may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1998).
STATE OF MINNESOTA
IN COURT OF APPEALS
Filed August 10, 1999
Affirmed in part and reversed in part
Hennepin County District Court
File No. 986881
Peter M. Lancaster, Dorsey & Whitney LLP, Pillsbury Center South, 220 South Sixth Street, Minneapolis, MN 55402-1498 (for respondent)
Considered and decided by Peterson, Presiding Judge, Harten, Judge, and Shumaker, Judge.
Appellant Mike Rejsa challenges the district court's (1) dismissal of his complaint on grounds that res judicata and collateral estoppel barred the action and (2) imposition of sanctions against him. We affirm the dismissal of the complaint and reverse the award of sanctions.
In 1992, Gary Beeman, Robert Szymborski, Dale Szymborski, Peter Bick, and appellant Mike Rejsa formed respondent FieldWorks, Inc., to manufacture and sell laptop computers designed for use in rugged environments. The original distribution of 2,350,000 stock shares was made as follows: 900,000 shares each to Beeman and Robert Szymborski; 200,000 shares each to Rejsa and Bick; 50,000 shares to Dale Szymborski; 93,957 shares to HMS Capital Partners; and 6,043 shares to HMS Overseas Partners.
In May 1993, FieldWorks offered 800,000 shares to private investors. Rejsa knew about the sale and did not object at that time. In August 1993, FieldWorks's directors sought to amend the articles of incorporation by eliminating preemptive rights. Rejsa signed a document authorizing the amendment.
Between November 1993 and February 1994, FieldWorks issued 2,500,000 stock shares to private investors. Shortly after FieldWorks shipped its first computers in August 1994, Rejsa resigned from the corporation. Between December 1994 and September 1995, FieldWorks issued about 1,000,000 additional shares to private investors.
In 1996, Rejsa brought an action against the following parties: Beeman and Robert Szymborski, individually and as members of FieldWorks's board of directors; Ron Buck and George Kline, as members of FieldWorks's board of directors; and FieldWorks. Rejsa alleged that the defendants issued additional stock shares without his consent and in violation of his preemptive rights and sought as relief the right to exercise his preemptive rights to obtain additional stock shares or, alternatively, dissolution of FieldWorks. The district court granted summary judgment in favor of the defendants. Rejsa appealed to this court, and this court affirmed based on Rejsa's acquiescence in the issuances of stock to outside investors. Rejsa v. Beeman, No. C7-97-182, 1997 WK 526320 (Minn. App. Aug. 26, 1997), review denied (Minn. Oct. 31, 1997).
Rejsa began the current action in February 1998. He alleged that the amendments to the articles of incorporation were invalid and ineffective because they had not been signed by all of FieldWorks's shareholders. He requested a declaratory judgment that the amendments and all corporate actions taken pursuant to them were invalid, void, and of no legal effect.
The district court concluded that res judicata and collateral estoppel barred this action and dismissed Rejsa's complaint. As a sanction, the district court ordered Rejsa to pay FieldWorks's attorney fees of $9,117.36. The district court imposed the sanction against Rejsa for the following reasons:
[Rejsa's] arguments that this second action is not barred by res judicata and collateral estoppel are unpersuasive. [Rejsa's] complaint is presented for an improper purpose, that is to cause a needless increase in the cost of litigation. [Rejsa] has not presented arguments to extend, modify, or reverse existing law or establish new law. [Rejsa's] allegations do not have evidentiary support and are not likely to have evidentiary support if further discovery were allowed.
1. Res judicata
When a party moves to dismiss and matters outside the pleadings are presented to and considered by the district court, "the motion shall be treated as one for summary judgment." Minn. R. Civ. P. 12.03. On appeal from a summary judgment, this court must review the record to determine whether any genuine issues of material fact exist and whether the district court erred in applying the law. Offerdahl v. University of Minn. Hosps. & Clinics, 426 N.W.2d 425, 427 (Minn. 1988). We must view the evidence in the light most favorable to the nonmoving party. Id. Whether res judicata applies to a given set of facts is reviewed de novo. Erickson v. Commissioner of Dep't of Human Servs., 494 N.W.2d 58, 61 (Minn. App. 1992).
Res judicata, which is designed to prevent the relitigation of claims, applies when a subsequent claim is based on an action previously determined, regardless of the issues raised or actually litigated in the initial action. Beutz v. A.O. Smith Harvestore Prods., Inc., 431 N.W.2d 528, 531 (Minn. 1988); Hauser v. Mealey, 263 N.W.2d 803, 806 (Minn. 1978). Res judicata requires (1) a final adjudication on the merits, (2) a subsequent suit involving the same cause of action, and (3) identical parties or persons in privity with the original parties. Demers v. City of Minneapolis, 486 N.W.2d 828, 830 (Minn. App. 1992). Res judicata will bar a subsequent suit for the same cause of action not only as to every matter actually litigated, but also as to every matter that might have been litigated. Id. (citation omitted); see also Youngstown Mines Corp. v. Prout, 266 Minn. 450, 466, 124 N.W.2d 328, 340 (1963) (judgment on merits is absolute bar not only to every matter actually litigated "but also as to every matter which might have been litigated").
