In re Claire Ruth Lohmann, petitioner, Respondent, and Ronald Lyle Kopeska, Lower Court Respondent, vs. Supply Company, Inc., d/b/a Alpha II Mortgage, Appellant.

In re Claire Ruth Lohmann, petitioner, Respondent, and Ronald Lyle Kopeska, Lower Court Respondent, vs. Supply Company, Inc., d/b/a Alpha II Mortgage, Appellant. A04-608, Court of Appeals Unpublished, January 18, 2005.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-608

 

 

In re Claire Ruth Lohmann, petitioner,

Respondent,

 

and

 

Ronald Lyle Kopeska,

Lower Court Respondent,

 

vs.

 

Supply Company, Inc., d/b/a

Alpha II Mortgage,

Appellant.

 

Filed January 18, 2005

Affirmed Hudson, Judge

 

Hennepin County District Court

File No. DW 266916

 

Robert L. Weiner, Robert L. Weiner & Associates, 701 Fourth Avenue South, Suite 500, Minneapolis, Minnesota 55415 (for respondent Lohmann)

 

John G. Westrick, Westrick & McDowall-Nix, P.L.L.P., 450 Degree of Honor Building, 325 Cedar Street, St. Paul, Minnesota 55101 (for appellant Alpha II Mortgage)

 

Randall D.B. Tigue, Randall Tigue Law Office, P.A., 3960 Minnehaha Avenue South, Suite 100, Minneapolis, Minnesota 55406 (for interested observer Kopeska)

 

            Considered and decided by Willis, Presiding Judge; Toussaint, Chief Judge; and Hudson, Judge.

U N P U B L I S H E D   O P I N I O N

HUDSON, Judge

            This appeal arises out of a dissolution action between respondent-petitioner Claire Lohmann (Lohmann) and respondent-respondent Ronald Kopeska (Kopeska).  Appellant Supply Company d/b/a Alpha II Mortgage (Alpha II) is a third party and appeals the district court's denial of its motion to quash a subpoena duces tecum served on it by Lohmann.  Alpha II claims that the district court erred by giving preclusive effect to the discovery decision of a special master.  Alpha II also argues that, because Alpha II is not a party to the dissolution, the requested documents are irrelevant.  Because the district court has broad discretion in discovery matters and the information sought by the subpoena is relevant, we affirm.

FACTS

Lohmann instituted the underlying dissolution action in March 2001.  In conjunction with the surrounding dissolution, Lohmann made extensive discovery requests of Kopeska regarding Alpha II Mortgage (Alpha II).  Alpha II is Kopeska's employer and is a mortgage pooling and real estate business; and is a non-party to the dissolution action.  Lohmann has repeatedly asserted that Kopeska is not merely employed by Alpha II, but actually holds some equitable or legal ownership in the company.  Kopeska, in turn, has repeatedly claimed that (1) he has no ownership interest in Alpha II; (2) his sister, Rebecca Bullard (Bullard), is the owner of Alpha II; and (3) the Alpha II documents are irrelevant to this proceeding because the district court lacks personal jurisdiction over non-party Alpha II and therefore cannot order that any of Alpha II's assets (or equity therein) be awarded to Lohmann. 

Kopeska did not comply with Lohmann's discovery requests, and in December 2001, Lohmann moved the district court for the appointment of a special master.  The district court initially attempted to mediate the discovery issues on its own, but on January 30, 2002, the court appointed a special master to oversee the discovery proceedings.

            Despite the appointment of a special master, the record indicates that the discovery process remained rife with problems.  On October 21, 2002, Lohmann moved to compel production of the disputed documents from Kopeska, including a specific request for valuation information regarding Alpha II.  Kopeska did not comply.  On March 26, 2003, the special master issued an order directing Kopeska to produce the requested documents.  The special master found that "[t]he information and documentation requested by the October 21, 2002 letter is relevant and proper discovery in this case.  The issues that are covered, including without limitation, that of alter ego ownership, waste of marital assets and specific information regarding numerous other assets and liabilities involved in this case, are all proper matters of discovery herein." 

In addition, on April 28, 2003, the parties entered into a confidentiality stipulation, which stated that the entire file in this matter was to be sealed "in order to avoid any confidentiality issues pertaining to third party information and proprietary business information."           

Despite the special master's order and the confidentiality stipulation, Lohmann continued to meet with little success in her discovery requests.  In August 2003, Lohmann moved to strike Kopeska's answer to the complaint and asked the district court to enter default judgment in her favor in the dissolution action.

