Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-04-04150/USCOURTS-ca8-04-04150-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

 No. 04-4104

 No. 04-4150

___________

The Baker Group, L.C.; Carle Baker, * 

Jr., Trustee of the MTY Profit *

Sharing Plan and Trust, *

*

Plaintiffs - Appellants, *

*

v. *

*

Burlington Northern and Santa Fe *

Railway Company, *

*

Defendant - Appellee. *

___________ Appeals from the United States

District Court for the

 No. 04-4124 Western District of Missouri.

___________

Linus L. Baker; Laurence M. Jarvis, *

*

Appellants, *

*

v. *

*

Burlington Northern and Santa Fe *

Railway Company, *

*

Appellee. *

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___________

Submitted: January 9, 2006

Filed: June 16, 2006

___________

Before LOKEN, Chief Judge, HANSEN and MELLOY, Circuit Judges.

___________

LOKEN, Chief Judge.

The Baker Group, L.C., and MTY Profit Sharing Plan and Trust (collectively

“the Baker Group”) commenced this action against Burlington Northern and Santa

Fe Railway Company (“BNSF”) in Missouri state court, asserting contract and tort

claims arising out of a Railroad Car Net Lease Agreement (“the Lease”) under which

BNSF leased 649 railcars for a ten-year period. BNSF removed the action, invoking

the district court’s diversity jurisdiction. In a prior appeal, we reversed the district

court’s dismissal of certain claims on res judicata grounds and remanded for further

proceedings. Baker Group v. Burlington N. & S.F. Ry., 228 F.3d 883 (8th Cir. 2000)

(“Baker I”). On remand, District Judge Scott O. Wright recused, and the case was

reassigned to District Judge Fernando J. Gaitan. In a series of pretrial rulings, Judge

Gaitan sharply limited the issues to be tried. After a one day jury trial, the court

granted BNSF judgment as a matter of law on the remaining claims. The Baker

Group appeals these rulings. In a separate appeal, Baker Group attorneys Linus

Baker and Laurence Jarvis ask us to expunge comments critical of them in Judge

Wright’s order that we reviewed in Baker I. We affirm the judgment of the district

court and dismiss the attorneys’ appeal. 

Background

The Lease was signed in July 1987 by BNSF as Lessee and by Caldwell-Baker

Company (“CBC”) as Lessor acting as broker for a disclosed principal, First Security

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The Kansas Court of Appeals filed its opinion on July 21, 2000, more than two

months before our decision in Baker I, yet the Baker Group and its attorneys failed

to notify us of a decision that would have significantly impacted their prior appeal.

The failure is inexplicable and reflects a lack of candor that has plagued this litigation

from the outset. 

-3-

Bank of Utah. First Security assigned its interests under the Lease, including the

exclusive right to receive rental payments, to the Baker Group in 1993. The Lease

expired in 1997. Two Lease provisions are primarily at issue in this lawsuit and in

related litigation in a Kansas state court. Article 8 set forth BNSF’s duty to “maintain

the cars in good condition and repair,” required Lessor approval of physical

alterations to the cars, provided that BNSF was responsible for lost or destroyed cars,

and prescribed a procedure for resolving issues arising when a car was lost or

destroyed. Article 14 set forth BNSF’s duties to return the cars in good condition at

the end of the Lease and to pay the daily rent fee until a car was returned.

The Baker Group and CBC sued BNSF in Kansas state court before the Lease

expired, alleging violations of Article 8. With that litigation on-going, the Lease

expired and the Baker Group filed this action asserting violations of Article 8 during

the Lease plus additional violations of Article 14 at the end of the Lease, namely, the

return of railcars in poor condition and the failure to return other cars. After the

Kansas trial court dismissed all claims, the district court dismissed all claims in this

action as barred by the doctrine of claim preclusion (res judicata). In Baker I, we

reversed the dismissal of the Article 14 claims because they arose at the end of the

Lease, after the Kansas lawsuit commenced, and because the Kansas court refused to

permit Article 14 claims to be litigated. 228 F.3d at 886-87. 

The claim preclusion landscape was altered when the Kansas Court of Appeals

reversed the trial court decision on which Baker I relied. Caldwell-Baker Co. v.

