The U.S. Court of Appeals for the Eighth Circuit affirmed a jury verdict against Minnesota Medical University, LLC (MMU) and Philip Keithahn in a complex construction fraud case involving a failed osteopathic medical school project. The February 2, 2026 decision in *Selective Insurance Company of America v. Heritage Construction Companies, LLC* upheld findings that the defendants breached their contract and engaged in fraudulent conduct.
The case originated from Keithahn's 2017 formation of MMU with the goal of establishing an osteopathic medical school in Gaylord, Minnesota. In November 2018, Heritage Construction Companies, LLC was hired as the general contractor for the school project, with Andrew Harvala serving as Heritage's project manager and signing the construction contract.
The financing structure for the project centered on MMU's plan to issue bonds, with a "pre-condition" amount of $9,025,000 representing a critical component of the funding arrangement. However, the project ultimately failed, leading to a multi-party lawsuit involving Heritage Construction Companies, JAC & Sons Investments, Andrew P. Christensen, and Jennifer A. Christensen as third-party plaintiffs against Keithahn and MMU.
Selective Insurance Company of America served as the primary plaintiff in the case, likely reflecting the insurer's subrogation rights after paying claims related to the failed project. The complex litigation structure demonstrates the far-reaching consequences of construction project failures, which often involve multiple contractors, investors, and insurance companies.
The Heritage plaintiffs brought claims for breach of contract, indemnification, negligent misrepresentation, fraudulent misrepresentation, and fraud by omission against Keithahn and MMU. During the jury trial in the U.S. District Court for the District of Minnesota, evidence was presented supporting most of these claims.
The jury ultimately found the defendants liable on all claims except fraudulent misrepresentation. This verdict suggests that while the jury found evidence of deceptive conduct and omissions, it did not find sufficient proof of intentional false statements that would constitute fraudulent misrepresentation under Minnesota law.
Following the jury verdict, Keithahn and MMU filed post-trial motions seeking judgment as a matter of law or, alternatively, a new trial. These motions typically argue that the evidence was insufficient to support the jury's findings or that legal errors occurred during the trial that warrant setting aside the verdict.
The district court denied these motions, indicating that the trial judge found the jury's verdict was supported by sufficient evidence and that no reversible errors occurred during the proceedings. This denial paved the way for defendants' appeal to the Eighth Circuit.
On appeal, the defendants challenged both the jury verdict and the district court's denial of their post-trial motions. The case was submitted to a three-judge panel consisting of Circuit Judges Benton, Kelly, and Grasz on October 22, 2025.
In the February 2026 opinion authored by Circuit Judge Benton, the Eighth Circuit affirmed the lower court's rulings. The appellate court found that the jury verdict was supported by sufficient evidence and that the district court properly denied the defendants' post-trial motions.
The affirmance represents a significant victory for the Heritage plaintiffs and Selective Insurance, validating their claims that Keithahn and MMU breached their contractual obligations and engaged in deceptive conduct related to the medical school project.
This case highlights several important issues in construction law and project financing. The failure of educational institution construction projects can have particularly complex legal ramifications, given the specialized nature of such facilities and the often intricate financing arrangements involved.
The bond financing structure that MMU intended to use is common for large institutional projects, but such arrangements require careful coordination and transparency among all parties. When financing falls through or project sponsors fail to meet their obligations, contractors and their insurers often bear significant financial exposure.
The jury's findings on indemnification claims suggest that contractual risk allocation provisions were at issue in the case. Construction contracts typically include indemnification clauses designed to protect parties from certain types of losses, and disputes over these provisions are common in construction litigation.
The negligent misrepresentation and fraud by omission findings indicate that Keithahn and MMU failed to provide accurate information or disclosed material facts about the project's viability or financing. Such conduct can expose project sponsors to significant liability beyond simple breach of contract claims.
For construction industry participants, this case underscores the importance of thorough due diligence when evaluating project sponsors and financing arrangements. Contractors should carefully assess the financial capability of project owners and the viability of proposed financing structures before committing resources to large projects.
The Eighth Circuit's affirmance also demonstrates that appellate courts will uphold jury verdicts in complex construction cases when supported by adequate evidence, even when the legal and factual issues are sophisticated and the damages substantial.