2007-05-05 Memorandum in OppositionMAY-05-2007 09:12 FROM-JOHNSON LARSON PETERSON & MATT PA +7636824465 T-924 P 001/043 F-796
JOHNSON, LARSON, PETERSON & MATT, P.A.
ATTORNrVS AT LAW
908 COMMERCIAL DRIVE
BUFFALO, MINNESOTA S5313
rRLAeaONK: (763) 6824550 -- FAX: (763) 6824465 --- rm.i. FREE: (866) 682-4550
WEB: www.ilmulaw.mnl
JAN C. LARSONf OF COUNSEL
JOHN T. PETERSON j THOMAS W. RICHARDSw
CINDI S. MATT" THOMAS W. SPENCE•
13i(y: /:� a O[o I n RXITIRIOW
'IReal Prapero, Lmv Spedu&vt
Certtfted by Mtnnesatu State BurAsroctatton
- Qualified Neutral
WAVERLY OFFICE
Ily Appointment Only
WALTER S. JOHNSON
1972-2002
FACSIMILE MESSAGE
DATE: May 5 2007
THIS MESSAGE IS FOR THE ATTENTION OF: Jason I-uboushek, Esq.
FAX NUMBER OF RECIPIENT: (952) 946-1501
THIS MESSAGE IS FROM: Cindi S. Matt
THIS MESSAGE INCLUDES THIS COVER SHEET AND IfORADDITIONAL PAGE.
IF YOU RECEIVE LESS THAN THIS, PLEASE CONTACT US AT: (763) 682-4550
MESSAGE: See Attached
RE: Prairie Run Litigation
Court File Nos. 86-CV-06-2998/86-CV-06-4997
CONFIDENTIALITY NOTICE: The documcnt(s) accompanying this fax contain confidential
information which is legally privileged. The information is intended only for the use of the intended
recipient named above. if you are not the intended recipient, you are hereby notified that any
disclosure, copying, distribution, or the taking of any action in reliance on the contents of this telecopied
information except its direct delivery to the intended recipient named above is strictly prohibited. It
you have received this fax in error, please notify us immediately by telephone to arrange for the return
of the original documents to us.
N1AY-05-2007 09:12 FROM-JOHNSON LARSON PETERSON & MATT PA +7636824465 T-924 P 002/043 F-796
JOHNSON, LARSON, PETERSON & MATT, P.A.
ATTORNEYS A I'L.AW
908 CONINIERCIAL DRIVE
BUFFALO, NIMNESOTA S,313
TELEPHONIC: (763) 682.4550 -- FAx: (763) 682.4465 -- rOLL raEE: (860) 6824550
WEB: www.i lnmlaw.enm
JAN C. LARSON'h OF COUNSEL
JOHN T. PETERSONt THOMAS W. RICHARDSw
CINDI S. MATTw THOMAS W. SPENCE
MICHAEL G. HALVORSON
WAVF.RI_V OFFICC
By Appointment Only
I Real Property Law Specialist
Certified by Minnesota State Bar Association
• Qualified Neutral
May 5, 2007
WALTER S. JOHNSON
1912-2002
Mr. Jason J. Kuboushek
Iverson Reuvers
9321 Ensign Avenue South
Bloomington, MN 55438
VIAFACSIAHLEAND U.S. MAIL
RE: Prairie Run Litigation
Court File Nos. 86-CV-06-2998/86-CV-06-4997
Dear Mr. Kuboushekc:
Enclosed herein and served upon you by Facsimile and by U.S. Mail, please find Gold
Key's Memorandum in Opposition to the City of Albertville's Motion for Summary Judgment
and Affidavit of Cindi S. Matt. Thank you.
Sincerely,
Cindi S. Matt
CSM/jal
enclosures
cc: Steve Yoch, Esq. (w/enclosures)
John Marken, Esq. (w/enclosures)
Anton van der Merwe, Esq. (wlenclosures)
Dean Johnson (wlenclosures)
N1AY-05-2007 09:12 FROM-JOHNSON LARSON PETERSON & MATT PA +7636824465 T-924 P 003/043 F-796
JOHNSON, LARSON, PETERSON & MATT, P.A.
ATTORNEYS AT LAW
908 CONINIERCIAL DRIVE
BUFFALO, MINNESOTA 55313
TELEPHONE: (763) 682-4550 -- PAY: (763) 6824465 -- TOLL FREE: (866) 682-45511
WEB: www.ilnmlaw.cnm
JAN C. LARSON 'i OF COUNSEL.
JOHN T. PETERSONt THOMAS W. RICHARDS*
C(NDI S. MATT* THOMAS W. SPENCE
MICHAEL G. HALVORSON
WAVERLY OFFICE
By Appoinunenr Only
'IReal Property Lmv Specialist
Certified by Minnesota Stare Bar Association
`Qualified Neurral
May 5, 2007
Jolut A. Marken, Esq.
Coleman, Hull & Van Wet, PLLP
8500 Nonuandale Lake Boulevard
Suite 2110
Minneapolis, MN 55437
WALTER S. JOHNSON
1912-2002
ILIA FACSIMILE'AND U.S. MAIL
RE: Prairie Run Litigation
Court File Nos. CV-06-2998 and CV-06-4997
Dear Mr. Markert:
Enclosed herein and served upon you by facsimile and U.S. Mail please find Gold Key's
Memorandum in Opposition to Short-Elliott-l-lendrickson's Motion for Summary Judgment and
Affidavit of Cindi S. Matt. Thank you.
Sincerely,
Cindi S. Matt
CSMljal
enclosures
cc: Steve Yoch (wlenclosures)
Anton van der Merwe (wlenclosures)
Jason Kuboushek (wlenclosures)
Dean Johnson (wlenclosures)
N1AY-05-2007 09:12 FROM-JOHNSON LARSON PETERSON & MATT PA +7636824465 T-924 P 004/043 F-796
STATE- OF MINNESOTA DISTRICT COURT
COUNTY OF WRIGHT TENTH JUDICIAL DISTRICT
CASE TYPE: Declaratory Judgment/Breach of Contract
Court File No. 86-CV-06-2998
Gold Key Development, Inc., a ivunnesora corporuuuu,
Plaintiff,
vs.
City of Albertville,
Defendant/Third Party Plaintiff,
vs.
Short Elliott Hendrickson, Inc.,
Third Party Defendant.
T/C Homes, Inc., a Minnesota corporation, Court File No. 86-06-CV-4997
Plaintiff,
vs.
GOLD KEY'S MEMORANDUM
Gold Key Development, Inc., a Minnesota corporation IN OPPOSITION TO THE CITY
OF ALBERTVILLE'S MOTION
Defendant/Third Party Plaintiff, FOR SUMMARY JUDGMENT
VS.
Hedlund Lngineering,
Third Party Defendant,
vs.
City of Albertville,
Defendant/Third Party Plaintiff,
vs.
Short Elliott Hendrickson. Inc.
Third Party Defendant_
N1AY-05-2007 09:12 FROM-JOHNSON LARSON PETERSON & MATT PA +7636824465 T-924 P 005/043 F-796
The City completely fails to meet its burden for summary judgment as to Gold Key. The
City offers no factual support for its assertion that Gold Key has breached the Development
Agreement, no expert engineering support that Prairie Run does not comply with the
Development Agreement and pertinent ordinances, and no controlling legal authority that
supports it position on the issues.
The City tries to paint itself as the good guy, just looking out for health, safety and
welfare of the homeowners in the City of Albertville. The City does not mention that the basis
for its decision to declare a moratorium in Prairie Run stems from photographs of the June 2003
Flood event, that the City Zoning Administrator himself took, and which the City had in its
possession prior to preliminary plat approval and throughout the plat approval process, but which
the City failed to share with Gold Key or Hedlund Engineering. If the City were the good guy it
paints itself out to be, it should have taken steps to protect future homeowners by sharing the
photographs that it now claims are so critical, and which are the basis for the moratorium, with
Gold Key or Hedlund prior to the time the City approved the plat. In the words of City
Administrator Larry Kruse:
A. Ultimately we have to look at those homeowners and make
sure that they're protected from a 100-year event.
Q. Wouldn't the time to have done that be before the city
approved the plat?
A. Definitely.
(Kruse Depo at 101). For the reasons set forth herein, the City's motion for summary judgment
must be denied.
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ADDITIONAL DOCUMENTS RELIED UPON
L Affidavit of Cindi S. Matt Opposing SEH's and the City's Motions for Summary
Judgment, and the following exhibits:
A. a true and correct copy of the deposition transcript of Alan Brixius ("Brixius
Depo.")
B. a true and correct copy of the deposition transcript of Michael Couri ("Couri
Depo-")
2. All documents listed in Gold Key's Memorandum in Support of Gold Key's Motion for
Partial Summary Judgment.
MATERIAL FACTS IN DISPUTE AS TO THE CITY OF ALBERTVILLE'S CLAIM
Gold Key relies upon and incorporates by reference its recitation of the facts, as set forth
in Gold Key's Memorandum of Law in Support of its Motion for Partial Summary Judgment. In
addition, the following clarifications of the City's Statement of Facts are necessary:
1) City Memo at P. 8: "Hedlund Engineering knew the culvert could affect the flow
calculations for the Prairie Run property. Unfortunately, however, Hedlund Engineering
chose not to incorporate the culvert into its drainage documentation. Hedlund depo. pp.
