Steen et al v. Murray et al

Filing 52

MEMORANDUM AND ORDER - The Motion to Retransfer Case or Retain Pursuant to 28 U.S.C. § 1404(a) (Filing No. 47 ), filed by the Plaintiffs Richard "Bud" Steen and Lloydene Steen, is denied. The Motion for Judgment on the Pleadings (Filing No. 41 ) filed by Defendants Robert Murray, Ryan Boe, and Lamson, Dugan & Murray, LLP, is granted. This action is dismissed with prejudice. A separate judgment will be entered. Ordered by Chief Judge Laurie Smith Camp. (GJG)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
RICHARD “BUD” STEEN, and
LLOYDENE STEEN,
CASE NO. 8:13CV43
Plaintiffs,
vs.

MEMORANDUM
AND ORDER

ROBERT MURRAY, Individually;
LAMSON, DUGAN & MURRAY, LLP; and
RYAN BOE,
Defendants.

This matter is before the Court on the Motion for Judgment on the Pleadings
(Filing No. 41) filed by Defendants Robert Murray (“Murray”), Ryan Boe (“Boe”), and
Lamson, Dugan & Murray, LLP (“Lamson Dugan”) (collectively “Defendants”).

Also

before the Court is the Motion to Retransfer Case or Retain Pursuant to 28 U.S.C. §
1404(a) (Filing No. 47), filed by the Plaintiffs Richard “Bud” Steen and Lloydene Steen
(collectively “Plaintiffs” or the “Steens”). The parties have submitted briefs (Filing Nos.
42, 46, 48, 49, 50, and 51) in support of their respective positions. For the reasons
stated below, Plaintiffs’ Motion to Retransfer will be denied, and Defendants’ Motion for
Judgment on the Pleadings will be granted.
FACTUAL BACKGROUND
In 2003, the Defendants represented the Plaintiffs to help them avoid foreclosure
on their Iowa farmland. (Filing No. 32 ¶ 10; Filing No. 33 ¶ 5; see also Filing No. 1 at
CM/ECF p. 5.) Plaintiffs allege that, at the time of the representation, neither Murray
nor Boe was licensed to practice law in Iowa. (Filing No. 32 ¶ 2.) In connection with
their representation of the Plaintiffs, Defendants Murray and Boe drafted a Real Estate

Purchase Agreement (the “Purchase Agreement”) between Plaintiffs and AGR-Keast.
(Filing No. 33 ¶ 6; see also Filing No. 1 at CM/ECF pp. 5-9.1) Boe also drafted an
Option to Lease/Purchase Real Estate (“Option”). (Filing No. 25-3 at CM/ECF pp. 2729.) The Plaintiffs allege that at the time the Purchase Agreement and Option were
drafted, Defendants also represented AGR-Keast, the purchaser. (Filing No. 32 ¶ 15.)
Plaintiffs allege that Defendants committed legal malpractice in drafting the
Purchase Agreement and Option. (See generally Filing No. 32.) Specifically, Plaintiffs
allege that they retained Defendants to “draft a first option to purchase or right of first
refusal” but Defendants “instead drafted an unrestricted option in favor of the purchaser
of [Plaintiffs’] other property.” (Id. ¶¶ 10–14.) Plaintiffs further allege that they did not
know Defendants were also representing the purchaser; that Defendants “included
language to favor that purchaser;” and that Defendants “failed to disclose to Plaintiffs
their divided loyalties.” (Id. ¶¶ 15–21.) Plaintiffs allege that they discovered Defendants’
malpractice in October 2008. (Id. ¶ 20.) Based on these allegations, Plaintiffs assert
that Defendants failed to exercise appropriate care, breached the parties’ contract, and
breached ethical duties. (Id. at ¶ 18, 24, 26.) Plaintiffs further allege that because the
Option was incorrectly drafted, they incurred significant litigation expenses. (Id. at ¶
17.)

