This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1998).






American Family Mutual Insurance Company,



State Farm Mutual Automobile Insurance Company,



Filed January 9, 2001


Amundson, Judge


Hennepin County District Court

File No. 00-2169



Kay Nord Hunt, Lommen, Nelson, Cole & Stageberg, P.A., 80 South Eighth Street, 1800 IDS Center, Minneapolis, MN  55402; and


Clinton Collins, Jr., Clinton Collins & Associates, 250 Second Avenue South, The Crossings, Suite 120, Minneapolis, MN  55401 (for appellant)

David Oskie, Oskie & Bauch, P.A., 970 Raymond Avenue, Suite 202, St. Paul, MN  55114 (for respondent))


            Considered and decided by Schumacher, Presiding Judge, Amundson, Judge, and Mulally, Judge.*

U N P U B L I S H E D   O P I N I O N


            Multiple claims arose out of an automobile accident between insureds of appellant State Farm Mutual Automobile Insurance Company and respondent American Family Mutual Insurance Company.  State Farm settled two of the claims prior to trial and sought contribution from American Family under an arbitration agreement between the companies.  In granting American Family’s motion for a stay of arbitration, the district court determined that the matter was not arbitrable because the agreement only addressed unresolved disputes.  Further, the court determined that the claims could not be arbitrated under the rules of the arbitration agreement because payment may have exceeded American Family’s policy limits and arbitration might have substantially prejudiced American Family’s rights.  State Farm contends that the dispute was arbitrable and seeks reversal of the district court’s decision to grant American Family’s motion for a stay of arbitration. American Family moves to strike portions of State Farm’s brief and appendix.  We affirm the district court’s judgment and partially grant American Family’s motion to strike.


On April 4, 1998, two cars collided at an intersection.  One vehicle, owned and driven by Gerald Roehning, was insured by Appellant State Farm Mutual Automobile Insurance Company (“State Farm”).  The other vehicle was driven by Darrel Miller and owned by his father Melvin Miller, both of whom held automobile insurance policies with American Family Mutual Insurance Company (“American Family”) providing limits of $100,000 per person and $300,000 per event.  The accident caused the death of Margaret Roehning (the wife of Gerald Roehning) and injuries to Melvin Miller.  Both drivers maintained that the accident resulted from the other driver’s negligence.

Margaret Roehning’s daughter, Jean Linnell, brought a wrongful death action against the Millers.  Darrel and Melvin Miller named Gerald Roehning as a third-party defendant, seeking contribution or indemnity, and Roehning counterclaimed against Darrel Miller on the same basis.  Melvin Miller also sued Roehning for damages, which action Melvin Miller’s wife Wanda joined as plaintiff with a claim for lost consortium. Thereafter, Linnell amended her complaint to assert a wrongful death claim directly against Roehning and unilaterally dismissed her claim against Melvin Miller without prejudice.

Prior to trial, State Farm settled two of the claims against its insured, Gerald Roehning.  State Farm agreed to pay Melvin and Wanda Miller $250,000 in satisfaction of their claims for damages.  The district court ordered judgment dismissing with prejudice all claims between Gerald Roehning and Melvin and Wanda Miller.  On the morning of the proposed trial, State Farm agreed to pay Linnell $150,000 in settlement of her wrongful death claim against her father, Gerald Roehning.  The case was dismissed over the objection of the remaining co-defendant, Darrel Miller.  The parties have not provided this court with an order for judgment explaining the disposition of the remaining claims (i.e. the third-party claims for contribution and indemnity between Gerald Roehning and Darrel Miller), and the parties dispute the outcome of the second settlement.  State Farm maintains that it preserved its right to seek contribution from American Family through the special arbitration agreement between the companies. American Family counters that any contribution claim was not to be addressed by arbitration, but would be preserved for another forum. 