39-40."
City Memo at p. 9.: "Unfortunately, Hedlund Engineering did not calculate any
water flowing into the property from the east or from County Ditch No. 9. Hedlund depo.
P. 68"
• These are both inaccurate characterizations of Hedlund's testimony.
Although Hedlund did not consider the culvert in his original drainage calculations,
because anything flowing through County Ditch 9 basically bypasses Prairie Run,
Hedlund did consider it and incorporate it into the revised plans that were actually
approved by the City in June 2004. Hedlund did consider water flowing into Prairie Run
via County Ditch 9 in April 2004, based upon a conversation that he had with Jim Schulz
of SE-H, and based upon this conversation, Hedlund did revise the Prairie Run grading
plans and raise the elevation of several house pads. (Hedlund Depo at 39-47, 73-74).
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2) City Memo at p. 8: "Mr..Iohnson, however, never reviewed the City's Ordinances,
the grading plans, storm water control plans or any documentation regarding storm water
on the property. Instead, he only reviewed the site plan and layout created by Hedlund
Engineering."
• This is an incomplete characterization of the events. While Mr. Johnson himself
did not review these items, Gold Key's engineer, upon whom Gold Key relied, did
prepare and review these items. (Johnson Depo at 46-49: Hedlund Depo at 26-28, 60-
61).
3) City Memo at p. 8: "Hedlund Engineering was also required to provide the City
with a storm water pollution control plan. Hedlund depo. Pp. 61-62; Exh 46 (sic). Under
the Ordinance, a 100-year floodplain level was required. Id. Hedlund Engineering never
did this."
• This is an incomplete characterization of the Ordinance requirements and why a
100 year floodplain level was not provided by Hedlund. As Hedlund went on to testify, the 100
year floodplain was not included in the storm water pollution control plans because it was not
known at the time, and was not brought to his attention by the City or City Engineer. Hedlund at
62. Further, and significantly, the ordinance the City refers to, A.600.13(a), specifies that the
storm water pollution control plan that the developer submits must be reviewed and approved by
the Ciry Engineer. (Kuboushek Aff., Ex 47). The City represented that its engineer did review
and approve the storm water plans, prior to the City submitting an application to the MPCA for a
general storm water permit for construction activity on the entire Prairie Run project. (Kruse
Depo. 147-153).
4) City Memo at p. 10: "On November 29, 2005, City Attorney Michael Couri wrote a
letter to Gold Key advising that Gold Key was in default of paragraph B.F. of the
Development Agreement because several of the lots in the Prairie Run development did not
comply with City ordinances regarding the lowest opening elevation of a building. See
Exh. 39."
• This is an incomplete characterization of the basis for the City declaring Gold
Key to be in default. Significantly, the City fails to state that it was declaring Gold Key to be in
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default based upon a 100 year elevation of a culvert at County Ditch 9 tinder County Road 18,
which was prepared by a culvert sizing company in 2000, and which number was known by the
City Engineer as early as 2001, and again in 2003, but which number the City Engineer failed to
make known to Gold Key or Hedlund. (Kuboushek Exh 65 and Exh 46; Carlson Depo 172).
5) City Memo at p. 12. "Significantly, the Developer's own engineer admits the Prairie
Run development is currently in violation of several provisions of the City's Ordinances:"
The City then quotes a portion of Hedlund's deposition testimony.
• This is a misleading characterization of Hedlund's testimony. What the City fails
to make clear, and what is significant, is that this line of questioning to Mr. Hedlund involves the
Highest Known Water Elevation of 951.47, which was determined by Bolton & Menk in 2006,
two and a half years after the final plat of Prairie Run was approved, and which number was
based upon photographs of the June 2003 Flood Event that were in the City's possession and
which the City failed to share with Gold Key or Hedlund. (Sutherland Depo at 15-18, 20,22, 84;
Carlson Depo at 144; Schulz Depo. At 65-66; Matt Aff. Ex. L).
LEGAL ARGUMENT
A motion for summary judgment may only be granted if the moving party clearly sustains
its burden of showing an absence of genuine issues of material fact and that it is entitled to
judgment as a matter of law. The party moving for summary judgment has the burden of proof,
and must show that it meets all the elements of its cause of action as a matter of law. The
nonmoving patty has the benefit of that view of the evidence most favorable to him. Vierhs v.
Thorp Finance Co., 1975, 305 Minn. 522, 232 N.W.2d 776; Ahlm v. Rooney, 1966, 274 Minn.
259, 143 N.W.2d 65; Sauter v. Sauter, 1935, 244 Mimi. 482, 70 N.W.2d 351. Once moving
party has made out prima facie case that entitles it to summary judgment, nonmoving party may
not rely on mere averments in pleadings or unsupported allegations, but must come forward with
specific facts to satisfy its burden of production. Sr. Louis County Attorney's Office v. Tvventy-
5
N1AY-05-2007 09:13 FROM-JOHNSON LARSON PETERSON & MATT PA
+7636824465
T-924
P 009/043 F-796
Four Thousand Sir Hundred Forty -Three and
01/100 Dollars
(24,643.01)
in Various
Denominations of U.S. Currency and Twenty -Four Video Poker Machines, 524 N.W.2d 542
(Minn. App. 1994), review denied.
The City has completely failed to meet its burden and its motion for summary judgment
must be denied. The City has not shown, as a matter of law, that Gold Key has breached the
Development Agreement. In fact, an examination of the City's moving papers shows that the
City relies upon conclusory statements, which are supported by no facts, no affidavit, no expert
engineering opinion and no argument. Even though Gold Key, as non-moving party, only has to
come forward with specific facts to show there are genuine issues for trial in order to defeat the
City's motion if the City has met its burden in the first instance, Gold Key (in its moving papers
and also herein) has presented specific facts which would defeat the City's motion. As set forth
in Gold Key's moving papers in detail, Gold Key has shown that the City, not Gold Key, has
breached the Development Agreement by imposing a moratorium on development in Prairie
Run, and that, as a matter of law, Gold Key has not breached the Development Agreement. At a
minimum, there are genuine issues of material fact as to whether Gold Key has breached the
Development Agreement, precluding summary judgment in the City's favor.
1. GOLD KEY DID NOT BREACH THE DEVELOPMENT AGREEMENT, AS
ALLEGED BY THE CITY.
The City's memorandum, at section I, starts off by saying that "Gold Key breached the
Development Agreement because its Plat does not comply with all applicable provisions
contained in the City's Subdivision and Zoning Ordinances. The deficiencies of the Plat are set
forth in detail in City Attorney Couri's letter of December 1, 2006. See Exh. 99." The City
offers absolutely no facts in support of its position, no expert engineering affidavit and
absolutely no legal argument. The City is essentially saying Gold Key is in breach because the
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City says so, and because Gold Key has not fixed the problems the City alleges exist, Gold Key
is in breach.
In support of its position, the City relies upon: 1) unsupported factual allegations, 2)
deposition testimony that is taken out of context, 3) an incorrect interpretation of what legal
standard governs lot elevations (as between specific provision of Development Agreement or a
more general City Ordinance) and 4) an incorrect interpretation of the Development Agreement
that there is a continuing obligation for Gold Key to be in compliance with all City Ordinances
ad infinintm, even as the numbers that would affect City Ordinances change over the years. As
set forth in exhaustive detail in section III of Gold Key's Memorandum in Support of its Motion
for Partial Summary Judgment, and documented in the Affidavit of professional engineer Brian
Muuidstock, Gold Key has not breached the Development Agreement and in fact, Gold Key, and
not the City, is entitled to summary judgment on this very issue.
A. The City's Assertions That There Are "Deficiencies" In The Plat Are
Unsupported Factual Allegations.
In support of its assertion that Gold Key has breached the Development Agreement, the
City states that the "deficiencies of the Plat are set forth in detail in City Attorney Court's letter
of December 1, 2006. See Exh. 99. Because the Plat is not in compliance with the City's
Subdivision and Zoning Ordinances ... the City's refusal to issue certificates of occupancy and
building permits was proper and lawful ..." City memo at page 13.
Exh 99, the City's 12/1/06 letter to Gold Key, summarily sets forth alleged violations of
certain statutes, but does so in a conclusory manner with absolutely no factual or engineering
support. Further, contrary to the City's assertion in its brief, Exh. 99 is not written by City
Attorney Couri. It is authored by City Administrator Larry Kruse. Larry Kruse has testified
repeatedly and unequivocally that he does not know or understand details about the alleged
violations, that he is merely a conduit passing along information from the City Council and City
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MAY-05-2007 09:14 FROM-JOHNSON LARSON PETERSON & MATT PA +7636824465 T-924 P 011/043 F-796
Engineer. (Kruse Depo at 33-36, 65, 73). Clearly the City has not sustained its burden of proof
that Gold Key has violated the Development Agreement, when all it has to support its position is
a piece of paper authored by a City Administrator who admits he knows nothing about the details
of the violations that the City alleges.
H. The City Misconstrues The Testimony Of Randall Hedlund And Therefore
Hedlund's Testimony Does Not Support The City's Position That Gold Key
Is In Violation Of The Development Agreement As A Matter Of Law.
