Opinion
A23-0015
09-11-2023
Craig A Reichel, et al., Appellants, v. Wendland Utz, LTD, et al., Respondents.
Charles A. Bird, Grant M. Borgen, Matthew B. De Jong, Bird, Stevens & Borgen, P.C., Rochester, Minnesota (for appellants) Kevin P. Hickey, Jessica L. Klander, Peggah Navab, Bassford Remele, P.A., Minneapolis, Minnesota (for respondents) Duane A. Lillehaug, Maring Williams Law Office, P.C., Detroit Lakes, Minnesota; and Michael L. Weiner, Yaeger & Weiner, PLC, Roseville, Minnesota (for amicus Minnesota Association for Justice)
This opinion is nonprecedential except as provided by Minn. R. Civ. App. P. 136.01, subd. 1(c).
Olmsted County District Court File No. 55-CV-19-7968
Charles A. Bird, Grant M. Borgen, Matthew B. De Jong, Bird, Stevens & Borgen, P.C., Rochester, Minnesota (for appellants)
Kevin P. Hickey, Jessica L. Klander, Peggah Navab, Bassford Remele, P.A., Minneapolis, Minnesota (for respondents)
Duane A. Lillehaug, Maring Williams Law Office, P.C., Detroit Lakes, Minnesota; and Michael L. Weiner, Yaeger & Weiner, PLC, Roseville, Minnesota (for amicus Minnesota Association for Justice)
Considered and decided by Worke, Presiding Judge; Ross, Judge; and Cleary, Judge.
Cleary, Judge [*]
In this appeal from a partial judgment under Minn. R. Civ. P. 54.02, appellants Craig A. Reichel et al., challenge the district court's grant of summary judgment for respondents Wendland Utz, LTD, et al. on appellants' legal-malpractice and fraud claims. Appellants argue that the district court erred by (1) concluding they were required to show "but for" causation in a legal-malpractice claim; and (2) applying Minn. R. Civ. P. 9.02 at the summary judgment stage to conclude that appellants failed to plead fraud with particularity. By notice of related appeal, respondents, as cross-appellants, argue that the district court erred by denying their motion for partial summary judgment on appellants' remaining claims that require appellants to prove "but for" causation. We conclude that the district court did not err in dismissing appellants' legal malpractice claim because appellants failed to show "but for" causation, but that the district court erred in dismissing appellants' fraud claim because the district court did not properly conduct a judgment analysis. We also conclude that the district court erred in denying summary judgment on appellants' remaining claims that involve a showing of "but-for" causation. But we conclude that the district court did not err in denying respondents' motion to dismiss on appellants' respondeat superior claim. We affirm in part, reverse in part, and remand.
FACTS
Appellant Craig Reichel is the owner and president of Reichel Foods Inc (RFI), and several LLCs: Coyote Creek LLC, Herdbull Holding LLC (Herdbull), and Bullets & Broadheads LLC. Craig's brother is the principal of Reichel Investments LLC. This appeal stems from a multi-year business dispute between Reichel Investments and Craig's LLCs (the underlying lawsuit) which led to a lawsuit against respondents Wendland Utz, LTD., et al., for the law firm's allegedly negligent handling of the business dispute.
The Underlying Lawsuit
On May 21, 2013, Reichel Investments sued Craig's LLCs and Craig personally. RFI was not included in the complaint. The complaint alleged that Reichel Investments had invested $186,000 in Coyote Creek and therefore had a 40% ownership interest in Coyote Creek. Craig asserted that the $186,000 payment was for repayment of a loan, not an investment.
