SEVEN ACQUISITION LLC v. WILLIAMS (2025)

OPINION

This appeal hangs on whether a court-appointed receiver in a mortgage-foreclosure action is entitled to quasi-judicial immunity for his part in an alleged scheme by the mortgage holder to unlawfully force a tenant restaurant to vacate the foreclosed property. The restaurant sued the receiver for his role in the scheme, seeking money damages primarily for his failure to maintain the building for the restaurant to operate, resting on two theories: that the receiver breached his fiduciary duty to the restaurant as a creditor defendant in the foreclosure action and as a building tenant, and that the failure constitutes negligence. The district court only partly granted the receiver's motion to dismiss the restaurant's civil claims under the doctrine of quasi-judicial immunity. Because all the harms the restaurant alleges flow from actions the receiver took within the scope of the receivership, we reverse the district court's decision not to dismiss all the restaurant's claims under the quasi-judicial-immunity doctrine.

FACTS

Seven Acquisition LLC filed a civil complaint in district court naming Gregg Williams as the sole defendant. The district court considered Williams's motion to dismiss based on the facts alleged in Seven's complaint and supporting documents, and we do the same in this appeal. See Cocchiarella v. Driggs, 884 N.W.2d 621, 624 (Minn. 2016); see also N. States Power Co. v. Minn. Metro. Council, 684 N.W.2d 485, 490 (Minn. 2004) (stating that the district court “may consider documents referenced in a complaint without converting the motion to dismiss to one for summary judgment” (emphasis omitted)). The following facts—which have not been tested by a trial or other fact-finding inquiry—rest only on Seven's complaint and its referenced documents and are merely assumed to be true for the sake of our analysis today.

 Factual Summary and Litigation

Seven ran a restaurant, event center, and nightclub business in a Minneapolis building it rented from 700 Hennepin Holdings LLC. 700 Hennepin failed to repair the building's roof after it began to leak around 2018, forcing Seven to close part of its business operations. Seven began withholding rent, and 700 Hennepin commenced an eviction action to oust it from the building. Seven responded by seeking damages from 700 Hennepin for the roof leak. Seven arbitrated its claims against 700 Hennepin, winning an arbitration award for more than $800,000.

700 Hennepin stopped repaying the loan on its mortgage, held by Wilmington Trust. Wilmington Trust commenced a foreclosure action against 700 Hennepin, assigning Midland Loan Services to serve as its agent to execute the foreclosure. Wilmington and Midland (together “the bank”) schemed to force Seven from the building during the foreclosure action. The bank maintained in the foreclosure action that Seven had no right to occupancy, but Seven's lease and Minnesota law required a new owner to honor a preexisting lease. Recognizing that it could not likely expel Seven legitimately, the bank concocted a plan to do so illegitimately. It would seek to appoint a foreclosure receiver who would manage the building in a manner that would leave Seven unable to operate its business and forced to vacate.

To execute this plan, the bank drafted its initial foreclosure complaint improperly, omitting Seven as a party, failing to provide notice to Seven as required by law, and mischaracterizing Seven's vested arbitration award as merely pending. Because of this complaint-drafting strategy and with 700 Hennepin's stipulation, the bank secured Gregg Williams—the bank's inside man—as the court-appointed receiver to manage the building during the foreclosure action. Seven would have opposed Williams's appointment if Seven had been properly included at that point in the foreclosure proceedings. The bank amended its foreclosure complaint to name Seven as a party only after Williams had been appointed receiver.

According to the district court's appointment order, Williams was appointed receiver and given broad powers to maintain the “uninterrupted operation” of the property. The order also protects Williams from personal liability, stating that in Williams's “capacity as Receiver ․ [he] shall have all protections available to a fiduciary under applicable federal and state laws, including but not limited to derivative judicial immunity.”