The City states that "Gold Key's own engineer readily admits" that the Plat is not in
compliance with the City's Subdivision and Zoning Ordinances, and apparently uses this as the
basis for its position that it is entitled to summary judgment on the issues of whether Gold Key
breached the Development Agreement. City Memo at page 13. In malting this statement, the
City relies upon the testimony of Randy Hedlund, which the City cites at page 12 of its memo.
What the City fails to make clear, and what is significant, is that this line of questioning to Mr_
Hedlund involves the Highest Known Water Elevation of 951.47, which was determined by
Bolton & Menk in 2006, two and a half years after the final plat of Prairie Run was approved.
As set forth in detail in section II of Gold Key's Memo in Support of its Motion for Summary
Judgment, the line of permanent aquatic vegetation, and not the highest known water level,
applied and governed the establishment of the elevations for structures and, as a matter of law,
there is no violation of the Development Agreement when this basis is used (die line of
permanent aquatic vegetation), which was approved by the City in 2004.
Instead of providing its own engineering expert testimony as to the specific basis for any
alleged violations of the Development Agreement by Gold Key, the City attempts to use the
testimony of Gold Key's own engineer, which it takes out of context and misconstrues, to
support its claim that Gold Key has violated the Development Agreement. Since facts must be
construed in the light most favorable to the non-moving party, this Court must construe
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Hedlund's testimony in the light set forth by Gold Key, above. Therefore, not only has the City
not offered any specific factual support for its position that Gold Key has breached the
Development Agreement, but the engineering support it attempts to offer (via Hedlund's
testimony) also does not support the City's position.
C. In Declaring Gold Key To Be In Breach, The City Incorrectly Concludes
Than Gold Key Has An Obligation To Change Its Lot Elevations And Runoff
Rates Ad Infinitum, Even When New Numbers Are Determined.
The City relies upon part of the Development Agreement that says:
Unless otherwise explicitly set forth in this Agreement ... Developer agrees that
the following conditions will be met on a continuing basis:
C. All grading, drainage, utility, wetland mitigation, and transportation
issues that arise during development of Said plat shall be subject to
review and approval by the City Engineer.
Emphasis added. The City, at page 14 of its memo, states "instead of attempting to fix
the grading and drainage problems identified by the City and City Engineer in 2005 and
2006, Gold Key sued the City for breach of contract." City Memo at p. 14.
As an initial matter, the Development Agreement, at page 6, paragraph 3E, does
explicitly set forth what Developer is required to do as to runoff and drainage, so the
provision cited by the City, above, regarding a continuing obligation to comply, does not
apply to runoff and drainage (since the Development Agreement specifically states
"Unless otherwise explicitly set forth in this agreement . . .") Paragraph 3E of the
Development Agreement states:
E. Developer shall install storm water rctention/water quality ponds and
basins upon Said Plat as shown on the Grading, Drainage and Erosion
Control Plan attached as Exhibit D.. .
There is no dispute that Gold Key installed the ponds and graded the property in accordance with
the approved plan attached as Exhibit D. (Nafstad Depo. at 88-90)
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Nor does Gold Key have a continuing obligation to adjust lot elevations that deviate from
The approved plans, since paragraph 13.I. of the Development Agreement explicitly addressed lot
elevations. Paragraph 13.I of the Development Agreement states as follows:
Developer shall not place any structure at an elevation such that the lowest grade
opening is less than two feet above the highest known surface water level or
ordinary high water level or less than one foot above the 100-year flood level of
any adjacent water body or wetland. If sufficient data on high water levels is not
available, the elevation of the line of permanent aquatic vegetation shall be
used as the estimated high water elevation...
I -lad the City and Gold Key intended for Gold Key to have a continuing obligation to adjust the
lot elevations for structures if "new" information was uncovered years later, then the parties
would have included paragraph 13.I. under the "continuing obligations" portion of the
Development Agreement cited by the City. They did not, because they did not intend that there
be a continuing obligation in this regard because everyone recognizes that it is expensive,
illogical and unfair for a developer to rip apart a development after the infrastructure has been
built. (See Nafstad Depo. at 82; Kruse Depo at 143) In any event, as set forth in exhaustive
detail in Gold Key's Memorandum in Support of its Motion for Partial Summary Judgment,
Gold Key has complied with paragraph 131 of the Development Agreement, and City
Ordinances, regarding lot elevations.
Finally, the language that the City points to about the alleged continuing obligation for
Gold Key merely states that if issues arise regarding grading, drainage, utility, wetland
mitigation, and transportation, those issues are subject to review and approval by the City
Engineer. Gold Key is not representing that it will be in continuing compliance with all City
Ordinances, based on new information, for all of time. There is no breach by Gold Key under
this provision.
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II. THE CITY OF ALBERT'VILLE CAN BE ESTOPPED FROM ENFORCING THIS
ORDINANCE IN THIS CASE.
The City argues a municipality cannot be estopped from enforcing an ordinance even if
the property owner relied to his detriment on prior municipal action, and that Gold Key's
estoppel claims should therefore be dismissed. The City relies primarily upon The City of Prior
Lake v. Harbor Lake ]development Co. to support its position that in this case, the City cannot be
estopped from enforcing its ordinances against Gold Key as to Prairie Run, even though there is
a signed Development Agreement, and even though both the Planning Commission and the City
Council approved the plats. Harbor Lake is easily distinguished from this case. In Harbor Lake,
the City of Prior Lake issued a citation to a developer for violating its PUD use ordinance by the
implementation of a boat launching system on the developer's PUD property. Prior Lake
obtained a permanent injunction requiring the developer to remove the boat launching system
from its PUD. The developer argued that the City was estopped from enforcing its ordinance,
because the city had approved the use of the boat launching system. However, significantly, the
city council had not approved the boat launching system. The "approval" that the developer
argued it was relying upon was merely the verbal approval by one city official and another city
official seeing the boat latmching system after it was built and doing nothing about it. The Court
of Appeals held that the developer did not meet the criteria for estoppel because there was no
evidence of misconduct by Prior Lake, or reasonable reliance by the developer.
Unlike Harbor Lake, in this case affirmative governmental misconduct and reasonable
reliance upon that conduct by Gold Key exists. The City affirmatively approved the Plat of
Prairie Run. It was not approved through mistaken conduct or inadvertence, as would be the
case if the City just overlooked the plat submissions and they were automatically deemed
approved pursuant to Minn. Stat. § 462.358, subd.3b, by virtue of the City's inaction. The Plat
of Prairie Run was approved after a process that lasted at least 18 months (from the initial
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concept plan in early 2003 through final plat approval in .tune 2003) and during which time the
City's "development team" met to discuss the project frequently and during which time many
emails, memos, reports, plans and other documents were exchanged among the members of the
development team and with Gold Key and Hedlund. The City Administrator admitted that it was
reasonable for Gold Key and Hedlund to assume that the plans they submitted had been reviewed
and approved by the City Engineer. (Kruse Depo at 42, 92-93). The City Planner and the City
Attorney had undertaken their own assessment of the grading and drainage plans submitted by
Gold Key and determined that they complied with City ordinances and subdivision ordinances.
(Kruse Depo at 43, 77-78). Not only did the City take affirmative action when it initially
approved the plat of Prairie Run, but the City and the City Engineer engaged in a second and
third review of the approved plans when it issued building permits and certificates of occupancy.
Clearly Gold Key was relying in good faith upon affirmative action taken by the City of
Albertville. And, significantly, Gold Key developed the property exactly in accordance with the
approved plans. (Unlike the Harbor Lake case, where the basis of the developer's argument was
a boat launching system which was not shown on the plans that were approved by the City of
Prior Lake).
It is undisputed that Gold Key and the various builders have committed substantial
resources in reliance upon the City's approval of the Plat of Prairie Run. The entire
development's infrastructuue — roads, sewers, ponds — have been developed. Gold Key has
committed millions of dollars to the development of Prairie Run. (Johnson Aff. ¶2, 3 and 4).
Homes have been constructed on Prairie Run by various builders. The physical and financial
obligations that have been incurred are extensive and cannot be used for anything else. (Johnson
APE ¶2). They storm sewer system, roads, and ponds are in place for this particular residential
development, in accordance with the plans that were approved by the City. The City is not
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allowing any type of development to occur in Prairie Run, so it is not like Gold Key can simply
use the property for something else. It is hard to imagine Lhe resources that have been committed
by Gold Key and the builders to be any more substantial than that which they have already
incurred.
The City also string cites several other cases for the proposition that a municipality
cannot be estopped from correctly enforcing its ordinances even if the property owner
detrimentally relied upon prior municipal action. The other cases cited by the City are
inapplicable and distinguishable from this case.
In Prior Lake Aggregrates, /nc. v. Ciry of Savage, 349, N.W.2d 575 (Minn. App. 1984),
the court held that the city council was not estopped from denying a special use permit for an
asphalt plant which was in violation of the city's use ordinances, even though the city had
previously granted a temporary special use permit on the same property to a different applicant
and even though members of the city council had conversations with the applicant about the
applicant's proposed use of the land. The Prior Lake Court noted that the parties did not in fact
rely upon any actions of city council because the conversations with council that they referred to
happened after the parties applied for a special use permit. Here, we know that Gold Key in fact
relied upon the actions of City Council in approving the plat of Prairie Run, because Gold Key
waited until it had such approval before it began spending millions of dollars to develop the
properly, and before it entered into binding contracts with the various builders.
