Opinion
No. C6-01-1345.
Filed February 5, 2002.
Appeal from the District Court, Hennepin County, File No. CT011400.
Eric J. Magnuson, Diane B. Bratvold, (for respondent)
Thomas William Pahl, (for appellant)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Landmark Partners, Inc. brought a breach-of-contract action against Michael Investments to recover a broker's fee Michael had agreed to pay Landmark after Landmark secured a tenant for Michael. Michael counterclaimed. The district court dismissed Michael's counterclaims on summary judgment, reasoning that they were precluded under the doctrine of collateral estoppel by an arbitrator's ruling in a previous action between Michael and the tenant. Because the issues Michael's counterclaims raise are identical with the issues the arbitrator conclusively determined and Michael had an opportunity to be heard on those issues, we affirm.
FACTS
Michael Investments is a partnership in the business of leasing office and warehouse space. Landmark Partners, Inc. is a commercial-real-estate broker whose primary shareholder and employee is Joseph Antonucci. Through Antonucci, Landmark located office and warehouse space for Disetronic Medical Devices, Inc. in a complex Michael owned and was developing at the time. Disetronic manufactures and distributes medical devices.
In July 1999, Michael entered into a five-year lease with Disetronic, under which Michael agreed to build the leased premises according to the plans and specifications attached to the lease and in compliance with all applicable laws. Michael also agreed to pay Landmark a two-dollar-per-square-foot broker's fee.
Before the lease was signed, Antonucci told Michael representative Timothy Nelson that he had extensive experience in commercial developments and build-to-suit arrangements and was qualified to identify Disetronic's special needs and to act as its construction manager. In response to whether Disetronic had any special space requirements, Antonucci mentioned the need for lighting, floor sealant, air conditioning, and a back-up generator. But Antonucci never mentioned that Disetronic's products were made of grade-A plastic or that they might require a special fire-protection system.
Before taking possession, Disetronic learned from the fire marshall that its products were classified as grade-A plastic and could not be stored more than six feet from the ground unless the fire-protection system was improved. Disetronic had intended to store its products in racks as high as 15 feet. Michael refused to make the improvements necessary to allow Disetronic to store its products as planned. Disetronic opted to make the improvements itself and to withhold rent instead. Michael then brought an action against Disetronics for unpaid rent.
Relying on a lease provision, the district court referred the matter to arbitration over Michael's objection. The court concluded that the dispute centered on whether Michael had breached the lease by failing to upgrade the fire-protection system. Accordingly, the court ordered that the matter be submitted to arbitration on the question of "any alleged default by [Michael] and whether that default, if any, materially interfered with [Disetronic's] Lease."
During arbitration, Michael claimed that Antonucci had misrepresented Disetronic's special fire-protection needs. Antonucci testified and was cross-examined on "the [role] he played in creating and changing and overseeing the construction details and specifications which ultimately became the attachments to the lease."
After a two-day hearing, the arbitrator ruled in Disetronic's favor. The arbitrator rejected Michael's misrepresentation defense, finding that Antonucci played no role in the design or installation of the fire-protection system:
Regardless of Mr. Antonucci's knowledge of construction, he had no involvement with the design or installation of the fire-protection system. Neither [Michael] nor its consultants ever discussed fire protection with him. Mr. Antonucci knew that [Disetronic] intended to store its products about 15 feet high, but there is no suggestion that he knew that [Disetronic's] products were Group A Plastics or that, as stored, they posed any particular fire hazard. Finally, the evidence supports a finding that [Michael], and its consultants, knew or should have known enough about [Disetronic's] products and intended use of the warehouse space to assume responsibility for a proper fire protection system * * * without regard to Mr. Antonucci's [representations] on those subjects.
The district court confirmed the arbitrator's award and ordered entry of judgment in Disetronic's favor. Michael appealed from the judgment but later dismissed the appeal.