Burlington N. & S.F. Ry., No. 82,715 (Kan. App. July 21, 2000).1 On remand in that

case, the Kansas trial court refused to permit an expansion of the issues to be tried to

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include the primary issue in this Missouri action -- Article 14 claims involving the

condition of cars returned by BNSF at the end of the Lease. Instead, the court’s

pretrial Journal Entry recited that the causes of actions remaining for trial in Kansas

were “plaintiffs’ claim that defendant violated Article 8C and Article 14 of the Lease

in question by destroying wrecked cars and not returning them to plaintiffs,” plus a

contract claim for attorneys’ fees. The Kansas case was tried, and the jury awarded

plaintiffs $168,000 because BNSF failed to give timely notice that certain rail cars

had been damaged and would be destroyed.

The Article 14 Claims That Were Tried

In a laudable effort to narrow the issues for trial, the district court on remand

ordered the parties to respond to a series of questions and then used those responses

as a basis for determining that the only issue to be tried was the Baker Group’s

Article 14 claim that BNSF failed to return certain railcars at the end of the Lease.

The parties agreed that either 648 or 649 cars were initially leased, that 23 cars were

lost or destroyed during the term of the Lease and paid for by BNSF pursuant to

Article 8, and that 615 cars were returned by BNSF or were being repaired by the

Baker Group at the end of the Lease. That left eleven cars to be accounted for at trial.

The task of tracing a particular railcar was complicated by the fact that BNSF had

renumbered some cars during the term of the Lease. Just before trial, the court issued

an order that identified eleven cars at issue, limited the trial to those eleven cars, and

provided that the Baker Group “will be required to establish that the above referenced

cars were not returned at the end of the lease in accordance with Article 14.” 

Carle Baker was the only witness for the Baker Group at trial. While insisting

that eleven cars were never returned, Baker admitted that the Baker Group had been

notified by BNSF during the term of the Lease that at least six of the eleven had been

damaged and would be destroyed pursuant to Article 8. However, Baker explained,

the Baker Group was never paid for those six cars and the other five “have not been

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accounted for.” Roger Sperry, retired Director of Equipment, testified for BNSF that

he was responsible for finding all leased railcars at the end of the Lease and that

“every active car was returned.” Sperry explained that, just before the Lease expired,

BNSF was paying rent on 626 cars, eleven more than the 615 that were returned,

because “[i]n some cases Mr. Baker refused to acknowledge that the cars had been

destroyed so it was determined that it would be at that time appropriate to continue

to pay rent until resolution could be made between Mr. Baker and BN[SF].” 

Reviewing the issue de novo, we conclude that the district court correctly

granted BNSF judgment as a matter of law at the close of the evidence. See Arabian

Agric. Servs. Co. v. Chief Indus., Inc., 309 F.3d 479, 482 (8th Cir. 2002) (standard

of review). Recall that the Kansas court defined the issue to be tried in that case as

“plaintiffs’ claim that defendant violated Article 8C and Article 14 of the Lease in

question by destroying wrecked cars and not returning them to plaintiffs.” The

doctrine of claim preclusion barred the Baker Group “from relitigating claims that

were litigated or could have been litigated” in that prior suit. Baker I, 228 F.3d at

885. All claims for cars that were not returned because they were lost or destroyed

during the term of the Lease could have been litigated in the Kansas action. This

included claims for a larger settlement payment under Article 8 because BNSF did

not provide timely notice. It also included claims for rental payments not made prior

to the settlement payments, which could be viewed as either Article 8 or Article 14

claims. On the other hand, the Kansas court did not include in the issue to be tried

Article 14 claims for cars that were not wrecked, were still in existence, and were not

returned at the end of the Lease. Any cars in that category were never involved in the

Article 8 process that was the core of the Kansas lawsuit. Thus, to prevail at this trial,

the Baker Group had to prove that one or more railcars fell into this narrow category.

It failed to do so. Indeed, on direct examination, Carle Baker testified:

Q (By Mr. [Linus] Baker) Mr. Baker, for every car that was

destroyed, did you find a payment record? 

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A No.

Q How many payments records are you missing, for the cars under

the lease?

A Eleven.

This testimony, plus the Baker Group’s failure to discredit Sperry’s testimony that all

railcars in existence at the end of the Lease were returned, establish that all claims for

non-returned cars are precluded because they could have been litigated in the Kansas

case. “[A]n entire claim arising from a single wrong cannot be divided and made

subject of several suits no matter how numerous the items of damage.” Klassen v.

Central Kan. Co-op Creamery Ass’n, 165 P.2d 601, 606 (Kan. 1946).