The special arbitration agreement between State Farm and American Family contains several provisions relevant to this appeal.  The agreement begins by stating that its signatories desire “the prompt settlement of all meritorious claims and suits.”  The parties also agree to “forego litigation and arbitrate unresolved disputes.”  The arbitration agreement goes on to provide that a “signatory company, prior to verdict, may in its discretion and without the consent of the other signatory company, settle such claim or suit” and that neither party is required to arbitrate any claim or suit if  “any payment which such signatory company may be required to make under this Agreement is or may be in excess of its policy limits” or if “arbitration might substantially prejudice its rights in the defense or prosecution of any other claim or suit arising out of the same accident or occurrence.”

In January of 2000, State Farm filed a demand for inter-company arbitration with Arbitration Forums, Inc., the administrator of the special arbitration agreement.  State Farm sought $250,000 from American Family in contribution or indemnity for its settlement of the two claims against Gerald Roehning.  American Family moved for a stay of arbitration and the district court ordered State Farm to withdraw its demand for arbitration pending a declaratory judgment of the court declaring the rights of the parties by reason of the involved agreements.  This appeal followed.


The district court determined the issue of arbitrability by ascertaining the parties’ intent in light of the language of the arbitration agreement.  State v. Berthiaume, 259 N.W.2d 904, 909 (Minn.1977).  However, we are not bound by the district court's interpretation of the contract.  We independently determine whether that interpretation was correct.  Michael-Curry Companies, Inc. v. Knutson Shareholders Liquidating Trust, 449 N.W.2d 139, 141 (Minn. 1989); Ottman v. Fadden, 575 N.W.2d 593, 595 (Minn. App. 1998).  Arbitration is favored by the law as an alternative to litigation.  Hughes v. Lund, 603 N.W. 2d 674, 676 (Minn. App. 1999).  If the parties evinced a clear intent to arbitrate a controversy arising out of specific provisions of the contract or if the intention of the parties is reasonably debatable as to the scope of the contract, the matter is for the arbitrators to determine and not the court. Atcas v. Credit Clearing Corporation of America, 292 Minn. 334, 341, 197 N.W.2d 448, 452 (1972).      

Under Minnesota law, “the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate.”  Minn. Stat. § 572.09(b) (1996).  American Family sought a stay of arbitration based upon its claim that the special arbitration agreement to which it and State Farm were signatories did not govern State Farm’s request for contribution resulting from the Roehning/Miller automobile accident.  The district court granted American Family’s motion based upon three distinct reasons.  The district court determined that State Farm’s pursuit of contribution was a dispute that was resolved in the Linnell litigation and did not satisfy the requirement that unresolved disputes should be arbitrated.  The court also found that arbitration of the dispute could subject American Family to payments in excess of its policy limits, thus triggering the “excessive payment” exception to the arbitration agreement. Finally, the court determined that arbitration of this dispute could substantially prejudice the rights of American Family in the defense of other disputes arising out of the same accident.  While the district court made several errors in its analysis of the parties’ special arbitration agreement, we affirm its grant of American Family’s motion to stay arbitration.

I.  Unresolved Disputes

The special arbitration agreement states that it is intended for “unresolved disputes between two or more signatories.”  The district court determined that State Farm’s pursuit of contribution or indemnity from American Family was a dispute that had been resolved by the dismissal of the Linnell litigation.  In order to properly examine this issue, it must be emphasized that both Darrel Miller, the driver of one of the vehicles, and Melvin Miller, the owner of that vehicle, held automobile insurance policies issued by American Family.  The district court’s memorandum of law does not consistently recognize this distinction, referring at one point to the “Millers’ policy” and at another to “Darrel D. Miller and Melvin E. Miller’s policies.”  The fact that American Family carried two policies involved in these claims is relevant to a determination of which disputes may have remained unresolved in the wake of State Farm’s settlements with plaintiffs.

