HCC Manufacturing v. Jeffrey A. Robinson and Capital Avenue Corporation
- Laura Provinzino
- 0:24-cv-01013
- U.S. District Court · District of Minnesota
- 31
In HCC Manufacturing v. Robinson, Judge Provinzino granted defendants' motion for summary judgment, dismissing all of HCC's fraud, negligent misrepresentation, breach of contract, and conversion claims with prejudice.
Businesses that enter loan or financing agreements — particularly startups seeking non-traditional lenders — may find relevant guidance on: the limited circumstances in which fraud claims can survive alongside breach-of-contract claims; the effect of ratifying a contract after learning of potential fraud; the unavailability of negligent misrepresentation claims in arm's-length commercial dealings under Minnesota law; the enforceability of contractual waivers of consequential damages; the high burden of proving lost profits for a new business with no operating history; and the unavailability of conversion claims based on wire transfers under Minnesota law.
What happened
HCC Manufacturing, LLC entered a May 2021 loan agreement with Capital Avenue Corporation (CAC) for $4.75 million to fund a new ammunition primer manufacturing business. CAC never delivered the promised funds, ultimately returning HCC's $250,000 deposit in March 2022. HCC sued CAC and its owner Jeffrey A. Robinson, alleging fraudulent misrepresentation, fraudulent concealment, negligent misrepresentation, breach of contract, and conversion under Minnesota law.
The court examined each claim in turn. On the fraud claims, the court found no evidence that CAC ever affirmatively represented it held the loan funds itself, and separately found that HCC ratified the loan agreement even after learning CAC could not fund the loan without third parties — by agreeing to extend the closing date and refusing to rescind. The negligent misrepresentation claim failed because Minnesota law does not impose a duty of care between parties to an arm's-length commercial transaction. Although CAC plainly breached the contract by never delivering the money, HCC could not prove recoverable damages: it never sought alternative financing, the loan agreement contained a waiver of consequential and indirect damages, its lost-profits expert opinion rested on speculation, and specific performance is not available to enforce a promise to pay money. The conversion claim failed because HCC's deposit was made by wire transfer, which Minnesota courts hold cannot support a conversion claim.
Judge Provinzino granted defendants' motion for summary judgment and dismissed HCC's amended complaint with prejudice, finding no genuine dispute of material fact as to any claim.
The detailed version
- HCC Manufacturing v. Jeffrey A. Robinson and Capital Avenue Corporation · No. 0:24-cv-01013
- Laura M. Provinzino
- June 26, 2026
Background
In 2020, Aaron Buscher and Benjamin Ray developed a plan to manufacture ammunition primers in the United States. Buscher formed HCC Manufacturing, LLC, a Colorado limited liability company, in February 2021. Seeking startup capital, Buscher and Ray were introduced to Jeffrey A. Robinson, the sole owner and principal of Capital Avenue Corporation (CAC), a Minnesota corporation. Robinson operated CAC as a lender and had a revenue-sharing arrangement with Taimour Zaman (who ran a company called AI Line of Credit) and Steven de Koenigswarter, under which AILC and de Koenigswarter would generate funding to finance any loans CAC made, with profits shared among the parties.
In February 2021, Robinson presented a $100 million loan program to Buscher and Ray, explicitly warning that the funding tranches would be "unreliable" and that the program was "not guaranteed to work." HCC declined that program. Robinson then offered smaller options, and the parties settled on a $4.75 million loan with a $250,000 deposit. On May 2, 2021, CAC sent HCC a pre-approval letter; Buscher executed the loan agreement on May 5, 2021, after declining to have independent counsel review it despite CAC's attorney urging him to do so.
The loan agreement required HCC to wire $250,000 to an escrow agent and obligated CAC to deliver the $4.75 million by August 24, 2021 (the "Closing Date"). The agreement: (1) limited CAC's liability to acts of gross negligence or willful misconduct; (2) contained a "Waiver of Consequential Damages" provision; and (3) expressly permitted CAC to enter into "participations" — arrangements with other lenders — without prior notice to HCC.
CAC failed to deliver the funds by the original closing date. Robinson informed HCC the program was "oversubscribed" and needed more time. HCC agreed to extend the closing date to October 30, 2021. CAC again failed to deliver. At that point Ray learned for the first time that the funding was coming from third parties, including de Koenigswarter. Nevertheless, HCC did not rescind the agreement and instead chose to wait. When Robinson told Buscher that returning the deposit would cancel the agreement, Buscher said HCC "did not want the deposit back." CAC ultimately returned the $250,000 deposit on March 4, 2022, and HCC never launched its manufacturing business.
HCC filed this lawsuit on March 21, 2024, asserting claims under Minnesota law for fraudulent misrepresentation, fraudulent concealment, negligent misrepresentation, breach of contract, and conversion. Defendants moved for summary judgment on all claims.
Legal Standard
Summary judgment (a ruling by the court without a trial) is appropriate when there is no genuine dispute about any fact that matters to the outcome and the moving party is entitled to win as a matter of law. The court must view all evidence in the light most favorable to the non-moving party (HCC) and draw all reasonable inferences in HCC's favor, but is not required to accept speculation or unreasonable inferences as fact.
Fraudulent Misrepresentation
To win on fraudulent misrepresentation under Minnesota law, HCC had to show: (1) a false representation of a past or existing material fact; (2) made with knowledge of its falsity or without knowing whether it was true; (3) intended to induce reliance; (4) that actually caused reliance; and (5) resulting damages.
The court identified three independent reasons why this claim fails.
