A lawsuit over Lake Minnetonka water rights has a real estate agent battling power players in Orono

On the east side of Shoreline Drive, a narrow road that cuts scenically along Lake Minnetonka, sits a sliver of land known as Outlot B, Dragonfly Hill. The 330-square foot piece of property is owned by the city of Orono and isn’t much to see, a steep incline of shrubs and small trees with patchy grass and scattered litter.

In the winter, with cars whipping by, the lake frozen and wind howling off the shore, it’s hard to understand how the water rights abutting this property have become a pitched legal battle drawing in Orono politicians, administrators, attorneys and private residents for more than seven years.

But in Minnesota, access to water — especially Lake Minnetonka — is always worth a fight.

Dan Gustafson, a real estate agent, has become a self-described expert on riparian rights — regarding lands that abut bodies of water. He says his purchase of these water rights in 2020 and a plan to install a dock with several boat slips has been undermined by a coterie of power players in Orono.

That group includes former Orono Mayor Denny Walsh, former Orono City Council Member Matt Johnson, Orono City Attorney Soren Mattick and Dr. David Feldshon, who also tried to buy the riparian rights with his wife, Dr. Archelle Georgiou Feldshon, a consultant and consumer advocate.

They all dispute the claims and the city of Orono and the Feldshons have prevailed twice in court against Gustafson.

After Gustafson’s dock plan received a first round of approval by the Lake Minnetonka Conservation District (LMCD) in 2023, he says, that group coalesced to successfully shut the plan down by questioning the legitimacy of his title.

Gustafson, through his company Lake Minnetonka Real Estate II, sued the city of Orono and the Feldshons, accusing them of a false claim of ownership to the property. The suit was dismissed in Hennepin County District Court by Judge Jamie Anderson, who determined Gustafson couldn’t claim ownership to the rights he purchased. That decision was upheld by the Minnesota Court of Appeals. Gustafson has now filed a petition to the Minnesota Supreme Court.

“If they’ll do it to me, they’ll do it to anybody,” Gustafson said. “These guys are trying to take my property because they want it and because it’s valuable.”

Walsh served eight years as Orono mayor before losing re-election to Bob Tunheim in November. He said Gustafson’s suit never had merit.

“In my opinion, he had no legs to stand on. He never did, he never will,” Walsh said. “It’s over. He’s lost. He’s lost everything — in court, on appeal. It’s all about the money and it just didn’t work.”

These water rights are unusual. They were formerly connected — along with Outlot B, Dragonfly Hill — to a house on the other side of Shoreline Drive, a 7,965-square-foot Mediterranean behemoth perched atop a hill with lakefront on two sides.

Anne and David Duff bought a house on that site in 1972. In 1984, the Duffs agreed to a quitclaim deed, which gave Orono control of that tiny sliver of land on the other side of the road. But the Duffs asked to maintain “riparian access and docking and boat buoy rights, and the right to install and maintain the same.” In short, they wanted to keep their access to Lake Minnetonka. Orono agreed.

The Duffs sold the house in 1987. It was sold again in 1996 and 1999, and to the Feldshons in 2001.

Several years later, David Feldshon wanted to put a buoy in Browns Bay so he could have a boat in the water. He went to the LMCD to get a permit.

“They said, ‘Well, you don’t have the rights to that,‘” Feldshon recalled. “I said, ‘Well, who does?’

The LMCD told him it appeared the water rights might belong to the city of Orono, but it wasn’t clear.

In 2017, Feldshon and Johnson, who were neighbors at the time, before Johnson became a council member, sued the city for the riparian rights, and lost. The city, represented by Mattick, argued it had no claim to the riparian rights and that the Duffs retained them. Anne and David had died, so the rights were split equally among their three grown children.

Feldshon had an attorney contact one of the heirs, Andrew Duff, the former CEO of Piper Jaffray, and got a quitclaim deed for his third of the riparian rights in 2019. That deed was not recorded with the county at the time.

Elizabeth Duff, another heir, contacted Feldshon about selling the remaining rights.

“I was willing to buy it,” Feldshon recalled, “But it was so confusing at that point that my wife and I said, ‘Look, we just want to be sure that you own the rights that you’re selling us. So you need to have an attorney tell us you own these rights, and we’d be willing to buy it.' She didn’t want to do that. So she contacted Gustafson.”

Gustafson is not a lawyer, but he has spent the better part of a decade immersed in riparian rights.

He said Elizabeth Duff contacted him in 2019, and in 2020 the heirs signed a purchase agreement with Gustafson for the riparian rights. Elizabeth was then appointed special administrator for her parents' estate. In 2021, Elizabeth signed a deed transferring title of the water rights to Gustafson. Gustafson said that in probate cases, these contracts are “the legal foundation” for his claim.