It may be that the Baker Group has lost an opportunity to litigate whether there

are up to five leased railcars that were never returned to the Baker Group and are still

functioning somewhere in the BNSF system or elsewhere. But this is the result of

filing multiple lawsuits with overlapping claims in different courts. Those who abuse

the judicial system in this fashion must suffer the consequences. The judgment

dismissing all claims for non-returned cars is affirmed.

The Claims That Were Not Tried

The district court made a series of pretrial rulings that simplified the issues to

be tried in this action. These rulings are ripe for review because the court has now

entered final judgment. 

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We are inclined to agree with BNSF that the amended complaint did not plead

a claim for conversion, but the district court treated the claim as adequately pleaded.

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A. Tort Claims. The Baker Group’s amended complaint included tort claims

for conversion of non-returned cars,2

 for negligent breach of a bailee’s duties, and for

breach of the duty of good faith and fair dealing. Judge Wright initially dismissed

these claims on the ground that the Lease defined the parties’ relationship and “no

independent duty exists beyond the contract.” We declined to review that

interlocutory ruling in Baker I, 228 F.3d at 888. On remand, Judge Gaitan reaffirmed

the prior ruling. The Baker Group appeals the dismissal of these claims, an issue we

review de novo. See Weaver v. Clarke, 45 F.3d 1253, 1255 (8th Cir. 1995).

Under Kansas law, a plaintiff may pursue breach of contract and “independent”

tort claims, even if based on the same facts. See Burcham v. Unison Bancorp, Inc.,

77 P.3d 130, 145-46 (Kan. 2003). In this case, however, the Baker Group does not

allege an independent tort, such as the breach of fiduciary duty at issue in Unrau v.

Kidron Bethel Retirement Servs., 27 P.3d 1, 15 (Kan. 2001). Rather, the amended

complaint alleged only the breach of duties imposed on BNSF by the Lease. In the

Kansas action based on the same Lease, the Kansas Court of Appeals affirmed the

dismissal of all tort claims because “all the tort claims arose from the alleged breach

of contract.” CBC v. BNSF, slip op. at 19.

Turning to the additional claims in this case, the Baker Group’s claim for

breach of the duty of good faith and fair dealing is a contract claim, not a tort claim.

See Kansas Baptist Convention v. Mesa Operating Ltd. P’ship, 864 P.2d 204, 211

(Kan. 1993). As the duty is an implied term of the Lease, it cannot add to BNSF’s

express duties under Article 8 and Article 14 of the Lease. See Taylor Equip., Inc.

v. John Deere Co., 98 F.3d 1028, 1031-32 (8th Cir. 1996), cert. denied, 520 U.S. 1197

(1997). Likewise, the tort claims for conversion and negligent breach of a bailee’s

duties are based upon the parties’ contractual relationship. Though a choice of

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remedies may be available to a bailor in this situation, the Kansas courts construe

complaints that emphasize the defendant’s contractual duties, liked the amended

complaint in this case, as an election to waive the tort and sue for breach of contract.

See Cont’l Ins. Co. v. Windle, 520 P.2d 1235, 1238 (Kan. 1974). Thus, the district

court did not err in following the lead of the Kansas courts in related litigation

involving the same Lease and dismissing the Baker Group’s purported tort claims.

B. Contract Claims for Returned Cars. Article 14 of the Lease, entitled

“Delivery at End of Term,” imposed the following obligations on BNSF at expiration:

Lessee shall deliver the cars to Lessor or Lessor’s designee at the

end of the lease term . . . empty, free from residue, and in the same order

and condition as it was delivered by Lessor to Lessee, except for and

subject to ordinary wear and tear and modifications permitted under this

Agreement. . . . Lessee shall continue to pay the daily rental charge on

each car . . . until it is returned to Lessor [in the condition required]. . . .

Lessee, at its expense, shall remove or cause to be removed from

the cars any of Lessee’s special paint and advertising and all Lessee

marks. Lessee shall on demand, reimburse Lessor for the expense of

cleaning any car that contains residue or other such cost which may be

incurred to place a car in the condition described above, provided Lessor

advises Lessee of such cost or expense within fifteen (15) days from the

time it receives the car . . . from Lessee, and provided Lessor has

permitted Lessee to participate in a joint inspection of such car(s) to

verify its reported condition.