Craig had a longstanding relationship with respondent law firm Wendland Utz and hired an attorney from the firm to defend the lawsuit. By October 2013, just a few months into the litigation, the district court ordered a temporary restraining order against Craig and his LLCs, ordering them to "preserve and maintain all records and evidence in their possession" following an alleged discovery violation. A month later, Reichel Investments brought a motion for contempt, alleging that Craig and his LLCs again failed to comply with discovery. The district court granted the motion for contempt and ordered Craig and his LLCs to produce the documents within seven days and pay a $12,133.51 fine. Around the same time, Reichel Investments brought a motion for temporary injunction, arguing that Craig and his LLCs lost, hid, or otherwise secreted electronically stored information and failed to provide complete discovery. The district court entered a preliminary injunction and appointed a receiver to manage the LLCs due to the discovery violations. The district court provided the receiver with the power and duty to take custody and control of all funds, property, and other assets of the LLCs.
By December 2013, another attorney at Wendland Utz took over as the primary attorney on the case. After discussing the receivership order, the attorney advised Craig to file for bankruptcy. Craig agreed and hired a new law firm to assist him with the bankruptcy proceedings. On December 26, 2013, Coyote Creek filed for bankruptcy a nd the state-court action was stayed pending the approval of the bankruptcy plan. Two years later, the bankruptcy court confirmed the bankruptcy plan. Craig then moved to dismiss the state-court action, arguing that all of Reichel Investments' claims d epend ed on its status as the owner of Coyote Creek and the bankruptcy proceedings had determined the ownership of Coyote Creek. The parties stipulated to a dismissal of all state-court claims against Coyote Creek, but the claims against Craig himself remained until August 27, 2015, when the district court granted Craig's motion to dismiss with prejudice. Reichel Investments appealed and this court affirmed the summary judgment dismissal of claims. See Reichel Invs., L.P. v. Reichel, No. A15-1724, 2016 WL 3884552 (Minn.App. July 18, 2016).
Legal-Malpractice Lawsuit
On November 20, 2018, approximately two years after the underlying lawsuit concluded, Craig, RFI, and the LLCs (collectively appellants) commenced an action against Wendland Utz and the attorney (collectively respondents) alleging nine causes of action in connection to the underlying lawsuit: (1) breach of contract; (2) professional malpractice; (3) unjust enrichment; (4) breach of fiduciary duty; (5) negligent supervision; (6) respondeat superior; (7) fraudulent misrepresentation against Wendland Utz; (8) fraudulent misrepresentation against the attorney; and (9) fraudulent nondisclosure. In a deposition, Craig testified that a primary reason for the lawsuit was that he believed that if his "legal representation would have done the right things[,] that it never would have escalated to the point it did."
On June 16, 2021, respondents filed a motion for partial summary judgment as to RFI, arguing that RFI lacks standing because it was not a party to the underlying lawsuit. Alternatively, respondents argued that if RFI had standing, appellants' substantive claims still fail. The district court concluded that there were genuine issues of material fact as to whether RFI had an attorney-client relationship with Wendland Utz and declined to grant summary judgment on the issue of standing. But the district court found that summary judgment was appropriate on four of appellants' other claims.
First, as to the professional malpractice claim, the district court found that appellant s failed to demonstrate an essential element of the claim: that, but for respondents' conduct, appellants would have succeeded in the prosecution or defense of the action. The district court reasoned that the appellants could not prove this element because "the ultimate result" in the underlying litigation "was favorable to Plaintiffs." Second, as to the unjust enrichment claim, the district court found that the "record does not support a genuine issue of material fact" because appellants could not establish what services were paid for and retained illegally by respondents. Third, as to the fraudulent-misrepresentation claims, the district court found summary judgment was appropriate because appellants "failed to plead the elements of a fraud claim with particularity." Finally, as to the fraudulent-nondisclosure claim, the district court concluded that summary judgment was appropriate for the same reasons as the fraudulent-misrepresentation claims: appellants failed to plead the elements of the claims "with particularity." The district court, in a footnote, declined to grant summary judgment on the remaining counts because respondents did not address those causes of action in their brief or discuss why they should be dismissed.
Appellants do not challenge this determination on appeal.
