Hamstra v. Hamstra

Filing 14

OPINION AND ORDER GRANTING 6 Defendant's MOTION to Dismiss. This case is DISMISSED. Signed by Senior Judge James T Moody on 9/19/18. (ksp)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
JODI HAMSTRA,
Plaintiff,
v.
GREG HAMSTRA,
Defendant.

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No. 2:18 CV 67

OPINION and ORDER
This matter is before the court on defendant Greg Hamstra’s motion to dismiss.
(DE # 6.) For the reasons identified below, defendant’s motion will be granted.
I.

BACKGROUND
Plaintiff Jodi Hamstra brought the present suit against her ex-husband,

defendant Greg Hamstra, for actions he allegedly took during the course of the parties’
dissolution of marriage proceedings before the Jasper County Superior Court.
(DE # 1 at 1.) According to Jodi, during the course of these proceedings Greg
intentionally misled her regarding his ownership of a certain marital asset, leading to
her acceptance of an unfavorable property settlement agreement.
Jodi’s complaint alleges the following facts, which this court accepts as true for
purposes of the pending motion to dismiss. At the time of the dissolution proceedings,
Greg and a third party, Mitchell Van Kley, were members and managers of GJMS, LLC,
an entity that owned various parcels of real estate. (Id. at 2.) Jodi argues that Greg’s
membership interest in GJMS was a marital asset. (Id.) During the course of discovery,

Greg provided Jodi with a GJMS Financial Summary report which showed that GJMS
owned four properties, including a property known as “French Lick.” (Id.) On March
16, 2016, GJMS sold the French Lick property for $630,000 – yet Greg never disclosed
the sale of the property during the course of discovery. (Id.) Jodi alleges that Greg
intentionally withheld this information. (Id.) Jodi also alleges that Kley conspired with
Greg to conceal the sale of the property by testifying at his deposition on May 2 and 3,
2016, that the French Lick property was an asset of GJMS. (Id.)
On May 20, 2016, Jodi and Greg participated in a mediation that resulted in a
settlement agreement regarding the marital assets. (Id. at 3.) As part of the settlement,
Jodi received 100% of Greg’s membership interest in GJMS. (Id.) The settlement
agreement also stated that Greg would obtain the agreement of the other members of
GJMS to transfer their interests to Jodi. This was later accomplished through a separate,
out-of-court agreement. (DE # 1-1 at 7; DE # 9 at 2.) Jodi alleges that she agreed to the
settlement based on her understanding that GJMS owned four properties, including
French Lick, and claims that she would not have agreed to the terms of the settlement if
she had known GJMS no longer owned French Lick. (Id.) In her complaint, Jodi argues
that Greg’s intentional omission and misrepresentation constitutes fraud. (Id. at 4.)
Greg now moves to dismiss the claims against him on the basis that this court
lacks jurisdiction to consider Jodi’s claims. (DE # 6 at 1.) He argues that the complaint
poses an impermissible collateral attack on the Jasper County Superior Court’s
dissolution decree, which incorporated the property settlement agreement. (DE # 6-1 at

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4.) Though he does not identify them as such, Greg’s motion raises two issues: (1)
whether this court is deprived of subject matter jurisdiction pursuant to the RookerFeldman doctrine; and (2) whether Jodi’s claims are barred by the collateral estoppel
doctrine. Jodi responded to both of these arguments. Greg failed to file a reply brief and
the time to do so has passed. This matter is now ripe for resolution.
II.

LEGAL STANDARD
A motion to dismiss under Rule 12(b)(1) asserts that the court lacks jurisdiction

over the subject matter. A Rule 12(b)(1) motion can present either a facial or factual
challenge to subject matter jurisdiction. Apex Digital, Inc. V. Sears, Roebucks & Co., 572
F.3d 440, 443-44 (7th Cir. 2009). A facial attack is a challenge to the sufficiency of the
pleading itself. Id. When such a challenge has been presented, the court takes all
well-pleaded factual allegations as true and draws all reasonable inferences in favor of
the plaintiff. Id. at 444. “In contrast, a factual challenge lies where ‘the complaint is
formally sufficient but the contention is that there is in fact no subject matter
jurisdiction.’” Id. (quoting United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946
(7th Cir.2003)) (emphasis in original). Where there is a factual challenge to subject
matter jurisdiction, “the district court may properly look beyond the jurisdictional
allegations of the complaint . . . to determine whether in fact subject matter jurisdiction
exists.” Sapperstein v. Hager, 188 F.3d 852, 855 (7th Cir. 1999) (internal quotation marks
and citation omitted). Here, Greg presents a facial challenge to this court’s subject
matter jurisdiction.

