25th Street Group Apartments #1, LLC v. Bremer Bank, National Association

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
EASTERN DIVISION
25th Street Group Apartments #1, LLC,
Plaintiff,
vs.
Bremer Bank, National Association,
Defendant.
MEMORANUDM AND ORDER
Case No. 3:20-cv-167
Before the Court are two motions. The first is a motion for partial summary judgment filed
by Plaintiff 25th Street Group Apartments #1, LLC, (“25th Street”) on September 2, 2021. Doc.
No. 33. On September 23, 2021, Defendant Bremer Bank, National Association, (“Bremer”) filed
a response in opposition to the motion. Doc. No. 42. 25th Street filed its reply. Doc. No. 51. The
second motion is Bremer’s motion for summary judgment, filed on September 3, 2021. Doc.
No. 38. 25th Street filed a response in opposition on September 24, 2021. Doc. No. 43. Bremer
filed its reply. Doc. No. 54. For the reasons below, the Court denies 25th Street’s motion for partial
summary judgment (Doc. No. 33) and grants in part and denies in part Bremer’s motion for
summary judgment (Doc. No. 38).
I. 	BACKGROUND
The case before the Court centers on the termination of an interest-rate swap agreement
between 25th Street and Bremer and the resulting commercial dispute over the terms of that
agreement. In basic terms, the parties to an interest-rate swap agreement essentially “swap” interest
rates, or more specifically, swap payments that are based on interest rates. Doc. No. 48-1, p. 20.
In some cases, an interest-rate swap is used in conjunction with a loan agreement. Here, 25th Street
entered into a loan agreement with Bremer. The loan agreement had a variable interest rate, which
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was higher risk than a fixed interest rate. To mitigate that risk, 25th Street and Bremer entered into
an interest-rate swap agreement. This interest-rate swap agreement essentially transformed 25th
Street’s interest rate from a variable rate to a synthetic fixed rate. 25th Street eventually terminated
the swap and, as a result, incurred a fee. With this general background in mind, a brief introduction
of the parties is necessary.
25th Street is a North Dakota limited liability company and has its principal office in Fargo,
North Dakota.1 Doc. No. 1-3, ¶ 2. Richard Jordahl and Brent Olson are members of 25th Street.
Doc. No. 67, p. 5. Jordahl is also the President of 25th Street. Doc. No. 42-3, p. 7. Jordahl has
more than 10 million dollars in investments, which include, among other things, investing in
farmland and buying and developing land with apartment buildings or rental properties. Doc.
No. 67, pp. 6, 9. Additionally, Jordahl is involved in “a number of different entities,” including at
least a dozen limited liability companies, and about half of the entities Jordahl is involved in
include Olson. Id., p. 6. Olson, a certified public accountant with an active license, serves as the
secretary/treasurer of 25th Street. Doc. No. 48, pp. 17-20. Olson has been a part of more than 60
business entities and has more than 10 million dollars in investments. Doc. No. 40-3, p. 6, 44.
Bremer is a banking corporation and has its principal office and place of business in Saint
Paul, Minnesota, with branch offices in Fargo, North Dakota. Doc. No. 1-3, ¶ 3. Vassil Zanev is a
Bremer employee and currently the director of capital markets, and he has, throughout his time
with Bremer, worked on swap agreements. Doc. No. 48-1, pp.17-18. Jennifer Carlier is another
Bremer employee, who works with Zanev in the capital markets department and is currently the
1 As alleged, 25th Street is the “survivor of a merger between 25th Street Group Apartments
#1, LLC and 25th Street Group Apartments #2, LLC.” Doc. No. 1-3, ¶ 2. 25th Street also alleges,
and Bremer does not dispute, that while 25th Street’s “cause of action arose before the merger was
complete,” 25th Street is qualified to bring claims as a successor-in-interest. For ease of reference,
the Court will simply refer to the Plaintiff as 25th Street.
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vice president capital markets associate. Doc. No. 48-2, p. 20. Jessica Broers is a business banker
for Bremer and works on commercial loan requests. Doc. No. 24-1, p. 19. According to Broers, if
a client is interested in a swap, she pulls in Zanev and Carlier and serves as a connection between
the client and the “swap department.” Doc. No. 28, p. 22. Broers also works on client relationships.
Doc. No. 24-1, p. 19.
A. 	25th Street finances with Bremer
Broers has worked with both Jordahl and Olson on different financing transactions in the
past. Doc. No. 28, pp. 23-24; Doc. No. 48, p. 27. In early 2017, Jordahl and Broers were working
on separate financing unrelated to this case. See Doc. No. 48, p. 27. At the same time, 25th Street
was seeking permanent financing to replace an existing construction loan. Doc. No. 42-3, p. 5. At
some point, Jordahl and Broers discussed financing for 25th Street.2 Doc. No. 48, p. 27. Broers
represented that Bremer had “a fixed-rate product on a ten-year fixed,” according to Olson. Id.
Olson explained that this “seemed to be a good deal” so 25th Street “explored a fixed-rate loan
with Bremer.” Id.
25th Street ultimately decided to pursue financing with Bremer. When asked why, Jordahl
explained, “[Olson] and I discussed it, so it was kind of a mutual thing. But [Olson] does a lot of
this stuff. [Olson’s] a real smart guy, kind of educated . . . he’s the CPA guy[.]” Doc. No. 67, p. 7.
2 According to Olson, Broers “solicited” 25th Street’s business. Doc. No. 48, p. 27. Broers, on the
other hand, testified that she did not remember who brought up the possibility of using a swap
agreement first. Doc. No. 28, p. 38.
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As part of this financing, 25th Street and Bremer entered into a loan agreement and a swap
agreement on June 26, 2017.3 Doc. Nos. 65-1, 65-2.
The Loan Agreement
The loan agreement consists of several documents—the loan, the note,4 and collateral
documents5 (together, the “Loan Agreement”). See Doc. No. 65-1, p. 88. Under the Loan
Agreement, Bremer agreed to make a single advance to 25th Street of $12,800,000. Id., p. 84. The
interest rate under the Loan Agreement was a variable rate based on the ICE London Interbank
Offered Rate (“LIBOR”) plus 2.10%.6 Id., p. 103. 25th Street, however, wanted a fixed interest
rate. See Doc. No. 48, p. 32. To reach that end, 25th Street and Bremer created a synthetic fixed
rate by entering into a swap agreement.
In entering into the swap agreement, Bremer wanted to ensure “the loan is structured
exactly as the swap is,” according to Zanev. Doc. No. 48-1, p. 31. Part of this process included
having Bremer’s “swap counsel do a review as well and make sure that everything related to the
swap is included appropriately in the [Loan Agreement].” Id. Indeed, the Loan Agreement
expressly contemplates the parties entering into a swap agreement. For example, under the Loan
Agreement, a condition precedent to an initial monetary advance is “an independent ISDA swap
3 According to James Lovely, a private consultant, 25th Street “in general viewed the swap and
loan as an economic package” even though the loan agreement and swap agreement are “separate
contracts.” Doc. No. 42-2, pp. 20, 22. The loan agreement and swap agreement were both
negotiated in North Dakota. Doc. No. 43, p. 14.
4 The “note” is a promissory note payable to Bremer, containing the terms relating to the
repayment, interest rate and other matters. Doc. No. 65-1, p. 84.
5 The loan defines the “collateral documents” as “the Mortgage, Assignment and any other loan
and collateral documents referred to in Section 3.1.” Id., p. 83. In this case, the collateral for the
Loan Agreement is located in North Dakota. Doc. No. 43, p. 14.
6 The LIBOR is the “interest rate high-credit quality banks charge one another for short-term
financing.” Doc. No. 42-3, p. 10.
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agreement executed by [25th Street], in form and substance satisfactory to [Bremer].” Doc. No.
65-1, p. 87 (emphasis added). The Loan Agreement also has a “Prepayment” clause, which
provided, in part, that 25th Street “may prepay the Note, in whole or in part, at any time and from
time to time without premium or penalty, subject to the terms and conditions of any independent
ISDA swap agreement executed by [25th Street] of approximate even date herewith.” Id., p. 85.
Additionally, the Loan Agreement lists as an event of default, a “default under any interest rate
swap . . . any time entered into by [25th Street] in connection with the Note[.]” Id., p. 96.
The Swap Agreement
Similar to the Loan Agreement, the swap agreement consists of several documents—the
2002 ISDA Master Agreement (the “Master Agreement”), the schedule, and confirmations
(together, the “Swap Agreement”).7 See Doc. No. 65-2, pp. 1, 16. Here, the Swap Agreement was
for a 10-year interest rate swap, which created a synthetic fixed rate loan of 4.32% between the
parties.8 Doc. No. 42-3, p. 6.
Several provisions of the Swap Agreement are important to the competing motions. The
Swap Agreement states, “This Agreement will be governed by and construed in accordance with
the laws of the State of New York (without reference to choice of law doctrine).” Doc. No. 65-2,
7 The Master Agreement is a standard form used by almost all derivative market participants. Doc.
No. 42-3, p. 14. Instead, the “schedule is what is used to both complete and refine the terms of the
ISDA Master Agreement.” Doc. No. 42-2, p. 5. “Separately you have confirmations which are
typically transaction specific documents.” Id.