In Jasaka Company v. City of St. Paul, 309 N.W.2d 40, 44 (Minn. 1981), the Minnesota
Supreme Court held that the city was not estopped from halting construction of a radio tower,
even though the city had previously issued a building permit, since the tower encroached 15 feet
onto an unopened public street (which did not conform to the terms of the permit). The Jasaka
Court noted that because the tower was 90% complete, and the property- owner had committed
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$103,000 to the project, if the tower had conformed with the terms of the previously issued
permit and stood entirety upon Jasaka's property, that under the Ridgewood rule, Jasaka may
have acquired a vested right despite the invalidity of the building permit. Here, it is undisputed
that Gold Key's development of the Prairie Run infrastructure conformed exactly with the plans
that were approved by the City, and that Gold Key and the builders have spent millions of dollars
in reliance upon the -same.
Gold Key has already extensively briefed the issue of why estoppel is appropriate in this
case, and why Gold Key is entitled to relief from the moratorium and requirements of the
Ordinances and Development Agreement based upon the logic of Minn. Stat. §462.355, Subd. 4,
the "reasonable reliance" doctrine created by Minn. Stat. §462.358, SUM. 3c (1998) and the
prohibition against retrospective application of laws, or vested rights doctrine. Gold Key hereby
incorporates by reference its Memoranthan of Law in Support of Motion for Partial Summary
Judgment, and refers the Court to pages 41 — 49 therein for the argument regarding estoppel. For
the reasons set forth in that brief, and herein, the City's argument that it is entitled to Summary
judgment as to Gold Key's estoppel claims must be denied.
III. THE CITY IS NOT ENTITLED TO EITHER STATUTORY OR OFFICIAL
IMMUNITY.
The City argues that it is entitled to statutory immunity on Gold Key's claims because
those claims are "based upon the performance or the failure to exercise or perform a
discretionary function or duty". City Memo at 25-26. The City is wrong. The City is not
entitled to immunity on Gold Key's claims because they are breach of contract claims.
McDonough v. City of Rosemount, 503 N.W.2d 493 (Minn. Ct. App. 1993). "A municipality
must perform its valid contracts the same as an individual or private corporation." 10A Eugene
' Ridgewood and the vested rights doctrine is discussed extensively at pp. 41-49 of Gold Key's Memo in Support of
Motion for Partial Summary Judgment, which is incorporated herein by reference.
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McQuillan, The Law of Municipal Corporations § 29.119 (3d ed. rev. vol. 1990); see Ketterer v.
Independent Sch, Dist. No. 1, 79 N.W.2d 428, 435 (1956) (where city enters into contract of
business nature, common principles of law applicable to private persons apply). Gold Key has
two claims against the City: 1) a declaratory judgment action, seeking a determination that the
City has breached the development agreement and that it must issue certificates of occupancy
and building pen -nits; 2) a breach of contract action for damages stemming from the City's
breach of the Development Agreement. Since both of these claims are grotuided in contract, and
not ton, the City is not entitled to immunity.
The cases cited by the City in its brief all involve ton claims brought by a Plaintiff
against a governmental entity. See Nusbaum v. Blve Garth Cotenry, 422 N.W.2d 713 (Minn.
1988) (Motorist injured in one -car accident on comity road sued county and state for negligence
in placement of speed signs); Christopherson v. City of Albert Lea, 623 N.W2d. 272 (Minn. Ct.
App. 2001) (negligence action based upon a municipality's decision not to make major capital
improvements to an existing sewer system is immune from tort liability as a discretionary
function.); Fisher v. Counry of Rock, 596 N.W.2d 646 (Minn. 1999) (A county is entitled to
statutory immunity in wrongful death action when its decision not to install guardrails at an
existing bridge site where a fatal automobile accident occurred is based on both engineering and
policy considerations.); Anderson v. Ciry of ,14inneapolis, 178 N.W.2d 215 (Minn. 1970)
(Plaintiffs, owners of real estate, sued the city of Minneapolis for damages which resulted when
a building permit issued for the construction of a garage was canceled, upon the ground that the
structure involved was of a kind not permitted under the applicable provisions of the
Minneapolis zoning ordinance); _Llohler v. City of St. Louis Park, 643 N.W.2d 623 (Minn. Ct.
App. 2002) (claim against city for negligent misrepresentation for issuance of building permit for
garage barred by statutory immunity). Wilson v. Ramocher, 352 N.W.2d 398 (Minn. 1984)
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(Landowner brought action against city for negligent and unreasonable diversion of surface
waters onto his property.); 11asonick v J.P. Homes, 494 N.W.2d 910 (Homeowners whose house
was damaged in fire brought action against city, alleging city building inspector negligently
issued certificate of occupancy.); IvIcnamara v. McLean, 531 N. W.2d 91 1 (Minn. Ci. App. 1995)
(Sellers of house with failed septic system filed third -party claim against county alleging
negligence in issuing construction permit for the septic system and conducting point -of -sale
inspection of the system.)
The claims brought by Gold Key are breach of contract, not ton claims. Nonetheless, the
City is not entitled to summary judgment in its favor because genuine issues of material fact exist
as to whether the City is immune. A fact issue exists as to whether City failed to provide
relevant information to Gold Key prior to the approval of the plat, when it failed to provide Gold
Key with photographs of the June 2003 Flood event that were taken by Zoning Administrator
Jon Sutherland, and which photographs now are the very basis for the City's moratorium on
development. A fact issue also exists as to whether the City's conduct (in refusing to issue the
building permits and certificates of occupancy and declaring a moratorium) involves a balancing
of policy objectives (which would be immune) or is merely an operational function, which does
not involve the exercise of any discretion, but instead involves merely implementation of a
planning -operational decision. See Sota Foods, Inc. v. Larson -Peterson & Associates, Inc. 497
N.W.2d 276 (material facts in dispute prevent resolution of issue of discretionary immunity on
plaintiffs claim against city and engineers for negligence in desibn of sewage treatment facility
that lacked capacity to handle discharge from plaintiff s plant).
In its brief, the City tries to persuade this court that the actions it took (in imposing a
moratorium in Prairie Run) were discretionary, policy based decisions, by quoting portions of
City Administrator Larry Kruse's deposition testimony about wanting to be "proactive" and that
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its "ultimate responsibility [ ] to protect current and future homeowners." However, the
testimony actually shows, or at the very least there is a genuine issue of material fact, that the
City was merely applying the scientific judgment of the engineers to the criteria for issuance of
building permits and certificates of occupancy. See Sutherland Depo at pp 42 — 43 ("its not
normal to question the engineer. The engineer knows — is qualified and knows what he or she is
doing. So I guess it's — interaction might occur, but its not really a question of the call the
engineer made."). Further, there is a fact question precluding summary judgment because
everyone from the City is pointing fingers and denying that they were even the one that made the
decision to shut down Prairie Run. City Attorney Couri has claimed attorney client privilege and
refuses to testify about the letter. The City's current engineers; Bolton & Menk, say they didn't
make the decision to halt development, that SEH made that decision. SEH's engineers claim that
they did not make the ultimate decision that there were deficiencies in the plat justifying holding
certificates of occupancy and building permits.
So while Gold Key believes it is clear, as a matter of law, that immunity does not
preclude its claims because they are breach of contract claims, even if this Court finds that they
do somehow sound in negligence, genuine issues of material fact exist which would preclude
summary judgment in the City's favor on immunity grounds.
IV. THERE ARE FACT ISSUES PRECLUDING SUMMARY JUDGMENT ON THE
ISSUE OF WHETHER THE CITY IS ENTITLED TO ATTORNEYS FEES
UNDER THE DEVELOPMENT AGREEMENT.
The City asks the Court for summary judgment in its favor on the issue of whether it is
entitled to attorneys fees in this case. In support of its request, the City points to two paragraphs
in the Development Agreement (an indemnification provision and a fees provision) and the case
of YVoodland Developmeni Corporation v. Ciry of Andover, No. A05-1636 , 2006 Minn. App.
Lexis 621 (Minn. App., June 13, 2006).
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There are genuine issues of material fact that preclude summary judgment on this issue.
The fees provision states, 'Developer will pay all reasonable professional fees incurred by the
City as a result of City efforts to enforce the terms of this Agreement." Emphasis added. The
City's request for a determination that it is entitled to fees is premature, as there are genuine
issues of material fact as to whether its actions are reasonable, and whether it even has the right
under the development agreement to shut down the entire development. For the reasons set forth
in great detail in Gold Key's Memorandum in Support of its Motion for Partial Summary
Judgment (and supporting affidavits and documents), the City's actions throughout the approval
process, and continuing through the present with the imposition of the moratorium on
development in Prairie Run, are unreasonable. By way of example, and not meant to be an
exhaustive list, the City's actions have been unreasonable in the following respects!
• The City approved the Prairie Run plat submissions without ensuring that those
submissions received the same engineering review that the City has provided (and requires) for
every other plat in the City of Albertville. The City should have known the engineering review
had not been done because the City did not receive the City Engineer's review memorandum that
it always receives for plats.