Williams generally acted on bias. (Again, these facts derive from Seven's yet-unvetted factual allegations and are only presently assumed to be true.) Williams had a previous relationship with Midland that prevented him from being impartial in his receivership duties, having received over half of his business in the previous 15 years from Midland. Williams also misrepresented this past relationship to the district court to secure his appointment. The stipulated receivership order relies in part on an affidavit from Williams to say that the only prior relationship Williams had with the parties was through discussions about the proposed receivership in this case. The affidavit asserted too that Williams had no material interest in the outcome of the dispute. Yet Williams lacked significant prior experience with properties in the Twin Cities. And based on his cozy relationship with Midland, Williams was on a mission from the beginning of his appointment to oust Seven from the building. This relationship is reflected in the receivership-appointment order, which waives the statutory requirement that Williams post a bond and grants him excessive immunities beyond what he may achieve by default under the law.

Williams executed his ouster role in the scheme by committing wrongs against Seven. For example, Williams tried to force Seven to pay rent by making misrepresentations to the district court that Seven had defaulted on its rent obligations even though Seven was not required to pay under its arbitration award. He also tried to evict Seven. Seven had to spend a significant amount in attorney fees combating Williams's contrived claims. And Williams disregarded his receivership duty to conserve and protect the building. He refused to fix the leaky roof unless Seven vacated the building, causing the building to deteriorate further. He was late to make other repairs to the building's sole elevator, broken windows, and the HVAC system. Williams also lied to the court about the source of his income to fund the building's upkeep, saying that 700 Hennepin was paying him to maintain the building when, in truth, Wilmington Trust paid him almost $1 million. Williams used this money to pay legal fees he incurred in litigation against Seven. Williams's only significant action as receiver overall had been to make legal claims against Seven for the bank's benefit. Williams's failing to maintain the building ultimately forced Seven to shutter its businesses and vacate the property, ending in a total loss, with damages exceeding $3 million.

 Present Action

Seven made two primary allegations in its complaint seeking money damages. Seven alleged first that Williams breached his fiduciary duty to Seven as a creditor defendant in the foreclosure action and as a building tenant. He did so by refusing to maintain the property, with the aim of forcing Seven out, and by acting intentionally to harm Seven at the bank's direction. Seven asserted that Williams's actions were driven by his conflict of interest and contradicted his statutorily defined receivership duties. Seven alleged second that Williams's failing to maintain the building constituted negligence.

Williams moved to dismiss Seven's complaint for failure to state a claim under Minnesota Rule of Civil Procedure 12.02(e). He argued that the claims are barred entirely by the doctrine of quasi-judicial immunity. The district court only partly agreed. It held that Seven's breach-of-fiduciary-duty claim survived dismissal because there were factual questions regarding Williams's potential conflict of interest, refusing to apply quasi-judicial immunity to the claim. But it dismissed Seven's negligence claim, reasoning that Williams's maintenance decisions about the building fell within the scope of his receivership appointment, immunizing him from liability.

Williams appeals.

ISSUE

Did the district court err by declining to dismiss the entirety of Seven's complaint based on quasi-judicial immunity?

ANALYSIS

Williams appeals the district court's order declining to dismiss Seven's breach-of-fiduciary-duty claim. We review de novo whether a complaint sets forth a legally adequate claim for relief sufficient to survive a rule 12.02 dismissal motion. Walsh v. U.S. Bank, N.A, 851 N.W.2d 598, 606 (Minn. 2014). We consider the facts alleged in the complaint, accept those facts as true, and make all reasonable inferences in favor of the nonmoving party. Berrier v. Minn. State Patrol, 9 N.W.3d 368, 372 (Minn. 2024). A pleading may be dismissed only if it appears certain that no facts could be introduced consistent with the pleading to support the relief sought. Bahr v. Capella Univ., 788 N.W.2d 76, 80 (Minn. 2010). We apply this standard (which favors Seven) and nevertheless reverse.