Landmark then sued Michael for breach of contract and unjust enrichment to recover its commission. Michael counterclaimed for misrepresentation, negligence, breach of contract, and contribution and indemnity. Generally, Michael alleged that it had "rightfully refused to pay any commission to Landmark because [Landmark] ha[d] caused or may have caused Michael Investments to incur additional costs in connection with the improvements to the fire-protection system." More specifically, however, Michael alleged that Landmark had (1) misrepresented Antonucci's qualifications and his ability to identify Disetronic's space requirements; (2) voluntarily assumed and then negligently breached the duty to act as construction liaison between Disetronic and Michael and to identify Disetronic's needs for the space; and (3) breached its contractual obligation to Disetronic to locate space meeting Disetronic's needs, an obligation on which Michael relied in entering into the lease.
Landmark moved for summary judgment, arguing that Michael was collaterally estopped from relitigating its claim that Antonucci had misrepresented Disetronic's fire-protection needs. Michael opposed the motion, claiming that collateral estoppel did not apply and, alternatively, that it had been unable to conduct the discovery necessary to establish a genuine issue of material fact for trial. The district court granted Landmark summary judgment on a finding that Michael's counterclaims were barred under the doctrine of collateral estoppel because they were "based on [Michael's] position that [Landmark] had a duty to disclose the need for the fire protection system," an issue the arbitrator had conclusively determined. The court did not address Michael's claim that summary judgment was premature because discovery had not been completed. This appeal followed.
DECISION
On appeal from summary judgment, this court must determine whether genuine issues of material fact remain for trial and whether the district court erred in applying the law. CareInstitute, Inc. v. County of Ramsey, 612 N.W.2d 443, 445 (Minn. 2000). No genuine issues of material fact remain for trial when collateral estoppel conclusively precludes relitigation of an issue. State Farm Mut. Auto. Ins. Co. v. Spartz, 588 N.W.2d 173, 175 (Minn.App. 1999), review denied (Minn. March 30, 1999). Whether collateral estoppel is available raises a mixed question of law and fact subject to de novo review. Id. But the decision to apply collateral estoppel is left to the district court's broad discretion and will not be reversed absent an abuse of that discretion. In re Trusts Created by Hormel, 504 N.W.2d 505, 509 (Minn.App. 1993), review denied (Minn. Oct. 19, 1993).
Collateral estoppel precludes a party from relitigating a legal or factual issue that was actually litigated in a prior proceeding and was essential to the judgment rendered. Id. Collateral estoppel applies even if the subsequent proceeding is predicated on a different cause of action. Hauser v. Mealy, 263 N.W.2d 803, 806 (Minn. 1978). And it applies without regard to whether the first determination of an issue was correct. See Mondich v. Watters, 970 F.2d 462, 466 (8th Cir. 1992); Jack H. Friedenthal et al., Civil Procedure § 14.9 (3d ed. 1999) (stating the reviewing court's role in determinining whether collateral estoppel applies is not to assess merits of previous adjudication).
Collateral estoppel is available when (1) the issue to be precluded is identical to an issue raised and necessarily determined in a previous proceeding; (2) the previous proceeding resulted in a final judgment on the merits; (3) the party against whom collateral estoppel is asserted was a party or in privity with a party to the previous proceeding; and (4) the application of collateral estoppel will not work an injustice on the party sought to be estopped, because the party had a fair opportunity to be heard on the issue. Graham v. Special Sch. Dist. No. 1, 472 N.W.2d 114, 116 (Minn. 1991).
The second and third elements of collateral estoppel are not disputed. Minnesota law clearly establishes that an arbitration award constitutes a final judgment on the merits for collateral-estoppel purposes. Aufderhar v. Data Dispatch, Inc., 452 N.W.2d 648, 651 (Minn. 1990). And Michael acknowledges it was a party to the arbitration. The present dispute thus centers on whether Michael's counterclaims raise issues that are identical with issues the arbitrator conclusively determined and whether Michael had a fair opportunity to be heard on those issues.