The first claim which State Farm settled resolved the dispute between its insured Gerald Roehning and Melvin and Wanda Miller.  On behalf of Roehning, State Farm paid the Millers $250,000 to settle their claims based upon Melvin Miller’s injuries.  As a result of this settlement, these parties stipulated to a dismissal, with prejudice, of “all crossclaims and counterclaims, on the merits” and an order for judgment was entered in the district court.  The Minnesota Supreme Court has stated that “a dismissal 'with prejudice and on the merits' is, by its explicit terms, a final determination and is equivalent to an adjudication on the merits.”  Butkovich v. O’Leary, 225 N.W. 2d 847, 848 (Minn. 1975).  Because the dismissal with prejudice extinguished Melvin Miller’s crossclaim against Roehning for contribution or indemnity, any opportunity that Roehning may have had to counterclaim for contribution or indemnity was also extinguished under the doctrine of res judicata.[1]  Therefore, any subrogated claims for contribution or indemnity which State Farm sought to arbitrate with American Family were resolved and are not arbitrable under the special arbitration agreement.[2]

The second claim settled by State Farm resolved the dispute between Roehning and his daughter, Jean Linnell.  On behalf of Roehning, State Farm paid Linnell $150,000 to settle her wrongful death claim.  As previously mentioned, the disposition of the Linnell litigation is not apparent from the record because neither party has submitted a copy of an order for judgment detailing the terms of the voluntary dismissal.  Both parties have submitted affidavits offering their opposing versions of whether the parties agreed before the judge to proceed to arbitration in the wake of the Linnell settlement.  The transcript of the settlement conference was not included in the record.  However, this information is irrelevant, as it is the language of the arbitration agreement itself that reveals the intention of the parties.  Cloquet Educ. Ass’n v. Ind. School District No. 94, 344 N.W. 2d 416, 418 (Minn. 1984).  The following facts are relevant to this assessment: (1) Roehning settled his claim with Linnell, and no mention is made of Darrel Miller and Roehning’s competing claims for contribution or indemnity; and (2) the case was dismissed against the objection of Darrel Miller.  The district court had no basis upon which to determine that the competing claims of Darrel Miller and Roehning were resolved and thus not arbitrable.  Furthermore, a counterclaim that has been pleaded by defendant prior to the service by plaintiff of a voluntary motion to dismiss shall not be dismissed “against the defendant’s objection” unless that counterclaim will endure for independent adjudication by the court.  Minn. R. Civ. P. 41.01(b).  These factors suggest that the mutual claims for contribution and indemnity between Roehning and Darrel Miller were unresolved and thus arbitrable under the special arbitration agreement.  In light of the agreement’s settlement language, a contribution and indemnity dispute following the sort of settlement which State Farm made on behalf of Roehning appears to be precisely what this agreement was designed to resolve.[3]

II.  Payment in Excess of Policy Limits

Article third, subsection (b) of the special arbitration agreement provides an exception if “any payment which [a] signatory company may be required to make under this Agreement may be in excess of its policy limits.”  The district court found that State Farm’s claims for contribution and indemnity were not arbitrable because the total amount paid by State Farm in the two settlements ($400,000) exceeded the amount available under the “Millers’ policy,” which it considered to be $200,000.  While the court erred on several counts in this computation, we affirm its final result. 

The court’s first error was in equating State Farm’s total expenditure in the two settlements with the amount that American Family may have been required to pay in arbitration.  However, the amount sought by State Farm through arbitration was $250,000, not $400,000.  The court also erred in only considering the value of a single American Family policy when, under its analysis, two policies were involved.  However, since it has already been determined that Melvin Miller’s policy is not subject to arbitration because the issue of his contribution or indemnity was resolved, the issue of arbitrability must be examined solely in light of the limits of Darrel Miller’s policy.

The policy issued by American Family to Darrel Miller provides for the payment for bodily injuries of $100,000 per person up to a total of $300,000 per event.  State Farm settled claims against Gerald Roehning based upon the injuries suffered by Melvin Miller and the death of Margaret Roehning.[4]  Therefore, the American Family policy held by Darrel Miller would provide for a maximum payment of $200,000.  Because State Farm seeks $250,000 in arbitration, the payment which American Family may be required to make under such proceedings may be in excess of its policy limits.  Under the “excessive payment” provision of the special arbitration agreement, such a claim is not arbitrable.