Williams asserts that quasi-judicial immunity shields him from having to defend Seven's suit. Quasi-judicial immunity derives from judicial immunity. See Gammel v. Ernst & Ernst, 245 Minn. 249, 72 N.W.2d 364, 368 (1955). Judicial immunity protects a judge from civil liability for acts she makes in the exercise of her judicial authority, with an underlying rationale of protecting the judiciary's independence. Myers v. Price, 463 N.W.2d 773, 775 (Minn. App. 1990), rev. denied (Minn. Feb. 4, 1991). Judicial immunity is a doctrine “rooted deeply” in the common law and has evolved to immunize actors who are not judges but are “integral parts” of the judicial process. Gammel, 72 N.W.2d at 368; Sloper v. Dodge, 426 N.W.2d 478, 479 (Minn. App. 1988). Judicial immunity that shields someone who is not a judge is called quasi-judicial immunity and, like judicial immunity, is a form of absolute immunity. See Gammel, 72 N.W.2d at 368; Brown v. Dayton Hudson Corp., 314 N.W.2d 210, 214 (Minn. 1981). Court-appointed receivers are entitled to quasi-judicial immunity both through the common law and by statute providing for all “defenses and immunities provided at common law.” See Schmidt v. Gayner, 59 Minn. 303, 62 N.W. 265, 265 (1895); Minn. Stat. § 576.28(a) (2024). The parties do not dispute that Williams may invoke quasi-judicial immunity in the appropriate situation.

Our question is whether this is such a situation. The more specific question is whether Seven's complaint sufficiently pleaded that Williams acted outside the scope of his receivership appointment. Quasi-judicial immunity applies only when a court-appointed official acted within the scope of his duties. See Minn. Stat. § 576.28(a); Myers, 463 N.W.2d at 776. The district court emphasized two of Seven's allegations to implicitly conclude that the complaint alleges behavior outside the scope of Williams's receivership:

93. Defendant breached his fiduciary duty by having a conflict of interest between the duties imposed on him under the Receivership Order and the duties imposed on him by Wilmington Trust and Midland. Specifically, the Defendant's decision to placate Wilmington Trust and Midland came at the expense of abiding by the Receiver's duties imposed by the Court.

94. Upon information and belief, Defendant breached his fiduciary duty by taking direction from Wilmington Trust and Midland, rather than acting independently, as required by the Minnesota Receivership Act, Minnesota Statutes Chapter 576.

The district court seemingly based its conclusion on a receiver's implicit statutory duty to act independently. The district court's rationale was flawed. It is true that a person may serve as a receiver only when “the court, in its order appointing the receiver, makes written conclusions based in the record that the person ․ is independent as to the parties and the underlying dispute.” Minn. Stat. § 576.26, subd. 1 (2024). But the mere allegation that Williams was never an independent actor is not enough to open a receiver to liability for his actions during the receivership. This is because “the immunity rule is not to be ‘scuttled’ by pleadings which allege that the wrongful acts resulted from a conspiracy.” Jenson v. Olson, 273 Minn. 390, 141 N.W.2d 488, 490–91 (1966) (citing Linder v. Foster, 209 Minn. 43, 295 N.W. 299, 301 (1940)). Seven's allegation that Williams acted at the behest of the bank does not remove his immunity for acts he undertook as part of the receivership.

The supreme court's reasoning in Linder supports our decision. The Linder court analyzed a civil complaint that alleged that a court commissioner, a public-relief supervisor, and two court-appointed physicians conspired to have the plaintiff committed to the state hospital for the mentally ill. 295 N.W. at 299–300. The court acknowledged that the plaintiff had “pleaded a conspiracy involving wrongful acts committed prior to the commencement” of the commitment proceeding, but it nevertheless held intact the shield of judicial immunity by “declin[ing] to hold that a cause of action can be pleaded against a judicial officer for acts performed in the scope of his duties by merely pleading that they were the result of a conspiracy previously entered into.” Id. at 301–02. Linder dispenses with the notion that Williams's allegedly improper motive—supposedly borne from a conspiracy—alone will make quasi-judicial immunity inapplicable. Because the cited paragraphs of Seven's complaint allege facts relating only to Williams's improper motive, those paragraphs in themselves do not support the district court's decision to withhold quasi-judicial immunity.