8 Recall that under the Loan Agreement, 25th Street is paying Bremer a variable rate (one-month
LIBOR plus 2.10%). Doc. No. 48-1, p. 21. Under the Swap Agreement, Bremer is now paying
25th Street the same variable rate (one-month LIBOR plus 2.10%). These payments, therefore,
essentially cancel each other out. After this cancellation, the only payment left is 25th Street’s
payment to Bremer under the Swap Agreement, which is based on a fixed rate of 4.32%. The fixed
rate of 4.32% is the average of the expected future one-month LIBOR plus the 2.10%, according
to Zanev. Id., p. 22.
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p. 34. Other relevant provisions concern the parties, the Loan Agreement, and termination. As to
the parties, the Swap Agreement states:
[Each party] is acting for its own account, and it has made its own independent
decisions to enter into that Transaction and as to whether that Transaction is
appropriate or proper for it based upon its own judgment and upon advice from
such advisers as it has deemed necessary. It is not relying on any communication
(written or oral) of the other party as investment advice or as a recommendation to
enter into that Transaction, it being understood that information and explanations
related to the terms and conditions of a Transaction will not be considered
investment advice or a recommendation to enter into that Transaction. No
communication (written or oral) received from the other party will be deemed to be
an assurance or guarantee as to the expected results of that Transaction.
Id., p. 35. The Swap Agreement further provides that “[t]he other party is not acting as a fiduciary
for or an adviser to it in respect of that Transaction.” Id.
The Swap Agreement also contains provisions relating to the Loan Agreement. For
example, the Swap Agreement defines “Credit Agreement” as “that certain Loan Agreement, dated
June 26, 2017 [] among [Bremer] and [25th Street].”9 Id., p. 31. The Swap Agreement also contains
an “Independent Obligations” provision, that states:
Although [25th Street] may be entering into one or more Transactions under this
Agreement to hedge against the interest expense of, or other risk associated with,
an existing or future Loan, this Agreement and each Transaction shall be an
independent obligation of [25th Street] separate and apart from any such Loan, and
therefore: (A) each party’s obligations under this Agreement or any Transaction
shall not be contingent on whether any Loan closes, is outstanding or is repaid, in
whole or in part, at any time; (B) except as expressly set forth in this Agreement,
any repayment . . . of . . . any Loan, whether in whole or in part, at any time, shall
not in any way affect this Agreement, any Transaction or either party’s obligations
under this Agreement or Transaction[.]
Id., p. 37.
9 For consistency and readability, the Court will continue to refer to the June 26 loan as the “Loan
Agreement.” Therefore, when the Swap Agreement refers to the “Credit Agreement,” the Court
will substitute in brackets the phrase “Loan Agreement.”
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The Swap Agreement also has provisions relating to its termination. For example, the Swap
Agreement lists six different “Additional Termination Events.” See id., p. 31. One listed event is
the “the payment in full of all loans, advances, indebtedness and other obligations of [25th Street]
to [Bremer] and its Affiliates, other than obligations under this [Swap] Agreement (collectively,
the “Loans”), or the prepayments of such Loans such that the aggregate outstanding principal
amount of such Loans is less than the aggregate notional amount of the Transactions under [the
Swap Agreement.]” Id.
If an Additional Termination Event occurs then a party may, under certain circumstances,
give notice and designate an Early Termination Date. Id., p. 12. The amount, if any, payable in
respect of that Early Termination Date is the Early Termination Amount. Id., p. 13. The calculation
methodology for the Early Termination Amount depends on whether there is an event of default,
a termination event, or a mid-market event, but each methodology relies on or references the Close-
out Amount. See id., pp. 13-14. The Swap Agreement defines the Close-out Amount and contains
specific provisions regarding how the Close-Out Amount is determined, among other things. See
id., pp. 22-24.
B. 	Bremer’s Hedge Swap with JP Morgan
Bremer managed its own risk under the Swap Agreement by entering into a separate
interest-rate swap (the “Hedge Swap”) with JP Morgan Chase Bank, National Association (“JP
Morgan”). Doc. No. 42-3, p. 6; Doc. No. 42-2, p. 13 (According to Lovely, a hedge swap, while
not essential, is a common tool banks use to manage risk.). The Hedge Swap was a mirror image
of Bremer’s Swap with 25th Street, according to Zanev. Doc. No. 48-1, p. 81. Namely, under the
Hedge Swap, Bremer essentially paid JP Morgan a fixed interest rate of 4.32% of the notional
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amount and, in return, JP Morgan paid Bremer a variable interest rate of one-month LIBOR plus
2.10% of the same notational amount. Doc. No. 42-3, p. 6.
C. 	Termination
In early 2020, 25th Street began to explore refinancing options. Id., p. 7. One option
included seeking refinancing through the department of Housing and Urban Development
(“HUD”). Id. To that end, while the HUD loan was being discussed Olson sent an email to Broers
on February 25, 2020, asking, “Can you get me a prepay penalty on 25th buildings. I can’t believe
how low the 10 year has dropped.” Doc. No. 48, pp. 62, 63. On February 26, 2020, Jenny Carlier
emailed Olson and stated, “As of right now, the indicative termination amount for a full unwind
of the interest rate swap is $870,000 due to Bremer Bank.” Id., p. 64.
On March 11, 2020, 25th Street signed a loan commitment with Dwight Capital to
refinance the Loan with a new, fixed-rate HUD loan that did not involve a swap and that would be
secured by the same apartment buildings then securing the Loan. Doc. No. 48-3, p. 12. After
entering into this loan commitment, 25th Street received a quarterly statement from Bremer
showing the value of the swap, as was Bremer’s typical practice. The April 1, 2020 quarterly
statement provided that the “theoretical cost to termination the [Swap] transaction” was
$1,339,698.68. Doc. No. 65-7, p. 27. This cost of termination, however, “made no sense” to Olson
because he thought Bremer was valuing the swap with the 10-year treasury rate, not the LIBOR.
Doc. No. 48, p. 59.
Nevertheless, 25th Street continued to pursue refinancing and scheduled the refinancing
closing for mid-June 2020. Doc. No. 42-3, p. 7. As part of the refinancing, 25th Street requested a
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payoff statement from Bremer on May 18, 2020.10 Id. In response, Broers sent an email on May
19, 2020, providing the payoff amount and noting that the “indicative amount to fully terminate
the swap is $1,385,000 due to Bremer Bank.” Doc. No. 48, p. 80. Olson responded, “are you sure
that prepay is accurate? We were quoted 1,339,699 on April 1 when the 10 year was 60 basis
points. I would expect the prepay to be somewhere around 1.2 million today.” Doc. No. 48-1, p.
116.
Broers forwarded Olson’s email to Carlier and Zanev, asking if they could provide any
insight into Olson’s question. Doc. No. 65-10, p. 3. While both Carlier and Zanev responded to
Olson, the parties focus on Zanev’s response, which was as follows:
the quarterly valuation we provided on 4/1 was based on rates as of end of
business on 3/31. The 10 year treasury increased around 3 bps since 3/31. I have
attached a scree[n] shot of the 10 year treasury rate history over the period for
reference.
Since there are approximately 7 years left on the swap, looking at rate
changes at the 7 year point on the curve provides a better indication of changes in
the swap value. We are also looking at the 7 year swap rate and not treasuries, since
this is a LIBOR based swap. While market rates tend to move together and so
treasuries can provide directionally an idea of where the swap value is heading, we
can see swap and treasury rates diverge from each other. I have attached a chart
comparing the 7 year US Treasury rate to the 7 year Swap rate since 3/31. While
the treasury rate is relatively unchanged over the period, the 7 year swap rate has
declined approximately 10 bps.
When we are ready to unwind the swap, we will go to the market to get a
termination value and we will pass that directly to you. Bremer only adds $2,000
to the termination costs to compensate us for direct expenses associated with the
10 According to Carlier, Bremer cross collateralizes the loan with the swap. Doc. No. 48-2, p. 43.
As such, in order for Bremer to release the collateral that’s pledged for both the loan and the swap
agreement, both the loan would have to be paid off and any swap termination fee would have to
be paid. Doc. No. 48-2, p. 44. If a swap is not terminated than the personal guarantees that are
provided in support of the swap agreement are not released and the collateral pledged in support
for the swap agreement also is not released. Doc. No. 48-1, p. 111.
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termination.11 You should be able to reach out to any bank with swap capabilities
and have them value the swap as of a specific date as well, and compare the
valuation to the indication we have provided.
Doc. No. 40-13, p. 2. Jordahl represented that up until May 20, he and Olson thought the swap was
based on the 10-year treasury. Doc. No. 67, p. 14.