Rejsa concedes that a final judgment on the merits was rendered in the first action and that the parties are identical. However, he argues that the two lawsuits involve different causes of action.
"Two causes of action are the same when they involve the same set of factual circumstances or when the same evidence will sustain both actions." Myers Through Myers v. Price, 463 N.W.2d 773, 777 (Minn. App. 1990) (citing Anderson v. Werner Continental, Inc., 363 N.W.2d 332, 335 (Minn. App. 1985) (claims are identical "if the same operative nucleus of facts is alleged in support of the claims"), review denied (Minn. June 24, 1985)), review denied (Minn. Feb. 4, 1991). A party cannot avoid the application of res judicata by changing its theory of liability. Porta-Mix Concrete, Inc. v. First Ins. East Grand Forks, 512 N.W.2d 119, 122 (Minn. App. 1994), review denied (Minn. Apr. 28, 1994).
When a given state of facts is susceptible of alternative interpretations and analysis, plaintiff must seek and exhaust all alternative grounds or theories for recovery in one action.
Id. (quoting Sundberg v. Abbott, 423 N.W.2d 686, 690 (Minn. App. 1988), review denied (Minn. June 29, 1988)).
In the first action, one of Rejsa's claims was that the issuance of stock shares to private investors violated his preemptive rights as they existed under the original articles of incorporation. Some of those stock shares were issued after the attempted amendment of the articles of incorporation to eliminate preemptive rights, and Rejsa's claim regarding those shares was based on the alleged invalidity of the amendment. For relief, Rejsa sought additional stock shares for himself or, alternatively, the dissolution of FieldWorks. This court concluded that Rejsa had acquiesced in the issuance of stock shares to private investors and, therefore, was estopped from challenging those actions. The validity of the amendment to the articles of incorporation eliminating preemptive rights was not determined in the first action.
In the current action, Rejsa seeks a declaratory judgment on behalf of all shareholders that the amendment to the articles of incorporation eliminating preemptive rights was invalid because it was not consented to by all shareholders and, therefore, corporate actions taken pursuant to the amended articles of incorporation were invalid and void. The central issue in this case is the validity of the amendment to the articles of incorporation, and the validity of the amendment was at issue in the first action. The events relevant to determining the validity of the amendment, specifically whether all shareholders consented to it, had already occurred when Rejsa brought the first action. Rejsa is not challenging any corporate actions that occurred after the first lawsuit. The declaration of shareholders' rights that Rejsa now seeks could have been sought in the first action. The district court did not err in concluding that res judicata bars this action.
Having determined that res judicata applies, we need not decide whether collateral estoppel also applies.
The district court found that Rejsa brought this action "to cause a needless increase in the cost of litigation," which is an improper purpose under Minn. Stat. § 549.211, subd. 2(1) (1998). The court also found that Rejsa's claims were not supported by existing law or a nonfrivolous argument for changing existing law and that Rejsa's allegations lacked factual support. Id., subd. 2(2), (3). The court may impose sanctions on an attorney or party that violated subdivision 2. Id., subd. 3 (1998).
Minn. Stat. § 549.211, subd. 5(c) (1998), requires the court to "describe the conduct determined to constitute a violation of this section and explain the basis for the sanction imposed." The only conduct described by the district court is that Rejsa brought this action, argued unpersuasively that res judicata and collateral estoppel did not apply, and failed to present arguments to extend, modify, or reverse existing law or establish new law. The fact that Rejsa's arguments did not prevail and his action was not successful does not demonstrate that he or his attorney violated Minn. Stat. § 549.211, subd. 2. Application of the doctrine of res judicata to the facts of this case was not so clear cut or obvious as to support a finding that Rejsa violated Minn. Stat. § 549.211, subd. 2, by merely bringing this action. Because the district court's findings do not support the imposition of sanctions under Minn. Stat. § 549.211, we reverse the award of sanctions in favor of FieldWorks.
Affirmed in part and reversed in part.
 This court stated in dictum that "[b]ecause respondents failed to produce a copy of the document [amending the articles of incorporation] with the signatures of all requisite shareholders, it did not effectively terminate preemptive rights." Rejsa, 1997 WL 526320, at *5 n.1 (citing Minn. Stat. § 302A.441 (1996)). A statement in an opinion that is unnecessary to the court's decision is dictum. In re MedCenters Health Care, Inc., 450 N.W.2d 635, 640 (Minn. App. 1990), review denied (Minn. Mar. 8, 1990). Dictum is not binding authority in later decisions. State ex rel. Foster v. Naftalin, 246 Minn. 181, 208, 74 N.W.2d 249, 266 (1956).