The full case caption appears at the
end of this opinion. LAY, Circuit Judge. Humbird Securities Co. (“Humbird”), Northern Securities Co. (“Northern”),Popp Telcom, Inc. (“Popp”),
[FOOTNOTE 1] and Washington Sharecom, Inc. (“Washington”)(collectively and hereinafter “Dissenters”) , appeal the district court’s grant of a motionto dismiss and subsequent motion for summary judgment brought by AmericanSharecom, Inc. (“the Corporation”), Steven C. Simon (“Simon”), James J. Weinert(“Weinert”), and William J. King (“King”) (collectively and hereinafter “ASI”).Because we disagree with the district court’s analysis and dismissal of the Dissenters’fraud claims, we reverse and remand. I. FACTS AND BACKGROUND We recognize that this case has been before assorted state and federal courtssince 1992 and the chronology of events is thus well-documented. Nonetheless, dueto the complexity of this appeal, we feel it beneficial to give a somewhat detailedaccount of the events leading up to this proceeding. A. The Business Relationship and the Merger The Dissenters are former stockholders in American Sharecom, Inc., aMinnesota corporation principally engaged in the business of purchasing telephone lineaccess and reselling long-distance services to small and medium-sized businesses.Simon, Weinert, and King were the President, Vice-President and Chief FinancialOfficer of the Corporation, respectively. Each man also held a place on theCorporation’s Board of Directors. In April of 1992, the Board voted to approve a freeze-out
[FOOTNOTE 2] merger of theCorporation with Sharecom Holdings, Inc., a Minnesota corporation owned exclusivelyby Simon and Weinert. As a result, every shareholder with the exception of Simon andWeinert would be cashed out, leaving them as the sole shareholders of the survivingcorporation. The Board voted to pay each shareholder, save Simon and Weinert,$17,694.64 per share.
[FOOTNOTE 3] The Dissenters opposed the merger and exercised theirDissenters’ rights under Minnesota Statute � 302A.471(1)(c), thereby challenging thecorporation’s proffered payment per share.
[FOOTNOTE 4] The merger became effective on May 8, 1992. The Corporation paid off eachshareholder with the exception of the Dissenters. In accordance with MinnesotaStatute � 302A.473(7), the Corporation thereafter filed a petition for determination ofvalue with the state court.
[FOOTNOTE 5] B. The Valuation Proceeding Shortly after the Corporation filed its appraisal petition,
[FOOTNOTE 6] the Dissenters filed acounterclaim alleging that the merger was invalid due to the grant of fraudulent stockoptions and the dissemination of misleading proxy materials. The Corporationthereafter moved for dismissal of the counterclaim, which was granted on February 24,1993. The court found that the counterclaim, which was not compulsory since it hadno “logical relationship” to the appraisal action, was outside the limited scope of thevaluation proceeding and dismissed it without prejudice. The court further noted thatthe fraud claim “may be filed again within the applicable statute of limitationsperiod . . . .” The Dissenters did not appeal Judge Howard’s dismissal of theircounterclaims. On June 28, 1994, Judge Howard found that the stock had been significantlyundervalued. Each share was found to be worth $111,893, over six times the amountthe Corporation had paid frozen-out shareholders. By court order, the Corporation paidPopp $4,050,514; Humbird and Northern received $376,792; and Washington wascompensated in the amount of $191,193.
[FOOTNOTE 7] The Corporation appealed, and theDissenters cross-appealed; the Minnesota Court of Appeals upheld the decision for themost part, remanding only for reconsideration of the accrual date for prejudgmentinterest. See American Sharecom, Inc. v. LDB Int’l Corp., No. C9-94-2419, 1995 WL321540 (Minn. Ct. App. May 30, 1995) (Sharecom I). Approximately five months after Judge Howard handed down his decision,Rochester Telephone Corporation, a telecommunications firm based in New York,announced that it was purchasing American Sharecom, Inc. for approximately $190million in Rochester Telephone stock.