• A year and a half after it approved the Prairie Rum plat, and after Gold Key spent
millions of dollars developing the plat in reliance upon the approval, the City then arbitrarily and
unreasonably declared Gold Key to be in default of the development agreement based upon a
100-year elevation "of sorts" that the City knows to be inaccurate, and which number was in the
possession of the City's own engineer at the time of original plat approval. At this point the City
refuses to issue building permits or certificates of occupancy for certain lots it claimed had
elevation issues. After attempting to negotiate a resolution unsuccessfully, Gold Key sued the
City because there was no other choice — the City had shut down building on certain lots in the
development and Gold Key was facing claims from builders as to those lots.
• To further complicate things, on December 1, 2006, dte City takes an even more
unreasonable position — it shuts down development in the entire Prairie Run development,
declaring a complete moratorium on development in Prairie Run, even as to lots that it admits
have no elevation issues, and even though its own engineer admits that no homes are at
elevations that they would actually be flooded. The basis for this moratorium of the City was a
highest known elevation that the City now established, and which elevation was based upon
photographs of the June 2003 Flood Event that were in the City's possession, and which it did
not share with or make known to Gold Key, prior to preliminary plat approval.
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The Cities reliance upon Woodland is misplaced. Although Woodland dealt with a City's
request for fees under a fee provision of a development agreement, it is significant to note that
the Woodland court did not decide the fee issue on a summary judgment motion. Instead, the
court awarded fees following a bench trial and a hearing on attorney fees. In Woodland, the
developer was challenging the amount of assessments and charges imposed by the City in a
development. The court assessed the merits of the developer's claims and ultimately determined
that the developer's claims were without merit. This case is not factually similar to Woodland at
all. Here, we have significant issues of whether the City's actions were unreasonable in the first
place and essentially forced Gold Key to sue the City to move development forward. The fee
issue cannot be resolved until the merits of Gold Key's claims against the City are resolved.
The City seeks a determination as to its entitlement to fees, without telling the Court or
counsel what amount of fees it has incurred (despite the fact that Gold Key has asked for this
amount in discovery, the City has ignored Gold Key's requests and refuses to tell Gold Key the
amount of fees it has incurred). Although the City states that that it would make an appropriate
motion to the court at a later time as to the amount of the fees, the issue of whether the City's
actions in the first instance were reasonable is so significant that it creates a genuine issue of
material fact and would preclude any award of fees, that the City's request for summary
judgment on the fee issue should be denied.
CONCLUSION
For the reasons set forth herein, there are factual issues which preclude summary
judgment in the City's favor and its motion for summary judgment must therefore be denied in
its entirety.
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JOHNSON, LARSON, PETERSON & MATT. P.A.
Dated: S b
By: �•� GZ d
Cindi S. Man, I.D. # 269359
Anomey for Gold Key Development, Inc.
908 Commercial Drive
Buffalo, MN 55313
(763)682-4550
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STATE OF MINNESOTA DISTRICT COURT
COUNTY OF WRIGHT TENTH JUDICIAL DISTRICT
CASE TYPE: Declaratory Judgment/Breach of Contract
Court Pile No. 86-CV-06-2998
Gold Key Development, Inc., a Minnesota corporation,
Plaintiff,
vs.
City of Albertville,
Defendant/Third Party Plaintiff,
vs.
Short Elliott Iendrickson, Inc.,
Third Party Defendant.
T/C Homes, Inc., a Minnesota corporation,
Plaintiff
Court File No. 86-06-CV-4997
vs.
GOLD KEY'S MEMORANDUM
Gold Key Development, Inc., a Minnesota corporation IN OPPOSITION TO SHORT-
ELLIOTT-HENDRICKS ON' S
Defendant/Third Party Plaintiff, MOTION FOR SUMMARY JUDGMENT
vs.
Hedlund Engineering,
Third Party Defendant,
vs.
City of Albertville,
Defendant/Third Party Plaintiff,
vs.
Short Elliott Hendrickson, Inc.
Third Party Defendant.
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INTRODUCTION
This Court must deny Short Elliot Hendrickson's (hereinafter -SEH") motion for
summary judgment in its favor on Gold Key's negligence and breach of contract claims, based
upon Minnesota case law which allows exactly these types of claims. See Sora Foods Inc. V.
Larson, Peterson & .4ssociares, Inc., 497 N.W2d 276 (Minn. App. 1993). SEH not only had a
duty to Gold Key to review the Prairie Run plat submissions, but also, by SEH's own admission,
it committed a serious error by completely failing to conducL any review of the Prairie Run plat
submissions whatsoever. Minnesota Courts recognize claims virtually identical to the claims
Gold Key and TC Homes have brought against SEH in this case and have held that summary
judgment is inappropriate as to those third party negligence and breach of contract claims against
a city and its engineer.
ADDITIONAL DOCUMENTS RELIED UPON
Affidavit of Cindi S. Matt Opposing SEH's and the City's Motions for Summary
Judgment, and the following exhibits:
A. a true and correct copy of the deposition transcript of Alan BrixiUS ("Brixius
Depo.")
B. a true and correct copy of the deposition transcript of Michael Court ("Couri
Depo.")
2. All documents listed in Gold Key's Memorandum in Support of Gold Key's Motion for
Partial Summary Judgment
MATERIAL FACTS IN DISPUTE AS TO SEWS CLAIM
Gold Key relies upon and incorporates by reference its recitation of the facts, as set forth
in Gold Key's Memorandum of Law in Support of its Motion for Partial Summary Judgment. In
addition, the following clarifications of SEH's Statement of Undisputed Facts are necessary:
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1) SLH memo at 4 — 5: "Hedlund used the line of permanent aquatic vegetation
located on the site to set the 100-year HWL."
• This is inaccurate. Hedlund used the line of permanent aquatic vegetation
to estimate a high water elevation, not to set a 100-year elevation.
2) SEH memo at page 5: "Even though Hedlund used a 100-year HWL based on the
aquatic vegetation line, Hedlund admits that it undertook no investigation through either
the City or Wright County to see if a different 100-year HWL was established in the area of
the Project.
• This is inaccurate. Hedlund did not use a 100-year HWL. ITedlund used
the line of permanent aquatic vegetation as the estimated high water level, as was allowed
by Ordinances and the Development Agreement. Hedlund undertook no further
investigation because Peter Carlson of SEH stated that a Storm Water Management Plan
of the area (therefore no 100-year) had not been done; Albertville was the LGU in charge
of County Ditch 9, and SEH was aware of the use of the permanent line of aquatic
vegetation. (Conway Aff; Johnson Depo at 130-132, 149-150; Gold Key Memo,
footnote 20).
3) SEH memo at page 5: "SEH did not perform a review of Hedlund's calculation of
the 100-year HWL."
• This characterization by SEH is incomplete and does not reflect that SEH, by its
own admission, performed absolutely no engineering review of the Prairie Run plat
submissions, like the review it has done of the plat submissions for virtually every other
plat in the City of Albertville. (Carlson Depo at 20-21, 49-30, 68-69, 83-84, 99-100).
4) SEH memo at page 6: "On October 1, 2004, an official from Wright County Soil
and Water District wrote to SEH, Hedlund and others expressing concern about potential
flooding of the Project from the adjacent County Ditch No. 9. (Markert Aff., Ex. I). After
reviewing the concerns, Randy Hedlund wrote to SEH and Wright County and indicated
that he had taken potential flooding into consideration in his design and declined to revise
the grading plan for the residential portion of the Project."
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• This characterization by SEH is incomplete and does not reflect that
Hedlund actually made revisions based upon SEH's St. Cloud office recommendations,
and further that SEH did not then require further revisions to the grading plan based
upon the 1011104 letter .from YYSWCD. Mr. Hedlund's response to SEA regarding
WSWCD's concern about potential flooding from Ditch 9 was that "potential flooding
from the ditch 9 backup was taken into account when designing the plan. I worked with
your St. Cloud office to come up with minimum elevations for buildings based on the 100
year flood elevations associated with ditch 9." (Markert Aff, Exh. K.)
5) SEH memo at page 7: "Bolton Menk and the City looked into the flooding and
decided to use a 100-year HWL associated with a culvert replacement project on County
Ditch No. 9 that occurred in 2000."
• This characterization by SEH is incomplete and does not reflect SEH's
continued involvement in the decision to hold Gold Key in default of the development
agreement. SEH was still acting as City Engineer on the Prairie Run project until June
2006, and SEH was involved in the investigation of the water on Prairie Run and the
decision to use the culvert study as the 100-year I-IWL. (Moberg Depo at 9-10, 20-23).
• This characterization by SEH is also incomplete in that it fails to point out
to the Court that the "culvert replacement project on County Ditch No. 9 that occurred in
2000" (which is the City's initial basis for declaring Gold Key to be in default of the
Development Agreement) was in SEH's possession as early as July 1, 2003, which is 7
days before the preliminary plat of Prairie Run was approved by the Planning and Zoning
Commission. (Carlson Depo at 73-78).
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LEGAL ARGUMENT
I. GOLD KEY CAN ASSERT A NEGLIGENCE CLAIM AGAINST SEH
A. Minnesota Courts Recognize Third Party Negligence and Breach of Contract
Claims Against An Independent City Engineer.