With the mid-June deadline for the refinancing approaching, Olson emailed Broers on June
4, disputing that the value of the swap termination and noting that 25th Street “will have to pay
this off under dispute or whatever the legal language is that says we don’t agree . . . but of course
we will have to pay it off in order to get our HUD loan done.” Doc. No. 48, p. 115. On June 5,
2020, Zanev emailed Alexander Fraser, an attorney for Bremer, with regards to swap agreements.
Doc. No. 48-1, p. 108-109. That same day, Fraser responded and his response was forwarded to
Olson. Id., pp. 109-110. The email from Fraser on June 5, 2020, provides, in pertinent part:
[Zanev], you asked for me to confirm how a swap transaction should be
valued for this transaction. As we’ve discussed, this depends on whether the
termination is voluntary or forced as a result of a termination event such as the
payoff of the related loan.
 	The customer does not have a right under these documents to require that
the swap be terminated, and does not have any input at all on valuation of a
terminated swap. Sometimes, a customer will request optional termination
language to be included in the Schedule, but that language is not included
here. Accordingly, the customer can request a voluntary termination, but the
bank is not required to grant this request or adhere to any particular
valuation. Of course, as you know, market convention is to grant this request
at a market value, and I understand that you have provided this customer
certain information about the current market value of the swap. But to be
clear, you are not required to execute a voluntary termination at all, and if
you do choose to accommodate such a request, you can choose the
mechanism for how the swap is valued – like any other trade, this should be
conducted on a recorded line where you will quote an unwind price to the
customer and the customer can either accept or reject that price (and as a
result, terminate, or not terminate at that value). The customer has not input
11 The $2,000 is a direct expense that Bremer pays in connection with unwinding the transaction.
Doc. No. 48-1, p. 152. Bremer, however, did not charge 25th Street the $2,000 in this case. Id.
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on valuation for this purpose (other than choosing to terminate or not once
you quote a live price).
 	If the loan is paid off or refinanced, this will cause an Additional
Termination Event under the Schedule. In that circumstance the bank will
have the right, but not the obligation, to terminate the trade in accordance
with very specific procedures outlined in the Master Agreement. An
oversimplified version of those procedures is as follows:
o 	The bank provides notice of its election to terminate to the customer
in writing – typically the termination date is a couple business days
after the notice, but that date is explicitly listed in the termination
notice
o 	On the termination date, the bank terminates the customer trade. The
customer has no input on or right to contest the value of the
termination. The value is determined according to the “Close-Out”
method which is defined in the Master Agreement. Functionally,
this is an indemnity method for banks that run back-to-back book,
as you are permitted to charge the customer for your own cost of
unwinding your market hedge, but you are also required to evaluate
externally available pricing information – typically we obtain a
couple of dealer quotes as a market check for our own unwind cost.12
The cost to the customer is then (i) the Bank’s unwind cost for its
upstream hedge, plus (ii) any missed payments, plus (iii) legal fees
incurred in connection with the termination.
o 	Once the termination value is determined, a second notice is sent to
the customer detailing the calculation of the termination amount.
Doc. No. 46-3.
12 Here, Bremer did not obtain a couple of dealer quotes as a market check on the day of termination
but did provide two dealer quotes to Bremer approximately six days prior to the termination date.
Doc. No. 48-1, p. 113. To that end, Ryan McCamy emailed Mark Hanson on June 17, 2020 (six
days prior to the June 23, 2020 termination date), stating “Mark, please see the attached written
correspondence on behalf of Bremer. I would also like to add that Bremer reached out to a few
dealers this morning on termination quotes and here are the results: Dealer 1 indicative termination
amount of $1,365k valued at 9:54 a.m. C.T. Dealer 2 indicative termination amount of $1,267k
valued at 10:43 a.m. CT. Bremer internal model showed indicative termination amount of $1,368k
valued at 11:19 a.m. CT. Once you’ve had a chance to review the attached letter, give me a call.”
Id., p. 138-39.
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The parties do not dispute that the Swap Agreement was terminated on June 23, 2020. Doc.
No. 65-16; see also Doc. No. 70-2 (a MarkitWire IRS Deal Tick with timestamps). 25th Street
decided to terminate the loan and swap on June 23, 2020, so as to not delay refinancing. Doc. No.
42-3, p. 8. To that end, 25th Street represents that “without repayment of the Loan and payment of
the Swap Termination Amount, the Loan’s collateral and guaranties would not be released, and
the Refinancing Loan could not close.” Doc. No. 34, p. 11. This is consistent with the Pay-off
letter, which provides that “Collateral securing the [the Note and Swap Agreement’s termination
amount] will not be released until [the Note and Swap Agreement’s termination amount], including
any obligations under the Swap Agreements, have been paid in full.” Doc. No. 65-14. In this case,
25th Street paid Bremer $13,465,145.61—the principal balance of the loan ($12,013,046.32), the
accrued interest ($6,099.29), and the estimated payoff of the swap termination ($1,446,000)—on
June 23, 2020. Doc. No. 42-3, p. 8. The same day, the HUD refinancing closed. Doc. No. 1-3, ¶
13. According to Olson, 25th Street would have to pay to terminate the Swap Agreement “in order
to get our HUD loan done.” Doc. No 40-3, p. 30.
According to Zanev, at the time of the termination, Carlier was on another call with the
dealer bank terminating Bremer’s hedge. Doc. No. 48-1, p. 89. When Carlier got price of
$1,386,000 to terminate the hedge swap, she provided that amount to Zanev, who in turn gave that
amount to Olson. Id. Ultimately the termination of the swap was valued at Bremer’s cost to
terminate the hedge swap at $1,386,000. Doc. No. 42-3, p. 8. This case followed.
D. 	Procedural Posture
25th Street originally filed this action in state court in early August of 2020, and Bremer
filed its notice of removal on September 4, 2020. Doc. No. 1. On September 2, 2021, 25th Street
filed a motion for partial summary judgment as to three claims: breach of contract (count I),
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negligent misrepresentation (count IV), and breach of covenant of good faith and fair dealing
(count V). Doc. No. 33. On September 3, 2021, Bremer filed a separate motion for summary
judgment as to each of 25th Street’s seven claims: breach of contract (count I); declaratory
judgment (count II); unlawful sales or advertising practices (count III); negligent misrepresentation
(count IV); breach of the covenant of good faith and fair dealing (count V); breach of fiduciary
duty (count VI); and unjust enrichment (count VII). Doc. No. 38.
II. 	LAW AND ANALYSIS
Before diving into the merits of the summary judgment motions, the Court must first
address the threshold issue of whether to apply North Dakota law or New York law to 25th
Street’s claims in this case.
Choice of Law
“Because this Court is sitting in diversity jurisdiction, North Dakota choice-of-law rules
apply in this case.” N. Bottling Co. v. PepsiCo, Inc., 427 F. Supp. 3d 1106, 1117 (D.N.D. 2019),
aff’d, 5 F.4th 917 (8th Cir. 2021) (citing Chapman v. Hiland Partners GP Holdings, LLC, 862
F.3d 1103, 1108 (8th Cir. 2017)). In applying North Dakota choice of law rules, the Court will
first address 25th Street’s claims sounding in contract, then its claims that arise in tort.
25th Street’s Contract Claims
As to 25th Street’s contract claims, “North Dakota courts honor contractual choice-of-law
provisions with respect to questions of interpretation or construction of a contract unless doing so
would violate a fundamental public policy of North Dakota.” Id. (citing Chapman, 862 F.3d at
1108; John T. Jones Constr. Co. v. Hoot Gen. Constr. Co., 613 F.3d 778, 782-83 (8th Cir. 2010)).
Here, the choice of law provision in the Swap Agreement states, “This Agreement will be governed
by and construed in accordance with the laws of the State of New York (without reference to
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choice of law doctrine).” Doc. No. 65-2, p. 34. Notably, neither party appears to dispute that New
York law governs the breach of contract claims.13 See Doc. No. 38-1, p. 11; Doc. No. 43, p. 12.
Additionally, neither party has asserted that the provision violates any fundamental public policy
of North Dakota. As such, New York law governs the interpretation of the Swap Agreement.
25th Street’s Tort Claims
The parties do disagree on whether 25th Street’s tort claims are governed by North Dakota
or New York law, though the specific choice of law analysis from both parties is minimal. As to
tort claims, when applying North Dakota choice of law rules:
In 	determining 	which 	state 	law 	applies, 	North 	Dakota 	courts 	employ 	the
“significant contacts test.” Id.; see Daley v. American States Preferred Ins. Co., 587
N.W.2d 159, 161 (N.D. 1998). “The significant contacts test authorizes a court to
look at all of the significant factors which might logically influence it in deciding
which law to apply and choose the law of the state that has the greatest contacts
with the case.” Daley, 587 N.W.2d at 161. The specific contacts to be considered
in tort cases are:
the place where the injury occurred; the place where the conduct
causing the injury occurred; the domicile, nationality, residence,
place of business, or place of incorporation of the parties; and the
place where the relationship, if any, between the parties is centered.
