Court Opinion

ID: 2792395
Source: CourtListenerOpinion
Date Created: 2015-04-09 16:04:44.851979+00
Date Added: 2024-06-11T09:56:21.533370
License: Public Domain

This opinion will be unpublished and
                        may not be cited except as provided by
                        Minn. Stat. § 480A.08, subd. 3 (2014).

                             STATE OF MINNESOTA
                             IN COURT OF APPEALS
                                   A14-1332

                              Timothy Edward Knoedler,
                                     Appellant,

                               Candace Lynn Knoedler,
                                     Appellant,

                                          vs.

                            Wilford, Geske & Cook, P. A.,
                                     Respondent.

                                 Filed April 6, 2015
                                      Affirmed
                                 Rodenberg, Judge

                             St. Louis County District Court
                   File Nos. 69DU-CV-14-432, 69-DU-CV-13-2359

Timothy E. Knoedler, Saginaw, Minnesota (pro se appellant)

Candace L. Knoedler, Saginaw, Minnesota (pro se appellant)

David Mortensen, Wilford, Geske & Cook, P.A., Woodbury, Minnesota (for respondent)

      Considered and decided by Chutich, Presiding Judge; Rodenberg, Judge; and

Smith, Judge.

                       UNPUBLISHED OPINION

RODENBERG, Judge

      Appellants challenge the district court’s grant of respondent’s motion to dismiss.

We affirm.
                                          FACTS

         In 2013, appellants Timothy and Candace Knoedler brought suit in Minnesota

state court against respondent Wilford Geske & Cook, P.A., and Ocwen Loan Servicing,

LLC, U.S. Bank National Association, and Credit Based Asset Servicing and

Securitization, LLC, alleging that the procedures used in foreclosing appellants’

mortgage were improper. The case was removed to federal court. See Knoedler v.

Wilford, Geske & Cook, P.A. et. al., No. 13-2782, 2014 WL 28795 (D. Minn. Jan. 2,

2014).     Although respondent is a Minnesota company, the federal court held that

respondent’s party status did not deprive the federal court of diversity jurisdiction

because respondent had been fraudulently joined. Id. at *2. The federal court dismissed

appellants’ claims against all defendants with prejudice. Id. at *3. Appellants appealed

to the Eighth Circuit Court of Appeals, but have since voluntarily dismissed their appeal.

         Appellants then sued respondent in Minnesota state court, again alleging that its

foreclosure procedures were improper and specifically alleging that respondent was

negligent in representing the mortgagees. The district court dismissed appellants’ claims

on three bases. First, the district court held that it did not have jurisdiction to hear

appellants’ case because there was an appeal pending in federal court.1 Second, the

district court held that, even if the appeal in the federal court system did not deprive the

state court of jurisdiction, appellants’ claims were barred by res judicata and collateral

1
  While the record before us admits of no conclusion concerning the federal appeal, the
parties to this appeal have both represented that there is no pending federal appeal and we
therefore proceed with that understanding. We also observe that whether the federal
appeal has been dismissed is not dispositive.

                                             2
estoppel. Third, the district court held that, even if it had jurisdiction and appellants’

claims were not barred, appellants’ complaint failed to state a claim against respondent

upon which relief may be granted. This appeal followed.

                                      DECISION

       Fundamental to the doctrines of res judicata and collateral estoppel is the notion

that a “right, question or fact distinctly put in issue and directly determined by a court of

competent jurisdiction cannot be disputed in a subsequent suit between the same parties.”

Hauschildt v. Beckingham, 686 N.W.2d 829, 837 (Minn. 2004) (quotation omitted).

While related, res judicata and collateral estoppel serve different purposes. Id. Res

judicata is broader and applies “to a set of circumstances giving rise to entire claims or

lawsuits” and prevents litigation of claims arising from those circumstances, even if the

later claims are brought under new legal theories. Id. Collateral estoppel applies to

specific legal issues. Id. A reviewing court must decide whether application of either

doctrine “would work an injustice on the party against whom the doctrines are urged.”

Id. Whether collateral estoppel applies is “a mixed question of law and fact,” which we

review de novo. Id. Whether res judicata applies is a question of law, which we also

review de novo. Id. at 840.

