Ferrara v. Todd J. Ferrara

Case

Claire Ferrara v. Todd J. Ferrara, individually and as trustee of the Todd J. Ferrara Trust v. Theodore Ferrara, No. 25-cv-2142 (ECT/JFD)

Judge

Eric C. Tostrud

Date

October 30, 2025

Background and Parties Standard Heating & Air Conditioning, Inc. was founded in 1930 and eventually became equally owned (50/50) by brothers Todd J. Ferrara and Theodore ('Ted') Ferrara. In 2019, the parties entered a Shareholder Transfer Agreement and a First Amended Share Purchase Agreement. Under those documents: (1) Ted gifted all his shares to his daughter Claire Ferrara; (2) Todd sold 200 non-voting shares to Claire, making her the 51% majority owner; and (3) Todd granted Claire a call option—a contractual right to purchase all of Todd's remaining shares beginning December 31, 2024, at a price determined by the contract's valuation formula (Section 6 of the First Amended Share Purchase Agreement). That formula used either a shareholders' agreed-upon value from annual meetings or, if no such value had been set within 15 months before the option was exercised, an arm's-length fair market value potentially determined by independent appraisal.

The company had a history of setting artificially low valuations in annual 'Re-determination of Value Certificates,' a practice Ted developed to keep shares affordable for a surviving owner upon a co-owner's death. In 2020, Todd was reluctant to sign such a certificate; Ted proposed that the low figure would not be used to set the call option purchase price, and all three—Todd, Claire, and Ted—allegedly agreed. Subsequent certificates continued to use deflated values. At meetings in August and December 2024, Ted and Claire allegedly never suggested using the Re-determination value for the call option, and Ted stated he believed the shares were worth between $4 million and $6 million.

On March 3, 2025, Claire attempted to exercise the call option, tendering approximately $3,569,800—a figure derived from the April 2024 Re-determination of Value Certificate, which set the company's total value at $6,400,000. (The court noted an arithmetic inconsistency in the complaint but found it immaterial.) Todd refused to sell. Claire sued Todd for specific performance (a court order compelling the sale). Todd counterclaimed and filed a third-party complaint against Ted under Federal Rule of Civil Procedure 14, which allows a defending party to bring in a third party who may be liable for some or all of the original claim against the defendant.

Claims at Issue The operative Amended Third-Party Complaint (ECF No. 20) asserted four claims; two were voluntarily dismissed (breach of fiduciary duty against the company, and promissory estoppel against Ted). The two surviving claims were: 1. Negligent/Intentional Misrepresentation – Todd alleged Ted falsely represented that the call option price would not be based on the artificially low Re-determination of Value Certificate. 2. Tortious Interference with Contract – Todd alleged Ted used his influence over Claire to induce her to breach the agreements by demanding the lower price.

Ted moved to dismiss both claims under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.

Legal Standard Under Rule 12(b)(6), the court accepts all factual allegations as true and draws reasonable inferences in the plaintiff's favor. A complaint must state a claim that is 'plausible on its face,' meaning it must allege enough facts to allow the court to reasonably infer the defendant is liable. Mere conclusory statements or speculative allegations are insufficient. Additionally, because misrepresentation and fraud claims must be pleaded with particularity under Federal Rule of Civil Procedure 9(b), Todd was required to allege the specific circumstances of the alleged fraud.

Ruling on Negligent Misrepresentation Minnesota law requires a plaintiff to show: (1) a duty of care owed by the defendant; (2) the defendant supplied false information; (3) the plaintiff justifiably relied on it; and (4) the defendant failed to exercise reasonable care in communicating it. Minnesota courts have held that in arm's-length commercial transactions between parties of comparable sophistication, no such duty arises.

The court identified three independent reasons this claim failed:

First – No duty of care: Todd conceded there was no formal legal relationship (such as attorney-client or accountant-client) creating a duty. He argued the brothers had a 'collaborative' rather than adversarial relationship and that Ted had superior knowledge. The court rejected this, noting that both men were sophisticated businesspeople with decades of experience in the company, held senior corporate positions, and negotiated the agreements as equals. The complaint depicted Todd as capable of independent judgment, not as someone dependent on Ted's guidance.

Second – No actionable false statement: Under Minnesota law, predictions or promises about future events are not actionable as misrepresentation. Ted's alleged statements—that the call option price would be based on an independent appraisal, that he would not use the Re-determination value, and that he preferred to negotiate a fair price—were all predictions about what Claire would or would not do in the future. The court analogized to Rognlien v. Carter, 443 N.W.2d 217 (Minn. Ct. App. 1989), where a promise about what a family member would do in the future was held insufficient for fraud absent an allegation that the speaker knew the statement was false at the time. Todd did not allege Ted knew Claire intended to use the low valuation when he made these statements.

Third – No alleged damages: Misrepresentation requires actual pecuniary loss caused by reliance. Todd had not been forced to sell his shares at the disputed price; the call option had not yet been executed. Therefore, no loss was pleaded.

Ruling on Intentional (Fraudulent) Misrepresentation Minnesota's elements for intentional misrepresentation include, among others, that the false statement concern a 'past or present fact' (not a future event), that the defendant knew it was false or made it without knowing whether it was true, and that the plaintiff suffered damages. This claim also requires Rule 9(b) particularity.

The court dismissed this claim for two of the same reasons: (1) Ted's statements were about future events, not present or past facts; and (2) Todd had not alleged damages. The court also noted that one statement—Ted's expressed preference to negotiate a fair price—might be characterized as a false promise (a type of intentional misconduct under Minnesota law), but even then, Todd did not allege Ted knew the statement was false when made, and Todd's own complaint suggested Ted may have later changed his position rather than having deceived Todd from the start. Additionally, Todd failed to allege when this statement was made with the specificity required by Rule 9(b).

Ruling on Tortious Interference with Contract Mnnesota's tort of intentional interference with contractual relations requires: (1) a contract existed; (2) the defendant knew of it; (3) the defendant intentionally caused its breach; (4) without justification; and (5) damages resulted. Generally, a party cannot tortiously interfere with a contract to which they are themselves a party (the Nordling rule).

The court noted an initial complexity: Ted was a party to the Shareholder Transfer Agreement but not to the First Amended Share Purchase Agreement, which was incorporated by reference. The court found it unnecessary to resolve whether the Nordling rule barred the claim with respect to one or both agreements because the claim failed on the merits regardless.

The court held Todd failed to plausibly allege that Ted intentionally procured Claire's breach. Todd's allegations were conclusory: he claimed Ted 'exercises influence and control' over Claire (without supporting facts), that Ted's assurances about the valuation method somehow caused Claire to use that method (which the court called a non sequitur), and that Ted 'induced' Claire to make the demand (again, with no supporting facts). The complaint's own allegations about Claire exercising the call option made no mention of Ted's involvement. Additionally, as with the misrepresentation claims, Todd failed to allege damages.

Dismissal Without Prejudice The court exercised its discretion to dismiss without prejudice rather than with prejudice (which would permanently bar refiling). The primary reason was that the lack of damages was not permanent: if the call option is eventually executed at the contractually disputed price, Todd may then have actual damages and potentially viable claims. The other deficiencies in the complaint also did not appear to be beyond cure by amendment. The case between Claire and Todd—the main dispute over specific performance and the counterclaim—continues.