N. Bottling Co., 427 F. Supp. 3d at 1117. Additionally,
To supplement the significant contacts test, North Dakota has approved the use of
the choice-influencing considerations first enunciated by Robert A. Leflar, Choice-
Influencing Considerations in Conflicts Law, 41 N.Y.U.L.Rev. 267, 282 (1966). Id.
These 	five 	choice-influencing 	factors 	are: 	(1) 	predictability 	of 	results; 	(2)
maintenance of interstate and international order; (3) simplification of the judicial
task; (4) advancement of the forum’s governmental interests; and (5) application of
the better rule of law. Id.
13 The Loan Agreement has a choice of law provision, which provides that the “loan” shall be
governed by the laws of the State of North Dakota. Doc. No. 65-1, p. 98.
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With 	the 	adoption 	of 	Leflar’s 	choice-influencing 	factors, 	North 	Dakota’s
significant contacts test becomes something of a hybrid, resulting in a two-pronged
analysis. Daley v. Am. States Preferred Ins. Co, 587 N.W.2d 159, 162 (N.D. 1998).
First, a court is to make a determination of all of the relevant contacts that might
logically influence the decision of which law to apply. Second, Leflar’s choice-
influencing factors are applied to determine which jurisdiction has the more
significant interest with the issues in the case. Id.
Mitchell v. DynCorp Int’l, LLC, No. 3:11-CV-90, 2012 WL 12860119, at *6-7 (D.N.D. June 21,
2012).
Here, 25th Street is a North Dakota limited liability company and has its principal office
in Fargo, North Dakota. While Bremer has its principal office and place of business in Saint Paul,
Minnesota, it has branch offices in Fargo, North Dakota. Doc. No. 1-3, ¶ 3. Indeed, the Loan
Agreement and Swap Agreement were negotiated in North Dakota. Doc. No. 43, p. 14. And the
collateral for the Loan Agreement is also located in North Dakota. Id. Moreover, 25th Street alleges
(and Bremer does not appear to dispute) that “[t]here is no contact that occurred in, or arose from,
New York.” Id., p. 15. As such, the Court will apply North Dakota law to 25th Street’s tort claims.
Summary Judgment Standards
With the choice of law issues resolved, the Court moves to the summary judgment motions.
“A party may move for summary judgment, identifying each claim or defense—or the part of each
claim or defense—on which summary judgment is sought.” Fed. R. Civ. P. 56(a). Summary
judgment is required “if the movant shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” Id.; see also Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986). “An issue is ‘genuine’ if the evidence is sufficient to persuade a
reasonable jury to return a verdict for the nonmoving party.” Schilf v. Eli Lilly & Co., 687 F.3d
947, 948 (8th Cir. 2012) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). “A
fact is material if it ‘might affect the outcome of the suit.’” Dick v. Dickinson State Univ., 826
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F.3d 1054, 1061 (8th Cir. 2016) (quoting Anderson, 477 U.S. at 248). Courts must afford “the
nonmoving party the benefit of all reasonable inferences which may be drawn without resorting to
speculation.” TCF Nat’l Bank v. Mkt. Intelligence, Inc., 812 F.3d 701, 707 (8th Cir. 2016) (quoting
Johnson v. Securitas Sec. Servs. USA, Inc., 769 F.3d 605, 611 (8th Cir. 2014)).
“When both parties move for summary judgment, the Court must analyze each motion
individually and on its own merits.” Wade v. Acct. Resol. Corp., No. 4:15-CV-1354 JAR, 2017
WL 1958433, at *1 (E.D. Mo. May 10, 2017) (citing Wermager v. Cormorant Township Bd., 716
F.2d 1211, 1214 (8th Cir. 1983)). As such, the traditional approach “is only slightly modified.”
Avon State Bank v. BancInsure, Inc., No. CIV. 12-2557 RHK/LIB, 2014 WL 1048503, at *4 (D.
Minn. Mar. 18, 2014), amended in part, No. CIV. 12-2557 RHK/LIB, 2014 WL 1608262 (D. Minn.
Apr. 18, 2014), order amended and superseded, No. 12-2557 (RHK/LIB), 2014 WL 11516522 (D.
Minn. Apr. 21, 2014), and aff’d in part, 787 F.3d 952 (8th Cir. 2015), and aff’d, 787 F.3d 952 (8th
Cir. 2015). When considering 25th Street’s motion, the Court views the record in the light most
favorable to Bremer, and when considering Bremer’s motion, the Court views the record in the
light most favorable to 25th Street. See id. “Either way, summary judgment is proper if the record
demonstrates that there is no genuine issue as to any material fact.” Seaworth v. Messerli, Civ. No.
09–3437, 2010 WL 3613821, at *3 (D. Minn. Sept. 7, 2010), aff’d, 414 F. App’x 882 (8th Cir.
2011) (per curiam)).
“At summary judgment, the court’s function is not to weigh the evidence and determine
the truth of the matter itself, but to determine whether there is a genuine issue for trial.” Nunn v.
Noodles & Co., 674 F.3d 910, 914 (8th Cir. 2012) (citing Anderson, 477 U.S. at 249). If the movant
demonstrates the absence of a genuine issue of material fact, “[t]he nonmovant ‘must do more than
simply show that there is some metaphysical doubt as to the material facts,’ and must come forward
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with ‘specific facts showing that there is a genuine issue for trial.’” Torgerson v. City of Rochester,
643 F.3d 1031, 1042 (8th Cir. 2011) (en banc) (quoting Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 586-87 (1986)). “However, if a plaintiff cannot support each element
of its claim, summary judgment must be granted, because a complete failure of proof regarding an
essential element necessarily renders all other facts immaterial.” Cousineau v. Norstan, Inc., No.
00-1113 DSD/JGL, 2001 WL 1640118, at *3 (D. Minn. July 26, 2001), aff’d, 322 F.3d 493 (8th
Cir. 2003) (citing Celotex, 477 U.S. at 322-23). Rule 56 requires a proper summary judgment
motion to be opposed by the kinds of evidentiary materials listed in Rule 56(c), such as depositions,
documents, affidavits or declarations, stipulations, admissions, and interrogatory answers. See
Celotex, 477 U.S. at 324.
Discussion and Analysis
Here, both 25th Street and Bremer moved for summary judgment as to the breach of
contract claim (count I), the breach of covenant of good faith and fair dealing claim (count V), and
the negligent misrepresentation claim (count IV). See Doc. Nos. 33, 38-1. The Court will address
each in turn then analyze the four claims on which only Bremer moved for summary judgment:
declaratory judgment (count II), breach of fiduciary duty (count VI), unlawful sales or advertising
practices (count III), and unjust enrichment (count VII).
Breach of Contract (count I)
Both parties request summary judgment on 25th Street’s breach of contract claim. Under
New York law, the elements of a breach of contract claim are: “(1) the existence of a contract, (2)
the plaintiff’s performance, (3) the defendant’s breach, and (4) resulting damages.” Alloy
Advisory, LLC v. 503 W. 33rd St. Assocs., Inc., 195 A.D.3d 436, 436, 144 N.Y.S.3d 854 (N.Y.
2021). As well-stated by the United States District Court for the Southern District of New York:
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In determining a party’s obligations under a contract, “the initial interpretation of a
contract is a matter of law for the court to decide.” K. Bell & Assocs., Inc. v.
Lloyd’s Underwriters, 97 F.3d 632, 637 (2d Cir. 1996) (citation omitted).
“Summary judgment is generally proper in a contract dispute only if the language
of the contract is wholly unambiguous.” Compagnie Financiere de CIC et de
L’Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith Inc., 232 F.3d 153,
157–58 (2d Cir. 2000) (citing Mellon Bank, N.A. v. United Bank Corp. of N.Y., 31
F.3d 113, 115 (2d Cir. 1994)). “[T]he presence or absence of ambiguity is
determined by looking within the four corners of the document, without reference
to extrinsic evidence.” Chapman v. N.Y. State Div. for Youth, 546 F.3d 230, 236
(2d Cir. 2008) (citation omitted). Thus, if the “resolution of the ambiguity hinges
on such extrinsic matters as the credibility of witnesses or documents or upon
choosing one among several reasonable inferences that may be drawn from such
extrinsic evidence, a jury, and not a court, should decide what meaning is to be
ascribed to the contract.” Brass v. Am. Film Techs., Inc., 987 F.2d 142, 148–49 (2d
Cir. 1993) (citations omitted). However, “[t]he language of a contract is not made
ambiguous simply because the parties urge different interpretations. Nor does
ambiguity exist where one party’s view ‘strain[s] the contract language beyond its
reasonable and ordinary meaning.’” Seiden Assocs., Inc. v. ANC Holdings, Inc.,
959 F.2d 425, 428 (2d Cir. 1992) (quoting Bethlehem Steel Co. v. Turner Constr.
Co., 2 N.Y.2d 456, 459, 161 N.Y.S.2d 90, 141 N.E.2d 590 (1957)).