The amended complaint alleged that BNSF violated Article 14 by returning cars in

substandard condition and by not removing BNSF’s special paint, advertising, and

reporting marks. The complaint prayed for damages including “the fair and

reasonable cost of repairs” plus compensation for the loss of rental income while the

returned cars were restored to their original condition. The district court dismissed

these claims prior to trial on the ground that the Baker Group failed to satisfy

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conditions precedent to recovery under Article 14 -- advising BNSF of any repair

expenses within fifteen days of receiving the cars and permitting BNSF to participate

in a joint inspection to verify the alleged deficient conditions.

On appeal, the Baker Group argues that the district court erred in construing

Article 14 because the conditions precedent are found in the second paragraph of

Article 14 and therefore only apply to claims for reimbursement of the costs of

removing BNSF logos and reporting marks from the returned cars. The Baker

Group’s brief asserts that they did not “seek reimbursement of their out-of-pocket

costs in this lawsuit,” an assertion flatly contradicted by the above-quoted prayer for

relief in the amended complaint. This is an example of why the Baker Group’s everchanging litany of multiple claims asserted in multiple courts left it with little if any

credibility in the district court, or in this court.

After careful review of the Lease as a whole, the district court concluded that

the conditions precedent in the second paragraph of Article 14 unambiguously apply

to all damage claims for breach of BNSF’s duties under Article 14 concerning

returned cars. Reviewing the district court’s interpretation of the unambiguous

contract de novo, we agree. See Winthrop Res. Corp. v. Eaton Hydraulics, Inc., 361

F.3d 465, 470 (8th Cir. 2004) (standard of review). As the court noted, limiting the

conditions precedent to the duties set forth in the second paragraph would permit the

Baker Group to demand post-Lease rental payments on rail cars allegedly needing

repairs without providing BNSF with timely notice and a joint inspection to verify

that the cars were returned in substandard condition. In addition, the reference to

“residue” in the second paragraph links directly to the duty prescribed in the first

paragraph to return cars “free from residue,” further textual evidence that the

conditions precedent apply to all Article 14 duties. 

Alternatively, the Baker Group argues that BNSF may not enforce the Article

14 conditions precedent because the Kansas state court ruled that BNSF breached

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In their reply brief, the Baker Group argues for the first time that BNSF

frustrated performance of the conditions precedent. We do not consider issues raised

for the first time in a reply brief, particularly fact-intensive issues of this nature.

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Article 8 of the Lease by failing to give timely notice that certain railcars were lost

or destroyed during the term of the Lease. That ruling, the Baker Group explains,

discharged them from all future performance duties, including compliance with the

post-termination conditions precedent in Article 14. The district court rejected this

argument, concluding “there is no basis for applying collateral estoppel to prevent

[BNSF] from raising the issue of condition precedent as it relates to Article 14.” We

agree. See Restatement (Second) of Contracts §§ 237, 245 (performance of a

condition is excused only when the other party’s breach contributes materially to the

non-occurrence of the condition). The Baker Group offered no evidence that BNSF’s

failure to give timely notice under Article 8 that some railcars were lost or destroyed

during the Lease materially affected the Baker Group’s Article 14 duties to give

notice and offer joint inspection of cars allegedly returned in substandard condition.

The Baker Group does not challenge on appeal the district court’s conclusion

that the Article 14 conditions precedent were not satisfied. Accordingly, we affirm

the dismissal of all claims relating to returned railcars.3

The Indispensable Party Issue 

On the eve of trial, the Baker Group filed a motion to dismiss the lawsuit

without prejudice because CBC as Lessor was an indispensable party whose joinder

would destroy the court’s diversity jurisdiction. The motion was based on the final

judgment in the Kansas action in which the court ruled that the judgment must be

entered in favor of CBC, not the other plaintiffs, because CBC was the contracting

party. Agreeing with BNSF that the purpose of the Kansas court ruling was only to

determine the proper form of the judgment, the district court denied the motion to

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dismiss, concluding that the Baker Group continued to have standing and that CBC

was not needed “to adjudicate this case.” We review this ruling for abuse of

discretion. See Steele v. Turn Key Gaming, Inc., 135 F.3d 1249, 1251 (8th Cir.

1998).

The first question is whether the absent party, here CBC, must be joined if

joinder would not deprive the court of jurisdiction. See Fed. R. Civ. P. 19(a). If the

absent party is a necessary party, as defined in Rule 19(a), but joinder is not feasible,

then Rule 19(b) sets forth factors to apply in determining whether “in equity and good

conscience the action should proceed among the parties before it, or should be

dismissed.” Rule 19(b) is a pragmatic rule whose application turns on considerations

of efficiency and fairness in the particular case. See Pujol v. Shearson/American

Express, Inc., 877 F.2d 132, 134 (1st Cir. 1989); see also Ranger Transp., Inc. v. WalMart Stores, 903 F.2d 1185, 1187 (8th Cir. 1990). 