On June 2, 2022, respondents filed another motion for summary judgment as to appellants' remaining claims. They argued that the claims were derivative of appellants' malpractice claim that had been dismissed in the district court's summary-judgment order, and those claims too should be dismissed. On June 9, 2022, appellants filed an amended motion for leave to amend the complaint to claim punitive damages and additional instances of fraud. They argued that additional allegations of fraud were discovered after the complaint was served and during discovery. That same day, appellants filed a motion for entry of a partial final judgment pursuant to Minn. R. Civ. App. 54.02.
The district court held a two-day motion hearing. Following the hearing, the district court, in an amended order, granted appellants' motion for a final partial judgment and reserved appellants' motion for leave to amend their complaint to claim additional instances of fraud and punitive damages. The district court also reserved ruling on the remaining issues pending the outcome of this appeal.
This appeal follows.
DECISION
Both appellants and respondents challenge the district court's decisions on summary judgment. Summary judgment is appropriate when the moving party shows that "there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Minn. R. Civ. P. 56.01. "A defendant is entitled to summary judgment as a matter of law when the record reflects a complete lack of proof on an essential element of the plaintiff's claim." Lubbers v. Anderson, 539 N.W.2d 398, 401 (Minn. 1995). "Summary judgment is inappropriate when reasonable persons might draw different conclusions from the evidence presented." Henson v. Uptown Drink, LLC, 922 N.W.2d 185, 190 (Minn. 2019) (quotation omitted). This court reviews the district court's grant of summary judgment de novo. Montemayor v. Sebright Prods., Inc., 898 N.W.2d 623, 628 (Minn. 2017). "We view the evidence in the light most favorable to the party against whom summary judgment was granted." STAR Ctrs., Inc. v. Faegre & Benson, L.L.P., 644 N.W.2d 72, 76-77 (Minn. 2002).
Appellants argue that the district court erred in granting summary judgment for respondents on their legal malpractice and fraud claims. And respondents argue that the district court erred in not dismissing the remaining claims. We address each argument in turn.
I. The district court did not err in dismissing appellants' legal-malpractice claim.
Appellants first argue that the district court erred in d ismissing their legal-malpractice claim for failing to show all necessary elements of the claim. Under Minnesota law, four elements must traditionally be shown to establish legal malpractice: "(1) the existence of an attorney-client relationship; (2) acts constituting negligence or breach of contract; (3) that such acts were the proximate cause of the plaintiff's damages; [and] (4) that but for defendant's conduct, the plaintiff would have been successful in the prosecution or defense of the action." Jerry's Enterprises, Inc. v. Larkin, Hoffman, Daly & Lindgren, Ltd., 711 N.W.2d 811, 816 (Minn. 2006) (quotation omitted).
The parties dispute the application of "but for" causation in this legal malpractice claim. Appellants contend that the "but for" element of the legal malpractice claim is inapplicable in cases where, as here, an attorney's alleged negligence "required significant corrective fees." Relying primarily on Jerry's Enters., appellants assert that the "but for" causation requirement "may be modified when the plaintiff's legal malpractice claim does not rest on the loss of an underlying claim." See id. at 819. Appellants reliance on Jerry's Enters. is misplaced. In Jerry's Enters., the supreme court was tasked with deciding "[w]hether a plaintiff must show "but for" causation in actions alleging legal malpractice in a transactional matter." Id. at 816 (emphasis added). The supreme court held that, in a legal malpractice action "arising out of representation in transactional matters, the fourth element of the cause of action is modified to require a plaintiff to show that, but for defendant's conduct, the plaintiff would have obtained a more favorable result in the underlying transaction than the result obtained." Id. at 819. The supreme court did not, however, modify the fourth element in an action for legal malpractice arising from a non-transactional matter.
