United States Court of Appeals

For the Eighth Circuit

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No. 15-2333

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Larry Schaefer; Elaine Schaefer

lllllllllllllllllllll Plaintiffs - Appellants

v.

Dale L. Putnam; Putnam Law Office; Raymond Schaefer; Dean Schaefer

lllllllllllllllllllll Defendants - Appellees

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Appeal from United States District Court 

for the Northern District of Iowa, Waterloo

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 Submitted: February 10, 2016

 Filed: July 1, 2016 

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Before SHEPHERD, BEAM, and KELLY, Circuit Judges.

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SHEPHERD, Circuit Judge.
Larry and Elaine Schaefer (“Larry and Elaine”)1

 appeal the district court’s2

dismissal of their claims in this diversity action. The district court found that res

judicata and collateral estoppel barred all claims. We affirm.

I.

Larry and Elaine are husband and wife. They began to experience financial

troubles after a $127,125 judgment was entered against Larry in 1998 for breach of

a grain contract.

In January 2001, Larry and Elaine’s attorney, Dale Putnam, advised them that

if they were to file for Chapter 7 bankruptcy, the bankruptcy trustee could not reach

real property transferred more than two years prior to filing their bankruptcy petition. 

Pursuant to this advice, Larry and Elaine executed ten quitclaim deeds transferring

farmland and other real estate in Cerro Gordo County, Iowa (hereinafter the “Cerro

Gordo Property”) to a newly formed entity, G.R.D. Investments, LLC (“G.R.D.”). 

Larry and Elaine’s sons, Dean and Raymond Schaefer, were the sole members of

G.R.D., and Larry and Elaine were the managers, each drawing a salary of $20,000

per year.

In October 2003, Larry and Elaine filed for Chapter 7 bankruptcy. Around the

same time that Larry and Elaine filed for bankruptcy, Putnam sent them a letter

addressing the amount of money they would need to settle their bankruptcy

obligations. Putnam created SMP, LLC (“SMP”), and designated his wife as the sole

member. He planned to utilize SMP to make a loan to Larry and Elaine.

1

Because some of the parties share a last name, we refer to them by their first

names for the sake of clarity.

2

The Honorable Edward J. McManus, United States District Judge for the

Northern District of Iowa.

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The bankruptcy trustee filed a complaint seeking to avoid the ten quitclaim

deeds to G.R.D. with respect to the Cerro Gordo Property as fraudulent transfers. The

bankruptcy court issued an order concluding that the transfers to G.R.D. were

fraudulent and merely an effort by Larry and Elaine and their sons to shield nonexempt assets from the parents’ creditors. The court held that the transfers of the

Cerro Gordo Property to G.R.D. were avoidable under 11 U.S.C. § 544(b)(1).

The trustee later filed a motion to amend the order and judgment seeking to

modify the language pertaining to the quitclaim deeds from “avoidable” to “void.” 

The bankruptcy court subsequently corrected its order to reflect that the transfers of

the Cerro Gordo Property to G.R.D. were indeed void. 

To prevent the trustee from selling the Cerro Gordo Property, Larry and Elaine

borrowed money from SMP secured by a mortgage on their homestead and 40 acres

of agricultural property. Rather than liquidating the Cerro Gordo Property for a cash

distribution to creditors, the trustee accepted a settlement from Larry and Elaine (the

“Settlement Agreement”) in order to pay all of Larry and Elaine’s creditors in full. 

The court subsequently granted Larry and Elaine’s discharge from bankruptcy. 

Following the bankruptcy, Raymond farmed the Cerro Gordo Property and paid

rent to his parents. On May 6, 2008, after Raymond failed to pay rent, Larry and

Elaine filed a forcible entry and detainer action in Cerro Gordo County. In response,

Raymond and G.R.D. filed an action to quiet title in favor of G.R.D. On October 7,

2008, an Iowa district court determined that Larry and Elaine owned the Cerro Gordo

Property. Raymond and G.R.D. appealed, and on November 25, 2009, the Iowa Court

of Appeals reversed. Schaefer v. Schaefer, No. 08-2009, 2009 WL 4116197, at *4

(Iowa Ct. App. Nov. 25, 2009). On February 25, 2011, the Iowa Supreme Court

issued an opinion agreeing with the Iowa Court of Appeals’ analysis that the Cerro

Gordo Property was owned by G.R.D. Schaefer v. Schaefer, 795 N.W.2d 494 (Iowa

2011).