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Plaintiffs’ Third Amended Complaint (Filing No. 32) does not include the Purchase Agreement;
however, the Purchase Agreement is attached to the original complaint at Filing No. 1 at CM/ECF pp. 5-9.
The Option appears at Filing No. 25-3 at CM/ECF pp. 27-29. Both documents are incorporated by
reference into the Third Amended Complaint. Id.; Filing No. 46 at 2 n. 1.

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PROCEDURAL BACKGROUND
Plaintiffs filed this action on July 20, 2012, in the United States District Court for
the Southern District of Iowa (Filing No. 1.) On October 4, 2012, Defendants moved to
transfer the case to the United States District Court for the District of Nebraska under
the provisions of 28 U.S.C. § 1406(a), due to improper venue. (Filing No. 25.) Plaintiffs
resisted the Motion to Transfer, arguing that a substantial part of the events giving rise
to Plaintiffs’ claims occurred the Southern District of Iowa and, therefore, venue was
proper under 28 U.S.C. § 1391(b). The Southern District of Iowa granted the Motion,
concluding that venue in Iowa was improper. That court reasoned that under controlling
precedent in the United States Court of Appeals for the Eighth Circuit, it was required to
focus on the location of the Defendants’ alleged wrongful activities. (Filing No. 34 at 5
(citing Woodke v. Dahm, 70 F.3d 983, 985–86 (8th Cir. 1995).) The court determined
that each of Defendants’ alleged wrongful acts or omissions took place in Nebraska,
and Plaintiffs failed to meet their burden of establishing venue in Iowa. (Id. at 9.)
DISCUSSION
I.

Motion to Retransfer
A.

Standard

The Court first considers the Plaintiffs’ Motion to Retransfer. Plaintiffs argue that
the Court should retransfer the case because venue was proper in Iowa.

In the

alternative, Plaintiffs request that the Court consider the transfer as one under 28
U.S.C. § 1404(a) for the convenience of the parties, rather than § 1406(a) for improper
venue.

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Motions to retransfer are not readily granted, and are only appropriate where the
ruling of the transferor court is clearly erroneous and would result in manifest injustice.
Jenkins Brick Co. v. Bremer, 321 F.3d 1366, 1370 (11th Cir. 2003); 15 Charles Alan
Wright & Arthur R. Miller, Federal Practice and Procedure, Jurisdiction and Effect of
Transfer, Juris. § 3846 (3d ed.). Such motions are governed by the doctrine of the lawof-the-case. “As most commonly defined, the doctrine [of the law-of-the-case] posits
that when a court decides upon a rule of law, that decision should continue to govern
the same issues in subsequent stages in the same case.” Christianson v. Colt Indus.
Operating Corp., 486 U.S. 800, 815-16 (1988) (quoting Arizona v. California, 460 U.S.
605, 618 (1983)). “The law-of-the-case doctrine applies as much to decisions from
coordinate courts as it does to the court’s own decisions, including transfer decisions.”
Id. The Supreme Court has stated that the doctrine applies “with even greater force to
transfer decisions than to decisions of substantive law; transferee courts that feel
entirely free to revisit transfer decisions of a coordinate court threaten to send litigants
into a vicious circle of litigation.” Id. (citations omitted); see also Chrysler Credit Corp. v.
Chrysler Country, Inc., 928 F.2d 1509, 1516 (10th Cir. 1991) (stating that “traditional
principles of law of the case counsel against the transferee court reevaluating the
rulings of the transferor court, including its transfer order.”); Moses v. Business Card
Exp. Inc., 929 F.2d 1131, 1137 (6th Cir. 1991) (explaining that law-of-the-case doctrine
applies to transfer decisions to prevent litigants from being forced into “jurisdictional
ping-pong.”).

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B.

Analysis

The decision issued by the Southern District of Iowa was not clearly erroneous.
The Southern District of Iowa relied on the Eighth Circuit’s decision in Woodke v. Dahm,
70 F.3d 983 (8th Cir. 1995).

