United States Court of Appeals

FOR THE EIGHTH CIRCUIT

_____________

No. 97-3548MN

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U.S. West Financial Services, Inc., *

a Colorado corporation, *

*

Appellant, *

*

v. *

*

Buhler, Inc., a Minnesota corporation; *

Buhler International, Ltd., a Swiss *

corporation, *

* On Appeal from the United

Appellees, * States District Court

* for the District of

----------------------------- * Minnesota.

*

U.S. West Financial Services, Inc., *

as assignee of Reuter Recycling of *

Florida, Inc., a Florida corporation, *

*

Appellant, *

*

v. *

*

Buhler, Inc., a Minnesota corporation; *

Buhler Brothers, also known as *

Buhler International, Ltd., *

*

Appellees, *
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----------------------------- *

*

U.S. West Financial Services, Inc., *

as assignee of Reuter Recycling of *

Florida, Inc., a Florida corporation, *

*

Appellant, *

*

v. *

*

Buhler, Inc., a Minnesota corporation; *

Buhler Brothers, also known as *

Buhler International, Ltd., *

*

Appellees. *

___________

Submitted: May 13, 1998

Filed: July 31, 1998 

___________

Before RICHARD S. ARNOLD, JOHN R. GIBSON, and FAGG, Circuit Judges.

___________

RICHARD S. ARNOLD, Circuit Judge.

This appeal arises out of the construction of a municipal waste composting

facility in Pembroke Pines, Florida, by Reuter Recycling of Florida. Buhler, Inc.,

which is owned by Buhler International, Ltd. (then known as Buhler Brothers, Inc.),

provided equipment, design, and engineering services for the facility. U.S. West

Financial Services lent Reuter money to finance the facility. Less than a year after the

facility began operation, it was shut down by the state because of odor problems.

Reuter defaulted on its loan payments to U.S. West and assigned its legal rights to U.S.

West.
The Hon. David S. Doty, United States District Judge for the District of

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Minnesota.

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U.S. West initiated arbitration against Buhler Inc. and Buhler International on

fraud and negligence claims. It then alleged substantially the same claims in federal

suits, against both Buhler parties in its capacity as lender, and against Buhler

International in its capacity as Reuter’s assignee. The District Court stayed both

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actions pending the arbitration award. Ultimately, the arbitration panel awarded no

damages to U.S. West. Buhler Inc. and Buhler International then moved to confirm the

arbitrators’ decision, and U.S. West moved to vacate or modify it as to Buhler

International. The District Court confirmed the award as to both defendants. It

dismissed U.S. West’s assignee action on grounds of res judicata. In U.S. West’s

lender action, it granted summary judgment for Buhler Inc. and Buhler International.

On appeal, U.S. West challenges the dismissal of its assignee action against

Buhler International and the dismissal of its lender action against both Buhler parties.

We affirm.

I.

In 1990, Reuter and Buhler Inc. agreed that Buhler would design, engineer, and

provide equipment for the Pembroke Pines facility’s material separation and recovery

system and composting process. The contract included a requirement that

controversies arising from it be arbitrated. Later, U.S. West agreed to lend Reuter

$48,545,000 to finance the facility. Soon after the facility was completed and began

operation in October 1991, it developed odor problems and was cited and fined for

violations of state odor regulations. U.S. West lent Reuter an additional $4,700,000

to address these problems. The facility had to close in November 1992.
Against both parties, U.S. West also alleged breach of a 1986 partnership

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agreement between Reuter and Buhler Inc. This claim is not now before us.

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When the plant’s odor problems began, Reuter initiated arbitration against

Encorp, the designer of the underground aeration system, for design and construction

defects, and was awarded $2.5 million. In December 1994, Reuter initiated arbitration

against Buhler Inc. and Buhler International. Buhler Inc. asked the District Court to

stop the arbitration, on grounds that the claims should have been addressed in the

Encorp litigation. The Court allowed the arbitration to proceed. 

In 1995, Reuter defaulted on its loan and assigned its legal rights to U.S. West.