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On September 28, 2008, Larry and Elaine filed suit in Iowa state court against

multiple parties, including Putnam, whom they claimed was negligent in his prebankruptcy and bankruptcy-planning advice, including advising them to form G.R.D.

and transfer the Cerro Gordo Property to G.R.D. to stave off creditor claims. They

also claimed that Putnam breached his duty of loyalty. Putnam counterclaimed for

attorney’s fees. The trial commenced on February 8, 2011, and on March 4, 2011, the

jury found in favor of Putnam and awarded him a $12,200 judgment. On May 30,

2013, the Iowa Court of Appeals affirmed the award of unpaid legal fees. Schaefer

v. Putnam, No. 11-1437, 2013 WL 2368819, at *7 (Iowa Ct. App. May 30, 2013).

In this action, filed on November 25, 2014, Larry and Elaine allege that Putnam

was negligent in advising them regarding their bankruptcy, and that their sons,

Raymond and Dean, acted in concert with Putnam to close the bankruptcy through the

Settlement Agreement with the bankruptcy trustee. Specifically, Larry and Elaine

contend that Putnam negligently advised them to enter into the Settlement Agreement,

because if they had not executed the Settlement Agreement, they arguably would have

owned the Cerro Gordo Property that they had previously transferred to G.R.D. after

the bankruptcy court voided the transfer.3

 Larry and Elaine further allege that Putnam

breached his fiduciary duty to them because he had conflicts of interest with respect

to their bankruptcy.

Defendants Putnam and Putnam Law Office (collectively “Putnam”) filed a

motion to dismiss, arguing that Larry and Elaine’s claim was barred by res judicata,

collateral estoppel, and the statute of limitations. The district court determined that

the jury verdict in the prior case disposed of all issues in the instant case but one: the

alleged failure of Putnam to protect Larry and Elaine’s interests when the bankruptcy

3

The Court notes that Larry and Elaine ignore the fact that if they had not

executed the Settlement Agreement, in all likelihood, the bankruptcy trustee would

have obtained title to and sold the Cerro Gordo Property to pay off the claims of Larry

and Elaine’s creditors.

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was closed. Larry and Elaine argued that their claim of negligence with regard to the

protection of their interests in the Settlement Agreement had not accrued by the time

the trial commenced in the first malpractice action because the Iowa Supreme Court

had not yet rendered its decision regarding whether G.R.D. or Larry and Elaine owned

the Cerro Gordo Property. However, the district court found that Larry and Elaine

could have asserted this claim in the prior malpractice action but failed to do so. 

Thus, the district court concluded that claim preclusion and issue preclusion bar all

claims that were or could have been brought in the first malpractice action. 

Accordingly, the district court granted Putnam’s motion to dismiss Larry and Elaine’s

claims. This appeal followed.

II.

“We review de novo the district court’s grant of a motion to dismiss for failure

to state a claim based on res judicata.” C.H. Robinson Worldwide, Inc. v. Lobrano,

695 F.3d 758, 763 (8th Cir. 2012) (quoting Laase v. Cnty. of Isanti, 638 F.3d 853, 856

(8th Cir. 2011)). We accept the non-moving party’s factual allegations as true and

construe all reasonable inferences in favor of the nonmovant. St. Jude Med. S.C., Inc.

v. Cormier, 745 F.3d 325, 327 (8th Cir. 2014).

“The law of the forum that rendered the first judgment controls the res judicata

analysis.” St. Paul Fire & Marine Ins. Co. v. Compaq Computer Corp., 539 F.3d 809,

821 (8th Cir. 2008) (citing 28 U.S.C. § 1738). Thus, because an Iowa state court

rendered the first judgment, Iowa law controls.

In Iowa, the general rule of claim preclusion provides that a valid and final

judgment on a claim precludes subsequent actions by “the parties or their privies as

to any claim or cause of action that was litigated or could have been litigated in the

first action.” Colvin v. Story Cnty. Bd. of Review, 653 N.W.2d 345, 348 (Iowa 2002). 

“A party must litigate all matters growing out of his claim at one time and not in

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separate actions.” Harrison v. State Bank of Bussey, 440 N.W.2d 398, 400 (Iowa Ct.

App. 1989) (internal citations omitted). Thus, claim preclusion may foreclose matters

that were never actually litigated. Arnevik v. Univ. of Minn. Bd. of Regents, 642

N.W.2d 315, 319 (Iowa 2002). The party against whom preclusion is asserted must

have had a “full and fair opportunity” to litigate the matter in the prior action in order

for claim preclusion to apply in a subsequent action. Id. at 319 (quoting Whalen v.