            After Lohmann's motion to strike was denied, Lohmann, still seeking the Alpha II documents identified in the October 21, 2002 letter, noticed the deposition of Rebecca Bullard, and served the subpoena duces tecum at issue on Bullard individually and in her capacity as an officer of Alpha II.  Exhibit A to the subpoena requests documents related to Bullard's contributions to Alpha II, her ownership interest in Alpha II, communications between her and Kopeska, and documents relating to the value of Alpha II.

            Bullard lives in Las Vegas, Nevada, and her deposition was taken on January 19, 2004, in Nevada.  At her deposition, Bullard stated that Kopeska ran Alpha II out of Minneapolis, that all of Alpha II's records were kept in Minneapolis, and that all of Alpha II's bank accounts were maintained in Minneapolis.  Bullard also stated that Kopeska negotiated the mortgage loans and investor loans for Alpha II's mortgage pooling business, and that Kopeska set the interest rates for those loans.  Further, Bullard stated that she did not know who the officers of Alpha II were, nor was she aware whether she was an officer.  Finally, Bullard stated that she never spoke to anyone regarding the value of Alpha II before agreeing to sell her interest to her nephew in July 2003.

            Alpha II moved for a protective order or to quash the subpoena duces tecum on January 20, 2004.  On February 28, 2004, the district court denied the motion and reaffirmed the April 28, 2003 confidentiality stipulation between the parties.  This appeal follows.

D E C I S I O N

            Alpha II argues that its due process rights were violated by the district court's refusal to quash Lohmann's subpoena duces tecum and that because Alpha II is not a party to the dissolution, Lohmann will never have any right to the value of Alpha II.  Therefore, Kopeska claims, Lohmann should not be permitted any discovery into Alpha II's business dealings.  We disagree. 

            The district court "has wide discretion to issue discovery orders and, absent clear abuse of that discretion, normally its order with respect thereto will not be disturbed."  Shetka v. Kueppers, Kueppers, Von Feldt & Salmen, 454 N.W.2d 916, 921 (Minn. 1990); see also Minn. Twins P'ship v. State ex. rel. Hatch, 592 N.W.2d 847, 850 (Minn. 1999).  Minnesota courts have long recognized that "[d]iscovery is as fully available in a divorce action as in any other action."  Baskerville v. Baskerville, 246 Minn. 496, 505, 75 N.W.2d 762, 768 (1956). 

When ruling on a motion to quash a subpoena, courts "should balance the need of the party to inspect the documents or things against the harm, burden, or expense imposed upon the person subpoenaed."  Ciriacy v. Ciriacy, 431 N.W.2d 596, 599 (Minn. App. 1988).  For three reasons, we conclude that the district court here did not abuse its discretion in balancing these factors to arrive at the determination that it would not quash the subpoena duces tecum. 

First, we note that Alpha II is contesting a subpoena duces tecum; no ruling has been made that would in any way affect the property rights of Alpha II's non-party shareholders.  Second, the record supports the district court's finding that Kopeska and Alpha II are "sufficiently entwined" to make further discovery proper.  See Minn. R. Civ. P. 52.01 (stating findings of fact not set aside unless clearly erroneous).  Third, credibility determinations weighed heavily in the district court's refusal to quash the subpoena duces tecum.  We defer to the district court's credibility determinations, especially here in light of the district court's thorough review of the entire six volumes of the record in this matter.  Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988).  Therefore, we conclude that the district court did not abuse its discretion by ordering Alpha II to produce the documents requested in the subpoena duces tecum.

Alpha II also contends that its privacy interests will be violated if it is forced to disclose the requested information.  But when asked by the district court what the harm would be to Alpha II if it complied with the subpoena, Alpha II's counsel gave the following answer: 

Well, I believe that my clients have turned over sufficient documents and, in doing this, Your Honor, at some point in time, [Lohmann's counsel] doesn't get to go on a fishing expedition and stick his nose into our private business.  He has taken our accountant's deposition, he has looked at our tax returns.  He has taken a pension benefit . . . . We have complied with documents that we think to show them that this is wrong, we have produced the tax returns, we have done that, but at some point in time [Lohmann's counsel] doesn't get to come in and say I want to see all of your peoples' financial records.