Similarly, appellants reliance on Fiedler v. Adams is misplaced. 466 N.W.2d 39, 42 (Minn.App. 1991), rev. denied (Minn. Apr. 29, 1991). In Fiedler, this court clarified the elements for a legal-malpractice claim in cases that "do[] not involve the loss of an underlying claim." Id. at 42. This court held that in such cases, the plaintiff must show "negligent giving of advice or exercise of judgment on which the client detrimentally relies" and that the negligence act was "the proximate cause of damage to the client." Id. But Fiedler also affirmed that "where the attorney's alleged negligence has caused the loss of or damage to the client's existing cause of action, the client asserting malpractice must also prove that but for the attorney's negligence, 'he had a meritorious cause of action originally.'" Id. (quoting Hill v. Okay Constr. Co., 252 N.W.2d 107, 117 (Minn. 1977) (emphasis added). In other words, the elements applied in Fiedler and Jerry's Enters. do not apply in this case because this case does not involve a transactional dispute and appellants were successful in the underlying cause of action.
Appellants urge this court to conclude that the "but for" causation element is not to be strictly applied in cases where a party was ultimately successful in their underlying litigation but incurred additional litigation costs because of their attorney's alleged negligence. In doing so, appellants and amici Minnesota Association for Justice encourage this court to follow the recent holding from the Eighth Circuit. See Gerber Products Co. v. Mitchell Williams Selig Gates & Woodyard, PLLC, 28 F.4th 870 (8th Cir. 2022). In Gerber Products Co., the Eighth Circuit held that, in a negligent malpractice claim, "corrective fees are available, even without an underlying judgment." The Eighth Circuit concluded that although the plaintiff had not yet gone to trial and shown success or the defeat of a claim, the plaintiff's legal malpractice claim survived summary jud gment.
We decline to adopt this holding from the Eighth Circuit for two reasons. First, the Eight Circuit was tasked with interpreting Arkansas law and the Eighth Circuit's holding "is not binding on this court, though it may have persuasive value." TCI Bus. Cap., Inc. v. Five Star Am. Die Casting, LLC, 890 N.W.2d 423, 431 (Minn.App. 2017). And second, existing case law in Minnesota establishes a different requirement of proof in legal malpractice claims arising from litigation matters versus those arising from transactional matters, and it is not the role of this court to extend existing law. See Tereault v. Palmer, 413 N.W.2d 283, 286 (Minn.App. 1987) ("[t]he task of extending existing law falls to the supreme court or the legislature, but it does not fall to this court."), rev. denied (Minn. Dec. 18, 1987).
Minnesota law makes clear that, "[w]hen a case does not involve damage to or loss of a cause of action, but instead involves transactional malpractice," the but-for element is mod ified, and "require[s] a plaintiff to show that, 'but for defendant's conduct, the plaintiff would have obtained a more favorable result in the underlying transaction than the result obtained.'" Guzick v. Kimball, 869 N.W.2d 42, 50 (Minn. 2015) (quoting Jerry's Enters., 711 N.W.2d at 819); see also Hill, 252 N.W.2d at 117 (concluding that a party was not required to show "but for" causation in a case that did not involve the destruction or loss of a client's cause of action). In contrast, when the underlying matter involves the loss or destruction of a cause of action, a plaintiff must show traditional "but for" causation: "that but for defendant's conduct, the plaintiff would have been successful in the prosecution or defense of the action." Jerry's Enters., 711 N.W.2d at 816; see also Christy v. Saliterman, 179 N.W.2d 288, 293-94 (Minn. 1970) ("In an action against an attorney for negligence or breach of contract, the client has the burden of proving . . . the client would have been successful in the prosecution or defense of the action." (emphasis added)).
Appellants also argue that, even if the but-for causation element applies, they satisfied the element by showing that respondents failed to pursue meritorious defenses at an earlier stage in the litigation. But the outcome of the underlying litigation was successful for appellants as the district court dismissed the action with prejudice in favor of appellants and we affirmed the dismissal on appeal. Consequently, appellants cannot show that but for respondent's conduct, they would have succeeded in the defense of the action. The district court did not err in dismissing appellants' negligent misrepresentation claim.
