Benson v. Kemske, Civil File No. 17-3839 (MJD/DTS)

JOHN BENSON and BRIAN BENSON, Plaintiffs, v. ANN KEMSKE and JON KEMSKE, Defendants.

Civil File No. 17-3839 (MJD/DTS)

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

August 18, 2020

ORDER

John Benson, pro se.

Brian Benson, pro se.

David C. McLaughlin and Jason G. Lina, Fluegel, Anderson, McLaughlin & Brutlag, Chtd., Counsel for Defendants Ann Kemske and Jon Kemske.

I. INTRODUCTION

The above-entitled matter comes before the Court upon the Report and Recommendation of the United States Magistrate Judge dated June 2, 2020. Defendants Ann Kemske and Jon Kemske filed objections to the Report and Recommendation regarding application of res judicata to the claims against them.

Pursuant to statute, the Court has conducted a de novo review upon the record of that portion of the Report and Recommendation to which Defendants have objected. 28 U.S.C. § 636(b)(1); Local Rule 72.2(b). Based upon that review, the Court adopts in part and declines to adopt in part the Report and Recommendation dated June 2, 2020.

II. CONSIDERATION OF DEFENDANTS' OBJECTIONS

Plaintiffs argue that the Court should disregard Defendants' objections to the Report and Recommendation on the grounds that that they were served late. Under Local Rule 72.2(b)(1), "[a] party may file and serve specific written objections to a magistrate judge's proposed finding and recommendations within 14 days after being served a copy of the recommended disposition, unless the court sets a different deadline." "A party may respond to another party's objections within 14 days after being served with a copy." Local Rule 72.2(b)(2). The Report and Recommendation was filed on CM/ECF on June 2, 2020. Defendants' objections were filed on CM/ECF on June 16, 2020, within the 14-day limit.

Plaintiffs assert that the objections were served on Plaintiff Brian Benson by U.S. Mail, arriving on June 19, 2020 in an envelope that was stamped with a Pitney Bowes postal meter stamp dated June 16, 2020. Plaintiffs assert that, despite the June 16 meter stamp, the envelope must have been mailed at a later date because three days is too long for the Postal Service to deliver the mail from Defendants' attorneys' office in Morris, Minnesota, to Brian Benson's address in Prior Lake, Minnesota. The issue is further muddled because Defendants mistakenly filed an affidavit of service for the March 6, 2020 mailing of their Reply to Brian Benson rather than the affidavit of service for the mailing of the objections to Brian Benson. [Docket No. 188-1]

The Court need not make a finding regarding whether the objections were mailed on June 16, or, as Plaintiffs claim, June 17 or 18. The deadline for objecting to a Report and Recommendation is not jurisdictional, and thus this Court is not barred from considering late objections. See Vogel v. U.S. Office Prod. Co., 258 F.3d 509, 515 (6th Cir. 2001) ("[W]here a party files objections after [the time period allowed by rule], a district court can still consider them."); Kruger v. Apfel, 214 F.3d 784, 786-87 (7th Cir. 2000) (noting that the time period for filing objections "is not jurisdictional," and thus "the district court [i]s not barred from considering the late objections"). Even if the Court were to accept Plaintiffs' assumptions regarding the current speed of delivery of U.S. Mail in Minnesota, the objections were, at most, two days late, and Plaintiffs do not assert that they suffered any prejudice from the allegedly late service. In fact, Plaintiffs filed their response to the objections on June 23, a mere one week after they were filed on CM/ECF and well before the deadline to file such response. The Court finds that there was no prejudice from any possible late service on Brian Benson. Finally, the Court notes that "[t]he district judge may also reconsider on his or her own any matter decided by the magistrate judge but not objected to." Local Rule 72.2(a)(3). Therefore, the Court will consider Defendants' objections and modify the Report and Recommendation with regard to the application of res judicata in this case.

Based on the Court's review, the Court adopts the Report & Recommendation with the exception that the Court declines to adopt Section II of the Conclusions of Law, found at pages 10 through 15 of the Report and Recommendation and entitled "Neither Res Judicata Nor Claim Splitting Bars the Bensons' Fraud and Conversion Claims." Section II is replaced with the following analysis:

III. Res Judicata

A. Applicable Law of Res Judicata

North Dakota law governs the Court's res judicata analysis because "[t]he law of the forum that rendered the first judgment controls the res judicata analysis." St. Paul Fire & Marine Ins. Co. v. Compaq Computer Corp., 539 F.3d 809, 821 (8th Cir. 2008).

Res judicata, or claim preclusion, prevents relitigation of claims that were raised, or could have been raised, in prior actions between the same parties or their privies. Res judicata means a valid, final judgment is conclusive with regard to claims raised, or claims that could have been raised, as to the parties and their privies in future actions.