First, there was no affirmative false representation in the record. The only recorded evidence of Robinson discussing CAC's funding sources was the February 2021 call, in which he said capital came from "hedge funds, insurance companies, and private equity folks" — a statement that, if anything, disclosed reliance on outside capital. A statement Robinson made to a different borrower ("100% of the capital is MY RISK") was made to a third party with no relationship to HCC and therefore could not have been relied upon by HCC.
Second, to the extent HCC argued CAC misrepresented its future ability to fund the loan, a representation about future acts is not a sufficient basis for fraud merely because the act did not occur. There was no evidence CAC lacked the intention to fund the loan at the time of contracting; the revenue-sharing agreement actually gave CAC an incentive to find funding because CAC would only profit if it delivered.
Third, and independently, HCC ratified the loan agreement after learning of facts that would have permitted rescission. Under Minnesota law, a party who learns of fraud must promptly notify the other party of an intention to rescind and must refrain from conduct inconsistent with that intention. HCC had full knowledge by August 22, 2021 (at the latest) that CAC could not itself fund the loan, and by October 30, 2021 (at the latest) that CAC was relying on third-party funding. Despite this, HCC extended the agreement, refused to demand its deposit back, and never attempted to rescind. This conduct constituted ratification, waiving any fraud claim.
Fraudulent Concealment
HCC argued that CAC should have disclosed its revenue-sharing arrangement with AILC and de Koenigswarter. The court rejected this claim on multiple grounds.
As a threshold matter, a fraudulent concealment claim cannot proceed when the alleged concealment "relates to a promisor's duties under the contract" — here, CAC's core obligation was to deliver the funds regardless of where they came from, so concealment of the funding source relates directly to a contractual duty and cannot support an independent tort claim.
Beyond that, Minnesota law generally imposes no duty to disclose material facts in arm's-length business transactions between commercial entities. No special circumstances warranted departure from that rule here: (1) there was no confidential or fiduciary relationship — the parties had known each other only a few months; (2) there was no "special knowledge" — Buscher's self-serving declaration that he would not have entered the agreement had he known about the third-party arrangement was insufficient standing alone to create a genuine factual dispute; and (3) no misleading partial statements were made — the contract itself expressly permitted CAC to enter into "participations" without notice. The court also noted that HCC's post-discovery conduct (extending the agreement, refusing to rescind) was inconsistent with the inference that the third-party arrangement was a dealbreaker.
Negligent Misrepresentation
A negligent misrepresentation claim requires a defendant to owe the plaintiff a duty of care. The Minnesota Court of Appeals has consistently held that parties negotiating at arm's length in a commercial transaction owe each other no such duty. Although the Minnesota Supreme Court has not definitively settled the question, it has acknowledged that other courts do not extend this duty to arm's-length commercial transactions. Federal district courts in this district have uniformly followed the Minnesota Court of Appeals' approach. The court followed suit, concluding that no duty of care existed between HCC and Defendants, and the negligent misrepresentation claim fails as a matter of law.
Breach of Contract
Robinson Individually
Robinson signed the loan agreement and its amendment only on behalf of CAC, not in his individual capacity. Because a person cannot be sued for breach of a contract to which he is not a party, the breach-of-contract claim against Robinson individually fails as a matter of law.
CAC — Breach Established, But No Recoverable Damages
The parties did not dispute that: the loan agreement was valid; HCC fulfilled its obligations (wiring the $250,000 deposit); and CAC never delivered the $4.75 million. The court therefore held that CAC plainly breached the contract. However, HCC bore the burden of proving damages, and it could not do so.
Standard damages measure
When a lender breaches a loan agreement, the standard measure is the cost of obtaining a replacement loan — essentially the difference in interest rates. HCC never sought or obtained any alternative financing, so there were no such damages to measure. CAC also returned HCC's deposit in full.
Contractual limitations
The loan agreement contained two provisions that blocked HCC's broader damages claims. First, a limitation-of-liability clause insulated CAC from claims unless caused by gross negligence or willful misconduct — and HCC offered no evidence or legal authority supporting either standard. Second, a "Waiver of Consequential Damages" clause expressly barred claims for special, indirect, consequential, or punitive damages. Lost profits, the court held, are consequential damages under Minnesota law because they depend on benefits the loan would have produced — they are not a "direct and natural consequence" of the breach itself. The waiver therefore bars HCC's lost-profits claim.
Expert opinion on lost profits
Even setting aside the waiver, HCC's expert opinion that it suffered $10.8 million in lost profits was too speculative to support a jury verdict. The expert acknowledged that HCC needed approximately $35 million total to fund operations; the $4.75 million from CAC represented less than 14% of that total. About 73% of the needed funding was projected to come from equity and bank loans that HCC never seriously pursued. Additionally, neither Buscher nor Ray had any experience in manufacturing ammunition or ammunition components. Given these facts, the court concluded there was no reasonable basis for inferring HCC would have launched a profitable business even had CAC performed.
Specific performance
Specific performance (a court order compelling a party to perform a contract) is an equitable remedy unavailable when an adequate legal remedy exists. Minnesota courts do not specifically enforce obligations to pay money. HCC's inability to prove money damages does not open the door to equitable relief.
Conversion
Conversion under Minnesota law requires willful interference with another's personal property. The Minnesota Court of Appeals has held that electronic financial transactions — wire transfers — cannot support a conversion claim; only tangible money (such as a specific roll of coins or stack of bills kept separate from other funds) qualifies. Because HCC's $250,000 deposit was made by wire transfer, the conversion claim fails as a matter of law.
Disposition
The court granted Defendants' Motion for Summary Judgment (ECF No. 76) and dismissed HCC's Amended Complaint (ECF No. 6) with prejudice.
Read the full 31-page opinion on CourtListener, the free public archive maintained by the Free Law Project.