In January 1996, U.S. West filed its own arbitration complaint against Buhler Inc. and

Buhler International. It sought damages on theories of fraudulent and negligent

misrepresentation, promissory estoppel, negligent design and professional malpractice,

breach of contract, and unjust enrichment. As described below, the Buhler parties

repeatedly contested Buhler International’s party status.

Before the arbitration hearing, U.S. West filed two suits. First, with respect to

the inducement of its loan to Reuter, it asserted against both Buhler parties claims of

negligent misrepresentation, fraud, and promissory estoppel. Second, as assignee of

Reuter’s legal rights, and in response to Buhler International’s resistance to inclusion

in the arbitration, it alleged against Buhler International substantially the same claims

that it had raised against both Buhler parties in its arbitration complaint. 

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The arbitration hearing was held in November 1996 and lasted 17 days. At its

conclusion, the panel decided: “Claimant is awarded no damages from Respondents

on any of its claims.” Appellant’s Add. at 26. The caption of the award notice

included both Buhler parties.
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The Buhler parties moved for summary judgment in both federal actions, on

grounds of res judicata and collateral estoppel. They also sought confirmation of the

panel’s decision in a state court, pursuant to 9 U.S.C. § 9 (1994) and Minn. Stat. Ann.

§ 572.18 (West 1988). U.S. West removed the confirmation action to federal court

and sought to vacate or modify the award, as applied to Buhler International only,

pursuant to 9 U.S.C. §§ 10 and 11 (1994). The District Court confirmed the award as

to both Buhler parties. In the assignee action, it granted summary judgment in favor

of Buhler International, on grounds of res judicata. In the lender action, it granted

summary judgment in favor of both Buhler parties, on the ground that there were no

material facts in dispute.

II.

U.S. West challenges the District Court’s application of res judicata to its

assignee action against Buhler International. It argues that Buhler International was not

a party and, therefore, that the arbitration award was not a final decision on the merits

of its claims against Buhler International. We affirm.

We assess the preclusive effect of the arbitration award on U.S. West’s assignee

action under Minnesota law. See Mandich v. Watters, 970 F.2d 462, 465 (8th Cir.

1992). Under Minnesota law, “ ‘[a] judgment on the merits constitutes an absolute bar

to a second suit for the same cause of action, and is conclusive between parties and

privies . . ..’ ” Dorso Trailer Sales, Inc. v. American Body & Trailer, 482 N.W.2d 771,

774 (Minn. 1992) (quoting Mattsen v. Packman, 358 N.W.2d 48, 49 (Minn. 1984)

(citations omitted)). The doctrine “should not be rigidly applied; rather, it focuses on

whether its application results in an injustice against the party to be precluded.” Sondel

v. Northwest Airlines, 56 F.3d 934, 938 (8th Cir. 1995) (citing Houlihan v. Fimon, 454

N.W.2d 633, 635 (Minn. App. 1990)). A final arbitration award, unless it is set aside

for a legally sufficient reason, has the same preclusive effect as a judgment.
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The procedural history of the arbitration supports the District Court’s finding that

Buhler International was a party. U.S. West named Buhler International as a respondent

in its arbitration complaint and attempted to serve the complaint on it. U.S. West never

asked to dismiss Buhler International formally, and in fact opposed Buhler

International’s counsel’s proposal to do so. As a formal matter, then, from the time that

Buhler International was named as an arbitration party to the time when it was included

in the arbitration award’s caption, its party status never changed.

We recognize that the Buhler parties resisted the inclusion of Buhler International

as a party to the arbitration. Buhler Inc.’s response to the arbitration complaint denied

that Buhler International was a proper party to the arbitration, and Buhler International

did not serve an answer itself. In February 1996, counsel for the Buhler parties moved

the arbitration panel to dismiss Buhler International, though the panel did not do so. In

a May 1996 letter, their counsel reiterated that Buhler International was not a party to

the arbitration. When U.S. West brought its lender action against the Buhler parties, the

Buhler parties did not argue that the claims against Buhler International had to be

arbitrated, as they did regarding the claims against Buhler Inc.