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A judge reviewing a complaint pursuant to Rule 12(b)(6) must construe the
allegations in the complaint in the light most favorable to the non-moving party, accept
all well-pleaded facts as true, and draw all reasonable inferences in favor of the nonmovant. Erickson v. Pardus, 551 U.S. 89, 93 (2007); Reger Dev., LLC v. Nat’l City Bank, 595
F.3d 759, 763 (7th Cir. 2010). Under the liberal notice-pleading requirements of the
Federal Rules of Civil Procedure, the complaint need only contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). A plaintiff must plead “factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v.
Iqbal, 129 S. Ct. 1937, 1949 (2009).
III.

ANALYSIS
A.

Subject Matter Jurisdiction

Greg argues that the only court that may exercise jurisdiction over this matter is
the court that entered the dissolution decree. Greg’s argument appears to be rooted in
the Rooker-Feldman doctrine. Jodi contends that this doctrine is inapplicable because she
does not seek to overturn the state court judgment, but seeks damages for fraud that
imposed an extrajudicial injury, citing Iqbal v. Patel, 780 F.3d 728 (7th Cir. 2015).
The Rooker-Feldman doctrine deprives federal district courts of subject matter
jurisdiction over “cases brought by state-court losers complaining of injuries caused by
state-court judgments rendered before the district court proceedings commenced and
inviting district court review and rejection of those judgments.” Exxon Mobil Corp. v.

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Saudi Basic Indus. Corp., 544 U.S. 280, 283 (2005).
This court agrees that the Rooker-Feldman doctrine does not apply because Jodi
does not seek this court’s review and rejection of the state court’s entry of the parties’
property settlement. Rather, she seeks damages for Greg’s conduct during the course of
the litigation. See Bargo v. Porter Cty., Indiana, 734 F. App’x 375, 377 (7th Cir. 2018)
(plaintiff’s claims for conspiracy, fraud, and intimidation were not barred by RookerFeldman because his claims did not attack the state court judgment, but rather the
unlawful conduct that led the state court to rule against him); Milchtein v. Chisholm, 880
F.3d 895, 898 (7th Cir. 2018) (Rooker-Feldman did not apply where plaintiffs did not ask
the district court to alter or annul the state court decision); Kowalski v. Boliker, 893 F.3d
987, 995 (7th Cir. 2018) (same); Patel, 780 F.3d at 730 (“[I]f a plaintiff contends that
out-of-court events have caused injury that the state judiciary failed to detect and
repair, then a district court has jurisdiction—but only to the extent of dealing with that
injury.”). Thus, this court may properly exercise diversity jurisdiction.
B.

Issue Preclusion

Greg also argues that, under Indiana law, a claim that one party committed fraud
during the negotiation of a court-approved property settlement constitutes an
impermissible collateral attack on the court’s judgment. (DE # 6-1 at 4.) He argues that
the only remedy available to Jodi is a modification of the decree by the court that
entered the order, and argues that in no case would Jodi be entitled to damages.
Courts are to “apply state res judicata principles when the earlier action in

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question was decided in state court.” Czarniecki v. City of Chicago, 633 F.3d 545, 548 n.3
(7th Cir. 2011). Here, an Indiana court adjudicated the parties’ dissolution of marriage
and approved the property settlement at issue. Thus, this court will apply Indiana’s
principles of res judicata.
Under Indiana law, “[t]he principle of res judicata is divided into two branches:
claim preclusion and issue preclusion. Claim preclusion applies where a final judgment
on the merits has been rendered which acts as a complete bar to a subsequent action on
the same issue or claim between those parties and their privies.” French v. French, 821
N.E.2d 891, 896 (Ind. Ct. App. 2005). On the other hand, “[i]ssue preclusion, also
referred to as collateral estoppel, bars the subsequent relitigation of the same fact or
same issue between the same parties or their privies where that fact or issue was
necessarily adjudicated in a former suit and the same fact or issue is presented in a
subsequent action.” Id. Although res judicata is an affirmative defense typically raised
in an answer, and then in a motion for judgment on the pleadings pursuant to Federal
Rule of Civil Procedure 12(c), it may properly serve as the basis for a motion to dismiss
pursuant to Federal Rule of Civil Procedure 12(b)(6) when the basis for the motion is
evident in the complaint itself. Muhammad v. Oliver, 547 F.3d 874, 878 (7th Cir. 2008).
The parties agree that the Supreme Court of Indiana’s decision in Dodd v. Estate of
Yanan, 625 N.E.2d 456 (Ind. 1993) governs preclusion issues when one party
impermissibly attacks a prior dissolution decree. The Court’s opinion in Dodd is brief,
and largely relies on the Court of Appeals’ decision in Anderson v. Anderson, 399 N.E.2d