We are aided by the rationale of two of our nonprecedential opinions. See Kruse v. Comm'r of Pub. Safety, 906 N.W.2d 554, 559 (Minn. App. 2018) (recognizing that although our nonprecedential opinions are not binding, we may consider them for their persuasive reasoning). In Willow Run Partners v. Hillstrom, we considered a suit against a court-appointed receiver dismissed under rule 12. No. A21-0404, 2022 WL 275366, at *3 (Minn. App. Jan. 31, 2022). The complaint alleged that the receiver had conspired to harm the plaintiff in a previous action, breaching his fiduciary duties. Id. at *3, *5. These allegations and related appellate arguments included that the receiver was not qualified; that the receiver was not independent because he had an undisclosed “significant financial relationship” with a party; that the receiver was “hand chosen” in a conspiracy to achieve improper financial gain; and that the receiver violated his receivership-appointment order. Id. at *5–6. We held that the alleged improper actions fell within the scope of the receiver's appointment entitling him to quasi-judicial immunity and that the correctness of his conduct and motivation behind it were “irrelevant.” Id. Seven attempts to distinguish Willow Run, highlighting that in that case, the district court in a previous action had conducted an evidentiary hearing on other claims. Id. at *2–3. But the prior evidentiary hearing in Willow Run is beside the point. Our analysis there, like our analysis here, still accepted “the facts alleged in the complaint as true and construe[d] all reasonable inferences in favor of the plaintiff.” Id. at *3 (quotation omitted). The second persuasive case is Mike v. Perfetti, where we decided that a fiduciary-duty suit against a receiver was properly barred: “While we do not condone [the receiver's] conduct and violation of his fiduciary duty here, we must conclude that he is entitled to judicial immunity from suit for all conduct within the scope of his appointment as a receiver.” No. C3-95-1650, 1996 WL 33102, at *1–3 (Minn. App. Jan. 30, 1996). As in Willow Run and Mike, the breach-of-fiduciary-duty claim here rests on Williams's actions in his official role as receiver and his allegedly improper motive. The reasoning in those cases bolsters our conclusion that Williams is protected by immunity.

Looking beyond the district court's rationale, which relied on Williams's alleged conflict of interest, does not lead us to a different result. Williams persuasively argues that all of his alleged breaches of fiduciary duties arise from actions he undertook within the scope of his receivership. Seven's complaint indeed revolves around Williams's acts relating to his control, management, and protection of the building, as well as his ability to collect rent, assert claims, cancel or modify leases, and communicate with the district court. These are all powers granted to him under the order designating him receiver. And the duties that Seven alleged that Williams breached exist only because of his position as receiver, a fact that the complaint itself recognizes:

90. Defendant was required to act as a fiduciary representing the Court and all parties in interest.

91. Defendant had a fiduciary duty to Seven as a creditor, defendant in the Foreclosure Action, and tenant of the Receivership Property to maintain the property, to operate the property in the normal course of business and to pay expenses necessary to prevent the property from deteriorating.

We can see of course that Seven's complaint alleges that Williams's actions were “outside the scope of the receivership and in conflict with the duties imposed by the Receivership Order.” But these are legal conclusions rather than factual allegations, and we need not accept them as true. See Graphic Commc'ns Loc. 1B Health & Welfare Fund “A” v. CVS Caremark Corp., 850 N.W.2d 682, 692 (Minn. 2014). And we find support for this conclusion in the way other courts have treated the issue. In Kepperling v. Kepperling, a federal district court in Ohio determined that the “Plaintiff's conclusory statement that [the magistrate] ‘acted outside the scope of his judicial responsibilities’ is an unsupported legal conclusion, which the Court need not and does not accept.” No. 3:19-CV-1, 2019 WL 1518230, at *2 (S.D. Ohio Apr. 8, 2019). Seven has merely asserted, but failed to plead supportive facts, that Williams's allegedly improper conduct fell outside the scope of his receivership appointment. We hold that a plaintiff may not overcome a court-appointed receiver's quasi-judicial immunity based merely on the receiver's having improper motives in the exercise of his duties when his acts were within the scope of his authority.