However, we do not believe that these actions amounted to, or resulted in, the de

facto dismissal of Buhler International from the arbitration proceedings. U.S. West still

obtained extensive information from Buhler International, which the arbitration panel

ordered to participate in discovery despite its objections. Buhler International produced

approximately fifteen boxes of documents. In fact, the Buhler parties’ counsel informed

the arbitration panel that he had provided to U.S. West “all nonprivileged documents

from both Buhler Inc. and Buhler International related to the Pembroke Pines

Composting Facility . . ..” Appellant’s App. at 833. Additionally, U.S. West deposed

Herman Hofer, the Buhler parties’ expert in odor and “the Buhler International

employee most directly involved in the design of the Facility . . ..” Appellant’s App. at

162 (aff. of Buhler counsel). Though, as U.S. West asserts, these
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acts do not themselves render Buhler International a party, they do indicate that U.S.

West did not lack access to information pertinent to Buhler International’s liability.

Further, Buhler International’s conduct and knowledge appear to have figured

prominently in the arbitration hearing. It is true that, in its opening statement at the

hearing, U.S. West counsel said, “we are not asking this panel for a determination of

either liability or the amount of damages with respect to Buhler International LTD in

this case.” Appellant’s App. at 193. However, this statement was immediately

followed by a disclaimer: “Having said that, I will tell the panel that it’s going to be

difficult in this case to present the evidence without presenting evidence of the

involvement of Buhler International LTD. I think the panel is going to hear a lot of

evidence about where the original design for this composting system came from, who

was involved and the people from [Buhler International]. So I believe there are some

common factual backgrounds . . .. ” Id. 

The record indicates that U.S. West did indeed present, and the arbitration panel

considered, substantial evidence relevant to Buhler International’s liability. U.S. West’s

arbitration brief alleged odor problems at “the 80 - 100 facilities [Buhler International]

had designed and engineered.” Appellant’s App. at 215. Its opening statement alleged

that Reuter had been lied to about odor problems at a Buhler plant in Germany and that

“major odor problems” at other foreign plants had been concealed. Appellant’s App.

at 194-95. U.S. West’s assignee action would have depended on proof of these same

odor problems. The overlap of “common factual backgrounds” is especially significant

in light of the fact that the alleged odor problems were in plants operated by Buhler

International, and not its U.S. subsidiary Buhler Inc. As Buhler counsel explained in the

memorandum supporting the Buhler parties’ application to confirm the award, “only

Buhler International supplied composting equipment to facilities outside the United

States” and “only Buhler International had supplied equipment to approximately 80 -

100 composting facilities.” Appellant’s App. at 146, n.2. U.S. West does not deny

these assertions.
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U.S. West argues that, in the arbitration hearing, “U S WEST tried to show that

Buhler USA asked others -- including Buhler Int’l., its parent corporation -- how to

build and design such a plant and what problems had been previously faced and dealt

with. This is entirely different than stating U S WEST offered the testimony of Buhler

Int’l’s employee as evidence that Buhler Int’l made false or misleading statements.”

Appellant’s Reply Br. at 8. However, U.S. West’s opening statement alleged that

Herman Hofer, the Buhler parties’ odor expert, had concealed evidence of odor

problems during a test run of the Pembroke Pines facility. Appellant’s App. at 194-95.

Mr. Hofer was a Buhler International employee. Additionally, in U.S. West’s answers

to Buhler Inc.’s arbitration interrogatories, it alleged misrepresentations by other Buhler

International employees. Appellant’s App. at 200. U.S. West does not specify

instances of alleged fraud, beyond those already explored in arbitration, that it would

seek to prove in further litigation.

Because Buhler International technically remained a party throughout the

arbitration, and because U.S. West presented substantial evidence relevant to Buhler

International’s liability during the hearing, the District Court’s finding that Buhler

International had been a party was not error. We believe that the arbitration panel

considered U.S. West’s claims against Buhler International on their merits fully, and we

are not convinced that its use of the plural “respondents” in the award was inadvertent.

