Maus v. Toder

Decision Date19 January 2010
Docket NumberCase No. 09-cv-628-PAC/JJK.
Citation681 F. Supp.2d 1007
CourtU.S. District Court — District of Minnesota
PartiesSteven M. MAUS, Plaintiff, v. Brian N. TODER, and Chestnut & Cambronne, P.A., Defendants.

Charles J. Welter, John G. Westrick, Westrick & McDowall-Nix, PLLP, St. Paul, MN, for Plaintiff.

Phillip Gainsley, Attorney at Law, Minneapolis, MN, for Defendants.

ORDER GRANTING MOTION FOR SUMMARY JUDGMENT

PATRICK A. CONMY, Senior District Judge.

Before the Court is the Defendants' motion for a summary judgment. The Plaintiff resists the motion. For the reasons set forth below, the motion is granted.

I. BACKGROUND

This is an action for an accounting, usury, recision of an agreement to provide legal services, and breach of fiduciary duty. Between 2001 and 2005 the Chestnut & Cambronne law firm, where Defendant Brian Toder works as an attorney, represented the Plaintiff Steven Maus in a business partnership dissolution matter. See Maus v. Galic, 669 N.W.2d 38 (Minn. App.2003). For more than three years the Defendants provided legal services to Maus based upon an oral agreement. A written fee agreement was signed on January 29, 2004. The written fee agreement does not appear in record before the court but there is no dispute that it did not mention interest or finance charges and did contain a clause which stated Maus owed the Defendants $44,871.29 for services provided. The monthly billings sent to Maus stated that "any amount not paid within 30 days shall accrue interest at the rate of 1 1/2% per month." The relationship soured sometime in 2005 in a dispute over fees. The last payment to the Defendants was made on December 17, 2004.

In December of 2005 Chestnut & Cambronne brought a motion to establish and enforce an attorney's lien on Maus's partnership-dissolution trust account. See Minn.Stat. § 481.13. In response, Maus alleged usury, violation of the Truth in Lending Act, and Rule 1.8 of the Minnesota Rules of Professional Conduct (fiduciary duty). On April 15, 2006, a Special Master granted Chestnut & Cambronne's motion for an attorney's lien without making any findings as to Maus's allegations. The lien amount is $81,778.93. The dissolution trust account is on deposit with the Hennepin County District Court. A Minnesota district court approved the Special Master's decision on April 19, 2006. Maus v. Galic, No. 99-5673 (Hennepin County Dist. Ct. April 19, 2006). The Special Master's order, which was approved by the district court, contained the following findings of fact:

1. "Maus" retained "C & C" in the fall of 2001 to serve him in the above lawsuit continuously until the end of February of 2005 when "Maus" fired "C & C" and rehired his attorney, John G. Westrick.
2. "Maus" never established that "C" ever agreed to cap its legal services at $50,000.00.
3. "Maus" and "C & C" executed a written fee agreement on January 29, 2004 entitled "agreement to provide legal Services". (Ex. A. Second Affidavit of Brian N. Toder).
4. "C & C" billed "Maus" for $94,043.93 remaining unpaid. "C & C" later reduced that amount to $81,778.93 by deducting $12,265.00, erroneously charged to him.
5. "Maus" failed to prove that "C & C" ever agreed to provide legal services on a contingent fee basis.
6. "Maus" failed to prove that "C & C" was not entitled to charge for services rendered in an attempt to obtain a fair accounting.
7. "Maus" failed to prove that "C & C" charged "Maus" for interest. In fact "C & C" merely added finance charges to "Maus" for delinquent invoices. "C & C" later waived all finance charges.
8. "C & C" has provided reasonable, fair and equitable legal services to "Maus" in the unpaid amount of $81,778.93
9. "C & C" has perfected it lien pursuant to Minn.Stat. Sec.481.13.

Id.

The lien against the partnership-dissolution trust account was to be payable at the time of the final distribution. In its counterclaim Chestnut & Cambronne states that it has not collected on the lien although demand has been made.

An appeal was taken and the lien affirmed. Maus v. Galic, No. A06-1183, 2007 WL 1248160 (Minn.Ct.App. May 1, 2007). In affirming the lien, the Minnesota Court of Appeals noted that "Maus is not barred from bringing a separate action for usury, Truth in Lending Act violations, or breach of fiduciary duty." Id. The Court explained that proceedings to establish an attorney's lien are summary in nature and the defenses raised by Maus were grounded in law rather than fact and thus inappropriate for resolution in a summary proceeding. Id. The current action was filed March 18, 2009.