In Woodke, the Eighth Circuit interpreted the phrase

“events or omissions giving rise to the claim,” within § 1391(b)(2), to indicate that
“Congress meant to require courts to focus on relevant activities of the defendant, not of
the plaintiff.” Id. at 985.
Here, the Southern District of Iowa determined that Defendants’ alleged failure to
disclose the dual representation occurred when Murray learned from the Plaintiffs that
they reached an agreement to sell their land to AGR-East.

(Filing No. 34 at 6-7.)

Plaintiffs informed Murray of this potential conflict through a telephone call to Murray at
his office in Omaha, Nebraska. (Id. at 6.) The Southern District of Iowa also reasoned
that the drafting of the Option and all legal work leading to the drafting of the Option
occurred in Nebraska. (Id. at 8.) Finally, the court was not persuaded by Plaintiffs’
argument that venue would be proper in Iowa because the injury occurred there. (Id. at
9 n. 8.) The court reasoned that under Eighth Circuit precedent, venue is proper not
where the events giving rise to damages occurred, but where the events giving rise to
the action occurred. (Id. (citing Wisland v. Admiral Beverage Corp., 119 F.3d 733, 736
(8th Cir. 1997).). The Southern District of Iowa applied a reasonable interpretation of
Eighth Circuit precedent to the facts of this case. Plaintiffs have not met their heavy
burden of demonstrating that a previous order was clearly erroneous. Accordingly, the
transfer Order (Filing No. 34) will not be disturbed.

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II.

Motion For Judgment on the Pleadings
A.

Standard

“Judgment on the pleadings is appropriate where no material issue of fact
remains to be resolved and the movant is entitled to judgment as a matter of law.”
Minch Family LLLP v. Buffalo-Red River Watershed Dist., 628 F.3d 960, 965 (8th Cir.
2010) (citing Faibisch v. Univ. of Minn., 304 F.3d 797, 803 (8th Cir. 2002)). This is “the
same standard used to address a motion to dismiss for failure to state a claim under
Rule 12(b)(6).” Ashley Cnty., Ark. v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009). “To
survive a motion to dismiss, the factual allegations in a complaint, assumed true, must
suffice ‘to state a claim to relief that is plausible on its face.’” Northstar Indus., Inc. v.
Merrill Lynch & Co., 576 F.3d 827, 832 (8th Cir. 2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)).
B.

Analysis

Plaintiffs have invoked the Court’s diversity jurisdiction under 28 U.S.C. §1332.
Defendants argue that they are entitled to judgment on the pleadings because Plaintiffs’
claims are barred by Nebraska’s statutes of limitations. Plaintiffs counter that more
lenient Iowa statutes of limitations should control. For purposes of this analysis, the
Court will assume, without deciding, that Iowa substantive law applies to the Plaintiffs’
causes of action as the Plaintiffs assert.
1.

Nebraska’s Choice-of-Law Rules Apply to this Action

First, the Court must determine which state’s choice-of-law rules apply. Courts
generally employ the forum state’s choice-of-law rules. Whitney v. Guys, Inc., 700 F.3d
1118, 1123 (8th Cir. 2012) (citing Eggleton v. Plasser & Theurer Exp. Von
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Bahnbaumaschinen Gesellschaft, MBH, 495 F.3d 582, 585 (8th Cir. 2007)); see also In
re Derailment Cases, 416 F.3d 787, 794–95 (8th Cir. 2005). Exceptions to this rule
exist where a case was transferred for the convenience of the parties. The Eighth
Circuit explained that where “a district court in one state transfers an otherwise properly
filed case to a district court in another state solely ‘[f]or the convenience of parties and
witnesses,’ 28 U.S.C. § 1404(a), the transferee court applies the choice-of-law rules of
the state in which the transferor court sits.” Eggleton, 495 F.3d at 585-86 (quoting
Ferens v. John Deere Co., 494 U.S. 516, 531 (1990)). However, where, as here, a
case has been transferred under § 1406(a), the Eighth Circuit has determined that the
choice-of-law rules of the transferee court apply. Eggleton, 495 F.3d at 585 (citing
Wisland v. Admiral Beverage Corp., 119 F.3d 733, 736 (8th Cir. 1997)). Accordingly,
the Court will apply Nebraska’s choice-of-law rules.
2.