We find U.S. West’s other arguments against res judicata unpersuasive. First,

we reject its challenge that the award is ambiguous and should be remanded for

clarification, because it did not raise this issue before the District Court. Further, it

contends that Buhler International cannot benefit from the arbitration award because it

did not sign the arbitration agreement, and because it was estopped by its resistance to

inclusion in the arbitration. Noting the District Court’s characterization of the litigation

process on both sides -- “nobody is being real clear about what they want to
The motion of U.S. West to supplement the record is granted, but the

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supplemental materials presented do not change our view as to the conclusiveness of

the arbitration award.

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do because I think they also want to maintain the argument the other way,” Appellant’s

App. at 512-13 -- we hold that these arguments are belied by U.S. West’s own course

of conduct in these proceedings. See Twomey v. Durkee, 291 N.W.2d 696, 699 (Minn.

1980) (“Plaintiffs by acquiescing in and participating in the proceeding in effect

represented . . . that the dispute was arbitrable, and that the parties would be bound by

the decision and award . . ..”). 

We therefore hold that the District Court’s application of res judicata did not

result in “injustice.” Sondel, 56 F.3d at 938. Rather, it properly acted “to relieve

parties of the burden of relitigating issues already determined in a prior action . . ..”

Buetz v. A.O. Smith Harvestore Products, Inc., 431 N.W.2d 528, 531 (Minn. 1988).3

III.

We also affirm the District Court’s grant of summary judgment in U.S. West’s

lender action. For evidence of a genuine issue of material fact, U.S. West relied on the

deposition of Joseph Blankenship, U.S. West’s project manager and loan officer:

Q. In any event, did Buhler ever misrepresent anything to you or

make any fraudulent statements to U S WEST that you are

aware of?

A. No, but if there were problems going on in some of the

European facilities that Buhler was aware of, they didn’t

bring them up either. What represents misrepresentation, is

it omission?
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Q. I will ask you about the omission. Did the

Buhler folks ever, you think, fail to tell you

something, did you ever ask them about any

problems with any of their facilities, did they

ever lie to you or misrepresent? Maybe your

response was if there was a problem out there

and they didn’t tell you about it, that would be

an omission that you might think of?

* * *

A. I do not believe and I have never felt that Buhler people

either lied or in the same term [sic] purposefully

misrepresented.

Q. One of the things you just mentioned is you think if they

knew about some problems in terms of odor, that if they are

guilty of anything, they are guilty of the sin of omission, if

you will, for failing to raise the issue?

A. I think they probably knew more than they were telling.

Appellant’s App. at 406-07. Blankenship’s vague statements do not create a genuine

issue of material fact as to the Buhler parties’ knowledge and misstatement of odor

problems, key elements of U.S. West’s fraud claims. Summary judgment was therefore

proper.

We also affirm the District Court’s denial of U.S. West’s post-judgment motions.

U.S. West first filed a motion to reconsider, along with additional affidavits from

Blankenship and another employee, which attested to fraudulent conduct by the Buhler

parties. The District Court denied this motion: “[n]otwithstanding the procedurally

defective nature of plaintiff’s motion [failure to comply with the procedural requirement

of obtaining “express permission” from the court to file such a motion, Local Rule

7.1(g)], the court has reviewed plaintiff’s motion and determines that it has failed to

make the requisite showing of compelling circumstances.” Appellant’s App. at 685
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(Order at 2 (Sept. 16, 1997)). U.S. West then resubmitted its motion as a Rule 59(e)

motion to alter or amend the judgment. The Court summarily denied this second

motion.

U.S. West admits that the affidavits it wished to submit were available to it before

the entry of judgment. Appellant’s Reply Br. at 21. It was not an abuse of discretion

for the Court to deny U.S. West’s Rule 59(e) motion “to introduce new evidence that

could have been introduced during pendency of the summary judgment motion . . ..”

Global Network Techs., Inc. v. Regional Airport Auth., 122 F.3d 661, 665-66 (8th Cir.

1997) (citation omitted).

We therefore affirm the judgment of the District Court.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.