Anderson v. Werner Continental, Inc.
| Citation | 363 N.W.2d 332 |
| Decision Date | 26 February 1985 |
| Docket Number | No. C4-84-1659,C4-84-1659 |
| Parties | John W. ANDERSON, et al., etc., Appellants, v. WERNER CONTINENTAL, INC., et al., Respondents. |
| Court | Court of Appeals of Minnesota |
Syllabus by the Court
The trial court did not err in dismissing appellants' state action on res judicata grounds.
James Malcolm Williams, Minneapolis, for appellants.
Robert V. Atmore, Minneapolis, for respondents.
Heard, considered, and decided by SEDGWICK, P.J., and FOLEY and CRIPPEN, JJ.
This appeal is from a June 13, 1984, judgment dismissing with prejudice appellants' state court case on grounds of res judicata. Affirmed.
Ten years ago appellants commenced an action in the federal district court against the same defendants named herein; the complaint alleged that they had violated federal securities laws and regulations in the course of negotiating the purchase of stock from another company.
At the same time, appellants commenced this action in Hennepin County alleging common law fraud, and violations of fiduciary duties and state securities laws. Although this action is based on the same set of facts as the federal action, and the named respondents in both actions are the same, appellants made no attempt to join the state claim to the pending federal court action.
Respondents moved immediately to dismiss or stay the state court action, arguing that appellants could seek pendent jurisdiction over their state claims in the federal action.
Three years later the state court issued an order granting respondents' motion to stay the action. During this time appellants did nothing to pursue the state court action.
Meanwhile, the federal court denied appellants' motion for class action certification. The federal court also dismissed 30 of the 120 named appellants for failure to state a claim. Ultimately, the federal court judge dismissed all claims of 84 of the remaining appellants for willful failure to make discovery and to comply with court orders.
When the state court issued its order staying state proceedings, appellants moved to stay the federal proceedings so the matter could be tried first in state court. The federal court denied the motion.
More than a year later appellants moved for an order lifting the stay of their state action, certifying a class and setting a trial date. Respondents moved to dismiss the action on grounds of res judicata. The state court found that res judicata barred further prosecution of appellants' state law action and ordered it dismissed.
Did the trial court err in dismissing appellants' state action on res judicata grounds?
The trial court relied heavily on Rennie v. Freeway Transport, 294 Or. 319, 656 P.2d 919 (1982), in dismissing appellants' state action. In that case, the plaintiff had filed a federal action charging federal securities violations. He then filed a similar state common law fraud action. Upon the motion of the defendants and over the objection of the plaintiffs, the trial court stayed the state court action. Plaintiff lost in the federal court, having never asserted his state claims in that forum. Defendants then moved to dismiss the state action on res judicata grounds. The court held that the action was barred because plaintiff could have asserted his state claims in federal court. The court said:
We are convinced that the better rule, the one more consonant with the policies behind res judicata, is that a plaintiff must attempt to have all claims against a defendant arising out of one transaction adjudicated in one court in one proceeding, at least insofar as possible, despite the fact that the various claims may be based on different sources of law.
Appellants try to distinguish this case by arguing that the plaintiffs in Rennie had their day in court, whereas here the case was dismissed without a full hearing on the merits. Therefore, res judicata cannot apply.
This argument is without merit because the federal court action was dismissed on the merits. Federal Rules of Civil Procedure, Rule 41(b) provides:
Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision and any dismissal not provided for in this rule, other than a dismissal for lack of jurisdiction, for improper venue, or for failure to join a party under Rule 19, operates as an adjudication upon the merits.
Since this case does not fall within the enumerated exceptions, it was dismissed on the merits.
Appellants also argue that in Rennie there was no statute of limitations problem, as there is here. They contend the statute of limitation is the "substantial justification" the Rennie court envisioned as justifying failure to join state claims to federal actions, citing the following language.
Since plaintiff has failed to advance any substantial justification for having neglected to attempt joinder of the present claim in the prior federal court action, where it could have been finally adjudicated, we hold that the judgment there bars this action under res judicata.
This language is not persuasive in light of several other passages in the opinion. Rennie also held:
To the extent that a given state of facts is susceptible to alternative interpretation and analysis, plaintiff must seek and exhaust...
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...nucleus of facts is alleged in support of both claims." Sunrise Elec., 425 N.W.2d at 852 (construing Anderson v. Werner Continental, Inc., 363 N.W.2d 332, 335 (Minn.Ct. App.1985)). Applying the transactional approach, the court notes that although Turner's state and federal claims may rest ......
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