 

As this excerpt shows, Alpha II's explanation to the district court focused on privacy concerns.  But in April 2003, the parties entered into a confidentiality stipulation designating the entire record in this case as confidential.  And this stipulation was affirmed by the district court in its February 28, 2004 order, which is the subject of this appeal.  As such, we conclude that Alpha II's privacy interests are adequately protected.  See Ciriacy,431 N.W.2d at 600 (holding that by focusing on the hardship imposed on the third-party respondent without considering the protective order in place, and by failing to give adequate consideration to the need to confirm or deny the representations of respondent, the court unduly restricted discovery).

            Further, Alpha II cites Sammons v. Sammons, 642 N.W.2d 450 (Minn. App. 2002) and Wick v. Wick, 670 N.W.2d 599 (Minn. App. 2003), for the proposition that, as a matter of due process, the district court has no authority to make a determination that affects a non-party's rights.  Alpha II argues that any determination of the district court that Kopeska has an "equitable interest" in Alpha II is a judicial determination that would affect the property rights of non-partiesi.e., Alpha II's shareholders.  In effect, Alpha II argues that in order for a district court to enforce an interlocutory discovery order, it must have authority to grant any later actual award.  We find no merit in this position. 

While Alpha II correctly points out that the district court could not enter a final judgment affecting the rights of Alpha II shareholders without Alpha II being joined as a party, there is little danger of such an outcome at this preliminary discovery stage in the litigation.  As the district court noted, both Sammons and Wick involved post-decree motions regarding final judgments crafted by the respective district courts to seize the property of third-party entities in order to satisfy the financial obligations of one spouse to another.  In both cases, the district court ignored the fact that the businesses at issue were separate, independent entities.  This court held that the district court lacked personal jurisdiction over those separate, independent entities to deprive them of their property.  Sammons, 642 N.W.2d at 457; Wick, 670 N.W.2d at 604.  We agree, however, with the conclusion of the district court in this case that the rulings in Sammons and Wick "cannot fairly be read as applicable to limit the scope of discovery permitted in dissolution litigation leading up to final judgment and decree."  The discovery order here is not a final judgment awarding Lohmann any interest in Alpha II.  Rather, it is an interlocutory order that properly allows the district court to accurately determine what property of the parties should be considered part of the marital estate such that an equitable division of the marital estate may later be made pursuant to Minn. Stat. § 518.58 (2002).

            For similar reasons, Alpha II's collateral estoppel argument fails as well.  Alpha II argues that the district court "appeared to rely on the doctrine of collateral estoppel to preclude Alpha II from arguing the issue of relevancy based on the previous [relevancy] determination by the Special Discovery Master."[1]  Alpha II argues that as a non-party not privy to the discovery proceeding before the special master, it is not bound by the special master's order of March 26, 2003.  But the district court did not base its decision on collateral estoppel; nor did the court prevent Alpha II from arguing the question of relevancy.  The record shows that, in addition to considering the special master's ruling, the district court considered the entire six-volume record of proceedings.  The record also shows that Alpha II was allowed to submit considerable information on the relevancy issue at the February 13, 2004 hearing. 

            Finally, our decision is reinforced by the Minnesota Supreme Court's comments in Bollenbach v. Bollenbach:

            The trial court in divorce proceedings, having determined that one of the parties is entitled to a divorce, and being called upon to make a division of property, must determine as accurately as possible the kind and value of the real and personal property owned by the parties . . . .  This being so, the parties, called upon to supply this essential information in a proper way, must make a full and accurate disclosure of their assets and liabilities.  Failure to do so justifies inferences adverse to the party who conceals or evades.  A party to a marriage subject to severance in divorce proceedings cannot be permitted to subvert the orderly processes of the courts by concealing, dissipating, or misusing his assets in anticipation of divorce so as to reduce the property available for division or as a standard for the court in fixing payments for alimony or support. 

 

285 Minn. 418, 428, 175 N.W.2d 148, 155 (1970) (citations omitted).  We conclude that the information sought by Lohmann is relevant, and Alpha II's privacy concerns have been adequately addressed by the district court.

Affirmed.

[1] In Minnesota, the doctrine of collateral estoppel has four elements:  (1) the issue must be identical to that raised in a prior adjudication; (2) there must have been a final judgment on the merits; (3) the estopped party was a party or in privity with a party to the prior adjudication; and (4) the estopped party was given a full and fair opportunity to be heard on the adjudicated issue.  Willems v. Comm'r of Pub. Safety, 333 N.W.2d 619, 621 (Minn. 1983).