MBIA Ins. Corp. v. Coop. Centrale Raiffeisen-Boerenleenbank B.A., No. 09 CIV. 10093 RJS,
2011 WL 1197634, at *6 (S.D.N.Y. Mar. 25, 2011). “‘Contract language is unambiguous if it has
a definite and precise meaning, unattended by danger of misconception in the purport of the
contract itself, and concerning which there is no reasonable basis for a difference of opinion.’”
U.S. Bank Nat. Ass’n v. Ables & Hall Builders, 696 F. Supp. 2d 428, 440 (S.D.N.Y. 2010) (quoting
Metro. Life Ins. Co. v. RJR Nabisco, Inc., 906 F.2d 884, 889 (2d Cir.1990)). “In interpreting a
contract under New York law, words and phrases ... should be given their plain meaning, and the
contract should be construed so as to give full meaning and effect to all of its provisions.” Citibank,
N.A. v. Morgan Stanley & Co. Int’l, PLC, 724 F. Supp. 2d 398, 404 (S.D.N.Y. 2010), aff’d, 482
F. App’x 662 (2d Cir. 2012), as amended (Oct. 25, 2012) (internal citations and quotations
omitted).
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With this framework in mind, the Court notes as an initial matter that neither party disputes
the second element for a breach of contract claim, that 25th Street preformed under the contract,
is satisfied. See Doc. No. 38-1. Similarly, as to the fourth element, resulting damages, 25th Street
acknowledges that calculation of any alleged damages would not be appropriate at this stage of
the proceedings, based on the facts of this case. See Doc. No. 34, p. 18. And, as 25th Street and
Bremer only engage in limited (if any) analysis as to the fourth element, the Court will only address
it to the extent necessary. Accordingly, the Court will focus its analysis on the two remaining
elements: existence of a contract and the alleged breach.
i. 	Existence of a Contract
As to the first element, the existence of a contract, Bremer and 25th Street concur that a
contract exists14 but disagree as to which agreements form the contract at issue. See Doc. No. 43,
p. 17. For example, Bremer adopts a narrow view of the contract, arguing that for the purposes of
the breach of contract claim, its relationship with 25th Street “is governed by the Master
Agreement, the Schedule, and the Confirmation.” Doc. No. 38-1, p. 10; see also Doc. No. 42, p. 2
(arguing that the Loan and Swap are two sperate and distinct contracts with “different
obligations”). Conversely, 25th Street posits a more expansive view, arguing that the contract
consists of several agreements: the Master Agreement, schedule, swap confirmation, the “course
and performance between Bremer and 25th Street,” “the documents Bremer provided to 25th Street
as part of the swap,” “the representations Bremer made to 25th Street further explaining how this
swap would be terminated, including its value at termination,” and “the agreements subsequent to
those documents, including the non-wavier and reservation of rights agreement in the Pay Off
14 See Doc. No. 34, pp. 17-18 (25th Street asserts the “parties do not dispute that the Swap was a
contract.”); Doc. No. 38-1, p. 12 (where Bremer notes “there is no dispute about the existence of
a contract”).
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letter.” Doc. No. 43, pp. 3-4. Unfortunately, neither party cited any law to support their competing
propositions.15
Nevertheless, the core dispute between the parties in the breach of contract claim is a
dispute over the pay off, or Close-Out Amount (a defined term in the Swap Agreement), to
terminate the Swap Agreement. So, in determining which agreement is the operative contract for
the breach of contract claim, the Court looks first to the plain language of the Swap Agreement.
To that end, under the plain and unambiguous language of the Swap Agreement, the Loan
Agreement and Swap Agreement are separate contracts. For example, the Swap Agreement defines
a “Credit Agreement” as “that certain Loan Agreement, dated June 26, 2017 [] among [Bremer]
and [25th Street].” Doc. No. 65-2, p. 31. Keeping in mind that the Swap Agreement has specifically
defined the Loan Agreement, the term is notably absent from the “Single Agreement” clause which
provides, in part, that “this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this ‘Agreement’)[.]” Id., p. 1. Most persuasive,
however, is the “Independent Obligations” provision, which provides:
Although [25th Street] may be entering into one or more Transactions under
this Agreement to hedge against the interest expense of, or other risk associated
with, an existing or future Loan, this Agreement and each Transaction shall be an
independent obligation of [25th Street] separate and apart from any such Loan, and
therefore: (A) each party’s obligations under this Agreement or any Transaction
shall not be contingent on whether any Loan closes, is outstanding or is repaid, in
whole or in part, at any time; (B) except as expressly set forth in this Agreement,
any repayment . . . of . . . any Loan, whether in whole or in part, at any time, shall
not in any way affect this Agreement, any Transaction or either party’s obligations
under this Agreement or Transaction[.]
15 The Court notes that both the Swap Agreement and Loan have different choice of law provisions.
The choice of law provision in the Swap Agreement provides that it is governed by the law of the
State of New York. Doc. No. 65-2, p. 34. On the other hand, the choice of law provision in the
Loan Agreement, however, provides that it is governed by the laws of the State of North Dakota.
Doc. No. 65-1, p. 98. The Court will use New York law to consider whether the terms of the Swap
Agreement are ambiguous as to what documents form the contract between 25th Street and
Bremer.
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Id., p. 37. Accordingly, the Court finds that the plain and unambiguous language of the Swap
Agreement shows that the Loan Agreement and Swap Agreement are separate contracts.
Therefore, as to the breach of contract claim, the operative and controlling contract is the Swap
Agreement, which is comprised of the Master Agreement, schedule, and confirmations.
ii. 	Breach
With the question of which contract controls resolved, the next issue is the alleged breach
of the Swap Agreement. 25th Street argues that Bremer breached the contract “by failing to meet
its duty to ‘use commercially reasonable procedures in order to produce a commercially reasonable
result’ during the calculation of the Close-Out Amount.” Doc. No. 34, p. 18. Bremer raises two
counterpoints: (1) that 25th Street requested a voluntary termination, and (2) Bremer was not
required to apply the “Close-Out Amount” to a voluntary termination but did so anyways. Doc.
No. 42, p. 17.
Before the Court can address the Close-Out Amount, it must first address the threshold
issue of whether there was an Additional Termination Event, as defined under the Swap
Agreement. Both parties agree that under the terms of the Swap Agreement, if there was an
“Additional Termination Event[,]” then Bremer would be contractually obligated to compute the
Close-Out Amount using the methodology set forth in the Swap Agreement. See Doc. No. 51, p.
7; Doc. No. 38-1, p. 12. And, neither party disputes that 25th Street requested a voluntary
termination of the Swap. See Doc. No. 42, p. 17; Doc. No. 43, p. 18. Rather, the issue is whether
25th Street’s voluntary termination qualifies as an “Additional Termination Event” as defined
under the Swap Agreement.
To that end, the Swap Agreement lists six different events that qualify as an Additional
Termination Event. See Doc. No. 65-2, p. 31. One such event is the “the payment in full of all
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loans, advances, indebtedness and other obligations of [25th Street] to [Bremer] and its Affiliates,
other 	than 	obligations 	under 	this 	[Swap] 	Agreement 	(collectively, 	the 	“Loans”), 	or 	the
prepayments of such Loans such that the aggregate outstanding principal amount of such Loans is
less than the aggregate notional amount of the Transactions under [the Swap Agreement.]” Id. 25th
Street asserts that pursuant to this language, its “voluntary prepayment” of the Loan is an
Additional Termination Event. Doc. No. 43, p. 19. Bremer disputes that interpretation and views
25th Street’s payment as a voluntary termination of the Swap Agreement, which did not trigger
the Close-out valuation methodology in the Swap Agreement.
The parties’ respective framing of this issue highlights the critical and material question of
fact necessary to resolve this issue. A fact finder must make a credibility and fact determination as
to whether 25th Street’s payment was a “prepayment,” as that is understood in the definition of an
Additional Termination Event, or if it was simply a voluntary termination of the Swap Agreement
in order to obtain refinancing with HUD. Answering this question requires assessing credibility
and facts – 25th Street’s view is that its approach to Bremer to “prepay” the Loan triggered an
Additional Termination Event, but Bremer’s view is that 25th Street approached Bremer to
voluntarily terminate the Swap Agreement to pursue other financing options for the Loan.
Additionally and relatedly, there is a genuine issue of material fact as to whether 25th
Street’s payment occurred before or after the Swap Agreement was terminated. If the voluntary
prepayment occurred before the Swap Agreement was terminated, then it would seem that under
the plain and unambiguous language of the Swap Agreement, an Additional Termination Event
occurred. See BDC Fin. L.L.C. v. Barclays Bank PLC, 25 N.Y.3d 37, 43 (N.Y. 2015). However,
if an Additional Termination Event occurs, then several other steps and rights under the Swap
Agreement are triggered (notably, none of which appear to have occurred here); an Additional
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Termination Event does not in and of itself terminate the Swap Agreement. On the other hand,
consider a situation where the parties agreed that the Swap Agreement would be terminated before
prepayment, which is arguably Bremer’s view. In that situation, whether voluntary prepayment is
an Additional Termination Event under the Swap Agreement does not matter because the Swap
Agreement is terminated and no longer in effect.