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391 (Ind. Ct. App. 1979), and thus this court will begin its analysis with Anderson.
In Anderson, a husband and wife executed a property settlement agreement
during the course of the dissolution of their marriage. Id. at 394. Several months later,
the wife filed a separate action alleging that the husband committed fraud during their
property settlement negotiations by misrepresenting the value of the assets she would
receive as part of the settlement. Id. at 395. The husband argued that the wife’s
complaint impermissibly collaterally attacked the dissolution decree. Id. The wife
responded that her complaint stated an independent action for fraud in the
procurement of a judgment, pursuant to Indiana Rule of Procedure, Trial Rule 60(b),
and an independent action for fraud in the inducement of a contract. The Court of
Appeals rejected both of the wife’s arguments. First, the Court found that any claim for
fraudulent inducement of the settlement contract posed an impermissible collateral
attack precluded by res judicata. Id. at 397-399. Next, the Court found that the wife
could not maintain an action for damages for fraud in the procurement of a judgment
because the mechanism for such a claim arises out of Rule 60, and Rule 60 provides for
equitable relief only. Id. at 401. As Jodi admits in her brief, Anderson holds that “the
dissolution decree is preclusive of any action regarding marital property, including
actions which challenge the fraudulent means by which the decree was obtained.”
(DE # 9 at 7.)
In Dodd, the Supreme Court of Indiana summarily rejected a wife’s claim that her
husband fraudulently induced her to enter into a property settlement agreement by

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misrepresenting his net worth. 625 N.E.2d at 456. In its opinion, the Supreme Court of
Indiana relied on the Anderson court’s holding that “[a] judgment of dissolution is a
final judgment not subject to collateral attack in a sister court. . . ‘It has long been the
law in Indiana that a litigant defeated in a tribunal of competent jurisdiction may not
maintain an action for damages against his adversary or adverse witnesses on the
ground the judgment was obtained by false and fraudulent practices or by false and
forced evidence.’”1 Id. at 457 (quoting Anderson, 399 N.E.2d at 399).
It is clear under both Dodd and Anderson that Indiana gives preclusive effect to
claims of fraud arising from a party’s conduct during property settlement negotiations.2
For her part, Jodi does not contest that Dodd and Anderson represent the current state of
Indiana preclusion law regarding claims of fraudulent conduct underlying an adverse

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While Dodd was decided in 1993, this rule continues to be applied by the Court
of Appeals of Indiana today. See e.g. Estate of Mayer v. Lax, Inc., 998 N.E.2d 238, 247 (Ind.
Ct. App. 2013); Dean v. Dean, 785 N.E.2d 309, 311 (Ind. Ct. App. 2003); South Haven Sewer
Works, Inc. v. Jones, 757 N.E.2d 1041, 1045 (Ind. Ct. App. 2001).
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Jodi’s complaint does not specify whether her claim is for fraud in the
inducement of a contract or fraud in the procurement of a judgment – nor was she
required to at this stage of the litigation. See Fed. R. Civ. P. 8(a). However, she cannot
prevail under either theory in this court. If her claim is for fraud in the inducement, her
claim is barred by collateral estoppel. See Dodd, 625 N.E.2d at 457. Alternatively, if her
claim is for fraud in the procurement of a judgment she would be limited to equitable
relief only, in the form of relief from the dissolution judgment. Anderson, 399 N.E.2d at
400. This court lacks subject matter jurisdiction over any claim for fraud in the
procurement because such a claim woud (1) fail to meet the amount in controversy
requirement of diversity jurisdiction; and (2) run afoul of the Rooker-Feldman doctrine.
See id. (“An attack upon a judgment for fraud in its procurement has long been
recognized in Indiana as a direct attack [on the judgment] to which the rule of former
adjudication does not apply.”).
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judgment. Rather, she argues that this preclusion rule does not apply to bar her present
claim, for three reasons.
First, Jodi claims that issue preclusion only bars subsequent litigation of an issue
that was “actually litigated” in a former suit. She argues her claim is not precluded
because Greg’s alleged fraud was not litigated and adjudicated in the dissolution
proceedings. (DE # 9 at 9.) First, the court notes that under Indiana law issue preclusion
typically serves to bar any issue that was either actually litigated or that could have been
litigated in the prior suit. TacCo Falcon Point, Inc. v. Atlantic Ltd. Partnership XII, 937
N.E.2d 1212, 1218 (Ind. Ct. App. 2010). Neither party addresses the issue of whether
Jodi could have raised the issue of fraud in the state court proceeding. However, this
makes no difference in this case. In Dodd, the Supreme Court of Indiana explicitly found
that the wife’s fraud claim was precluded even though she did not discover the fraud
until years after it had been committed. Thus, in Dodd, preclusion applied even though
the wife’s claim was not – and could not – have been litigated in the underlying suit. It
is the duty of this court, sitting in diversity jurisdiction, to apply the law that would be
applied by the Supreme Court of Indiana. Lodholtz v. York Risk Servs. Grp., Inc., 778 F.3d
635, 639 (7th Cir. 2015). The Supreme Court of Indiana has categorically precluded
fraud claims in this type of case, and therefore this court must do the same.
Jodi next argues that preclusion does not apply because the asset in question,
GJMS, was a substantially non-martial asset. While Jodi admits that Greg’s interest in
the property was a martial asset, she argues that she also acquired the interests of the

