This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2002).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-671

 

Hessian & McKasy,

Respondent,

 

vs.

 

Christa Nejezchleba,

Appellant.

 

Filed January 18, 2005

Reversed and remanded

Hudson, Judge

 

Hennepin County District Court

File No. AC 02-16911

 

James K. Sander, James K. Sander, P.A., 4050 Olson Memorial Highway, Suite 195, Golden Valley, Minnesota 55422 (for respondent)

 

Marcy S. Wallace, Cox, Goudy, McNulty & Wallace, P.L.L.P., 676A Butler Square, 100 North Sixth Street, Minneapolis, Minnesota 55403 (for appellant)

 

            Considered and decided by Willis, Presiding Judge; Hudson, Judge; and Parker, Judge.*

U N P U B L I S H E D   O P I N I O N

HUDSON, Judge

            Appellant Christa Nejezchleba appeals a judgment for unpaid hourly legal fees and challenges a pretrial order dismissing her counterclaim for overpayment.  Because we conclude that collateral estoppel and res judicata do not bar appellant’s counterclaim, and there was a genuine issue of material fact regarding whether appellant had received full credit for the payments that respondent admits it received, we reverse and remand.

FACTS

            Respondent Hessian & McKasy P.A.[1] represented appellant Christa Nejezchleba in a lawsuit against New Horizon Enterprises, Inc. (New Horizon matter).  Following settlement of that matter, appellant and respondent disagreed about whether appellant owed contingency fees to respondent.  The parties agreed to have their dispute over the contingency fees arbitrated. 

The arbitrator awarded respondent $90,527.15, plus 10% of future settlement payments.  Respondent sought confirmation of the award in district court.  Appellant opposed confirmation and requested that the award be modified or vacated, asserting that respondent had not credited a $13,000 payment that she allegedly made toward contingency fees owed for the New Horizon matter.  The district court denied appellant any credit for the alleged $13,000 payment but modified the arbitration award on other grounds in its order (New Horizon order).  In a memorandum in support of the New Horizon order, the district court explained:

With respect to the $13,000 payment, [appellant] had information regarding this payment prior to the arbitration hearing.  Despite this fact, [appellant] did not present any evidence of this payment during the arbitration hearing.  In fact, [appellant] denied making any such payments during the arbitration hearing.  [Respondent] indicate[s] that [it] represented [appellant] on more than one account and den[ies] the payment was made on the account at issue.  For this reason, the award shall not be modified to reflect the $13,000 payment. 

 

Appellant did not appeal from the judgment entered on the district court’s order in the New Horizon fee dispute.

            Respondent later sued appellant in conciliation court for unpaid hourly fees of $7,500, unrelated to the New Horizon matter (hourly fee matter).  Appellant counterclaimed, arguing that respondent had not refunded or credited her for $15,000 in payments.  The $15,000 includes the $13,000 payment first raised during the district court’s review of the arbitration award in the New Horizon matter and another $2,000 check identified by appellant after the district court’s New Horizon order.  Appellant sought to recover the difference between the $15,000 paid and any hourly fees determined to be owed.  The conciliation court ruled against appellant, and she removed the hourly fee dispute to district court. 

            After the case was removed, respondent moved to dismiss appellant’s counterclaim and defense of overpayment, based on the New Horizon order.  Respondent argued that appellant’s counterclaim was an improper collateral attack on the New Horizon judgment, because the court in that proceeding intended to “sanction” appellant in that matter when it “denied the credit for $15,000.”  Appellant argued that respondent was seeking to avoid its previous position that $13,000 had been applied toward hourly fees unrelated to the New Horizon matter by now asserting that $15,000 had actually been applied to the New Horizon contingency fees.  Appellant also alleged that respondent had altered bills submitted to the court in both the first and second cases, in order to conceal receipt of the $15,000. 

The district court that heard the hourly fee dispute dismissed appellant’s counterclaim “based on the collateral estoppel/res judicata effect” of the New Horizon order.  The court indicated that “[a]ny such claim must be brought before [the district court that considered the New Horizon fee dispute] under the appropriate rule or statute.”  The court later clarified that the dismissal barred both appellant’s counterclaim for overpayment of the hourly fees and her defense that she had paid all or part of the claimed hourly fees.

After trial, the district court entered judgment against appellant for $6,276.60 in hourly fees unrelated to the New Horizon matter.  This appeal follows.

D E C I S I O N

I

            Respondent raises two arguments that potentially dispose of this case.  First, respondent argues that this case is moot.  Second, respondent argues that the district court’s order dismissing appellant’s counterclaim is not a final order and therefore not appealable.  Both arguments lack merit.

            An appeal should be dismissed as moot when events occur which make a decision on the merits unnecessary or an award of effective relief impossible.  In re Application of Minnegasco, 565 N.W.2d 706, 710 (Minn. 1997).  Respondent contends that this case is moot because “[respondent] already applied the full $15,000 to the contingency fees.” But respondent failed to provide a citation to any record evidence supporting this claim, such as a partial satisfaction of the contingency-fees judgment or proof that appellant was given credit for the full $15,000 against the claimed hourly fees.  In fact, in a stipulation between the attorneys claiming unpaid contingency fees and those claiming unpaid hourly fees—but not with appellant—that was reached after oral arguments on this appeal, respondent agreed “to forbear” to seek contingency fees from “the last” New Horizon settlement payment, to be made at an unspecified future date.  That stipulation confirms that appellant still has not received credit for the full $15,000.  Therefore, a decision on the propriety of the district court’s dismissal of the counterclaim remains necessary and an award of effective relief is possible.  Respondent has not established that the appeal is moot.