Plaintiffs’ Claims are Barred by the Applicable Statutes of Limitations

Before 2006, Nebraska’s statutes of limitations were applied to actions litigated in
Nebraska, because statutes of limitations were considered to be procedural rather than
substantive. See Grand Island Exp. v. Timpte Indus., Inc., 28 F.3d 73, 74 (8th Cir.
1994); Player Pianette, Inc. v. Dale Electronics, Inc., 478 F.2d 336 (8th Cir.1973);
Ndunguru v. Kone, Inc., 8:07CV286, 2008 WL 53603, at *1 (D. Neb. Jan. 2, 2008);
Whitten v. Whitten, 250 Neb. 210, 212-13, 548 N.W.2d 338, 340 (1996) (“Because
application of the statute of limitations is a procedural matter, Nebraska's statute of
limitations governed, rather than that of . . . the state where the cause of action
allegedly arose.”); see also 5 Neb. Prac., Civil Procedure § 5:33 (“Presumably, the
Nebraska statute of limitations would apply on the ground that statutes of limitations
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have been classified as procedural rather than substantive for choice of law purposes.”).
The Eighth Circuit also noted that, prior to 2006, Nebraska followed Restatement
(Second) of Conflict of Laws § 142(1), which states that “[a]n action will not be
maintained if it is barred by the statute of limitations of the forum.” Eggleton, 495 F.3d
at 584 (citing FDIC v. Nordbrock, 102 F.3d 335, 338 (8th Cir.1996).
In 2006, the Nebraska Legislature adopted the Uniform Conflict of Laws
Limitation Act (“UCLLA”), Neb. Rev. Stat. §§ 25-3201 through 25-3207 (Reissue 2008).
The UCLLA provides that when a claim is based on the substantive law of Nebraska,
Nebraska statutes of limitations will apply. Neb. Rev. Stat. § 25-3203(1)(b). If a claim is
based on the substantive law of another state, however, then the other state’s statutes
of limitations will apply, as well as the other state’s accrual and tolling rules. §§ 253203(a), 25-3204. The UCLLA applies only to claims “accruing after July 14, 2006.” §
25-3206.
Defendants contend that because Plaintiffs’ claims accrued before July 14, 2006,
they are not governed by the UCLLA, and are barred under the applicable Nebraska
statutes of limitations. Plaintiffs argue that their claims accrued after July 14, 2006, and,
therefore, the UCLLA dictates that Iowa’s statutes of limitations apply. To resolve this
conflict, the Court must determine when Plaintiffs’ claims accrued.
As established above, “[a] federal court sitting in diversity applies the statute-oflimitations rules of the forum.” Great Plains Trust Co. v. Union Pac. R. Co., 492 F.3d
986, 992 (8th Cir. 2007) (citing Nettles v. Am. Tel. & Tel. Co., 55 F.3d 1358, 1362 (8th
Cir.1995)); see also Kan. Pub. Employees Ret. Sys. v. Reimer & Koger Assocs., Inc.,
61 F.3d 608, 611 (8th Cir.1995) (explaining that federal courts generally apply the forum
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state's limitations provisions where the issue is not governed by federal statute). The
forum state’s statute of limitations rules govern accrual of the claim.

See id.

