Buchwald v. University of Minnesotsa

Citations: 573 N.W.2d 723; 1998 Minn. App. LEXIS 134; 1998 WL 49154Docket: C2-97-1191

Court: Court of Appeals of Minnesota; February 10, 1998; Minnesota; State Appellate Court

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Dr. Henry Buchwald, a tenured professor at the University of Minnesota and principal investigator for a federally funded research program on hyperlipidemias, sought indemnification for attorney fees and costs after being targeted in investigations regarding potential misuse of federal grant funds. Following a subpoena from a federal grand jury and an internal university investigation, Buchwald retained legal counsel and requested indemnification based on the university's policy. Initially, the university president acknowledged his eligibility for advancing reasonable attorney fees, ultimately advancing a total of $275,000. However, the university later restricted further payments without prior approval and withheld a determination on additional indemnification until the conclusion of the ongoing investigations. Subsequently, Buchwald faced disciplinary charges related to willful neglect and was required to step down from his position as principal investigator. He filed a complaint seeking a hearing to contest the disciplinary actions, which led to formal hearings under the university’s tenure regulations. The Court of Appeals of Minnesota affirmed the university's decision to deny further indemnification.

Buchwald was found by the committee to have not breached his duty regarding the POSCH grant nor caused damage to the university through negligence. The committee recommended that the president, Hasselmo, withdraw the requirement for Buchwald to step down as principal investigator and remove a letter of reprimand from his file. Hasselmo recused himself from this decision and appointed Elton A. Kuderer to determine the committee's recommendation. Kuderer initially reversed the committee's findings and instructed disciplinary action, but the university later opted to (1) appoint a new principal investigator for the POSCH program, (2) cease all disciplinary actions against Buchwald, (3) ensure no reprimand was filed in his personnel record, and (4) expunge any prior disciplinary documentation from his file.

On March 31, 1997, Buchwald sought indemnification for an additional $377,197, beyond a prior advance of $275,000. The university requested detailed time records and legal authority supporting his indemnification claim related to internal proceedings. Buchwald stated he would only provide this information if the university first agreed to indemnify him. On June 3, 1997, Hasselmo decided against any further indemnification, citing that Buchwald had already received substantial financial support and failed to provide requested documentation, which hindered the assessment of compensable fees. 

Key issues raised include whether the university acted arbitrarily in denying Buchwald indemnification and whether this determination was biased. The analysis indicates that judicial review of administrative decisions is limited to examining jurisdiction, procedural regularity, and assessing whether the decision was arbitrary or unsupported by evidence. Additionally, indemnity agreements are treated as contracts, interpreted to reflect the parties' intent, and unambiguous terms must be understood in their plain meaning.

In Bob Useldinger, Sons, Inc. v. Hangsleben, the indemnification policy of the University of Minnesota obligates the university to defend and indemnify its employees against various legal actions, provided they acted in good faith and within the scope of their employment. Eligibility hinges on the employee's good faith actions and the absence of reasonable cause to believe their conduct was unlawful. The policy specifies that the university president must determine eligibility after an appropriate investigation, which includes assessing whether claimed expenses and attorney fees were actually and reasonably incurred.

Buchwald contends the university acted arbitrarily by not determining his eligibility for indemnification. He argues that the policy necessitates a general determination of eligibility independent of specific expenses. However, the court disagrees, stating that the president's eligibility determination must consider whether the expenses were reasonably incurred. During the investigation, the university requested documentation of Buchwald's claimed expenses, which he failed to provide. Consequently, the president ruled Buchwald ineligible for indemnification, a decision deemed non-arbitrary as it was based on Buchwald's noncompliance with the information request. Additionally, the court notes Buchwald's previous submission of time records does not negate the current requirement for documentation. The ruling emphasizes that decisions are considered arbitrary only if they disregard established procedures or lack rational judgment.

Buchwald sought indemnification for $377,197 in expenses and fees incurred in 1997, but failed to provide the necessary documentation for the university to evaluate his request. Hasselmo determined Buchwald was ineligible for indemnification due to the lack of itemized time records and specific documentation, a decision deemed not arbitrary by the court. Buchwald also argued that Hasselmo should have recused himself due to claimed bias; however, the court found no evidence of bias or improper decision-making. Hasselmo had recused himself from a related disciplinary matter to maintain impartiality, and his prior conclusions regarding federal fund diversion did not imply bias against Buchwald. The court upheld the decision denying indemnification, affirming that Buchwald did not demonstrate Hasselmo's bias and confirming the legitimacy of Hasselmo's rationale for denying the indemnification request. The court also noted that a separate issue regarding a $275,000 advance from the university was not part of this appeal.