            Respondent also argues that the appeal should be dismissed because the order dismissing appellant’s counterclaim for overpayment is not appealable.  But appellant appealed from the judgment, and the order for partial dismissal is within our scope of review.  See Minn. R. Civ. App. P. 103.04 (stating that “on appeal from a judgment,” appellate courts “may review any order involving the merits or affecting the judgment”); see also Minn. R. Civ. App. P. 104.01 (stating that a partial dismissal is not immediately appealable, but can be appealed after entry of final judgment).  There is no basis to dismiss the appeal. 

II

            Appellant contends that neither collateral estoppel nor res judicata bars her counterclaim and defense.  We agree.

Collateral Estoppel

The availability of collateral estoppel is a mixed question of law and fact subject to de novo review.  Falgren v. State, Bd. of Teaching, 545 N.W.2d 901, 905 (Minn. 1996).  “Collateral estoppel bars the relitigation of issues which are both identical to those issues already litigated by the parties in a prior action and necessary and essential to the resulting judgment.”  Heine v. Simon, 674 N.W.2d 411, 421 (Minn. App. 2004) (quotation omitted).  Collateral estoppel is applicable where: (1) the issue is identical to one in a prior adjudication; (2) there was a final judgment on the merits; (3) the estopped party was a party or 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.

            Appellant contends that (1) the issue in this case is not identical with the issue previously adjudicated in the New Horizon order; and (2) there was not a full and fair opportunity to be heard on the handling of the $15,000 in payments in the New Horizon matter.  Respondent argues that refusal to credit appellant for the $13,000 payment in the New Horizon order was a sanction for appellant having withheld information about that payment during arbitration, and the counterclaim is an improper collateral attack on the judgment in that matter. 

It is not clear why the district court hearing the motion to confirm the arbitration award concluded that appellant was not entitled to a $13,000 credit against the contingency fees due for the New Horizon matter.  But the most plausible reading of the court’s memorandum is that the court concluded the payment was not applicable to the New Horizon fees, but to other matters on which respondent performed work for appellant.  The court indicated that appellant had denied making any payments toward the New Horizon contingency fees, and respondent had denied that the $13,000 payment was intended for that matter.  Furthermore, any doubts as to whether the issues in the two proceedings are identical must be resolved against respondent.  See Regents of Univ. of Minn. v. Med. Inc., 382 N.W.2d 201, 208 (Minn. App. 1986) (noting that the burden of proof is on the party invoking collateral estoppel), review denied (Apr. 18, 1986). 

Respondent failed to establish that the district court that heard the motion to confirm the arbitration award actually denied credit for the $13,000 payment as a sanction against appellant.  Because respondent failed to establish that credit for $13,000 was at issue and actually decided in the New Horizon order, we do not address whether appellant had a full and fair opportunity to be heard during that proceeding.

Res Judicata

            The application of res judicata is a question of law, which this court reviews de novo.  State v. Joseph, 636 N.W.2d 322, 326 (Minn. 2001).  The doctrine of res judicata is designed to prevent the relitigation of causes of action already determined in a prior action.  Beutz v. A.O. Smith Harvestore Prods., Inc., 431 N.W.2d 528, 531 (Minn. 1988).  A subsequent claim is barred under the doctrine of res judicata when:  (1) the earlier claim involved the same claim for relief; (2) the earlier claim involved the same parties or their privies; (3) there was a final judgment on the merits; and (4) the estopped party had a full and fair opportunity to litigate the matter.  Joseph, 636 N.W.2d at 327. 

            Appellant argues that neither her counterclaim nor her defense involves the same cause of action as the New Horizon matter.  Respondent does not contest appellant’s argument that res judicata is inapplicable. 

            Appellant correctly argues that the hourly-fees dispute does not involve the same claim as the New Horizon contingency-fee arbitration.  In the New Horizon order, the district court addressed whether to reduce the arbitration award on the basis of a single claimed payment ($13,000) that had not been presented to the arbitrator.  But the issue in the hourly-fee disputes is whether appellant is entitled to credit for two payments (totaling $15,000).  The claims are not the same, and there was no final judgment in the New Horizon matter on appellant’s entitlement to credit for the payments of $13,000 and $2,000.  The district court erred in dismissing the counterclaim and defense on the basis of res judicata.

            Because respondent failed to establish that either collateral estoppel or res judicata applies, or that it had fully credited appellant for $15,000 against the New Horizon contingency fee at the time that respondent moved to dismiss, we reverse and remand.  On remand, if respondent is able to establish that it has fully credited appellant for the full $15,000, it may seek summary judgment on appellant’s counterclaim.  But the existing record reveals that there are genuine issues of material fact concerning the handling of appellant’s claimed payments, and summary disposition was improper.

Reversed and remanded.



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

[1] Hessian & McKasy was a law firm based in Minneapolis that ceased active business on January 1, 2000.  Two separate groups of attorneys formerly associated with the firm are claiming fees from appellant.