III.  Substantial Prejudice of Signatory’s Rights

            The arbitration agreement also provides an exception where arbitration might “substantially prejudice” the rights of a signatory party “in the defense or prosecution of any other claim or suit arising out of the same accident or occurrence.”  The district court found that American Family’s rights “might be substantially prejudiced” but it did not consider that this language is limited to prejudice “in the defense or prosecution of any other claim or suit arising out of the same accident or occurrence.”  The district court reasoned that American Family would be prejudiced by the amount of time that had elapsed since the proposed trial date.  Such retrospective factors are not relevant to this inquiry.  The “substantial prejudice” provision clearly requires a prospective assessment of whether the arbitration of contribution or indemnity between State Farm and American Family would prejudice American Family’s defense of any other claims that could result from Darrel Miller’s participation in the accident with Gerald Roehning. 

It appears unlikely that such a potential claim or suit exists in this case.  However, we can only speculate as to whether the claim of Jean Linnell against Darrel Miller was dismissed along with her claim against Gerald Roehning.  Without such evidence, we cannot determine the arbitrability of this claim under the “substantial prejudice” provision and necessarily reject the district court’s finding.

IV.  Motion to Strike

Respondent hasbrought a motion to strike portions of appellant’s brief and appendix.  These portions include both arguments made by appellant and evidence which respondent claims were not produced at trial.

Appellate courts may not consider “matters outside the record on appeal, and may not consider matters not produced and received in evidence below.”  Thiel v. Stich, 425 N.W.2d 580, 582-83 (Minn. 1988) (citation omitted).  Therefore, the variant form of the special arbitration agreement, the arbitration guide or treatise, the version of the arbitration agreement referenced by a website, and the arguments affiliated with those documents must be stricken.  However, the rules and regulations promulgated by Arbitration Forums, Inc. are incorporated by reference within the arbitration agreement itself and are relevant to the court’s assessment of the parties’ intent in joining the agreement.

Although a party may not shift its position on appeal, Mattson v. Underwriters at Lloyds, 414 N.W.2d 717, 721-22 (Minn. 1987), and cannot “obtain review by raising the same general issue litigated below but under a different theory,” Thiele,425 N.W.2d at 582 (citation omitted), the arguments that respondent protests do not present a different theory of relief.  Rather, they are consistent with appellant’s theory at trial, which is that the arbitration agreement was intended to govern this dispute, consequently  appellant must be allowed to present these arguments on appeal.

            Affirmed.  Motion granted in part.


* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.

[1] “A judgment on the merits constitutes an absolute bar to a second suit for the same cause of action, and is conclusive between parties and privies, not only as to every other matter which was actually litigated, but also as to every matter which might have been litigated therein.”  Mattsen v. Packman, 358 N.W.2d 48, 49 (Minn. 1984) (citation omitted) (emphasis added).         

[2] State Farm cites Farm Bureau Mut. Ins. Co. v. Orr, 379 N.W.2d 596 (Minn. App. 1985), review denied (Minn. Feb. 19, 1986) as authority that actual notice by the tortfeasor of State Farm’s subrogation rights insulates State Farm from the effect of res judicata.  That case is not applicable to the circumstances of the present case.  The court in Farm Bureau protected an insurance company from the res judicata effect of a conciliation court judgment in favor of the company’s insured for the value of her deductible and items not covered by the policy.  Id. at 597.  In the present case, the amounts which State Farm seeks to arbitrate are precisely those for which it indemnified Roehning in the settlement.

[3] The district court’s determination that the special arbitration agreement was intended “to resolve coverage disputes between several insurers of the same insured, not to litigate liability between two alleged tortfeasors” is unfounded.

[4] Wanda Miller’s loss of consortium claim is not considered to be a bodily injury under Minnesota law.  Sicoli v. State Farm Mut. Automobile Ins. Co.,  464 N.W.2d 300, 303 (Minn. App. 1990).