Murillo v. Mayo Clinic Health System-Southeast Minnesota Region

Background

Pablo Murillo and Global Mercantile, LLC sued Mayo Clinic Health System-Southeast Minnesota Region over a Commercial Real Estate Purchase Agreement. The agreement required Mayo to sell the Professional and Community Center in Red Wing, Minnesota, to Global Mercantile for $1.00. Global Mercantile planned to redevelop the property for market-rate and affordable housing.

The agreement required Global Mercantile to satisfy five conditions, or waive them in writing, by April 4, 2019. These conditions included obtaining government approvals, being satisfied with inspections and utilities, obtaining zoning approval, and securing financing. The agreement stated that it would automatically terminate if the conditions were not satisfied or waived in writing by that date. It also set closing deadlines and stated that time was of the essence, meaning the parties had to meet the stated deadlines.

The parties did not obtain the required city approval by the contingency deadline, did not provide written notice waiving the conditions, and did not close by the initial or alleged amended closing date. Plaintiffs alleged that Mayo nevertheless continued working with them and encouraged redevelopment efforts. After community opposition to the project, Mayo told Murillo on August 29, 2019, that it would not sell the property and later sent a letter stating that the agreement was terminated.

Claims and motion

Plaintiffs asserted claims for racial discrimination under 42 U.S.C. § 1981, breach of contract, specific performance, and equitable estoppel. Specific performance is a request for a court order requiring a party to carry out a contract. Equitable estoppel is a doctrine that can prevent a party from taking a position inconsistent with its earlier conduct when the other party relied on that conduct.

Mayo moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not plausibly state a legally valid claim. Mayo argued that the agreement automatically terminated when the contingencies and closing deadlines passed without completion of the sale.

Court’s analysis

The court held that the Purchase Agreement terminated under its own terms. Because the agreement made time essential and the closing did not occur by the applicable deadlines, the property transaction could not proceed. The court also held that Minnesota’s statute of frauds required any extension or modification of this real-estate agreement to be in writing. Mayo’s alleged conduct and representations after the missed deadlines therefore could not extend the agreement.

The court rejected Plaintiffs’ argument that Minnesota Statute § 559.21 required Mayo to provide a termination notice. The court held that the statute does not apply to a real-estate agreement wholly dependent on contingencies such as this one. Without an enforceable agreement, the breach-of-contract and specific-performance claims failed. The court dismissed Counts II and III.

The court also dismissed the equitable-estoppel claim because that doctrine could not be used to avoid the statute-of-frauds requirement that an extension be written.

For the § 1981 claim, Plaintiffs alleged that Mayo terminated the agreement because of Murillo’s race and because he refused to hire more white individuals or white-owned companies. The court held that Plaintiffs could not plausibly allege that race was the necessary cause of the termination because the agreement had already ended when the contingencies and closing deadlines were not met. The court also held that Global Mercantile could not bring the claim because a corporation has no racial identity and cannot be the direct target of discrimination. Murillo could not bring it because he was not a party to the agreement. The court rejected his argument that he was a third-party beneficiary, concluding that the deed-use restriction did not show that the agreement was intended to benefit him or discharge a duty owed to him. The court dismissed Count I.

Disposition

Judge Ann D. Montgomery granted Mayo’s motion to dismiss and ordered judgment to be entered. The opinion states that Counts I, II, and III were dismissed and that the equitable-estoppel claim in Count IV was dismissed; it does not state that the dismissals were with or without prejudice.