Accordingly, Nebraska’s limitations rules determine when Plaintiffs’ claims2 accrued. If
the claims accrued before July 14, 2006, the applicable Nebraska statute of limitations
will apply. See Whitten, 250 Neb. at 211, 548 N.W.2d at 340 (“Because application of
the statute of limitations is a procedural matter, Nebraska's statute of limitations
governed, rather than that of Colorado, the state where the cause of action allegedly
arose.”). Only if Plaintiffs’ claims accrued after July 14, 2006, will the UCLLA determine
whether the Iowa or Nebraska statutes of limitations apply. See § 25-3203 (stating that
Nebraska courts generally must apply the limitation period contained in the law of the
state upon which a claim is substantively based). Because the Court determines that
Plaintiffs’ claims accrued in 2003, the Nebraska statutes of limitations apply.
a.

Breach of Contract Claim

As a general rule in Nebraska, a cause of action accrues, and the period of
limitations begins to run, when a legal right is violated, that is, when the aggrieved party
has the right to institute and maintain suit. Irving F. Jensen Co. v. State, 272 Neb. 162,
719 N.W.2d 716 (2006). “A cause of action in contract accrues at the time of breach or
the failure to do the thing agreed to.” Id. (citing Snyder v. EMCASCO Ins. Co., 259 Neb.
621, 611 N.W.2d 409 (2000); Hoeft v. Five Points Bank, 248 Neb. 772, 539 N.W.2d 637

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Plaintiffs’ claims are somewhat difficult to identify. The Third Amended Complaint alleges
causes of action for breach of contract and breach of ethical duties. (Filing No. 32 at 3.) However,
Plaintiffs’ brief appears to pursue only the claim for legal malpractice. (See Filing No. 46 at 4, 10; see also
Filing No. 48 at 10.) The Court need not determine which of these claims is Plaintiffs’ controlling claim,
because the result is the same.

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(1995)). “This is so even though the nature and extent of damages may not be known.”
Id. (citing Cavanaugh v. City of Omaha, 254 Neb. 897, 580 N.W.2d 541 (1998); L.J.
Vontz Constr. Co. v. Department of Roads, 232 Neb. 241, 440 N.W.2d 664 (1989)). “In
fact, a cause of action in contract accrues at the time of the breach or failure to do the
thing agreed to, irrespective of any knowledge on the part of the plaintiff or of any actual
injury occasioned to him or her.” Cavanaugh, 254 Neb. at 901, N.W.2d 541 at 544; see
also Pennfield Oil Co. v. Winstrom, 272 Neb. 219, 236, 720 N.W.2d 886, 901 (2006).
Plaintiffs’ only potential allegation of breach suggests that the breach of contract
occurred when Defendants’ legal services were provided in March and April of 2003.
(Filing No. 48 at 10; Filing Nos. 32 ¶¶ 23, 24.) The date Plaintiffs discovered the breach
is not pled, nor is it material for deciding when the statute of limitations began to run.
See Wineinger v. United Healthcare Ins. Co., 8:99CV141, 2001 WL 688530, at *4 (D.
Neb. Mar. 13, 2001) (stating that “the date on which the plaintiff here discovered [the
breach] is immaterial for purposes of determining when the statute of limitations began
to run.”). Plaintiffs claim, if any, for breach of contract accrued when the Option was
drafted in 2003.

Accordingly, Nebraska's five-year statute of limitations for written

contracts controls in this case. To be timely, Plaintiffs needed to file their action, at the
latest, in April 2008. Because Plaintiffs filed this action on July 20, 2012, their breach of
contract claim is time-barred and will be dismissed with prejudice.
b.

Breach of Ethical Duties

Plaintiffs’ claims for breach of ethical duties also accrued in March or April of
2003, when the alleged malpractice occurred.

As established above, the Court must

apply the forum state’s statute of limitations rules to determine accrual of the claim. See
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Nettles, 55 F.3d at 1362 (applying the forum state’s statute of limitations rules to
determine the date of accrual).

