id. at 21-23. In short, none of the
cases cited by A.W. clearly establish that a breach of fiduciary duty by Berg would require
him to disgorge all compensation he earned at A.W. while he was in breach, even if the
amount of that compensation far exceeded the direct losses incurred by A.W.
Thus, the district court did not abuse its discretion by not instru cting the jury that
A.W.’s damages on its breach-of-fiduciary-duty claim must be equal to the amount of the
compensation that Berg earned while he was in breach.
V. Judgment Amount
Appellants last argue that the district c ourt erred by ordering ju dgment in favor of
Berg in the amount of $87,431. Appellants contend, “No reasoning was provided for this
increase and the odd number it wa s not supported by any of evid ence presented at trial.”
In response, Berg contends th at $87,431 is the sum of his fraud damages of $75,431 and
his breach-of-contract damages of $12,000. We agree; it is a matter of simple math.

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Nonetheless, in light of our resolution of appellants’ challenge to the sufficiency of the
evidence of fraud, Berg is entitled to a judgment of only $12,000.
Affirmed in part and reversed in part.