II. The district court erred in dismissing appellants' fraud claims.
Appellants next argue that the district court erred in granting summary judgment on their fraudulent misrepresentation and fraudulent nondisclosure claims. They contend that the district court improperly analyzed their claims under a motion-to-dismiss standard rather than a summary-judgment standard and therefore failed to look at the record as a whole before dismissing claims. We agree.
Generally, a claim of fraudulent misrepresentation requires a plaintiff to establish:
(1) there was a false representation by a party of a past or existing material fact susceptible of knowledge; (2) made with knowledge of the falsity of the representation or made as of the party's own knowledge without knowing whether it was true or false; (3) with the intention to induce another to act in reliance thereon; (4) that the representation caused the other party to act in reliance thereon; and (5) that the party suffered pecuniary damage as a result of the reliance.Hoyt Props., Inc. v. Prod. Res. Grp., L.L.C., 736 N.W.2d 313, 318 (Minn. 2007); Martens v. Minn. Min. & Mfg. Co., 616 N.W.2d 732, 747 (Minn. 2000) (equating fraudulent misrepresentation with fraud and applying Minn. R. Civ. P. 9.02).
Similarly, to establish fraudulent nondisclosure, a plaintiff must establish that "a party conceal[ed] facts material to the transaction, and peculiarly within his own knowledge, knowing that the other party acts on the presumption that no such fact exists" and the "party is under a legal or equitable obligation to communicate to the other, and which the other party is entitled to have communicated with him." Richfield Bank & Tr. Co. v. Sjogren, 244 N.W.2d 648, 650 (Minn. 1976). A party asserting fraud must plead its claim "with particularity." Minn. R. Civ. P. 9.02. "To plead with particularity is to plead the ultimate facts or the facts constituting fraud." Hardin Cnty. Savs. Bank v. Housing and Redevelopment Auth. of the city of Brainerd, 821 N.W.2d 184, 191 (Minn. 2012). "Failure to particularly plead fraud justifies summary judgment against the party alleging it." Berke v. Resol. Tr. Corp., 483 N.W.2d 712, 717 n.3 (Minn.App. 1992), rev. denied (Minn. May 21, 1992).
Here, appellants asserted that respondents misrepresented an attorney's expertise and ability to handle the business dispute in the underlying litigation, that appellants relied on this misrepresentation, and that appellants suffered damages as a result. Appellants alleged that respondents knew that the attorney they encouraged appellants to hire was not qualified to handle the business dispute, and that respondents misrepresented the actions being taken by the firm as evidenced by false billing records, late contact with relevant witnesses, and the failure to inform appellants of a discovery violation. Appellants assert that these fraudulent missteps caused RFI to incur unnecessary costs and fees. Respondents assert that these allegations cannot support appellants' fraud claims and that appellants "must establish the specific actions that RFI took in reliance on [r]espondents' alleged misrepresentations."
The d istrict court ultimately d ismissed appellants' fraud claims, conclud ing that appellants failed to plead fraud with "particularity." In doing so, the district court stated that it "review[ed] Plaintiffs' complaint" and found that "it is not entirely clear from the complaint if Craig Reichel was receiving the alleged misrepresentations as Craig Reichel personally or on behalf of [RFI]." But appellants' fraud claims were challenged on a motion for summary judgment and not on a motion for judgment on the pleadings. The district court was required to consider the entire summary judgment record and not just the facts asserted in the four corners of the pleadings. See Minn. R. Civ. P. 56 (motion for summary judgment); Minn. R. Civ. P. 12.02 (motion for judgment on the pleadings).
"[O]n a motion for summary judgment, the facts and the reasonable inferences to be drawn from those facts must be resolved in [favor of the nonmoving party]." Staub as Tr. of Weeks v. Myrtle Lake Resort, LLC, 964 N.W.2d 613, 620 (Minn. 2021). "Summary judgment is appropriate only when there is no genuine issue of material fact and a party is entitled to judgment as a matter of law." Id. (quotation omitted). Summary judgment should not be granted, however, "when reasonable persons could draw different conclusions from the evidence presented." Id.