       Res judicata is available when “(1) the earlier claim involved the same set of

factual circumstances; (2) the earlier claim involved the same parties . . . ; (3) there was a

final judgment on the merits; [and] (4) the estopped party had a full and fair opportunity

to litigate the matter.” Id. A good indicator that the new claims arise from the same set

of operative facts as an earlier claim is that the new claim will rely largely on the same

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evidence as the previous claim. Id. at 840-41. The elements of collateral estoppel are

similar to those of res judicata except that the first element of collateral estoppel requires

that the specific issue in the earlier case be identical to the specific issue in the current

case. Id. at 837. When either res judicata or collateral estoppel is available, the decision

to apply either doctrine for preclusive effect is left to the district court’s discretion, and

we review only for abuse of that discretion. Fain v. Andersen, 816 N.W.2d 696, 699

(Minn. App. 2012).

       Appellants’ claim that respondent was negligent in the foreclosure-by-

advertisement procedure arises from the same set of facts underlying appellants’ earlier

claims, which were dismissed by the federal district court. And appellants’ state-court

negligence claim will rely on the same evidence underlying their federal claims.

Therefore, the first element of res judicata is met.

       Appellants argue that the earlier claim did not involve the same parties because it

was “legally impossible for [respondent] to have been party to the federal case” as

respondent’s Minnesota residency deprived the federal court of diversity jurisdiction.

But appellants are mistaken. The federal court took jurisdiction over respondents through

the doctrine of fraudulent joinder. See Wiles v. Capitol Indem. Corp., 280 F.3d 868, 871

(8th Cir. 2002) (stating that federal courts may take jurisdiction over resident parties

without destroying diversity jurisdiction when “there exists no reasonable basis in fact

and law supporting a claim against the resident defendants”). The federal court then

                                              4
dismissed the claims against respondent on the merits after asserting jurisdiction.2

Appellants concede not pursuing the federal appeal and the federal district court action is

final. Respondent was a party to the previous action. Therefore, this case and the earlier

case involve the same parties.

       Finally, appellants argued to the district court that they did not have a full and fair

opportunity to litigate the matter because the judge in the dismissed federal case did not

hear oral arguments on every aspect of appellants’ claims. Appellants do not appear to

make this argument on appeal. Even if they did, whether the proceedings in the federal

court were improper or inadequate would have been an issue in the federal appeal.

Appellants cite no authority for the notion that we or a state district court could properly

decide the adequacy of a federal district court’s consideration of this or any matter. We

also observe that appellants and respondent argued extensively before the federal district

court and appellants apparently perfected and later abandoned a federal appeal.

Appellants had a full and fair opportunity to litigate the issues in the earlier case.

2
  Whether the federal court’s application of fraudulent joinder to this case was proper is
outside the scope of our subject matter jurisdiction. See Chesapeake & Ohio Ry. Co. v.
McCabe, 213 U.S. 207, 217, 221, 29 S. Ct. 430, 434, 436 (1909) (holding that after a
federal court has decided that a case is removable, taken jurisdiction of the case, and
rendered a final judgment, the judgment is binding unless reversed by the United States
Supreme Court and the state court lacks subject matter jurisdiction to review the
judgment, including the decision that removal was proper).

                                               5
       All of the elements of res judicata are clearly met here. The district court did not

err in concluding that the dismissal of appellants’ claims by the federal district court may

operate as a ban to the present claims.3

       Further, the district court’s application of res judicata did not work an injustice on

appellants. As the district court held, aside from claim-preclusion considerations,

appellants failed to state a claim against respondent. See McDonald v. Stewart, 289

Minn. 35, 40, 182 N.W.2d 437, 440 (1970) (stating that “an attorney acting within the

scope of his employment as attorney is immune from liability to third persons for actions

arising out of that professional relationship,” but this immunity may be defeated by a

fraudulent or unlawful act). As the district court succinctly stated: Appellants “simply

have no case against the law firm.” Appellants claim respondent was negligent. Even if

true, that would not give rise to a claim by a nonparty to the attorney-client relationship.

See id. The federal district court dismissed appellants’ complaint for failure to state a

claim and the district court correctly determined that, even if appellants’ state-court

action were not barred by res judicata, their complaint also fails to state a claim against

respondent. Application of res judicata in this circumstance was within the district

court’s discretion.

       In short, the district court’s analysis was exactly correct.

       Affirmed.

3
 The district court also concluded that collateral estoppel applies so as to bar relitigation
of the same issues involved in the earlier federal litigation. Because we conclude that the
district court properly applied res judicata (claim preclusion), we do not separately
analyze whether collateral estoppel (issue preclusion) also applies. See generally
Hauschildt, 686 N.W.2d at 837.

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