II. STANDARD OF REVIEW

Summary judgment is appropriate when the evidence, viewed in a light most favorable to the non-moving party, indicates that no genuine issues of material fact exist and that the moving party is entitled to judgment as a matter of law. Davison v. City of Minneapolis, 490 F.3d 648, 654 (8th Cir.2007); see Fed.R.Civ.P. 56(c). Summary judgment is not appropriate if there are factual disputes that may affect the outcome of the case under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is "material" if it might affect the outcome of the case and a factual dispute is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Id.

The basic inquiry for purposes of summary judgment is whether the evidence presents a sufficient disagreement to require the submission of the case to a jury or whether the evidence is so one-sided that one party must prevail as a matter of law. Diesel Mach., Inc. v. B.R. Lee Indus., Inc., 418 F.3d 820, 832 (8th Cir.2005). The moving party bears the burden of demonstrating an absence of a genuine issue of material fact. Simpson v. Des Moines Water Works, 425 F.3d 538, 541 (8th Cir.2005). If the moving party has met this burden, the nonmoving party "may not rely merely on allegations or denials in its own pleading; rather, its response must . . . set out specific facts showing a genuine issue for trial." Fed. R.Civ.P. 56(e)(2). A mere trace of evidence supporting the non-movant's position is insufficient. Instead, the facts must generate evidence from which a jury could reasonably find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

III. DISCUSSION
A. Preclusion

The Defendants raise the closely related doctrines of res judicata, also known as claim preclusion, and collateral estoppel, also known as issue preclusion, as a bar to the Plaintiff's claims for an accounting, usury, and breach of fiduciary duty. The two doctrines collectively stand for the proposition that a "right, question or fact" that has been tested and decided by a "court of competent jurisdiction" cannot be disputed by the same parties in subsequent litigation. Kaiser v. Northern States Power Co., 353 N.W.2d 899, 902 (Minn.1984).

In the Eighth Circuit, the application of claim and issue preclusion principles in a diversity action is a question of substantive law controlled by state common law. Lane v. Sullivan, 900 F.2d 1247, 1250 (8th Cir.1990); Hillary v. Trans World Airlines, 123 F.3d 1041 (8th Cir. 1997). In this case Minnesota law will be applied.

Claim preclusion is a finality doctrine. Hauschildt v. Beckingham, 686 N.W.2d 829, 840 (Minn.2004). The doctrine works as a bar to not only all claims actually litigated but to all claims that could have been litigated. Id. Claim preclusion "applies as an absolute bar to subsequent litigation when (1) the earlier claim involved the same set of factual circumstances; (2) the earlier claim involved the same parties or their privies; (3) there was a final judgment on the merits; (4) the estopped party had a full and fair opportunity to litigate the matter." Id. All four prongs of this test must be met for the doctrine to apply. Id.

Issue preclusion is a narrower doctrine than claim preclusion. Hauschildt, 686 N.W.2d at 837. Issue preclusion applies where: (1) the issue was identical to the one in the prior adjudication; (2) there was a final judgment on the merits; (3) the estopped party was a party or was in privity with a party to the prior adjudication; and (4) the estopped party was given a full and fair opportunity to be heard on the adjudicated issue. Id. In order for issue preclusion to apply the particular issue must have been "distinctly contested and directly determined" in the prior adjudication. Id. Collateral estoppel also applies in the context of attorney lien proceedings. Gaughan v. Gaughan, 450 N.W.2d 338, 343 (Minn.Ct.App.1990); Boline v. Doty, 345 N.W.2d 285, 289 (Minn. Ct.App.1984).1 Once the lien amount has been fairly determined, relitigation of the amount of the lien, and by implication the necessary factual findings, is precluded. Id.

The underlying proceedings did involve the same parties, the same set of factual circumstances and there was a final judgment on the merits. But, the underlying proceedings which established the Defendants' lien were summary in nature and did not permit Maus to fully raise the defenses of usury, violation of the federal Truth in Lending Act and breach of fiduciary duty. Indeed, in rejecting Maus's appeal the Minnesota Court of Appeals specifically held that he "is not barred from bringing a separate action for usury, Truth in Lending Act violations, or breach of fiduciary duty." Maus v. Galic, No. A06-1183, 2007 WL 1248160 (Minn.Ct.App. May 1, 2007). Thus, the doctrine of claim preclusion is inapplicable.

However, the doctrine of issue preclusion would seem to apply. The issues relating to the propriety and amount of the attorney lien were fully litigated. The Special Master conducted a full evidentiary hearing after which he made certain findings of fact before concluding a lien was proper. The district court approved the Special Master's order and the Minnesota Court of Appeals affirmed. Maus had a full...

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