The issue of whether the parties agreed to voluntarily terminate the Swap Agreement or
whether 25th Street made a voluntary prepayment to trigger an Additional Termination Event
presents as a classic “which came first” question. However, based on the record currently before
the Court, the Court cannot say there are no genuine issues of material fact as to the breach of
contact claim. Resolving that question requires a fact finder to weigh the testimony and evidence
and make a factual determination. As a result, because a genuine issue of material fact exists as to
the breach of contract claim, the Court denies both motions for summary judgment on that claim.
Breach of Covenant of Good Faith and Fair Dealing (count V)
Next, 25th Street next alleges that Bremer breached the covenant of good faith and fair
dealing. See Doc. No. 34, pp. 23-25. The Eighth Circuit has recently explained:
“[U]nder New York law, every contract contains an implied covenant of
good faith and fair dealing,” and the duty to exercise good faith and fair dealing can
be rooted in both New York common law and the UCC. Arbitron Inc. v. Tralyn
Broad., Inc., 526 F. Supp. 2d 441, 447–48 (S.D.N.Y. 2007). “New York courts have
repeatedly affirmed that a party may be in breach of an implied duty of good faith
and fair dealing, even if it is not in breach of its express contractual obligations,
when it ... deprive[s] the other party of the fruit of its bargain.” Duration Mun. Fund,
L.P. v. J.P. Morgan Sec. Inc., 2009 WL 2999201, at *6 (N.Y. Sup. Ct. Sept. 16,
2009) (unpublished). But, “[a] claim of implied duty of good faith and fair dealing
cannot create new duties under a contract or substitute for an insufficient contract
claim.” Duration, 2009 WL 2999201, at *7; accord Lehman Bros. Int’l (Europe) v.
AG Fin. Prod., Inc., 2013 WL 1092888, *2 (N.Y. Sup. Ct. Mar. 12, 2013)
(unpublished) (“[T]he covenant of good faith and fair dealing cannot be construed
so broadly as to effectively nullify other express terms of the contract, or to create
independent contractual rights.” (citation omitted)).
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A claim for the breach of the covenant of good faith and fair dealing is not “a
substitute for a nonviable breach of contract claim.” Triton Partners LLC v.
Prudential Sec. Inc., 301 A.D.2d 411, 752 N.Y.S.2d 870, 870 (2003). “[T]he
implied covenant of good faith and fair dealing only precludes each party from
engaging in conduct that will deprive the other party of the benefits of their
agreement.” Arbitron, 526 F. Supp. 2d at 448 (alteration in original) (quotation
omitted). The covenant “merely brings to light implicit duties to act in good faith
already contained, although not [ ] specified in the contract. ... [F]or the implied
duty of good faith and fair dealing to stand as a cause of action, there must be an
underlying contractual obligation between the parties.” Duration, 2009 WL
2999201, at *7.
N. Bottling Co., 5 F.4th at 923-24. Importantly, “an implied covenant claim “will not stand if it is
duplicative of a breach of contract claim.” Negrete v. Citibank, N.A., 237 F. Supp. 3d 112, 130
(S.D.N.Y. 2017), aff’d, 759 F. App’x 42 (2d Cir. 2019). See also Lehman Bros. Int’l (Eur.) v. AG
Fin. Prod., Inc., 969 N.Y.S.2d 804 (Sup. Ct. 2013) (“A cause of action for breach of the implied
covenant will be dismissed as duplicative of a breach of contract cause of action where both claims
arise from the same facts and seek identical damages.” (internal citation omitted)).
Here, 25th Street’s allegations of the breach of contract and implied covenant causes of
action overlap in significant respects. First, looking to the language of the complaint, under the
breach of contract cause of action, 25th Street alleges that “Bremer breached the contract(s) by
charging [25th Street] an incorrect, inflated Early Termination Amount.” Doc. No. 1-3, ¶ 16. For
its breach of the covenant of good faith and fair dealing claim, 25th Street makes a nearly identical
assertion—that “Bremer breached its covenant of good faith and fair dealing by charging [25th
Street] an incorrect, inflated Early Termination Amount.” Id. ¶ 36. Because an implied covenant
claim “will not stand if it is duplicative of a breach of contract claim,” the Court dismisses 25th
Street’s breach of the implied covenant of good faith and fair dealing cause of action.
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Negligent Misrepresentation (count IV)
Both 25th Street and Bremer move for summary judgment on 25th Street’s negligent
misrepresentation (count IV) under North Dakota Century Code section 9-03-08(2).16 Doc. No. 1-
3, p. 5. That statute states, in relevant part:
Actual fraud within the meaning of this title consists in any of the following
acts committed by a party to the contract, or with the party’s connivance, with intent
to deceive another party thereto or to induce the other party to enter into the
contract:
* * *
2. The positive assertion, in a manner not warranted by the information of
the person making it, of that which is not true though that person believes it to be
true[.]
N.D. Cent. Code § 9-03-08. When analyzing section 09-03-08, the United States Court of Appeals
for the Eighth Circuit explained:
Subsection 2, unlike the other enumerated acts of actual fraud, eliminates “intent”
as a necessary element and as interpreted by the court in Bourgois indicates that a
claim of fraud may be actionable on the basis of mere negligence of representation.
However, because a plaintiff claiming fraud must also demonstrate that the acts
were committed “with intent to deceive another party thereto or to induce him to
enter into the contract,” a successfully raised negligent misrepresentation claim
must also allege that the misrepresentation occurred in the context of a contractual
inducement.
The “inducement to contract” requirement logically applies because the alternative,
“with intent to deceive another” (set apart by the disjunctive “or”), does not require
“inducement,” but does require “intent.” As negligent conduct is conduct that lacks
intent, the fraud statute seems to suggest that negligent misrepresentation could
only 	occur 	in 	a 	contractual 	context. 	In 	other 	words, 	the 	most 	reasonable
16 Bremer’s opening argument as to negligent misrepresentation and unlawful sales or advertising
practices (count II) is that 25th Street failed to plead these fraud claims with sufficient particularity
under Federal Rule of Civil Procedure 9(b). 	Notably, Bremer raises this argument for the first
time in its motion for summary judgment. Doc. No. 38-1, p. 18. 25th Street noted that a Rule 56
motion for summary judgment is not the proper vehicle to raise a Rule 9(b) particularity challenge.
See Doc. No. 43, pp. 25-26. While there is no direct authority resolving that issue, the case law
appears to suggest a Rule 9(b) challenge is untimely when raised in a summary judgment motion.
5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1300 (4th ed.). So,
without expressly deciding that open legal question, the Court will proceed to deciding the motion
under Federal Rule of Civil Procedure 56.
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interpretation of the bifurcated clause, “with intent to deceive another party thereto
or 	to 	induce 	him 	to 	enter 	into 	the 	contract,” 	suggests 	that 	negligent
misrepresentation attaches to the latter, intentional fraud to the former. This was
the conclusion reached by the district court, see Cooperative Power Ass’n v.
Westinghouse Elec. Corp., No. A1–90–150, at 4–7 (D.N.D. Sept. 26, 1994)
(Memorandum and Order), and one strongly suggested by the court in Bourgois,
466 N.W.2d at 817–18 (characterizing negligent fraud claims as only arising in the
context of contractual inducements).
Coop. Power Ass’n v. Westinghouse Elec. Corp., 60 F.3d 1336, 1342 (8th Cir. 1995) (emphasis in
original). In other words, a negligent misrepresentation claim made under North Dakota Century
Code section 9-03-08(2), which is the precise claim brought by 25th Street here, “relates to a
misrepresentation 	that 	allegedly 	induced 	one 	party 	to 	enter 	the 	contract 	or 	at 	least 	a
misrepresentation in a contractual setting.” Id. at 1343 (emphasis added).
25th Street posits that North Dakota courts have clarified that this section can also apply if
the fraudulent inducement occurs after the parties have entered into a contract, if one party
detrimentally alters its position. However, the plain language of section 9-03-08(2) and the case
law appear to belie that argument. See N.D. Cent. Code § 9-03-08(2); Westinghouse Elec. Corp.,
60 F.3d at 1342. 25th Street alleges several misrepresentations by Bremer occurring around the
termination of the Swap Agreement, including valuation statements and misrepresentations as to
the valuation of the swap at termination. See Doc. No. 43, p. 31-34. But there is no dispute that
the alleged misrepresentations at issue were not made to induce 25th Street to enter into the Loan
Agreement and Swap Agreement, but rather concern the valuation of the swap after 25th Street
decided to seek refinancing. Moreover, the facts further belie any argument as to detrimentally
altering its position–there is no dispute in the record that 25th Street was the party who sought
refinancing and set in motion a sequence of events that ultimately led to the termination of the
Swap Agreement (and the resulting dispute over the terms of the Early Termination Amount). 25th
Street intended to refinance; the operative question, then, became how much it would cost. There
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was no inducement or detrimental alteration in position. 	The record is clear that this is not a
situation where Bremer made certain misrepresentations to 25th Street, which then caused 25th
Street to enter into or detrimentally alter its position in the Swap Agreement.