Connelly, 621 N.W.2d 681, 685 (Iowa 2000)). “A second claim is likely to be barred

by claim preclusion where the ‘acts complained of, and the recovery demanded are the

same or where the same evidence will support both actions.’” Id. (quoting Whalen,

621 N.W.2d at 685). 

Iowa courts look for the presence of three factors when considering the defense

of claim preclusion: (1) the parties in the first and second action are the same; (2) the

claim in the second suit could have been fully and fairly adjudicated in the prior case;

and (3) there was a final judgment on the merits in the first action. Arnevik, 642

N.W.2d at 319. If any one of these factors is not present, the defense of claim

preclusion fails. Id.

Larry, Elaine, and Putnam were all parties to the prior malpractice action. Larry

and Elaine argue, however, that they could not have brought their claim against

Putnam for negligence with respect to the Settlement Agreement with the bankruptcy

trustee because the Iowa Supreme Court did not issue a decision regarding the

ownership of the Cerro Gordo Property until after the trial had commenced in the prior

malpractice action. 

To determine whether a claim in a second suit could have been fully and fairly

adjudicated in the prior case, we must examine “(1) the protected right, (2) the alleged

wrong, and (3) the relevant evidence.” Pavone v. Kirke, 807 N.W.2d 828, 837 (Iowa

2011) (quoting Iowa Coal Mining Co. v. Monroe Cnty., Iowa, 555 N.W.2d 418, 441

(Iowa 1996)). “[I]f it is doubtful whether a second action is for the same cause of

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action as the first, the test generally applied is to consider the identity of facts essential

to their maintenance, or whether the same evidence would sustain both.” Iowa Coal

Mining Co., 555 N.W.2d at 441 (quoting Phoenix Fin. Corp. v. Iowa-Wisconsin

Bridge Co., 20 N.W.2d 457, 462 (1945)).

In Pavone, defendants contractually agreed to involve plaintiffs in any

opportunity defendants had to develop or operate a casino in Iowa, and to negotiate

with plaintiffs in good faith to award them a management agreement. Pavone, 807

N.W.2d at 830. Plaintiffs filed a breach of contract action alleging that defendants

failed to negotiate in good faith for a management agreement concerning a casino in

Emmetsburg, Iowa (the “Emmetsburg action”). Id. at 831. About two months after

filing the Emmetsburg action, plaintiffs learned that defendants had awarded a

management agreement for a casino in Clinton, Iowa to another company. Id. at 838. 

Approximately two and half years after they filed the Emmetsburg action, plaintiffs

filed a separate breach of contract action against defendants alleging a failure to

negotiate in good faith with respect to the Clinton casino (the “Clinton action”). Id.

at 831-32. The Iowa district court held that the Clinton action was barred by res

judicata and granted summary judgment in defendants’ favor. Id. at 832. The Iowa

Court of Appeals and Iowa Supreme Court affirmed the grant of summary judgment. 

Id. at 832, 839.

The Iowa Supreme Court reasoned that the Clinton action involved the same

protected right, and plaintiffs learned of the facts underlying the Clinton Action a little

over two months after filing the Emmetsburg action, but did not amend their pleadings

in the Emmetsburg action to include any allegations regarding the Clinton casino. Id.

at 838. Instead, eleven months after the court had entered judgment in the

Emmetsburg action, plaintiffs filed the Clinton action. Id. Thus, because plaintiffs

had sufficient time and opportunity to amend their Emmetsburg complaint to seek

additional damages, plaintiffs were required to bring their claims in a single cause of

action. Id.

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Likewise, Larry and Elaine filed their first malpractice action against Putnam

on September 28, 2008, which was almost five months after they filed a forcible entry

and detainer action regarding the Cerro Gordo Property. In response to their filing the

forcible entry and detainer action, Raymond and G.R.D. filed an action to quiet title

in favor of G.R.D. Thus, at the time Larry and Elaine filed the first malpractice action

and as they litigated that action, they were aware that the Settlement Agreement had

left a question as to whether they owned the Cerro Gordo Property, and thus they were

aware of Putnam’s purported negligence. In fact, more than a year prior to the

commencement of trial in the malpractice action, the Iowa Court of Appeals

determined that G.R.D. owned the Cerro Gordo Property, providing Larry and Elaine

with more than enough time to amend their complaint. 