Here, in looking at the record as a whole and in a light most favorable to appellants and resolving all factual doubts and inferences against respondents, we conclude that a genuine issue of material fact exists as to whether respondents falsely represented an attorney's expertise and knowledge, inducing appellants to rely on the misrepresentation and incurring damages as a result. The disputed issue is for a fact-finder to resolve. We reverse the district court's grant of summary judgment for respondents on appellants' fraud claims.
Appellants also assert that the district court should have granted their motion to amend their complaint to provide additional evidence to support their fraud claims. Based on our conclusion that summary judgment was inappropriate on appellants' fraud claims, we leave the decision on whether to grant appellants' motion to amend the complaint at this stage in the proceedings to the sound discretion of the district court.
III. The district court erred in part in denying respondents' motion for summary judgment on appellants' remaining claims.
Finally, respondents assert that the district court erred in denying summary judgment on appellants' remaining four claims: breach of contract, breach of fiduciary duty, negligent supervision, and respondeat superior. We address each in turn and conclude that the district court erred in denying respondents motion for summary judgment on appellants' breach of contract, breach of fiduciary duty, and negligent supervision claims but did not err in denying summary judgment on appellants' respondeat-superior claim.
A. Breach of contract
Respondents argue that the district court should have dismissed appellants' breach-of-contract claim because, like a legal-malpractice claim, a breach-of-contract claim requires a showing of "but for" causation. We agree.
When the allegations of a breach-of-contract claim are the same as the allegations for a negligent-misrepresentation claims, the proof required to show either cause of action is the same:
In an action for negligence or breach of contract, the client has the burden of proving the existence of the relationship of attorney and client the acts constituting the alleged negligence or breach of contract; that it was the proximate cause of the damage; and that but for such negligence or breach of contract the client would have been successful in the prosecution or defense of the action.Christy, 179 N.W.2d at 293-94; see also Godbout v. Norton, 262 N.W.2d 374 (Minn. 1977) (citing these elements in Christy and stating that "[a] failure of proof as to any one of the enumerated elements defeats recovery").
As noted above, appellants' claim for breach of contract arises out of the same allegations as appellants' negligence claim. Appellants claim that respondents' failure to competently defend against the underlying action caused appellants to incur unnecessary legal costs and fees. But because the district court determined that appellants failed to establish "but for" causation on appellants' legal-malpractice claim, and we agree, we conclude that the district court should have also granted summary judgment on appellants' breach-of-contract claim. As such, we reverse the district court's denial of summary judgment on this claim.
B. Breach of fiduciary duty
Respondents next challenge the denial of summary judgment on appellants' breach-of-fiduciary claim. To establish a legal-malpractice breach-of-fiduciary-duty claim, a plaintiff must show "(1) the existence of an attorney-client relationship, which establishes a standard of conduct, i.e., the duty; (2) a breach by the attorney of one or more of the fundamental obligations owed to the client under that standard of conduct; (3) causation; and (4) damages." Mittelstaedt v. Henney, 969 N.W.2d 634, 640 (Minn. 2022). "The fundamental obligations attorneys owe their clients are the duty of candor, the duty to disclose material facts, and the duty to put the client's interests ahead of the attorney's interests." Id.; see also Padco, Inc. v. Kinney & Lange, 444 N.W.2d 889 (Minn.App. 1989) (noting that, under the dominant fiduciary duty rule, an "attorney is under a duty to represent the client with undivided loyalty, to preserve the client's confidences, and to disclose any material matters bearing upon the representation of these obligations"), rev. denied (Minn. Nov. 15, 1989).
