Justices uphold receiver immunity in restaurant foreclosure case

In Brief

• Minnesota Supreme Court affirmed dismissal of Seven Acquisition LLC’s suit against a court-appointed receiver.
• Court held that quasi-judicial immunity protects receivers acting within the scope of their court-authorized duties.
• Seven alleged the receiver’s management decisions forced its restaurant and nightclub to close.
• Court ruled allegations of improper motive, conflict of interest, or conspiracy do not defeat quasi-judicial immunity when actions remain within receivership authority.

Seven Acquisition LLC, which operated a Minneapolis restaurant, nightclub and event center, filed a lawsuit against the court-appointed receiver overseeing the property during foreclosure, alleging that the receiver’s management of the building was improper and forced the company to leave the premises. Affirming the Minnesota Court of Appeals, the Minnesota Supreme Court concluded that the claims should be dismissed under the quasi-judicial-immunity doctrine.

Seven Steakhouse and Sushi opened in 2007 at 700 Hennepin Ave. It leased the building from 700 Hennepin Holdings LLC. The relationship deteriorated in 2018 after the building’s roof began leaking. According to Seven, the landlord failed to make adequate repairs. As a result, Seven was forced to close portions of its business.

Seven stopped paying rent, asserting that the landlord’s failure to repair the roof justified withholding rent. 700 Hennepin then filed an eviction action. The dispute went to arbitration, where Seven was awarded $826,000 against the landlord for failing to repair the roof.

700 Hennepin later stopped making mortgage payments to Wilmington Trust, prompting a foreclosure action. Wilmington appointed Midland Loan Services as its foreclosure agent and obtained court approval to appoint Gregg Williams as receiver to manage the property. Seven alleges that the receivership was used to force it from the building. It claims Williams improperly sought rent payments, refused to repair the roof unless Seven vacated, and delayed repairs to the elevator, windows, and HVAC.

Seven permanently closed in 2022. It claimed that the business suffered a total loss exceeding $3 million in damages and lost business. Eventually, the building that Seven was located in sold for $4.4 million in October 2024. In March 2026, it sold for $1.3 million, this time minus its rooftop billboard advertising rights.

Seven sued Williams for damages, alleging that he breached his fiduciary duties. Williams moved to dismiss on the ground that quasi-judicial immunity barred the claims. The district court did not apply this doctrine.

Williams then appealed. Williams argued that quasi-judicial immunity protected him from the lawsuit because his actions fell within the scope of his court-appointed receivership. The court ultimately held that an improper motive alone does not defeat quasi-judicial immunity. The Minnesota Court of Appeals explained that Seven’s claims concerned Williams’s control and management of the building, rent collection, lease decisions, claims, and communications with the court—all duties granted by his receivership order.

Seven argued that quasi-judicial immunity should not apply when the receiver is not neutral. “Williams secured his appointment by making misrepresentations to the court about his long-standing and substantial financial relationship with the bank,” argued James Kovacs, shareholder at Bassford Remele, who represented Seven. “Once appointed, Williams acted at the direction of the bank to intentionallly and methodically force Seven out of the receivership property, something which was antithetical to his appointment.”

Williams’ counsel argued that the district court is tasked with dealing with receivers whose actions are questionable. “District court judges have certain contempt powers inside receiverships. We should trust district court judges to use these powers wisely,” Scott Flaherty, of counsel at Taft Stettinius & Hollister LLP, who represented Williams, affirmed. “Allowing these separate money damages actions would chill receiver independence and make it less attractive for people to serve as receivers in the first place.”

The Minnesota Supreme Court affirmed, finding that Williams was protected by quasi-judicial immunity and therefore could not be sued for breach of fiduciary duty based on the conduct alleged by Seven. The court explained that quasi-judicial immunity extends judicial immunity to officers who perform judicial functions. Because a receiver acts as an agent of the court and manages receivership property under court authority, Minnesota law has long recognized immunity for receivers acting within the scope of their appointment. Under Chapter 576 the Minnesota Statutes and the receivership order, the court found that Williams had authority to manage and protect the property, collect rent, enforce leases, and assert claims relating to the property. Actions taken pursuant to those powers are protected from liability regardless of the receiver’s alleged motive.

The court also rejected Seven’s argument that simply alleging Williams acted outside the scope of the receivership was sufficient. It held that Seven needed to allege facts supporting the conclusion that Williams actually exceeded his authority. Ultimately, the court concluded that Seven had not done so. Williams’ failure to make repairs and his efforts to collect rent were activities expressly connected to managing the property and enforcing leases. It determined that even if Williams acted to benefit the bank or with an improper motive, immunity still applied because the conduct remained within the receivership’s scope.

Additionally, the court rejected Seven’s allegations that Williams acted pursuant to a conflict of interest, followed the bank’s directions, or participated in a plan to remove Seven. It characterized these allegations as essentially conspiracy allegations. Those cannot defeat quasi-judicial immunity.

While the court acknowledged concerns about potentially corrupt receivers, it stressed the importance of enforcing quasi-judicial immunity.

“We also take seriously Seven’s argument that applying quasi-judicial immunity here could allow corrupt receivers to engage in misconduct without adequate accountability,” wrote Justice Karl Procaccini. “But just as lawsuits brought by defeated parties against judges jeopardize judicial independence, so too do lawsuits against quasi-judicial officers when those officers exercise their powers contrary to the suing party’s wishes.”

It also noted Chapter 576 provides alternative remedies, including removal and sanctions. Finding that Seven’s complaint established that Williams acted within the receivership’s scope, the court affirmed dismissal.