Michael argues that the arbitrator did not conclusively determine its counterclaims because the arbitration proceeding was confined to whether Michael breached its contractual obligations to Disetronic and did not adjudicate whether Antonucci's representations induced Michael to enter into the lease and to assume the obligation to pay Landmark a broker's fee. We disagree. Although the arbitration proceeding was initially confined to whether Michael had defaulted on its obligations under the lease, Michael placed the misrepresentation issue before the arbitrator by proffering misrepresentation as a defense to Disetronic's breach-of-contract claim. The issue was actually litigated and the arbitrator decided it adversely to Michael. Because the arbitrator's factual determinations disposed of Michael's defense, they were essential to the judgment and subject to judicial review. Accordingly, the arbitrator conclusively determined Michael's claims that Antonucci misrepresented Disetronic's fire-protection needs.
Michael argues that even if the misrepresentation issue was conclusively determined, its counterclaims are not precluded by collateral estoppel because they are premised, not on Antonucci's misrepresentation of Disetronic's fire-protection needs, but on Antonucci's misrepresentation of his construction expertise and his ability to identify Disetronic's space requirements. The record contains no evidence, however, that Antonucci's alleged misrepresentations relate to anything other than the fire-protection dispute or that they have legal significance independently of that dispute.
Alternatively, Michael claims that the district court granted summary judgment prematurely because discovery had not been completed. We cannot agree. The rules of civil procedure allow a party opposing summary judgment to state by affidavit why essential facts cannot be presented to oppose a summary-judgment motion. Minn.R.Civ.P. Rule 56.06. The court, in its discretion, may deny summary judgment or grant a continuance to permit discovery. See id., Miller-Lagro v. Northern States Power Co., 566 N.W.2d 94, 96 (Minn.App. 1997), aff'd in part, rev'd in part on other grounds, and remanded, 582 N.W.2d 550 (Minn. 1998). A continuance is appropriate if the party seeking additional discovery (1) has been diligent in obtaining discovery prior to the rule 56.06 motion, and (2) has a good-faith belief that material facts will be uncovered and is not merely engaged in a "fishing expedition." Rice v. Perl, 320 N.W.2d 407, 412 (Minn. 1982).
The district court did not abuse its discretion in implicitly denying Michael's request for additional discovery without comment. In its rule 56.06 affidavit, Michael claimed only that it did not have sufficient time to conduct the discovery necessary to oppose Landmark's summary-judgment motion. See Minn.R.Civ.P. 56.06. A rule 56.06 affidavit must be specific about the evidence expected, the course of discovery necessary to obtain the evidence, and the reasons for the failure to complete discovery to date. See Vosbeck v. Lerdall, 245 Minn. 164, 167, 72 N.W.2d 371, 374 (1955). Michael's affidavit lacked the required specificity. It contained only a general allegation that Michael did not have sufficient time to complete discovery, and it neither detailed the evidence Michael expected to uncover or otherwise explained Michael's inability to obtain affidavits from its own witnesses detailing the evidence it expected to uncover. See Cherne Contracting Corp. v. Wausau Ins. Cos., 572 N.W.2d 339, 346 (Minn.App. 1997) (holding that requested continuance to allow discovery on relation between insurer and affiliate was mere fishing expedition when party seeking continuance did not submit own affidavit supporting good-faith belief that relation existed and insurer filed affidavit stating it had produced all files relating to lawsuit), review denied (Minn. Feb. 19, 1998). Because knowledge of the relevant facts was not in Landmark's exclusive possession, Michael's affidavit not only fails to demonstrate that additional discovery would lead to new evidence, but also brings into question its good-faith belief that material facts would be discovered if a continuance were granted. Under these circumstances, the district court did not abuse its discretion by implicitly denying Michael's request for a continuance to conduct additional discovery.