Putting aside the Rule 19(a) issue, and viewing the Rule 19(b) issue from the

dual perspective of fairness and efficiency, the Baker Group’s motion to dismiss was

without merit. Carle Baker, Jr. is the majority owner and chief executive officer of

CBC and the Baker Group and is the trustee of the MTY Trust. All three entities

joined in the Kansas action, but only the Baker Group and MTY joined in this action

when it was filed in state court before being removed by BNSF. The amended

complaint alleged that CBC entered into the Lease in its own interest and as broker

for First Security, that the Baker Group purchased from First Security “certain

ownership interest” in the railcars and the right to receive rental income under the

Lease, and that CBC brought a separate action concerning its interest in the Lease in

state court. Not until six years after the case was filed, after the district court made

adverse rulings limiting the issues to be tried, did the Baker Group assert that CBC

is an indispensable party and the suit must be dismissed without prejudice. It is hard

to imagine a clearer case of abusive forum shopping. The Baker Group’s appeal of

this issue is frivolous.

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The Attorneys’ Appeal

In Case No. 04-4124, attorneys Linus Baker and Laurence Jarvis urge us to

expunge critical comments Judge Wright made about them in his June 21, 1999 final

order dismissing the Baker Group’s claims. The Baker Group appealed that order in

Baker I, complained of the critical comments, and urged us to reassign the case to a

different judge if we remanded. We denied that relief. 228 F.3d at 888. Linus Baker

and Jarvis did not join in the Baker Group’s first appeal or file a separate appeal at

that time. In this circuit, an order sanctioning an attorney is appealable, and the

appeal “must be filed within 30 days from the entry of the order.” Hill v. St. Louis

Univ., 123 F.3d 1114,1120 (8th Cir. 1997). Accordingly, we dismiss the appeal from

Judge Wright's order as untimely. 

If Judge Wright’s comments did not amount to a sanction, they would not be

appealable at all, except perhaps by writ of mandamus, which was not sought. As

Judge Posner observed in Bolte v. Home Ins. Co., 744 F.2d 572, 573 (7th Cir. 1984),

appellate review of every judicial scolding of an attorney would presage “a

breathtaking expansion in appellate jurisdiction.” Compare Butler v. Biocore Med.

Tech., Inc., 348 F.3d 1163, 1166-69 (10th Cir. 2003), and cases cited. Though Judge

Wright expressly stated that ethical violations may have occurred, he left resolution

of that issue to the state disciplinary authorities. Linus Baker and Jarvis argue that

the order was nonetheless a sanction that deprived them of liberty and property

interests without due process of law because they were afforded no prior notice and

opportunity to respond. Though the appeal is untimely, we note that the due process

contention is frivolous. A judge’s referral of possible ethical violations to an attorney

discipline authority “is analogous not to a censure or reprimand but to an order to

show cause why sanctions should not be imposed,” following which the attorney will

receive all process due. Teaford v. Ford Motor Co., 338 F.3d 1179, 1181 (10th Cir.

2003). 

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After our remand in Baker I, the Baker Group filed a motion asking Judge

Gaitan to expunge Judge Wright’s critical comments from the June 21, 1999 order.

Judge Gaitan denied the motion, explaining that he “[did] not find the language

objectionable or unduly critical of plaintiffs’ counsel” and was “unwilling to second

guess Judge Wright or to state that there was no basis for his comments.” Order of

September 28, 2001, at pp. 11-12. Linus Baker and Jarvis appeal that order, but their

appeal briefs simply assume that we have jurisdiction to consider an appeal by them

at this time. Judge Gaitan’s order was not a sanction (if it was, the appeal would be

untimely). These attorneys are not parties to the underlying lawsuit and therefore

lack standing to appeal from the final judgment. In these circumstances, we dismiss

this part of No. 04-4124 for lack of jurisdiction. Alternatively, if we have

jurisdiction, we conclude that Judge Gaitan did not abuse his discretion in declining

to disturb Judge Wright’s prior order. 

Conclusion

We have carefully considered the other issues raised on appeal by the Baker

Group and their attorneys and conclude that each is without merit. The judgment of

the district court is affirmed. The appeal in No. 04-4124 is dismissed.

______________________________

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