Stated simply, on this record, there are no alleged misrepresentations by Bremer that
induced 25th Street to enter a contract or detrimentally alter its position as to that contract.
Accordingly, the Court finds that 25th Street’s negligent misrepresentation claim (count IV) fails
as a matter of law. The Court denies 25th Street’s motion for summary judgment as to that claim,
grants Bremer’s motion for summary judgment, and dismisses the negligent misrepresentation
claim (count IV) from the complaint.
Declaratory Judgment (count II)
With the cross motions for summary judgment resolved, the Court turns to the remaining
claims to which only Bremer moved for summary judgment. First, Bremer moves for summary
judgment on 25th Street’s declaratory judgment claim. Under this claim, 25th Street requests that
the Court determine both “the terms and value of the parties’ agreements” and the “proper
calculation for an Early Termination Amount owed to Bremer under the Swap.” Doc. No. 1-3, p.
4. Bremer argues that “no calculation of an Early Termination Amount is warranted under the plain
terms of the Schedule to the 2002 Master Agreement as no ‘Additional Termination Event’
occurred.” Doc. No. 38-1, p. 16.
For the reasons stated above, there are genuine issues of material fact regarding the
voluntary termination of the Swap Agreement that preclude the Court from granting summary
judgment on this claim. As such, summary judgment on this claim is not appropriate and is denied.
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Breach of Fiduciary Duty (count VI)
Next, Bremer moves for summary judgment on 25th Street’s breach of fiduciary duty
claim. As to this claim, 25th Street alleges that Bremer “owed a fiduciary duty to [25th Street] and
the duties of care, good faith, and transparency in regard to Bremer’s communications to [25th
Street], including, but not limited to, the valuation of the Swap and the calculation of the Early
Termination Amount.” Doc. No. 1-3, p. 6. 25th Street argues that Bremer breached these duties by
charging it an “incorrect, inflated Early Termination Amount.” Id.
Under North Dakota law, 17 “[i]n order to establish a breach of a fiduciary duty, the plaintiff
must prove: (1) a fiduciary relationship between the plaintiff and defendant, (2) a duty by the
defendant to the plaintiffs arising from that relationship, (3) the defendant’s breach of that duty,
and (4) damage to the plaintiffs proximately caused by that breach of duty.’” Matter of Est. of
Vendsel, 2017 ND 71, ¶ 14, 891 N.W.2d 750 (internal citation and quotation omitted) (cleaned
up). At issue here is the first element, whether there was a fiduciary relationship between 25th
Street and Bremer.
“The existence and scope of a fiduciary duty depends upon the language of the parties’
agreement.” Grynberg v. Dome Petroleum Corp., 1999 ND 167, ¶ 21, 599 N.W.2d 261 (internal
citation omitted). Bremer argues that 25th Street’s claim for breach of fiduciary duty should be
dismissed because, among other things, the parties expressly agreed in the Swap Agreement that
no fiduciary duty existed and “banks do not owe customers fiduciary duties under the
circumstances like those described in the Complaint.” Doc. No. 38-1, p. 23. The Court agrees.
17 25th Street asserts that because “[b]oth New York and North Dakota law consider a breach of
fiduciary duty to be a tort” the Court should analyze this claim under North Dakota law. Doc. No.
43, p. 38. While Bremer cites both North Dakota and New York law to support its arguments, see
Doc. No. 54, p. 8, it does not appear to dispute that the Court should apply North Dakota law when
analyzing this claim. For this reason, among others, the Court will apply North Dakota law.
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The Court notes as an initial matter that Jordahl and Olson, as members of 25th Street, both
executed the Swap Agreement on June 26, 2017. 	Doc. No. 65-2, p. 44. That same day, a
representative of Bremer also executed the Swap Agreement. Id. The Swap Agreement states:
[Each party] is acting for its own account, and it has made its own independent
decisions to enter into that Transaction and as to whether that Transaction is
appropriate or proper for it based upon its own judgment and upon advice from
such advisers as it has deemed necessary. It is not relying on any communication
(written or oral) of the other party as investment advice or as a recommendation to
enter into that Transaction, it being understood that information and explanations
related to the terms and conditions of a Transaction will not be considered
investment advice or a recommendation to enter into that Transaction. No
communication (written or oral) received from the other party will be deemed to be
an assurance or guarantee as to the expected results of that Transaction.
Id., p. 35. Importantly, the Swap Agreement further provides that “[t]he other party is not acting
as a fiduciary for or an adviser to it in respect of that Transaction.” Id. The Court finds that the
plain of these provisions are unambiguous and do not support 25th Street’s contention that a
separate and distinct fiduciary relationship existed.
Even beyond the plain language of the Swap Agreement, the circumstances in this case do
not give rise to a fiduciary relationship between 25th Street and Bremer. 25th Street argues that
Bremer made “representations” (such as its calculation of the Swap termination amount and
advising that 25th Street had no input in the Swap termination) that were “Bremer’s invitation that
25th Street could—or must—place its confidence and trust in Bremer as Bremer handled the Swap
termination.” Doc. No. 43, p. 39. The Court disagrees.
As well stated by the North Dakota Supreme Court:
[¶16] “The relationship between a bank and its customers is viewed as a debtor-
creditor relationship which does not ordinarily impose a fiduciary duty upon a
bank.” Union State Bank v. Woell, 434 N.W.2d 712, 721 (N.D. 1989). “Some
courts have recognized that a fiduciary relationship may arise under circumstances
which reflect a borrower’s reposing of faith, confidence and trust in a bank with a
resulting domination, control or influence exercised by the bank over the
borrower’s affairs.” Id. In those circumstances, “the borrower or party reposing the
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confidence must be in a position of inequality, dependence, weakness, or lack of
knowledge.” Id. However, “[i]n a commercial context, the mere rendering of advice
by a lender to a borrower, even if given in a sincere effort to help the borrower
prosper, does not transform a business relationship into a fiduciary relationship.”
Id. “Rather, actual day-to-day involvement in management and operations of the
borrower or the ability to compel the borrower to engage in unusual transactions is
required for the purposes of showing that a lending institution had ‘control over a
borrower.’” Id. The existence of a fiduciary relationship is a question of fact which
is dependent upon a showing of special circumstances. First Nat’l Bank & Trust
Co. v. Brakken, 468 N.W.2d 633, 637 (N.D. 1991).
Baker Boyer Nat’l Bank v. JPF Enterprises, LLC, 2019 ND 76, ¶ 16, 924 N.W.2d 381. Here, the
undisputed facts show that 25th Street was not in a position of “inequality, dependence, weakness,
or lack of knowledge.” Id. ¶ 19. Indeed, quite the contrary. It is undisputed that Olson and Jordahl
were savvy and sophisticated businesspeople. By way of example, Olson is a certified public
accountant with an active license. Doc. No. 48, p. 17. Additionally, Olson has more than $10
million in investments and testified that he has likely been a part of more than 60 business entities.
Doc. No. 40-3, p. 6, 44. Likewise, Jordahl has more than $10 million dollars in investments, which
include, among other things, investing in farmland and buying and developing land with apartment
buildings or rental properties. Doc. No. 67, pp. 6, 9. Jordahl is also involved in “a number of
different entities,” about half of which include Olson. Id., p. 6. One of Olson and Jordahl’s mutual
business entities, West 29, enter into and terminated a different swap agreement with Bremer. Doc.
No. 48, pp. 2, 22. As such, even viewing the facts in the light most favorable to 25th Street, the
undisputed facts show that 25th Street was not in a position of “inequality, dependence, weakness,
or lack of knowledge.” Baker Boyer Nat’l Bank, 2019 ND 76, ¶ 19.
Additionally, 25th Street has failed to present specific evidence to raise a factual issue
regarding whether Bremer assumed anything more than an ordinary lender-borrower relationship.
Indeed, 25th Street entered into a lender-borrower relationship because it was seeking permanent
financing to replace an existing construction loan. Doc. No. 42-3, p. 5. Broers has worked with
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both Jordahl and Olson on different financing transactions in the past. Doc. No. 28, pp. 23-24;
Doc. No. 48, p. 27. In early 2017, Jordahl and Broers were working on financing unrelated to this
case, and at the same time, 25th Street was seeking permanent financing to replace an existing
construction loan. Doc. No. 42-3, p. 5; see Doc. No. 48, p. 27. At some point, Jordahl and Broers
discussed financing for 25th Street. While Olson claims that Broers “solicited” 25th Street’s
business, he also claimed that the financing “seemed to be a good deal.” Doc. No. 48, p. 27.