Fredericks v. Vogel Law Firm, 946 N.W.2d 507, 510-11 (N.D. 2020) (citations omitted).

Res judicata applies even though the subsequent claims may be based on a different legal theory. If the subsequent claims are based upon the identical factual situation as the claims in the earlier action, then they should have been raised in the earlier action. It does not matter that the substantive issues were not directly decided in the earlier action, the key is that they were capable of being, and should have been, raised as part of the earlier action.

Fredericks, 946 N.W.2d at 511 (citing Littlefield v. Union State Bank, Hazen, N.D., 500 N.W.2d 881, 884 (N.D. 1993)). With regard to whether a claim "should have been raised" in the earlier action, "if the subsequent claims are based upon the identical factual situation as the claims in the prior proceeding, then they should have been raised in the prior proceeding." Littlefield, 500 N.W.2d at 884 (citations omitted).

[A] judgment on the merits in the first action between the same parties constitutes a bar to the subsequent action based upon the same claim or claims or cause of action, not only as to matters in issue but as to all matters essentially connected with the subject of the action which might have been litigated in the first action.

Fredericks, 946 N.W.2d at 511 (citation omitted).

"A party with a single cause of action generally may not split that cause of action and maintain several lawsuits for different parts of the action. Res judicata is premised upon the prohibition against splitting a cause of action." Fredericks, 946 N.W.2d at 512 (citations omitted).

Res judicata under North Dakota law has four elements:

1. A final decision on the merits in the first action by a court of competent jurisdiction;

2. The second action involves the same parties, or their privies, as the first;

3. The second action raises an issue actually litigated or which should have been litigated in the first action;

4. An identity of the causes of action[.]

Mo. Breaks, LLC v. Burns, 791 N.W.2d 33, 39 (N.D. 2010) (citing Sanders Confectionery Prods., Inc. v. Heller Fin., Inc., 973 F.2d 474, 480 (6th Cir. 1992)).

B. Final Decision on the Merits

As noted in the Report and Recommendation, in a conclusion to which no party objected, there was a final decision on the merits in the North Dakota Action, which was affirmed by the North Dakota Supreme Court.

C. Same Parties

As noted in the Report and Recommendation, in a conclusion to which no party objected, all parties to this federal action participated in the North Dakota Action: Ann Kemske, Jon Kemske, John Benson, and Brian Benson were all parties to the North Dakota Action.

D. Issue Was or Could Have Been Raised

"Under res judicata claim preclusion, a judgment in a prior action is conclusive 'as to all claims which, under the rules, might have been put in issue in the prior trial." Riverwood Commer. Park, LLC v. Std. Oil Co., 729 N.W.2d 101, 108 (N.D. 2007) (citation omitted).

The North Dakota Supreme Court has

distinguished collateral estoppel, or issue preclusion, and res judicata, or claim preclusion, in part on the basis of whether an issue was actually litigated in a prior proceeding, or whether the issue was raised or could have been raised in the prior proceeding.

Cridland v. N.D. Workers Comp. Bureau, 571 N.W.2d 351, 354 (N.D. 1997) (emphasis added). Under North Dakota law, "if the subsequent claims are based upon the identical factual situation as the claims in the prior proceeding, then they should have been raised in the prior proceeding." Littlefield, 500 N.W.2d at 884 (citations omitted).

The parties in the North Dakota Action litigated the same set of facts that give rise to Plaintiffs' current claims for fraud, conversion, and declaratory judgment against the Kemskes: the ownership of the same mineral rights and the validity and legality of the various transfers and deeds related to those mineral rights, including the Kemskes' 1990 deed to Thomas Benson recorded in 2012, the statement of claim of mineral interest executed by Thomas Benson and recorded in 2005, and the 2010 deed from Ann Kemske to Family Tree Corporation, Inc. ("Family Tree"). See Desert Partners IV, L.P. v. Benson, 875 N.W.2d 510, 514-515 (N.D. 2016).

Plaintiffs' current claims against Defendants are based on the allegation that Defendants "conveyed the same mineral interests more than one time, the second time a fraudulent transaction as they no longer held any right title or interest in the property to convey." (Am. Compl. ¶ 2.) "Plaintiffs further allege that Defendants' actions resulted in a conversion of Plaintiffs['] property." (Id. ¶ 3.) Plaintiffs assert Count 1: Fraud, based on the allegation that "the fraudulent conveyance by Defendants Kemskes deprived [Plaintiffs] of ownership of oil and gas royalty interests;" Count 2: Conversion of Property, based on...