Nevertheless, Larry and Elaine did not amend their complaint. Larry and Elaine

contend that they could not bring their claim against Putnam for his negligence

regarding the Settlement Agreement until the Iowa Supreme Court determined the

ownership of the Cerro Gordo Property, but this contention is without merit. Their

claim in this suit could have been fully and fairly adjudicated in the prior malpractice

action because they were aware of all the pertinent facts underlying their claim. See

Pavone, 807 N.W.2d at 838. Moreover, the protected right, alleged wrong, and

relevant evidence are all virtually the same. The protected right at issue, which is

Larry and Elaine’s right as Putnam’s clients to have Putnam uphold his fiduciary

duties and act as a reasonably prudent attorney, is identical for both actions. This

action involves the same alleged wrong as in the first malpractice case – Putnam’s

purported negligence in advising Larry and Elaine with respect to their bankruptcy,

and more specifically, the Cerro Gordo Property. The relevant evidence that sustained

their first cause of action would sustain this cause of action because a court would

necessarily have to consider the pre-bankruptcy transfer of the Cerro Gordo Property

to G.R.D. in order to understand any negligence on Putnam’s part in advising Larry

and Elaine to execute the Settlement Agreement.

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Larry and Elaine claim that the first malpractice action concerned Putnam’s prebankruptcy representation, and this action pertains to Putnam’s negligence

surrounding the Settlement Agreement, which resulted in their discharge from

bankruptcy. However, in their complaint in the instant case, Larry and Elaine alleged,

“This action grows out of the representation by Dale Putnam of Larry and Elaine

Schaefer in connection with advice concerning the formation of a limited liability

company called G.R.D. Investments, LLC, pre-bankruptcy planning advice and the

filing of a Chapter 7 bankruptcy in United States Bankruptcy Court for the Northern

District of Iowa.” (Pls.’ Compl. ¶ 8). Thus, Larry and Elaine have admitted that the

facts arise out of the same transaction – Putnam’s representation of Larry and Elaine

from the time prior to their filing for bankruptcy and through the execution of the

Settlement Agreement. 

Larry and Elaine were aware that their ownership of the Cerro Gordo Property

was disputed and had knowledge of all of the critical facts that would have supported

their claim, yet they neglected to amend their complaint in the prior malpractice action

to account for Putnam’s alleged malpractice with respect to the Settlement Agreement. 

They have not shown that they should be allowed a second bite at the proverbial

apple. Iowa courts have consistently held that plaintiffs cannot split claims arising

from the same transaction into two separate legal actions when there is no just reason

for the plaintiff’s delay. See e.g., Villarreal v. United Fire & Cas. Co., 873 N.W.2d

714, 729-30 (Iowa 2016) (final judgment in breach of contract case generally bars

subsequent bad-faith action against insurer because they form one transaction for

claim preclusion purposes); Bagley v. Hughes A. Bagley, Inc., 465 N.W.2d 551, 554

(Iowa Ct. App. 1990) (holding that plaintiff’s claim for back wages was precluded

because it arose from the same transaction as the first claim, which required plaintiff

to prove entitlement to back wages); Raymon v. Norwest Bank Marion, Nat. Ass’n,

414 N.W.2d 661, 666 (Iowa Ct. App. 1987) (plaintiff was obliged to raise all of his

theories of recovery pertaining to the same transaction prior to final adjudication). 

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Furthermore, Iowa follows the approach of the Restatement (Second) of

Judgments, which requires a plaintiff to bring all claims arising from the same

transaction or series of transactions in one lawsuit. See Villarreal, 873 N.W.2d at 719

(“[W]e have previously discussed and relied upon the Restatement (Second) of

Judgments in determining whether an action is barred by claim preclusion.” (citing

cases)). The Restatement (Second) of Judgments provides, “When a valid and final

judgment rendered in an action extinguishes the plaintiff’s claim pursuant to the rules

of merger or bar . . ., the claim extinguished includes all rights of the plaintiff to

remedies against the defendant with respect to all or any part of the transaction, or

series of connected transactions, out of which the action arose.” Restatement

(Second) of Judgments § 24(1) (1982). Under the restatement approach, whether a

factual grouping is part of a “transaction,” and whether the groupings form a “series”

is “to be determined pragmatically, giving weight to such considerations as whether

the facts are related in time, space, origin, or motivation, whether they form a

convenient trial unit, and whether their treatment as a unit conforms to the parties’

expectations or business understanding or usage.” Restatement (Second) of

Judgments § 24(2).

Likewise, looking to the Restatement factors, the facts in this case arise from

the same transaction as in the first action, and are related in time, origin, and

motivation. The facts would have created a convenient trial unit, and the parties’

expectations and business understanding was likely that Putnam’s representation was

a single representation – one “client-matter,” as attorneys often describe it. Thus,

Larry and Elaine’s claim in the instant action relates to the same cause of action that

was adjudicated to a final judgment on the merits in the first malpractice case, and

because Larry and Elaine have failed to show that their claim could not have been

fully and fairly adjudicated in the first action, we hold that Larry and Elaine’s claim

is barred by res judicata.

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III.

For the foregoing reasons, we affirm the judgment of the district court.

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