Appellants asserted in the breach-of-fiduciary-duty claim that respondents, as appellants' attorney, owed a duty to communicate information in regard to the underlying litigation. Appellants argue that respondents breached that duty by failing to disclose relevant information that affected appellants' interests and rights in the underlying litigation and that appellants suffered financial losses as a result. We conclude that appellants' breach-of-fiduciary claim includes the same assertions as appellants' legal-malpractice claim, just under a different name. Both assert that respondents had a duty to keep appellants informed of the litigation and make sound decisions with respect to litigation strategy and failed to do so resulting in unnecessary legal fees. And although "professional negligence and breach of fiduciary duty are distinct claims," both require a "but for" showing of causation. Mittelstaedt, 969 N.W.2d at 639; Perl v. St. Paul Fire and Marine Ins. Co., 345 N.W.2d 209, 213 (Minn. 1984). Because appellants' legal- malpractice claim fails on summary judgment, so too does appellants' breach-of-fiduciary claim. Therefore, we reverse the district court's denial of summary judgment as to appellants' breach-of-fiduciary claim.
C. Negligent supervision
Negligent-supervision claims are premised on the employer's failure "to exercise ordinary care in supervising the employment relationship, so as to prevent the foreseeable misconduct of an employee from causing harm to other employees or third persons." M.L. v. Magnuson, 531 N.W.2d 849, 858 (Minn.App. 1995), rev. denied (Minn. July 20, 1995); see also Yunker v. Honeywell, 496 N.W.2d 419, 421 (Minn.App. 2023) (stating that negligent-supervision claims involve the "ability [of the employer] to control and protect its employees while they are involved in the employer's business or at the employer's place of business."), rev. denied (Minn. Apr. 20, 1993); see also Semrad v. Edina Realty, Inc., 493 N.W.2d 528, 534 (Minn. 1992) (detailing the duties of an employer under the doctrine of respondeat superior).
Respondent argues that the district court should have granted summary judgment on appellants' negligent-supervision claim because appellants' legal-malpractice claim fails as a matter of law. We agree that the district court should have granted summary judgment on this claim but not for the reasons respondent asserts. Instead, we conclude that appellants' negligent-supervision claim fails as a matter of law because "[e]conomic harm alone is not enough to support negligent-supervision actions." Johnson v. Peterson, 734 N.W.2d 275, 277 (Minn.App. 2007). In Johnson, appellant brought a claim of negligent supervision against an insurance company, alleging that the insurance company "negligently failed to properly . . . supervise [the agent], which . . . contributed to the embezzlement and theft of money." Id. at 276-77. This court determined that his claim failed because his only injury was economic in nature. Id.; see also Bruchas v. Preventive Care, Inc., 553 N.W.2d 440, 443 (Minn.App. 1996) (holding that physical injury or apprehension of such injury is a required element of a claim for negligent supervision).
Here, appellants assert that respondents' negligent supervision of an attorney led appellants to incur unnecessary costs and fees. But appellants do not assert losses beyond the alleged economic loss. Appellants cannot show the necessary elements of a negligent-supervision claim, and we reverse the denial of summary judgment as to this claim.
D. Respondeat superior
Finally, respondents challenge the district court's denial of summary judgment on appellants' respondeat superior claim. They argue that because appellants' tort claims fail, so too, does appellants' respondeat superior claim.
Under the doctrine of respondeat superior, "an employer is vicariously liable for the torts of an employee committed within the course and scope of employment." Fahrendorff ex. Re. Fahrendorff v. N. Homes, Inc., 597 N.W.2d 905, 910 (Minn. 1999) (quotation omitted). "Such liability stems not from any fault of the employer, but from a public policy determination that liability for acts committed within the scope of employment should be allocated to the employer as a cost of engaging in that business." Id. Because we conclude that appellants allege sufficient facts that, if true, support their tort claim for fraudulent misrepresentation to overcome a motion for summary judgment, appellants' respondeat superior claim must also survive summary judgment. The district court did not err in denying summary judgment on this claim.
Affirmed in part, reversed in part, and remanded.
[*] Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.