In Nebraska, “[p]rofessional misconduct or any

unreasonable lack of skill or fidelity in the performance of professional or fiduciary duties
is malpractice and comes within the professional or malpractice statute of limitations.”
Nuss v. Alexander, 269 Neb. 101, 106, 691 N.W.2d 94, 99 (2005). Thus, Plaintiffs’
claim for breach of ethical duties, which Plaintiffs themselves characterize as legal
malpractice, falls under the statute of limitations rules for professional negligence to
determine the date of accrual.
A claim for professional negligence “shall be commenced within two years next
after the alleged act or omission in rendering or failure to render professional services
providing the basis for such action.” Neb. Rev. Stat. § 25-222 (Reissue 2008). The
statute further provides that “if the cause of action is not discovered and could not be
reasonably discovered within such two-year period, then the action may be commenced
within one year from the date of such discovery or from the date of discovery of facts
which would reasonably lead to such discovery.” Id. “Discovery ‘occurs when the party
knows of facts sufficient to put a person of ordinary intelligence and prudence on inquiry
which, if pursued, would lead to the knowledge of facts constituting the basis of the
cause of action.’” Auto Servs. Co., Inc. v. KPMG, LLP, 537 F.3d 853, 858 (8th Cir. 2008)
(quoting Gering–Fort Laramie Irrigation Dist. v. Baker, 259 Neb. 840, 612 N.W.2d 897,
903 (2000)); see also Weaver v. Cheung, 254 Neb. 349, 576 N.W.2d 773, 778 (1998)
(“In the context of statutes of limitations, ‘discovery’ refers to the fact that one knows of
the existence of an injury or damage, regardless of whether there is awareness of a
legal right to seek redress in court.”).
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Plaintiffs discovered the existence of injury or damage, at the latest, in October
2008. (Filing No. 32 ¶ 20.) However, the date of discovery under § 25-222 is not the
same as the date of accrual. Under the express language of § 25-222, Plaintiffs’ claim
accrued in 2003, and the statute of limitations began to run at that time. See Rosnick v.
Marks, 218 Neb. 499, 507, 357 N.W.2d 186, 191 (1984) (stating that “we reaffirm the
rule in Nebraska that a cause of action for malpractice accrues upon the violation of a
legal right.”). While the discovery provision in § 25-222 would allow Plaintiffs to bring
their claim within one year after the discovery of the alleged malpractice, it does not
change the date that Plaintiffs’ claim accrued. Accordingly, Plaintiffs’ malpractice claim
accrued at the time the legal services were rendered in 2003.

Because Plaintiffs’

malpractice claim accrued before July 14, 2006, the Nebraska statute of limitations
applies. To be timely, Plaintiffs would have had to file this action, at the latest, in
October of 2009, a year after their alleged discovery of Defendants’ malpractice.
Because Plaintiffs filed this action on July 20, 2012, their breach-of-ethical duties claim
is likewise time-barred and will be dismissed with prejudice.
CONCLUSION
The United States District Court for the Southern District of Iowa’s ruling that
venue was improper in the Southern District of Iowa was not clearly erroneous. Further,
under Nebraska’s choice-of-law rules, Plaintiffs’ causes of action accrued in March or
April of 2003. Plaintiffs’ claims were not timely filed and are barred under the applicable
statutes of limitations. Accordingly, Plaintiffs’ claims will be dismissed with prejudice.

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IT IS ORDERED:
1.

The Motion to Retransfer Case or Retain Pursuant to 28 U.S.C. § 1404(a)
(Filing No. 47), filed by the Plaintiffs Richard “Bud” Steen and Lloydene
Steen, is denied;

2.

The Motion for Judgment on the Pleadings (Filing No. 41) filed by
Defendants Robert Murray, Ryan Boe, and Lamson, Dugan & Murray,
LLP, is granted;

3.

This action is dismissed with prejudice; and

4.

A separate judgment will be entered.

Dated this 28th day of June, 2013.
BY THE COURT:

s/Laurie Smith Camp
Chief United States District Judge

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