Minnesota Courts recognize that a negligence and breach of contract action can exist by a
third party against a city engineer. See Soto Foods, Inc. v. Larson -Peterson & Associates, Inc.,
497 N.W2d 276 (Minn. Ct. App. 1993) (material facts in dispute as to whether engineer was an
independent contractor prevented summary judgment as to city engineer in action brought by
plaintiff' against city and city engineer for negligence and breach of contract, as third party
beneficiary, in design of sewage treatment facility that lacked capacity to handle discharges form
plaintiff's plant). here, there are no facts in dispute as to SEH's status as an independent
contractor of the City, as there were in Soto. Indeed, every employee of SEH who was deposed,
SEH's counsel, and the City Administrator all agree that SEH was an independent contractor,
and not an employee of the City. (Carlson Depo at 17 — 18, Kruse Depo at 15; Moberg Depo at
8; Schulz Depo at 9; I ledlund Depo 1 10). As the plaintiff in Soto was allowed to proceed with
its negligence and breach of contract claims against the engineer, so too should Gold Key be
allowed to proceed with its negligence and third party beneficiary contract claims against SEH.
B. SEH Owed A Duty To Gold Key
SETT claims that Gold Key's negligence claim against it fails as a matter of law, based
upon the Cracrafr and Hoffert cases, because SEH owed a duty only to the public and because
SEH had not assumed a private duty to Gold Key. SEH is wrong. As an initial matter, Cracraft
and Hoffert are not controlling, as those cases involve a plaintiff suing a building inspector or
City official for work that was within the city's discretionary function and immune on that basis.
Instead, Soto, discussed above, is controlling and Gold Key should be allowed to proceed with its
negligence and breach of contract claims against SE-H, since Gold Key is suing SEH, an
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independent contractor, for negligence and breach for its complete failure to review plat
submissions in the first place.
In any event, an analysis of the factors set forth in Cracrafr precludes summary judgment
in SEH's favor since, as City Engineer charged with reviewing engineering aspects of a
developer's plat submissions, SEH owed a duty to the developer. further, SEH assumed a
private duty to Gold Key to review Gold Key's plans to ensure that they conformed with City
Ordinances and Subdivision Ordinances, based upon the Cracrafr factors. This Court must
therefore deny SEH's motion for summaryjudgment as to Gold Key's negligence claim.
1. SEH's Duty to Review Plat Submissions Was a Duty Owed to the Developer,
and Not Only to the Public.
SEH argues that it does not owe a duty to Gold Key, the developer, because SEH's '-duty
to review a developer's plans to determine if they conform to subdivision and zoning ordinances
is exclusively a duty to the public — the party whom the ordinances are intended to protect."
SEH is wrong. As City Engineer, SEH's duty to review a developer's plat submissions is a duty
not only to the City and the public, but also to the developer itself. Indeed, this is abundantly
clear from the fact that a developer cannot get final plat approval and proceed with development
unless and until this review is done by the City Engineer, SE-H. (Brixius Depo at 19-20)_ In the
normal review process, the City expects the City Engineer to catch any errors that may exist in
the plans submitted by a developer. (Kruse Depo at 112-113). The City Engineer then typically
issues a review memorandum which sets forth the specific items that a developer would need to
correct before the City Engineer will issue a recommendation that the plat be approved by the
City Council. (Carlson Depo at 20, 118-119, 1330-132, 163, Kawe Depo at 102, 135-136). SEH
recognizes that a developer is relying upon it to review the developer's plans, a$ it normally
copies the developer and the developer's engineer on these review memorandums. (Ilowevcr in
this case, SEH failed to conduct a review and since Gold ICey and Hedlund had not developed
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property in Albertville before, they did not know that this review memorandum was routinely
prepared by SEH).
SET-T likens itself to the building inspector in Hofferr, and argues that like a building
inspector, SEH, as review engineer, only had a duty to the public to determine if the developer's
plans generally conformed to City Ordinances, and that it was not acting as an insurer or
guarantor to individuals that the plans were Cree of error. SEH then points to the provision of
the Development Agreement between the City and Gold Key where Gold Key represents that the
plat complies with City ordinances in general, and argues that this provision `-males it clew- that
any plan review, or lack of review, by SEH does not relieve Gold Key of its duty to ensure that
its plans conform" with City ordinances. SEH memo at page 12. SEI-I's recitation of Gold
Key's obligations under the Development Agreement is a transparent attempt to deflect attention
away from what was SEH's duty to the Developer in reviewing the engineering aspects of plat
submissions. The fact that Gold Key may have had obligations under the Development
Agreement does not take away any duty that SEH has as to the Developer regarding review of
the plat submissions.
This Court must step back and took at what SEH was taking on the duty to do. Without
question, SEH was taking on the duty to conduct so+ne review of the engineering aspects of plat
submissions in general, and this duty was to the developer, who clearly needs and relies upon
this review because the developer cannot get plat approval without the review. In its
memorandum, SEH tries to distract the Court's attention from this clear duty that SEH does not
deny that it has, and instead tries to focus on a more narrowly defined duty to be the guarantor
that a plat is free from all defects. The problem with SEH's argument, that it was not taking on
the duty to act as guarantor of perfection and cannot be held responsible for all defects, is that it
presumes there will be a review done by SEH. This is not a case like Hofferr or Cracrafr, where
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an individual who was not involved in the review process (or inspection, as the case may be)
itself is now coming forward and malting a negligence claim against the reviewer (inspector).
SEH would have a better argument if a homeowner sued SEH for negligence. Then, SEH's
argument that by its review it did not intend to make guarantees to a particular homeowner might
have some merit. But here, where it is the developer making a negligence claim, and where SEH
clearly had a direct duty to the developer to review the developer's plans, a negligence claim
clearly exists.
2. SETS Assumed a Private Duty to Gold Key.
Cracraft is the seminal case that discusses when a municipality (or private entity acting
on behalf of a municipality) assumes a special duty to act for the protection of others, as
distinguished from acting merely for the general public when it inspects the activities of third
parties. The Cracraft court noted that there is no bright line test, and that there are four factors
that should be considered in deciding whether a special duty exists, but these four factors are not
exhaustive and will not be applicable in all situations. Cracrafr, 279 N_W2d 801, 806-807. All
four factors do not necessarily need to be met to establish a special duty. Andrade v. Ellefsan,
391 N.W.2d 836,841 (Mimi. 1986).
The first Cracraft factor requires that the defendant have actual knowledge of the
dangerous condition. In this case, SEH had actual knowledge that the Prairie Run property was
potentially subject to flooding and that the 100-year elevations and known high water levels for
Prairie Run were higher than the elevations of the line of permanent aquatic vegetation.
However, SEH chose not to share its knowledge with Gold Key either prior to plat approval and
prior to the start of development on the property, and instead 5E1-1 let Gold Key proceed with
development of a plat based upon the line of permanent aquatic vegetation. In its memo, SEH
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summarily states that "SEH was unaware of any problems with Gold Key's plans." This could
not be further from the truth. Specifically, SEH was aware of the following:
• a June 2004 Flood Study by SEH, of the June 2003 Flood Event, which set the
100-year flood elevation at 950.9, but which was known to SEH and the City in
September or October of 2003, when it was presented at a City Council Meeting.
(Carlson Depo 87-90; Kruse Depo at 124-125)
• Photographs from the June 2003 Flood, which depicted water lines which
eventually contributed towards establishing a highest known elevation of 951.47.
• a 4/18/01 fax from Virgil Hawkins, Assistant Wright County Engineer regarding a
Risk Assessment for County Ditch #9, referencing a 951.5 100 year elevation for the
culvert under County Ditch 49 at County Road 18 (and showing a date stamp indicating
SEH received this document on July 1, 2003.) This was the same document that was
eventually used by the City as the basis for declaring Gold Key to be in default in
November 2005. (Carlson Depo at 74-76)
• Complaints from 56 homeowners, many in developments that drain into County
Ditch #9, whose homes were damaged or flooded after the June 2003 rain event
(Sutherland Depo at 28, 124). Peter Carlson of SEH was aware of virtually all of the
inspection notices that were prepared as to these homes. (Sutherland Depo at 13, 18-20,
32-34, 50-51, 54, 57-58). This was a significant, devastating rain event for Albertville,
with news media covering the flooding, a three hour citizen forum about the flooding at a
City Council meeting on July 7, 2003, uninhabitable homes, and a great deal of
devastation in the City. (Sutherland Depo at 27, 49-51, 55, 74-78).
• a 7/17/01 letter from Wright Soil & Water warning that " ... its irresponsible to
allow additional developments to fill those areas subject ro flooding or to make changes
to the ditch to improve flows without having a more complete hydrologic study to ensure
safety of the existing structures." (Kuboushek Aff, Exh I5).
• a 8/12/02 letter from Collen Allen (Wright Soil & Water) to the City warning of
serious potential for future flooding problems in Albertville because of new development
problems, which stated " ... I would like to rake this opportunity to alert your to a very
serious problem that we feel is developing in Albertville. Our office feels very strongly
that there is a serious potential for future flooding problems to occur in Albertville... YVe
are aware that plans are in process for several more development projects and feel that
further development will aggravate the problem unless corrective measures are taken.