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other partners of GJMS and their interests were not martial assets. Thus, because the
other partners were not parties to the dissolution proceedings, her fraud claim as it
relates to the other partners’ interest in GJMS is not subject to issue preclusion. Yet, Jodi
did not filed suit against the other partners of GJMS, she filed suit against Greg, for
actions Greg took during the state court litigation. Greg’s interest in GJMS was
adjudicated in the dissolution decree.
Jodi also argues that, with respect to Greg’s interest in GJMS, the decree “merely
adjudicated the fact that he would transfer his interest, but it did not make any
adjudication as to what that interest consisted of.” (DE # 9 at 10.) Jodi did not point to
any authority that would support such hair-splitting in the application of the preclusion
doctrine.
Finally, Jodi argues that issue preclusion does not apply because judgments are
only conclusive against parties in the character in which they sue or are sued. She
argues that Greg carried out his fraudulent scheme both as Jodi’s husband and as a
partner of GJMS. She argues that no claim has been adjudicated against Greg in his
capacity as a partner, and therefore issue preclusion does not apply. Jodi points to a
second holding in Anderson, wherein the Court held that the wife could proceed with
her legal malpractice claim against the husband, an attorney. The wife claimed that the
husband convinced her that she did not need to retain separate counsel for purposes of
the property settlement negotiations, and then committed legal malpractice when he
advised her of her legal rights and remedies during the course of those negotiations.

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The Court of Appeals found that although the wife’s claim for fraud was barred by the
doctrine of res judicata, her claim against her husband in his separate capacity as an
attorney for legal malpractice was not barred. Anderson, 399 N.E.2d at 401.
The holding in Anderson does not lend credence to Jodi’s argument. In Anderson,
the wife did not attempt to parse her fraud claim into separate claims against her
husband in his capacity as a spouse and in his capacity as an attorney, as Jodi does.
Rather, the wife brought an entirely different claim against the husband alleging that he
violated an independent duty he owed to her in a separate capacity. Here, Jodi admits
that Greg sold the French Lick property in his capacity as a partner, yet her fraud claim
is based on Greg’s actions as a litigant in the dissolution proceedings. Jodi has not sued
Greg in his capacity as a partner for selling the property, but rather for lying about it in
the dissolution litigation.
For these reasons, Jodi’s claims against Greg are barred by the doctrine of issue
preclusion, and her complaint must be dismissed.
C.

Attorneys Fees

Greg has requested that this court award attorneys fees and costs incurred in
bringing the motion to dismiss. Federal Rule of Civil Procedure 11(c) permits a district
court to impose sanctions upon an attorney, law firm, or party that has violated its duty
to present only good-faith, non-frivolous arguments, pleadings, and motions before the
court. However, “[a] motion for sanctions must be made separately from any other
motion and must describe the specific conduct that allegedly violates Rule 11(b).” Fed.

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R. Civ. P. 11(c)(2). “Permitting a motion for sanctions to be made in conjunction with
another motion constitutes an abuse of discretion.” Divane v. Krull Elec. Co., 200 F.3d
1020, 1025 (7th Cir. 1999). Here, Greg’s request was included at the end of his motion.
This is procedurally improper and must be denied. Moreover, although she has not
ultimately prevailed, there is no evidence that Jodi’s pleadings were made in bad-faith,
were frivolous, or were designed to harass or abuse. The fact that the parties disagreed
on the correct application of the law does not warrant the imposition of sanctions.
Therefore, Greg’s request for attorneys fees is denied.
IV.

CONCLUSION

For these reasons, the court GRANTS defendant’s motion to dismiss (DE # 6),
and dismisses this case.
SO ORDERED.
Date: September 19, 2018
s/James T. Moody______________
JUDGE JAMES T. MOODY
UNITED STATES DISTRICT COURT

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