Manion v. Nagin - 394 F.3d 1062 (8th Cir. 2005)

Rule:

An arbitration award counts as a final judgment for collateral estoppel purposes. To be clear, a party is precluded from litigating an issue if the following conditions are met: (1) the issue to be litigated is identical to one already decided in a prior adjudication; (2) the earlier case resulted in a final judgment on the merits; (3) the party raising the issue was a party to or in privity with a party to the prior case; and (4) the party was given a full and fair opportunity to be heard on the issue.

Facts:

In 1995, plaintiff Patrick Manion came up with a plan to organize, own, and operate an entity made up of retail boat dealers. Defendant Stephen Nagin held himself out as an attorney who was experienced in representing buying groups. In the spring of 1995, defendant agreed to represent plaintiff in creating and running the buying group named Boat Dealers' Alliance, Inc. (BDA). Defendant advised plaintiff that he maintained control over the buying group because the value of his preferred stock was so much greater than the value of the common stock. Defendant assured plaintiff that the Management Agreement precluded the buying group from removing him from his position as executive director for any reason for twenty years. However, in February 1999, the buying group held a special meeting at which plaintiff was terminated. In arbitration proceedings related to plaintiff’s claims of wrongful termination, the buying group successfully argued that plaintiff’s termination was proper because he acted in bad faith against their interests. The district court confirmed the arbitration award, and this court affirmed. Plaintiff filed suit against defendants BDA, the lawyer, and his law firms Herzfeld & Rubin and Herzfeld & Rubin, P.C. Plaintiff alleged breach of fiduciary duty, negligence, and tortious interference with the contract stemming from defendant attorney's conduct in the creation and representation of the retail boat dealers' buying group. Defendants moved to dismiss the complaint contending that the claims were either legally deficient, collaterally estopped, or barred for failure to comply with a Minnesota statute concerning legal malpractice claims. The district court dismissed plaintiff’s complaint, hence, this appeal.

Issue:

Did the district court correctly dismiss plaintiff’s complaint for breach of fiduciary duty, negligence, and tortious interference?

Answer:

Yes.

Conclusion:

The court affirmed the judgment and held that the plaintiff was collaterally estopped from raising the tortious interference with the contract claim since it stemmed from an allegation that the defendant attorney had interfered with his employment rights under a management agreement with the buying group. The court found that plaintiff had arbitrated the issue of whether the buying group had breached the agreement without justification, and the arbitrator had found that the buying group was justified in terminating the said agreement because of plaintiff's bad faith conduct. The court, thus, held that the same analysis applied to the dismissed negligence claims. Moreover, the court ruled that the remaining negligence and breach of fiduciary duty claims were properly dismissed because, although the court found that the district court erred in holding that no attorney-client relationship existed, the arbitrator's finding that plaintiff operated in bad faith against the buying group's interests precluded plaintiff's claims. Specifically, the court held that a claim that the attorney committed legal malpractice by not warning plaintiff that he could lose control of the buying group due to his malfeasance or protecting plaintiff from termination once he operated in that manner was not a viable claim under either Minnesota or Florida law.