We feel that the capacity for the downstream outlets to handle the increased storm -wetter
is poorly understood... In order to identify the capacity of the storm water system and to
identify remaining opportunities for management, we suggest that the city have a
comprehensive hydrologic analysis of the watershed conducted." (Kuboushek Af£, Exh
61).
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Despite having this information, the City and SEII did not share it with Gold Key and
Hedlund, and instead approved the Plat and grading plans for Prairie Run with the line of
permanent aquatic vegetation being used as the estimated high water level. Clearly SEH's
knowledge of this information weighs in favor of finding that SEH assumed a special duty m
Gold Key under the first Cracraft factor.
The second Cracraft factor to consider in deciding whether a special duty was assumed
requires reasonable reliance on specific representations or conduct of the defendant. Such
reliance must be based on specific actions or representations of the defendant which cause the
plaintiff to forego other alternatives of protection. In this case, Gold Key relied upon
representations by SEH and the City that SEH would provide Gold Key with any information it
had that would be pertinent to elevations and development of the plat of Prairie Run and that
SEH would perform an engineering review and approval of Gold Key's plat submissions.
Specifically, Gold Key relied upon the following representations and conduct:
• City Engineer Peter Carlson stated to Gold Key's realtor, Kevin Conway, very
early on in the development process, that the Albert Villas development and the property
that would become Prairie Run were in the same watershed, and that no storm water
management plan or study existed for the area (therefore there was no 100-year elevation
established)_ (Conway AM, Johnson Depo_ At 130-132, 149-150).
• Throughout the first few months of 2001, Dean Johnson had several meetings
with City staff, including Peter Carlson, Linda Goeb, Michael Couri, and Alan Brixius,
about the concept plan, during which time the use of the line of permanent aquatic
vegetation as the estimated high water level was discussed. Peter Carlson raised no
issues or objections as to this measure of the estimated high water level and therefore
Gold Key proceeded based upon SEH's implicit approval.
• The 6/25/03 Planning Report regarding the preliminary plat of Prairie Rum listed
as a condition that "The submitted grading and drainage plan will be subject to review
and approval by the City Engineer." (Mart Aff, Exh J.) Peter Carlson of SEH was
copied on this report and did not tell anyone from the City or Gold Key that he would not
be reviewing Gold Key's grading and drainage plans, or that he had any issues or
problems with the plans that were submitted.
• Gold Key and its engineer, Hedlund, had dozens of conversations with Peter
Carlson, Jim Schutz, Todd Udvig and others from SEH about Prairie Run and not once
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during any of these conversations did SER tell Gold Key or Hedlund that SEH was not
acting as the review engineer for the City.
• Not once during the dozens of conversations that Gold Key and Hedlund had with
SEH did SEH tell Gold Key or Hedlund that the line of permanent aquatic vegetation was
not the appropriate measure of the estimated high water level.
• In November 2003, Hedlund's office contacted SEH to get SEH's comments
regarding the requirements for the ponds and what size storm they have to hold on the
development, and minimum depth of overflow compared to house pads. SEH did not tell
Hedlund that it would not be conducting a review of the plans.
• In April 2004, Randy Hedlund was called by Jim Schulz of SEH regarding
concerns that Jim Schulz had about the grading plans. (Hedlund Depo at 78-81). In
response to Jim Schulz' concern about the grading plans, and at his request, Randy
Hedlund revised the grading plans to raise the elevation of the building pads on 1 1 lots in
Prairie Run.
• Not once during the dozens of conversations that Gold Key and Hedlund had with
SEH did SEH provide Gold Key or Hedlund with any information that would be useful to
Gold Key and Hedlund in establishing elevations for Prairie Run, despite the fact that
SEH had in its possession the June 2004 Flood Study, photographs from the June 2003
rain event, and the 4/18/01 fax from Virgil Hawkins stating the 951.5 culvert elevation.
• On 6/2/04 the City Planner issued a Memorandum regarding final plat approval.
Significantly, the preliminary plat condition regarding the grading and drainage plan
being subject to review and approval by the City Engineer was no longer mentioned and
was not a condition being recommended for final plat approval. Peter Carlson did not tell
anyone from Gold Key that SEH had not, in fact, reviewed the plat submissions and
instead he allowed Gold Key and the City to proceed to final plat approval as if the plans
had been reviewed_
• At the June 7, 2004 City Council meeting, the City approved the final plat of
Prairie Run. (Kruse Depo at 41-42). Despite recognizing that it would be important for
the City Council to know that the City Engineer had not yet reviewed grading and
drainage plans prior to final plat approval, and despite recognizing that once a final plat is
approved a lot of people are going to spend a significant amount of money grading and
developing the property based upon the approved final plat, City Engineer Peter Carlson
failed to stand up at the City Council meeting and let the City Council, Gold Key, or
anyone else know that SEH had not yet reviewed the grading and drainage plans.
Gold Key's reliance upon the actions/inactions and representations of SEH was
reasonable. The City Administrator testified that a developer and developer's engineer can
assume that the review by the City Engineer has been done by the time of final plat approval.
(Kruse Depo 37-40). SEH's actions and representations, set forth above, caused Gold Key to
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forego further investigation and or determination as to a differing elevation that would govern
development.
The third Cracraft factor may create a duty of care by an ordinance or statute that sets
forth mandatory acts clearly for the protection of a particular class of persons rather than the
public as a whole. At page 11 of its memo, SL-H quotes from the City's subdivision ordinance
and states that the ordinance was generally enacted by the City to benefit the public. While it is
certainly true that the general intent of the subdivision ordinance as a whole is to benefit the
public, the ordinances governing the procedures for plat approval benefit a developer, who
cannot proceed with development in a plat without the required reviews and approvals. See City
Ordinance 2700 regarding the procedure for Planted Unit Developments.' In any event, this
factor is not diapositive. All four factors do not need to be met for a special duty to exist.
1Indrade 391 N.W.2d at 841; Cracraft 279 N.W.2d at 806.
' 2700.4: PROCEDURE FOR PROCESSING A PLANNED UNIT DEVELOPMENT:
11 x :,
3. Review And Action By City Staff And Planning Commission:
a. Immediately upon receipt of a completed development stage plan, said plan shall be referred to the
following city staff and/or official bodies for the indicated action-
(i) The city attorney for legal review of all documents.
(2) The city engineer for review of all engineering data and the city/developer agreement.
(3)'rhe building official for review of all building plans.
(A) The zoning administrator or his agent for review of all plans for compliance with the intent, purpose
and requirements of this ordinance and conformity with the general concept plan and comprehensive plan.
(3) The planning commission for review and recommendation to the council.
(6) When appropriate, as determined by the zoning administrator, to other special review agencies such as
the watershed districts, soil conservation services, highway departments or other review agencies and
vovernmenial jurisdicrions.
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The fourth Cracraft factor to consider whether a special duty exists requires an analysis
of whether the defendant has increased the risk of harm. As a result of SEI1's implicit approval
of the Prairie Run plat based upon the line of permanent aquatic vegetation, development of the
infrastructure of Prairie Run, and eventually the homes in Prairie Run, proceeded. Without
review of plat submissions by the City Engineer, the developer could not get plat approval.
Clearly then, the situation that now exists on Prairie Run would not exist but for the actions of
SEH in approving (albeit silently) the Prairie Run plat submissions and this factor also weighs in
favor of finding that a special duty exists.
An analysis of the Cracraft factors makes it abundantly clear that in this case SEH had a
special duty to Gold Key to review the engineering aspects of the Prairie Run plat submissions.
Therefore, SEH's motion for summary judgment as to Gold Key's negligence claim must be
denied-
Q. GOLD KEY IS A THIRD PARTY BENEFICIARY Or, THE CONTRACT
BETWEEN SEH AND THE CITY
SEH argues that Gold Key cannot maintain a breach of contract action against it because
Gold Key cannot establish that it is a third party beneficiary of the contract between SE-H and the
City. SEH bases its argument on two faulty propositions. First, SEH focuses on the written
"Services Agreement" entered into between the City and SEH in 1994 and argues that under this
agreement, Gold ICey cannot be a beneficiary because of a non -beneficiary clause. The contract
between the City and SEH as to SEH's review of plat submissions was oral, and was not
governed by the written "Services Agreement." Z Second, SEH focuses on the contract being
2 SEH attempts to focus the Court's attention on the written contract between the City and SEK signed in 1994,
pointing to a non -beneficiary clause in said contract as a basis for SEH's claim that Gold Key cannot go forward
with its third party beneficiary breach claim. Flowever, the written contract that SEH refers to does not govern
SEH's duty to review plat submissions. As Peter Carlson of SEH testirted, this duty to review plat submissions was
not part of the written contract between the City and SEH because "it's so interwoven in all of the either discussions
with city council or city staff that they wanted the city engineer to review plans". Instead of being part of the
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about SEl-1's role as City Engineer in general, arguing that Gold Key was not intended to be a
beneficiary of SEH performing its general role as City Engineer. As discussed below, as to the
specific agreement between the City and SEH that SE-1-1 would conduct an engineering review of
the developer's plat submissions for all plats in the City of Albertville, developers in general, and
Gold Key specifically as to Prairie Run, were clearly intended to be a beneficiary.