Seven relies on other nonbinding authority to attempt to compel us to a different outcome. The cases Seven points to are substantively dissimilar. Seven first likens this case to New Alaska Dev. Corp. v. Guetschow, 869 F.2d 1298 (9th Cir. 1989). In New Alaska, the Ninth Circuit rejected a receiver's assertion of immunity from allegations that he committed theft and slander because those acts are not normally performed by court-appointed receivers. 869 F.2d at 1304–05. Seven also discusses Anes v. Crown Partnership, where the Nevada Supreme Court considered an appeal from summary judgment in favor of the receiver, who had allegedly withheld contracted-for services and “harassed and intimidated” the tenant-plaintiff to force her to relocate to another unit in the receivership property. 113 Nev. 195, 932 P.2d 1067, 1069 (1997). The Nevada court concluded that there remained factual issues as to whether the receiver's harassing and intimidating the tenant fell outside the scope of the receiver's appointment. Id. at 1071. The court strongly suggested that the conduct did. Id. In sum, the plaintiffs in New Alaska and Anes alleged acts that were likely entirely outside a receiver's appointment such that they were not performing a “judicial function.” See New Alaska, 869 F.2d at 1304 (quotation omitted); Anes, 932 P.2d at 1071 (“[A] receiver may be personally liable if he or she acts outside the authority granted by the court.”). These opinions address allegedly improper behavior that is unlike the circumstances here, where Seven merely alleges that Williams, acting with corrupt motives, made decisions within his receivership authority. New Alaska and Anes are not persuasive.

We acknowledge that one of our nonbinding opinions might suggest a different outcome. In Kuberka v. Anoka Mediation, Inc., we allowed a suit to proceed against a court-appointed custody evaluator despite her assertion of quasi-judicial immunity, in part because the complaint alleged that the evaluator affirmatively misrepresented her qualifications for the position. No. A05-2490, 2007 WL 3525, at *3 (Minn. App. Jan. 2, 2007). We reasoned that these alleged misrepresentations to the court regarded acts committed before immunity attached. Id. But the supreme court in Linder dispensed with a similar claim against court-appointed professionals (physicians) on quasi-judicial-immunity grounds even though the plaintiff pleaded that the professionals were appointed to effect a conspiracy previously entered into. Linder, 295 N.W. at 301–02; see also Jenson, 141 N.W.2d at 490–91 (relying on Linder to uphold the defendants’ quasi-judicial immunity despite the plaintiff alleging intentional torts arising before immunity attached). Although our Kuberka opinion cited Linder, we did not discuss how Linder’s reasoning might support applying quasi-judicial immunity to a complaint that, like the one here, alleges a previously entered conspiracy. We therefore decline to apply Kuberka’s reasoning to this situation. And to the extent that Kuberka might otherwise be read to conflict with our decision today, we do not rely on its result or reasoning.

We add that our holding does not leave Seven without remedy or absolutely shield Williams from accountability. Minnesota Statutes section 576.37, subdivision 1 (2024), provides that a district court may remove a receiver for “good cause.” Indeed, Seven suggested at oral argument that it had sought to remove Williams and vacate his receiver acts in a different court file. Other provisions of chapter 576 provide additional tools to ensure receiver accountability. See Minn. Stat. § 576.23 (2024) (outlining the district court's “exclusive authority to direct the receiver” and its “authority over all receivership property”); Minn. Stat. § 576.28(b) (2024) (providing a successor receiver a right of action to recover receivership property from a receiver); Minn. Stat. § 576.38, subd. 1 (2024) (allowing a district court to assess “any” sanctions it deems appropriate against a receiver whose appointment was procured in bad faith); Minn. Stat. § 576.39, subd. 1 (2024) (allowing a receiver to be sued subject to his immunities). We offer no opinion as to whether any of these tools could apply here.

DECISION

Williams is entitled to quasi-judicial immunity for his acts within the scope of his receivership regardless of his motivations. Because Seven's complaint alleges that Williams performed only acts that the receivership empowered him to perform, we reverse the district court's decision not to dismiss Seven's entire complaint based on quasi-judicial immunity.

Reversed.

ROSS, Judge