Dr. Martin Hinz; Neuroresearch *
In this diversity case, Dr. Martin Hinz and Neuroresearch Clinics, Inc.
A jury returned a verdict for Hinz
developed the D5 product series, including D5, D5 Extra, and D5 Mucuna
to treat neurotransmitter dysfunction.
The primary ingredient in D5 Mucuna was
Mucuna pruriens; the primary ingredients in D5 were L-Dopa (from standardized
Mucuna pruriens) and 5-HTP.
and Kellermann reached a Joint Working Agreement on October 14, 2001.
a royalty rate of 43 percent per product.
In August 2002, Hinz and Kellermann created Neuroscience, Inc. to develop
agreed to pay Hinz
royalty rate and salary, in addition to business expenses.
On November 30, 2002,
Neuroscience, while Hinz started Neuroresearch Clinics, Inc.
contacted all the customers in its database to persuade them to stay with
it. About 80 percent of the customers were contacts brought to Neuroscience by Hinz,
In January 2003, Kellermann sued Hinz; Hinz
specifically prohibited by this agreement for which [Hinz] had been paid
royalties in the past.
Four months later, Hinz
sued Kellermann for breach of the settlement
court granted judgment as a matter of law on damages, concluding Hinz
reasonable basis for the calculation of damages.
However, the court denied
Kellermanns motion for new trial, ruling it untimely.
and (4) denying Hinz
a permanent injunction, pre- and post-judgment interest, and
attorneys fees and costs.
Kellermann cross-appeals, objecting to the use of parol
Hinz argues Kellermann failed to comply with the particularity requirement
of Rule 7(b) of the Federal Rules of Civil Procedure in his
Kellerman provided the district court and Hinz
with notice, and Hinz
To prove damages, Hinz
must demonstrate by a preponderance of evidence that:
(a) profits were lost, (b) the loss was directly caused by the breach . . ., and (c) the
that (1)Hinz and Kellermann are competitors in a two-player market, (2) Kellermann
alleges this evidence demonstrates that his
insists that from September 2002 to August 2003, before the settlement agreement, he
had a 88.2 percent growth rate in actual revenues.
For the three years after the
settlement agreement, the growth rate was 28.4 percent (September 2003 to August
2004), 10.5 percent (September 2004 to August 2005), and 18.8 percent (September
2005 to August 2006).
would have maintained a growth rate of
816. Second, Hinz
did not introduce his
or Kellermanns customer lists, or show
is not entitled to pre- or post-judgment interest.
See Minn. Stat.
549.09; 28 U.S.C. 1961.
breaching products could have sustained the same growth rate over the time period,
and thus, Kellermanns breach would not affect Hinz
See Faust v. Parrott, 270
N.W.2d 117, 121 (Minn. 1978) (stating on remand that the plaintiff may recover
damages only if the profits they lost are a direct result of defendants competitive
did not introduce evidence of the market industry or the
relative growth rate of the market over the time period.
Because this is a relatively
new market, it is hard to discern how much of a growth rate is expected.
had a growth rate of 172.2 percent in September 2001 to August 2002.
172.2, 88.2 or 18.8 is typical of the market was uncertain and speculative.
Cardinal Consulting Co.
v. Circo Resorts, Inc., 297 N.W.2d 260, 267 (Minn. 1980)
(recognizing it is more difficult to prove loss of prospective profits to a new business
than to an established one).
Based on the evidence, Hinz
did not present a reasonable basis for calculating
The district court did not err in reversing the damage award.
299 N.W.2d at 419.3
argues the district court erred by excluding from the jury instructions the
concept that other proper measures of damages for Kellermanns breach included
Kellermanns profits and the royalty rate paid to Hinz
lost because Dr. Kellermann breached the settlement agreement. .
prospective customers of Hinz
measure of damages is the royalty rate previously paid to Hinz
the law, aiming at compensation, . . . considers it fair to hold a defendant for damages
which as a reasonable man he
ought to have foreseen as likely to follow from a
agreement (Hinz and Kellermann expressly agreed to terminate the Joint Working
Agreement, which required royalty payments to Hinz), it is unfair to instruct that
has not shown that he
has suffered, or will
suffer, any other type of injury.
Based on the record, this court agrees.
fails to show irreparable injury, he
is not entitled to a permanent injunction.
To the extent it becomes necessary for the Defendant [Hinz] . . . to seek
The question is whether Hinz
prevails under the settlement agreement.
As discussed, Hinz
did not provide a reasonable basis for his
damages, and thus,
breach-of-contract claim fails as a matter of law.
See Jensen, 688 N.W.2d at 578-
79. Because he
did not prevail under Minnesota law, he
is not entitled to attorneys
fees and costs.