“I saw Lake Minnetonka lakeshore and I knew I wanted it,” he said. “I offered money and I believe the heirs discussed it and may have asked other people if they want to match or exceed my offer, and my offer was accepted.”

In August of 2022, Gustafson applied to the LMCD for a “multiple dock license.”

Feldshon couldn’t believe it.

“There’s money in this. I mean, if he was able to put a dock up with 12 slips, you’re talking about over $10,000 per year, per slip. $100,000, $120,000 or $130,000,” Feldshon said. “I think that’s his primary motivation.”

And Feldshon’s motive for contesting that dock?

“My biggest concern was that Gustafson was going to persevere and put a huge dock in front of our house and then we’d have trouble selling our house,” Feldshon said. (The Feldshons sold the house for $4 million six months later.)

At a LMCD board meeting in January 2023, Feldshon objected to the dock. He claimed partial ownership to the riparian rights due to his contract with Andrew Duff, but Gustafson’s license was approved anyway. One of the LMCD directors commented that the application conformed to code “in every manner.”

It’s from that point that Gustafson believes a power apparatus in Orono started working against him.

He provided the Minnesota Star Tribune with emails showing Mattick and Feldshon’s attorney Marc Simpson, arguing to LMCD legal counsel Joe Langel that Gustafson’s application should not be approved.

“Orono has a ton of things coming down the pike on their planning commission,” Gustafson said. “Has the city attorney issued title opinions on those properties?”

Weeks after Gustafson’s dock proposal was approved, Feldshon officially filed the unrecorded quitclaim deed he got from Andrew Duff in 2019. Around that time Mattick emailed with LMCD Orono director Rich Anderson saying Gustafson didn’t have any riparian rights. In March 2023, the LMCD denied Gustafson’s application for his docks. That’s when Gustafson sued the city and the Feldshons.

Mattick said the city’s position on Gustafson’s dock application was basic.

“He applied for a marina permit based on what he believes are his riparian rights to that city parcel. The city said we don’t think a marina should be there,” Mattick said. “You don’t need to be a lawyer, there’s a certain logic to that. We own the land. We don’t want a marina.”

He added that because Orono owns the strip of land, “we think we have certain access rights.”

Gustafson found that ludicrous.

Gustafson’s lawsuit has lost twice in court, with judges primarily ruling that Elizabeth Duff did not have the authority to sell the riparian rights to Gustafson, even though she was the special administrator of the estate. Gustafson and his attorney say that decision jeopardizes the future of probate law in Minnesota.

“Who on earth is going to purchase estate property from an administrator and pay money only to have the heirs end up with both the money and their property?” Gustafson said. “That’s crazy.”

Walsh was defeated with 33% of the vote in the 2024 Orono mayoral election. Johnson resigned from the City Council a week after Walsh lost. Both had come under scrutiny for a series of land deals around Lake Minnetonka.

The Feldshons have moved out of their Shoreline Drive house.

The odds of the state Supreme Court hearing Gustafson’s case are low, but as long as the petition remains, the fight continues. And who owns the riparian rights to Outlot B, Dragonfly Hill, remains uncertain.

Walsh bristled at Gustafson’s claim that the fight is politically motivated and perhaps even about helping Johnson maintain a claim to the riparian rights.

“It had to do with the right thing. It would destroy the lake,” Walsh said. “It would be like the shantytown on the ice right now with all the icehouses. Just think of those with docks.”

Feldshon said if the Supreme Court takes up the case, he would likely get his attorney involved again, even though he no longer lives at the property. Something about Gustafson got under his skin.

“My wife would prefer that I give it up,” Feldshon said, laughing. “I just have a thing up my rear end. I don’t think he should get this. Even though it’s costing me and I’ll probably never get a dime back, it just irritates the daylights out of me.”

Gustafson was represented on appeal by attorney John Westrick, who has argued probate and riparian rights cases in Minnesota for more than three decades. The petition to the Minnesota Supreme Court was written by Tom Radio, one of the top land development and real estate lawyers in the Twin Cities. Both attorneys said they felt the district court and Court of Appeals approached the lawsuit incorrectly. Radio said the case has potentially wide-ranging probate and water rights implications for Minnesotans, and it deserves to be heard by the state Supreme Court.

For Gustafson, the lawsuit is about his rights, but it’s also about accountability.

“I have always been able to understand and comprehend rules because rules were a big deal at my house,” he said. “When a government agency changes their rules or doesn’t follow their rules … it’s very easy for me to pick up on that stuff and turn that on its head.”