Case Studies

PRACS Institute

In the early 1980s, Dr. James Carlson co-founded the PRACS Institute, a generic drug testing facility in North Dakota. The facility experienced immediate success, cementing itself as a key employer of the local Fargo community. Over the next twenty years, Dr. Carlson continued to expand PRACS’ efforts to new locations throughout North Dakota and Minnesota, including a 1999 PRACS facility in Grand Forks and a 2004 expansion.

Upon signing the leases for the Grand Forks location, Dr. Carlson’s contractual obligations involved a personal guarantee, where he agreed that the Grand Forks’ facility rent would be paid by him if PRACS failed to pay. In 2006, Dr. Carlson sold PRACS to a group of investors who took control of daily operations. PRACS went bankrupt six years following its change in ownership, ceasing all rental payments as it shuttered each of its facility locations. The landlord of the Grand Forks facility turned to Dr. Carlson, demanding to recover rent owed under the previous personal guarantee.

Faced with potentially $2 million in rent payments, Dr. Carlson reached out to Gray Plant Mooty’s litigation team. The firm’s litigators discovered that after Dr. Carlson’s sale of PRACS, changes had been made to the leases that exonerated Dr. Carlson under a North Dakota personal guarantee statute. At trial, the court adopted GPM’s findings and ruled in Dr. Carlson’s favor. The landlord filed appeal taking the case to the Supreme Court of North Dakota. Ultimately, the Supreme Court also agreed with GPM findings that the leases had been changed, and it affirmed the trial court’s decisions in all respects. The decision eliminated a potential $2 million claim against Dr. Carlson, allowing him to pursue new projects.

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