Reach Companies, LLC v. Newsert LLC

Background

Reach Companies, LLC and Newsert LLC entered into a hand-sanitizer sales agreement during the early months of the COVID-19 pandemic. Reach agreed to sell sanitizer to Newsert, but their relationship broke down after slightly more than a month. Each party asserted contract and tort claims against the other, although the tort claims did not survive summary judgment.

A jury found in favor of Newsert on its breach-of-contract claim, rejected Reach’s breach-of-contract claim, and awarded Newsert $1,196,364. Judgment was entered on July 22, 2022. The verdict did not itemize the damages.

After trial, Newsert learned that on July 20, 2022, Jon Tollefson had signed two checks transferring $1,249,704.72 from Reach to Munster Real Estate, LLC, another company he controlled. When the checks cleared, Reach’s bank balance fell from $1,396,461.97 to $152,663.62. Newsert later collected only $66,766.49 through garnishment, leaving $1,129,597.51 of the judgment uncollected.

Newsert’s Motion to Add Prejudgment Interest

Newsert asked the court to amend the judgment to include $265,493.70 in prejudgment interest under Minnesota Statutes § 549.09. The statute provides for interest beginning on the earlier of the action’s commencement or a written notice of claim, and provides a 10-percent annual rate for judgments exceeding $50,000.

Newsert sent Reach a written demand on May 4, 2020, providing a rough damages calculation, offering to accept $567,632.55 to resolve the dispute, and reserving the right to seek additional damages. The court held that this letter was a qualifying written demand even though it did not list every category of damages and did not calculate the final award.

The court rejected Reach’s argument that prejudgment interest was unavailable because the damages depended on the jury’s discretion. It concluded that this argument was based on an older rule that Minnesota’s prejudgment-interest statute had displaced. The court also rejected Reach’s argument that interest should begin on June 1, 2020, when Newsert filed its counterclaim, rather than on May 4.

The court granted Newsert’s motion and awarded $265,493.70 in prejudgment interest, making the total judgment $1,461,857.70 before costs.

Reach’s Motion for a New Trial

Reach sought a new trial concerning Newsert’s lost-profit damages, the parties’ contractual liability, the court’s determination that the purchase orders were unambiguous, the jury instruction on prior contract communications, and Newsert’s overcharge claim.

The court denied the motion. It determined that the evidence supported Newsert’s lost-profit damages. Newsert’s purchase orders showed agreements to buy 100,000 gallons and 400,000 units of hand sanitizer. Testimony and a stipulated spreadsheet showed that Newsert had agreements to resell those goods at profits of $7 per gallon and $1.05 per unit. The court concluded that the evidence supported Newsert’s claimed $693,112 in lost profits and provided a reasonably certain basis for calculating them.

The court also held that the purchase orders clearly stated prices, quantities, shipping deadlines, and shipping requirements. Because the purchase orders were unambiguous, the jury was properly instructed that earlier oral or written communications could not be used to change their terms. The instruction nevertheless allowed the jury to consider later modifications to the contracts. The court found no basis for a new trial on the overcharge issue for the same reason.

Supplemental Complaint and Prejudgment Attachment

Newsert sought permission to file a supplemental complaint against Reach, Munster Real Estate, LLC, and Jon Tollefson under Minnesota’s Uniform Voidable Transactions Act. That statute allows a creditor to challenge a transfer made with actual intent to hinder, delay, or defraud a creditor.

The court granted permission to file the supplemental complaint. It relied on factors including that the transfer was between entities controlled by Tollefson, was not disclosed in the record, transferred most of Reach’s bank funds, occurred shortly before the jury verdict, and left Newsert unable to collect enough to satisfy the judgment. The court also stated that sworn declarations appeared to mischaracterize the nature of payments to Munster, based on bank records and an email concerning a voluntary mortgage prepayment.

Newsert also sought prejudgment attachment, meaning an order securing property while related claims remain pending. The court granted that request under Minnesota law. It found a probability of success on Newsert’s voidable-transfer claim, a risk that the judgment could not be collected, no nonfrivolous defense identified by Reach, Munster, or Tollefson, and no greater harm from attachment than Newsert would suffer without it.

The attachment order covered $1,395,091.21, consisting of the uncollected judgment balance plus the prejudgment interest award. The order directed relevant sheriffs to freeze assets in accounts controlled by Reach, Munster, and Tollefson up to that amount. It also required those parties to identify their financial accounts, cash, and securities within seven days and required Newsert to post a $500 bond.

Disposition

The court granted Newsert’s motion to amend the judgment, denied Reach’s motion for a new trial, granted Newsert’s motion to file and serve a supplemental complaint, and granted Newsert’s motion for prejudgment attachment.