Streambend Properties III, LLC et al v. Sexton Lofts, LLC et al

Filing 201

ORDER. IT IS HEREBY ORDERED: 1. The Court ADOPTS the Report and Recommendation of United States Magistrate Judge Steven E. Rau dated January 28, 2013 196 . 2. Motion to Dismiss by Defendants Nedal Abdul-Hajj and Sexton I, LLC 54 ; Mo tion to Dismiss by Defendants Medved LP and Michael P. Medved 79 ; and Motion to Dismiss by Defendants MRM Management Corp. and James M. Myers 120 are GRANTED IN PART and DENIED IN PART as follows: a. To the extent the motions seek dismissal of Count I, Violation of 15 U.S.C. § 1703(a)(2)(B), they should be GRANTED;b. To the extent the motions seek dismissal of Count II, Violation of 15 U.S.C. § 1703(a)(2)(A) and (C), the motions are GRANTED;c. To the extent the motions se ek dismissal of Count III, Violation of Minn. Stat. 515B et seq., the motions are GRANTED;d. To the extent the motions seek dismissal of Count IV, Fraud, the motions are GRANTED;e. To the extent the motions seek dismissal of Count VII, Unjust Enr ichment, the motions are GRANTED;f. To the extent the motions seek dismissal of Count IX, Negligent Misrepresentation (Against Developers), the motions are GRANTED;g. To the extent the motions seek any other forms of relief, the motions are DENIE D. 3. In addition, although not specifically requested in the motions above, Count V, Wrongful Cancellation (Against Sexton Lofts, LLC); Count VI, Breach of Contract (against Sexton Lofts, LLC), and Count VIII, Minn. Stat. § 555.01, are DISMI SSED. In sum, all claims against Defendants Nedal Abdul-Hajj; Sexton I, LLC; Medved LP; Michael P. Medved; MRM Management Corp.; and James M. Myers are DISMISSED WITH PREJUDICE. (Written Opinion). Signed by Chief Judge Michael J. Davis on 2/24/13. (GRR)(cc: Brett A. Thielen)(TSS).

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

STREAMBEND PROPERTIES III, LLC,
and STREAMBEND PROPERTIES IV, LLC,
Plaintiffs,

v.

ORDER
Civil File No. 10-4745 (MJD/SER)

SEXTON LOFTS, LLC,
et al.,
Defendants.
Sara M. G. Rojas, The Law Offices of Sara M. G. Rojas, Counsel for Plaintiffs.
Daniel C. Beck and Jacob B. Sellers, Winthrop & Weinstine, PA, Counsel for
Defendant Medved LP and Michael P. Medved.
D. Charles Macdonald, Faegre Baker Daniels LLP, Counsel for Defendants MRM
Management Corp., John Gamble, and James M. Myers.
Brian R. Christiansen, John J. Steffenhagen, and Joseph P. Beckman, Hellmuth &
Johnson PLLC, Counsel for Sexton I, LLC, and Nedal Abdul-Hajj.

The above-entitled matter comes before the Court upon the Report and
Recommendation of United States Magistrate Judge Steven E. Rau dated January
28, 2013. Plaintiffs filed objections to the Report and Recommendation.
1

Pursuant to statute, the Court has conducted a de novo review upon the
record. 28 U.S.C. § 636(b)(1); Local Rule 72.2(b). Based upon that review, the
Court ADOPTS the Report and Recommendation of United States Magistrate
Judge Rau dated January 28, 2013.
The Court further explicitly holds that Plaintiffs had ample opportunity to
address the issue of the preclusive effect of the State Court Litigation.
Furthermore, application of res judicata and collateral estoppel is appropriate at
this stage of the litigation. There is no unfair surprise to Plaintiffs. See Sherman
v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th Cir. 2008) (“[W]hen an
affirmative defense is raised in the trial court in a manner that does not result in
unfair surprise, technical failure to comply with Rule 8(c) is not fatal.”) (citation
omitted). The knowledge of the existence of the prior lawsuit was within
Plaintiffs’ own control. Once the existence of that lawsuit was entered into the
record in this case, Defendants raised the issue of the effect of that lawsuit on this
current case. This Court gave warning that it was troubled by the potential effect
of this prior lawsuit in its September 28, 2012 Order. ([Docket No. 153] Sept. 28,
2012 Order at 4.) Plaintiffs had the opportunity to address the preclusive effect
of the prior lawsuit both in briefing and at oral argument. Additionally, despite

2

Plaintiffs’ claim to the contrary, a court may dismiss a case based on res judicata
or collateral estoppel on a motion to dismiss. See C.H. Robinson Worldwide, Inc.
v. Lobrano, 695 F.3d 758, 763-64 (8th Cir. 2012); Erickson v. Horing, No. 99–1468
JRT/FLN, 2001 WL 1640142, at *6 n.7 (D. Minn. Sept. 21, 2001). And, while the
Court concludes that Defendants clearly and repeatedly raised the issue of the
preclusive effect of the State Court Litigation, it is also true that a court may raise
collateral estoppel sua sponte in order to avoid judicial waste. See Johnson v.
LaSalle Bank Nat. Ass’n, 663 F. Supp. 2d 747, 765-66 (D. Minn. 2009) (gathering
cases). This case has been pending for more than two years. There are
approximately 200 entries in the docket, and Plaintiffs continually attempt to
amend their Complaint. Avoiding judicial waste is a clear concern in this case.
The Court concludes that the Report and Recommendation clearly and
correctly analyzed each of the claims at issue. It further explicitly holds that
application of collateral estoppel and res judicata is just in this case.
Accordingly, based upon the files, records, and proceedings herein, IT IS
HEREBY ORDERED:
1. The Court ADOPTS the Report and Recommendation of United States
Magistrate Judge Steven E. Rau dated January 28, 2013 [Docket No.
196].

3

2. Motion to Dismiss by Defendants Nedal Abdul-Hajj and Sexton I,
LLC [Docket No. 54]; Motion to Dismiss by Defendants Medved
LP and Michael P. Medved [Docket No. 79]; and Motion to
Dismiss by Defendants MRM Management Corp. and James M.
Myers [Docket No. 120] are GRANTED IN PART and DENIED
IN PART as follows:
a. To the extent the motions seek dismissal of Count I, Violation
of 15 U.S.C. § 1703(a)(2)(B), they should be GRANTED;
b. To the extent the motions seek dismissal of Count II, Violation
of 15 U.S.C. § 1703(a)(2)(A) and (C), the motions are
GRANTED;
c. To the extent the motions seek dismissal of Count III,
Violation of Minn. Stat. 515B et seq., the motions are
GRANTED;
d. To the extent the motions seek dismissal of Count IV, Fraud,
the motions are GRANTED;
e. To the extent the motions seek dismissal of Count VII, Unjust
Enrichment, the motions are GRANTED;
f. To the extent the motions seek dismissal of Count IX,
Negligent Misrepresentation (Against Developers), the
motions are GRANTED;
g. To the extent the motions seek any other forms of relief, the
motions are DENIED.
3. In addition, although not specifically requested in the motions
above, Count V, Wrongful Cancellation (Against Sexton Lofts,
LLC); Count VI, Breach of Contract (against Sexton Lofts, LLC),
and Count VIII, Minn. Stat. § 555.01, are DISMISSED. In sum,
all claims against Defendants Nedal Abdul-Hajj; Sexton I, LLC;
4

Medved LP; Michael P. Medved; MRM Management Corp.; and
James M. Myers are DISMISSED WITH PREJUDICE.

Dated: February 24, 2013

s/ Michael J. Davis
Michael J. Davis
Chief Judge
United States District Court

5