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STATE OF MINNESOTA IN SUPREME COURT A08-1730

Court of Appeals

Page, J. Concurring, Dietzen, J. Took no part, Gildea, C.J., and Stras, J.

Katherine M. Rucker, Respondent, vs. Steven B. Schmidt, Appellant, Rider Bennett, LLP, Appellant. ________________________ William R. Skolnick, Sean A. Shiff, Skolnick & Shiff, P.A., Minneapolis, Minnesota, for respondent. Joseph W. Anthony, Janel M. Dressen, Anthony Ostlund Baer & Louwagie P.A., Minneapolis, Minnesota, for appellant Steven B. Schmidt. Lewis A. Remele, Kevin P. Hickey, Bassford Remele, P.A., Minneapolis, Minnesota, for appellant Rider Bennett, LLP. ________________________ SYLLABUS A client and a lawyer are not in privity solely based on their lawyer-client relationship. Filed: January 5, 2011 Office of Appellate Courts

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Affirmed and remanded to the district court for further proceedings consistent with this opinion. OPINION PAGE, Justice. Respondent Katherine M. Rucker successfully sued her ex-husband, Robert Rucker, for fraud on the court committed during a dissolution of marriage action. The trial court found that in the dissolution action Robert Rucker engaged in an intentional course of material misrepresentation and non-disclosure concerning the value of his business interest in The Tile Shop that resulted in a grossly unfair property settlement. Katherine Rucker subsequently sued Robert Rucker`s dissolution attorney and the law firm that employed him, appellants Steven B. Schmidt and Rider Bennett, LLP, based primarily on the same facts asserted in her suit against Robert Rucker. Katherine Rucker accused Schmidt and Rider Bennett of fraud, fraud on the court, and aiding and abetting fraud in the marriage dissolution action. The district court granted summary judgment to Schmidt and Rider Bennett, holding that due to the attorney-client relationship, Robert Rucker and his attorneys were in privity for purposes of the application of the doctrine of res judicata, and therefore, Katherine Rucker`s separate action against Schmidt and Rider Bennett was barred. The court of appeals reversed and remanded, concluding that the attorney-client relationship, by itself, did not create privity between Robert Rucker and his attorneys for purposes of res judicata. For the reasons discussed below, we affirm. The material facts in this case are not in dispute. During their marriage dissolution action, the Ruckers agreed to use an independent appraiser to establish the value of 2

Robert Rucker`s 50% interest in The Tile Shop. Robert Rucker was represented in the dissolution action by Schmidt, who was employed by the Rider Bennett law firm. Based on documents provided by Robert Rucker and employees of The Tile Shop, the independent appraiser valued Robert Rucker`s interest in The Tile Shop at $7.125 million. Based on this valuation, the Ruckers signed a marriage termination agreement, drafted by Schmidt, that involved a property settlement award of $2.4 million to Katherine Rucker. Robert Rucker represented in the agreement that he had made full disclosure of his business interests. The Ruckers` marriage was dissolved by a judgment and decree entered on October 1, 2001. Katherine Rucker subsequently sued Robert Rucker for fraud on the court, asserting that Robert Rucker intentionally provided deceptive, misleading, and incomplete information to the independent appraiser and to the district court about his interest in The Tile Shop that resulted in the undervaluation of that interest. In that litigation, the district court concluded that Katherine Rucker had established her claim that Robert Rucker committed fraud on the court regarding the value of his interest in The Tile Shop. The district court found that the actual value of Robert Rucker`s 50% interest in the Tile Shop was $15,367,200 and that Robert Rucker had engaged in an intentional course of material misrepresentation and non-disclosure during the marital dissolution action. Based on those findings, the court awarded Katherine Rucker an additional $3,285,864. After factoring in prejudgment interest, costs, and disbursements, the judgment entered against Robert Rucker was $4,215,673.49.

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Robert Rucker appealed, but before his appeal was final, the Ruckers settled Katherine Rucker`s claim. The settlement agreement, which specifically reserved

Katherine Rucker`s right to pursue an action against Schmidt and Rider Bennett, released and discharged Robert Rucker, The Tile Shop, and certain individuals and entities related to The Tile Shop from all further claims in exchange for a payment of $2,600,000. On September 15, 2006, Katherine Rucker sued Schmidt and Rider Bennett, asserting fraud and deceit, fraud on the court, and aiding and abetting fraud. Katherine Rucker sought treble damages under Minn. Stat.

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