Rucker v. Schmidt

794 N.W.2d 114 (2011)

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Nature of the Case

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Facts

W successfully sued her ex-husband, Robert, for fraud on the court committed during a dissolution of marriage action. The court found that in the dissolution action Robert engaged in an intentional course of material misrepresentation and non-disclosure concerning the value of his business interests. After winning $2.6 million against Robert, W sued Ds based primarily on the same facts asserted in her suit against Robert. W accused Ds of fraud, fraud on the court, and aiding and abetting fraud in the marriage dissolution action. W sought treble damages. W alleges that Ds held a meeting with Robert and other senior management of The Tile Shop to discuss creating two sets of business projections: one of growth and new stores, to be used internally by The Tile Shop for actual business purposes, and one of no growth and no new stores to be given to the independent appraiser for use in the dissolution action. Ds denied this allegation and eventually moved for summary judgment on several grounds, including res judicata. The district court held that an attorney is in privity with his client for purposes of res judicata, and that privity existed between Robert and Ds. As a result of that privity, the court granted summary judgment based on res judicata. The court of appeals reversed and remanded, holding that an attorney-client relationship alone is insufficient to establish privity as a matter of law. It also held that before res judicata can be applied, the district court is required to analyze whether its application would work an injustice on the party against whom it is urged and because the district court did not make such a determination, remand was necessary even if the finding of privity was appropriate. P appealed. Ds claim they are in privity with Robert because the facts underlying W's claims against them are the same facts underlying her claims in her fraud action against Robert and the conduct at issue arose out of D's representation of Robert in the dissolution action. They also argue, by analogy, that to the extent that the attorney-client relationship is akin to a principal-agent relationship, privity can be found on a principal-agent basis.