The Minnesota Supreme Court, in setting forth criteria for the recognition of third -party
beneficiary rights, has adopted the "intended beneficiary" approach outlined in the Restatement
(Second) of Contracts § 302 (1979). Crerex Companies v. Constuction Leaders, 342 N.W.2d
135, 139 (Minn. 1984). A third party may recover as an intended beneficiary by satisfying either
the "intent to benefit" or "duty owed" test. Id. Gold Key meets the intended beneficiary
approach set forth in Cretex Companies v. Construction Leaders, 342, N.W M 135 (Minn.
1984), when one examines either the "intent to benefit" or the -duty owed" test. Therefore,
SEII's motion for summary judgment must be denied.
A. Gold Key Meets the "Intent -to -Benefit" test
Gold Key was an intended beneficiary of the contract between SEH and the City, which
required SEH to review the engineering aspects of a developer's plat submissions. To establish
an intent to benefit, the contract must express some intent by the parties to benefit the third party
through contractual performance. Crerex. at 138. Any intent to benefit a third party must be
found in the contract as read in light of all the circumstances at the time of contracting.
Concordia Coll. Corp. v. Salvation Army, 470 N.W.2d 542, 545 (Minn. Ct. App. 1991). When
reviewing a contract for the purpose of determining whether a third party has established third -
party beneficiary rights, all the circumstances surrounding the contract should be considered.
formal, written contract, the review of plat submissions was part of an oral contract, done "at the behest of the city
council." (Carlson Depo at 169 - 170). Therefore, the non-bcne Gciary clause that SEH rcl5ers to is nor applicable.
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The absence of the third party's name does not preclude a finding of an intent to benefit a third
party if the circumstances show otherwise. Chard Really, Inc. v. City of Shakopee, 392 N.W.2d
716, 720-21 (Minn- Ct. App. 1986).
In this case, the contract between the City and SEH required SEH to review the
engineering aspects of the preliminary and final plat submissions [or all plats in the City of
Albertville, including grading, drainage and storm sewer plans.' (Carlson Depo at 12, 18-21, 44-
45, 49-50, 69, Kruse Depo at 20-24, 131-132; Sutherland Depo at 60-61, 63, 71-73, 81-83.)
SI I-T was expected to review all plat documents, without having to specifically be requested to
do so by the City. (Kruse Depo at 21. 86-87; Carlson Depo at 165-166). The City expected that
this review by SE11 would be done before preliminary plat approval, but in all cases before final
plat approval. (Kruse Depo at 27, 36-37). The City agreed that a developer and developer's
engineer could also assume that the review by SEH has been done by the time of final plat
approval. (Kruse Depo at 37-40). The purpose of the review by the City Engineer is to be sure
the submitted plans complied with City Ordinances and Subdivision Ordinances. (Carlson Depo
at 18-21, 153, 160, 163; Moberg Depo at 57-58). The City expects that during the engineering
review SEH would catch any errors that may exist in the plans submitted by a developer and its
engineer. (Kruse Depo at l 12-113). Without this engineering review by SEH, a developer could
not get final plat approval. (Brixius Depo at 19-20). Because the City and SEH clearly intended
that a developer would benefit from SEH's engineering review (because the developer could not
get final plat approval without the City Engineer's review) there is clearly no genuine issue of
' This duty to review plat submissions was not part of the written contract between the City and SL-I-I because `it's
so interwoven in all of die either discussions with city council or city staff that they wanted the city engineer to
review plans'. Instead of being part of the formal, written contract, the review of plat submissions was part of an
oral contract, done `at the behest of the city council" (Carlson Depo at t69 — 170).
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material fact as to whether Gold Key was an intended beneficiary of the contract between the
City and SEH and therefore SEH's motion for summary judgment in its favor must be denied.
At a minimuun, there is a question of fact as to whether the contract between SL-`H and the
City was intended to benefit Gold Key, since whether the contract intended to benefit a third
party is a question of fact. See Julian .Iohnson Const. Corp v. Parranto, 352 N. W.2d 808, 811
(Minn. Ct. App. 1984). Therefore, in any event, SEH's motion for summary judgment must be
denied
B. Gold Key Meets the Duty Owed Test
The second test is the "duty owed" test. Third parties can still recover as intended
beneficiaries if there is a duty owed to the beneficiary or the promisee intends that the
beneficiary receive a benefit. Concordia Coll. Corp., 470 N.W.2d at 545. To establish a duty
owed, the promisor's performance under the contract must discharge a duty otherwise owed the
third party by the promisee. Id.
In this case, the City owed a duty to Gold Key to review, or have the City Engineer
review, various aspects of Gold ICey's plat submissions to determine whether they complied with
the City's Ordinances and Subdivision Ordinances. The City's own Ordinances contemplated
this review by the City Engineer on behalf of the City. for example:
• City Ordinance 11-7-12: "A. Storm Water Pollution Control Plan. A storm
water pollution control plan shall be submitted for review and approval by the city
engineer for subdivision applications for projects containing five (5) acres or more of
land ... C.2_ All calculations and hydrologic models/information used in determining
peak flows shall be submitted along with the storm water pollution control plan .... F.
Models/Methodologies/Computations' Hydrologic models and design methodologies
used for determining runoff characteristics ... shall be approved by the city engineer "
• City Ordinance A-500.2: -Preliminary Plat ... The preliminary plat shall contain
the information set forth in the subsections which follow: (c)(14) Storm Water Pollution
Control Plan. A storm water pollution control plan shall be submitted for review and
approval by the City Engineer...
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• City Ordinance 11-4-3: "Final Plat... Upon receipt of the final plat, the city
administrator shall refer one copy each to the ... appropriate city staff... 3. The city
staff receiving final plat copies shall submit reports through the city administrator to the -
city council within fifteen (15) days, expressing their recommendation on the final plat."
SET-T's engineering review of the Gold Key's plat submissions, as required by the terms
of the contract between the City and SEH, would discharge the City's duty to Gold Key (as set
forth in the City's own ordinances). Therefore, under the duty owed test, Gold Key would be a
third party beneficiary of the contract between SEH and the City.
Minnesota Courts recognize that a third party may be an intended beneficiary of a
contract between a municipality and an engineer. See Sota Foods, Inc. v. Larson -Peterson &
Associates, Inc., 497 N.W.2d 276 (Minn. Ct. App. 1993) (material facts in dispute prevented
resolution of discretionary immunity issue as to both city and engineers in action brought by
plaintiff against city and engineers for negligence and breach of contract, as third party
beneficiary, in design of sewage treatment facility that lacked capacity to handle discharges form
plaintiff's plant). Because Gold Key was clearly owed a duty by SEH, SEH's motion for
summary judgment on the basis that Gold Key is not an intended beneficiary must be denied.
CONCLUSION
Contrary to SEH's assertion, the undisputed facts establish that SEH did owe Gold Key a
duty to conduct an engineering review of Gold Key's plat Submissions and that Gold Key was an
intended beneficiary of the contract between the City and SEH and therefore SEH's motion for
summary judgment as to Gold Key's negligence and breach of contract actions must be denied.
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JOHNSON, LARSON, PL-TERSON & MATT, P.A.
� C J
Dated: S~ Sk' By: L�
Cindi S. Matt, I.D. # 269359
Attorney for Gold Key Development, Inc.
908 Commercial Drive
Buffalo, MN 55313
(763) 682-4350
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STATE OF MINNESOTA DISTRICT COURT
COUNTY OF WRIGHT TENTH JUDICIAL DISTRICT
CASE TYPE: Declaratory Judgment/Breach of Contract
Court File No. 86-CV-06-2998
Gold K-ey vevelopment, Inc., a rvttnnesota corporation,
Plaintiff,
vs.
City of Albertville,
DefendanvThird Party Plaintiff,
vs.
Short Elliott Hendrickson, Inc.,
Third Party Defendant.
T/C Homes, Inc, a Minnesota corporation,
Plaintiff,
Court File No. 86-CV-06-4997
VS.
AFFIDAVIT OF CINDI S. MATT
Gold Key Development, Inc., a Minnesota corporation
Defendant/Third Party Plaintiff,
vs.
Hedlund Engineering,
Third Party Defendant,
VS.
Ciry of Albertville,
Defendants/Third Party Plaintiff,
VS.
Short Elliott Hendrickson, Inc.
Third Party Defendant.
N1AY-05-2007 09:21 FROM-JOHNSON LARSON PETERSON & MATT PA +7636824465 T-924 P 043/043 F-796
STATE -OF MINNESOTA )
) ss
COUNTY OF WRIGHT )
Cinch S. Man, being first duly sworn on oath, deposes and states as follows:
1. I am an attorney with the law firm of Johnson, Larson, Peterson & Man, P.A., and am the
attorney representing Gold Key Development, Inc. ("Gold Key"), in the above captioned
matter. I make this Affidavit in Opposition the City of Albertville and Short -Elliott -
Hendrickson, Ine.'s Motion for Summary Judgment.
2. Attached hereto as Exhibit A is a true and correct copy of the deposition transcript of
Alan Brixius.
3. Attached hereto as Exhibit B is a true and correct copy of the deposition transcript of
Michael Couri upon Written Questions.
Further your affant sayeih not.
Dated:
Cindi S. Matt
Subscribed and sworn to before me
this day of May, 2007.
Notary Public