Moreover, when Jordahl was asked why 25th Street ultimately decided to pursue financing with
Bremer, Jordahl explained, “[Olson] and I discussed it, so it was kind of a mutual thing. But
[Olson] does a lot of this stuff. [Olson’s] a real smart guy, kind of educated . . . he’s the CPA
guy[.]” Doc. No. 67, p. 7. Even construing these facts in the light most favorable to 25th Street as
the nonmoving party, 25th Street has failed to allege that this relationship arose “under
circumstances which reflect a borrower’s reposing of faith, confidence and trust in a bank with
resulting domination, control or influence exercised by the bank over the borrower’s affairs.”
Baker Boyer Nat’l Bank, 2019 ND 76, ¶ 16. There is no evidence showing that Bremer was
somehow involved in the day-to-day business and management of 25th Street.
Additionally, neither party disputes that although 25th Street had a variable interest rate
under the Loan, it was 25th Street who wanted a fixed interest rate to mitigate risk. Doc. No. 48,
p. 32 (Olson represented that it “didn’t matter to me what [Bremer] did. I was getting the ten-year
fixed-rate loan. The fixed payment, fixed interest rate. That’s all I was focused on.”); Doc. No. 67,
p. 7 (When asked why 25th Group decided to go with a swap on this transaction, Jordahl stated “I
don’t think the swap was the discussion point. I think we looked at it, it was a fixed rate and it was
a fixed term, And so I think with that – rates looked competitive and it was a fixed term, and you
know, it was all in, and we jumped down the road on to another project.”). Accordingly, even
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construing all facts in the light most favorable to 25th Street, the Court concludes that, based on
the undisputed facts before it, Bremer’s alleged representations to 25th Street do not show a special
circumstance giving rise to a fiduciary relationship. As such, 25th Street’s breach of fiduciary duty
claim fails as a matter of law, and the Court grants Bremer’s motion for summary judgment as to
that claim. See Cousineau, 2001 WL 1640118, at *3 (explaining “if a plaintiff cannot support each
element of its claim, summary judgment must be granted, because a complete failure of proof
regarding an essential element necessarily renders all other facts immaterial.”).
Unlawful Sales or Advertising Practices (count III)
Bremer also moves for summary judgment on 25th Street’s unlawful sales or advertising
practices (count III). As to the unlawful sales or advertising practices claim, the North Dakota
Supreme Court has said:
The Unlawful Sales or Advertising Practices Act prohibits “any deceptive act or
practice, fraud, false pretense, false promise, or misrepresentation, with the intent
that others rely thereon in connection with the sale or advertisement of any
merchandise.” N.D.C.C. § 51-15-02. Under the Act, “[s]ale means any charitable
solicitation or any sale, offer for sale, or attempt to sell any merchandise [including
services] 	for 	any 	consideration.” 	N.D.C.C. 	§ 	51-15-01(5). 	Alleged
misrepresentations or omissions not “made in connection with the sale or
advertisement of any merchandise” are not actionable under the Act. Thimjon
Farms P’ship v. First Int’l Bank & Trust, 2013 ND 160, ¶ 26, 837 N.W.2d 327.
Krebsbach v. Trinity Hosps., Inc., 2020 ND 24, ¶ 30, 938 N.W.2d 133. Stated another way, North
Dakota Century Code section 51-15-02 prohibits deceptive and fraudulent conduct that a party
relies on “in connection with” a sale or advertisement of merchandise. “Sale” means “any
charitable solicitation or any sale, offer for sale, or attempt to sell any merchandise for any
consideration,” 	and 	“‘Advertisement’ 	includes 	the 	attempt 	by 	publication, 	dissemination,
solicitation, or circulation, oral or written, to induce, directly or indirectly, any person to enter into
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any obligation or acquire any title or interest in any merchandise.” N.D. Cent. Code Ann. § 51-15-
01(1), (5).
Here, the unlawful sales or advertising practices claim fails as a matter of law per the plain
language of the statute. In support of its claim, 25th Street alleges several misrepresentations by
Bremer, including valuation statements and misrepresentations as to the valuation of the swap at
termination. Doc. No. 43, pp. 28-29. Significantly though, all of these alleged misrepresentations,
which concern valuation once 25th Street decided to refinance, occurred several years after any
“sale” or “advertisement” between Bremer and 25th Street and were not made “in connection with”
any sale or advertisement. Instead, the alleged misrepresentations cited by 25th Street are better
characterized as disputes over the termination of the Swap Agreement, the resulting consequences
of the termination and the valuation of the swap, and the operative terms of the Swap Agreement
at the heart of the breach of contract claim. Moreover, 25th Street acknowledges the alleged
misrepresentations at issue occurred around the termination of the Swap Agreement and offers no
evidence that it relied on the alleged misrepresentations “in connection with” any sale or
advertising. Doc. No. 43, pp. 31-34. Accordingly, and consistent with the plain language of the
statute, the unlawful sales or advertising practices claim fails as a matter of law, and the Court
grants Bremer’s motion for summary judgment as to that claim. See Cousineau, 2001 WL
1640118, at *3 (explaining if a plaintiff cannot support each element of its claim, summary
judgment must be granted).
Unjust Enrichment (count VII)
Finally, Bremer moves for summary judgment on 25th Street’s unjust enrichment claim.
To this claim, 25th Street alleges that Bremer has been enriched by 25th Street’s “payment and
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fees” and that 25th Street has “been impoverished because Bremer required [it] to pay the incorrect,
inflated Early Termination Amount.” Doc. No. 1-3, p. 7.
As well-stated by the North Dakota Supreme Court:
Unjust enrichment is a broad, equitable doctrine which rests upon quasi or
constructive contracts implied by law to prevent a person from unjustly enriching
himself at the expense of another. To recover under a theory of unjust enrichment,
the plaintiff must prove: (1) an enrichment, (2) an impoverishment, (3) a connection
between the enrichment and the impoverishment, (4) the absence of a justification
for the enrichment and impoverishment, and (5) the absence of a remedy provided
by law. The theory may be invoked when a person has and retains money or benefits
which in justice and equity belong to another. For a complainant to recover, it is
sufficient if another has, without justification, obtained a benefit at the direct
expense of the complainant, who then has no legal means of retrieving it. The
essential element in recovering under the theory is the receipt of a benefit by the
defendant from the plaintiff which would be inequitable to retain without paying
for its value.
McDougall v. AgCountry Farm Credit Servs., PCA, 2020 ND 6, ¶ 21, 937 N.W.2d 546 (quoting
McColl Farms, LLC v. Pflaum, 2013 ND 169, ¶ 18, 837 N.W.2d 359). Moreover, “it is well-settled
that unjust enrichment applies only in the absence of a contract between the parties, and there can
be no implied-in-law contract when there is an express contract between the parties relative to the
same subject matter.” Ritter, Laber & Assocs., Inc. v. Koch Oil, Inc., 2004 ND 117, ¶ 28, 680
N.W.2d 634 (internal citation omitted). Indeed, “when the parties had voluntarily entered into an
express written contract which defined their rights, unjust enrichment was not available.” Id.
(internal citation omitted).
Even viewing the facts in the light most favorable to 25th Street, the nonmoving party, the
Court concludes that the Swap Agreement is an express written contractual agreement that defines
the relationship between 25th Street and Bremer. Recognizing the existence of an express contract,
25th Street instead argues that if Bremer is correct in its argument that the “agreement in question
does not require it to act in good faith and use commercially reasonable procedures with respect
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to the termination of the swap” then “there is not an express contractual agreement on the ‘subject
matter’ of what is and is not good faith and commercially reasonable conduct.” Doc. No. 43, p. 40.
The Court disagrees.
As explained above, 25th Street’s claim for a breach of good faith and fair dealing claim is
duplicative of its breach of contract claim. As such, the Court dismissed the breach of good faith
and fair dealing claims. Therefore, to the extent 25th Street relies on an argument regarding good
faith and fair dealing, that issue is subsumed by the contractual agreement between 25th Street and
Bremer, the Swap Agreement, and thus is part of the same subject matter as 25th Street’s breach
of contract cause of action. Accordingly, because there is an express contract between the parties
on the same subject matter, 25th Street is not entitled to recover under unjust enrichment. The
Court, therefore, grants Bremer’s motion for summary judgment as to this claim.
III. 	CONCLUSION
The Court has reviewed the record, the parties’ filings, and the relevant legal authority.
25th Street’s motion for partial summary judgment (Doc. No. 33) is DENIED. Additionally,
Bremer’s motion for summary judgment (Doc. No. 38) is GRANTED IN PART AND DENIED
IN PART. In summary, the Court grants Bremer’s summary judgment and dismisses with
prejudice the following claims: breach of the covenant of good faith and fair dealing (count V),
negligent misrepresentation claim (count IV), breach of fiduciary duty (count VI), unlawful sales
or advertising practices (count III), and unjust enrichment (count VII). The remaining claims for
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trial are the breach of contract claim (count I) and declaratory judgment claim (count II). The Court
will reach out to counsel in the coming days to discuss resetting the case for trial.
IT IS SO ORDERED.
Dated this 14th day of July, 2022.
/s/ Peter D. Welte
Peter D. Welte, Chief Judge
United States District Court
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