[FOOTNOTE 8] The Dissenters claim this sale aroused theirsuspicions, and after some investigation, they concluded that ASI had allegedlydefrauded the court during the appraisal proceeding. As a result, on December 16,1994, the Dissenters moved the Minnesota Court of Appeals to remand the appraisalaction to the state court for reconsideration on account of the discovery of newevidence. In the year following the motion to reopen, the Dissenters allegedly foundeven more evidence of fraud both during the years leading up to the merger and duringthe valuation proceeding. Meanwhile, on August 23, 1995, a Satisfaction of Judgmentwas entered in the amount of $5,013,327.84 (plus interest) on the valuation proceeding. On February 6, 1996, Judge Howard agreed to reopen the valuation proceedingto hear the Dissenters’ allegations of fraud occurring during the proceeding itself.However, six months later, the Minnesota Court of Appeals held in AmericanSharecom, Inc. v. LDB Int’l Corp., 553 N.W.2d 433 (Minn. Ct. App. 1996) (SharecomII), that Judge Howard had no jurisdiction to vacate the satisfied judgment on the basisof fraud and newly discovered evidence. The court explicitly noted, however, that theDissenters had another available remedy in the form of a separate common law fraudaction. See Sharecom II, 553 N.W.2d at 434. C. The District Court Proceedings In May of 1994, prior to Judge Howard’s determination in the valuationproceedings and well before the satisfaction of that judgment, the Dissenters servedASI with a complaint alleging common law fraud. In the accompanying cover letter,however, the Dissenters stated they “hereby agree[d]” that ASI “ may have an indefiniteextension in which to answer or otherwise respond to the complaint . . . .” It was notuntil November 8, 1996, that the Dissenters filed their fraud claims in state court. Atthat time, the Dissenters filed an Amended Complaint bringing forth additional factualcomplaints and a civil claim under the Racketeer Influenced and Corrupt OrganizationsAct (RICO), 18 U.S.C. � 1961 et seq. On December 2, 1996, ASI removed the caseto federal court on the basis of federal question jurisdiction under 28 U.S.C. � 1331.The Dissenters filed their Second Amended Complaint shortly thereafter. The crux of the Dissenters’ fraud allegations, broadly stated, is that Simon andWeinert “stole control” of the Corporation through a series of fraudulent schemes.Among these allegedly unlawful activities were strawman purchases, misleading tenderoffers, underpriced stock options, a fraudulent stock split, the freeze-out merger, andmaterial omissions and fraudulent misrepresentations during the valuation proceeding.The Dissenters argue that, through these assorted scams, Simon and Weinert were ableto eliminate every other shareholder and reap a huge profit after selling off theCorporation. On July 11, 1997, the federal district court granted in part ASI’s motion todismiss the fraud action, dismissing only those claims seeking damages related to stockvalue. Claims unrelated to the value of ASI stock, should any exist, were not subjectto the court’s dismissal order. In dismissing the allegedly value-related fraud claims,the district court noted that the doctrine of election of remedies prevented theDissenters from bringing an action for fraud after a determinative conclusion on theappraisal issue. In order to pursue the fraud claims, the court found that the Dissentersshould have stayed the appraisal proceeding. Further, the court felt the fraud claimsacted as an impermissible collateral attack on the valuation proceeding judgment, as thecourt would be required to overrule the state court’s determination of the fair value ofthe stock in order to provide the Dissenters with the sought-after “fair compensationfor their interests in ASI.” The court also found that the action was barred bycollateral estoppel because the issue in the two proceedings was identical, the appraisalproceeding was a final judgment on the merits, the Dissenters were parties to thevaluation proceeding, and the Dissenters received a “full and fair opportunity” tolitigate their claim in the prior proceeding. That opportunity, according to the court,was the option to stay the valuation proceeding and litigate the fraud claims. After the partial dismissal, the Dissenters moved for leave to file a ThirdAmended Complaint to add two state statutory causes of action. The magistrate judge,on referral of the issue from the district court, denied the motion to amend on the samegrounds as the district court’s earlier dismissal of the complaint alleging fraud. ASIthereafter moved for summary judgment, and that motion was granted by the districtcourt on September 16, 1998. The court rejected the Dissenters’ fraud claims basedon pre-merger conduct on the theory that the sought-after rescissionary damages wereinconsistent with the out-of-pocket damages awarded in the valuation proceeding.Thus, the court held the pre-merger fraud claims, including the RICO claim, werebarred by the election of remedies doctrine.
[FOOTNOTE 9] As for the alleged fraud that transpired during the valuation proceeding itself, thecourt found the claim an impermissible collateral attack on the judgment. It alsorejected these claims on the basis that the alleged fraud would have had no effect onthe valuation of the stock itself; thus, it could not have damaged the Dissenters.Finally, the court upheld the magistrate’s refusal to grant the Dissenters’ motion forleave to amend, stating instead that it would leave the order unchanged since it was notclearly erroneous. The Dissenters appeal the district court’s grants of dismissal and summaryjudgment. II. DISCUSSION In reviewing a district court’s grant of a motion for dismissal, we use a de novostandard of review. See Kulinski v. Medtronic Bio-Medicus, Inc., 112 F.3d 368, 371(8th Cir. 1997). We review the district court’s grant of summary judgment de novo,as well. See Estate of Gavin v. United States, 113 F.3d 802, 805 (8th Cir. 1997). A. Election of Remedies 1. Inconsistent Remedies In its grant of partial dismissal, the federal district court initially found that theelection of remedies doctrine barred the Dissenters from bringing a fraud claim afterthe appraisal proceeding had come to a determinative conclusion. We hold this to beerror. The election of remedies is “the act of choosing between different remediesallowed by law on the same state of facts, where the party has but one cause of action,one right infringed, one wrong to be redressed.” Geo. A. Hormel Co. v. First Nat’lBank, 212 N.W. 738, 740-41 (Minn. 1927) (citation omitted). The doctrine isfrequently seen in situations where the claimant is faced with the choice of affirmingthe contract or, if the remedy of rescission exists, disaffirming the contract. SeeMedcom Holding Co. v. Baxter Travenol Laboratories, Inc., 984 F.2d 223, 228 (7thCir. 1993) (citing Roberts v. Sears, Roebuck and Co., 617 F.2d 460 (7th Cir.),cert. denied, 449 U.S. 975 (1980)). The point is, a claimant cannot do both. Thedoctrine’s purpose is to prevent the claimant from collecting twice for a single misdeedagainst it. See Twin Cities Fed. Sav. & Loan Assoc. v. Transamerica Ins. Co., 491F.2d 1122, 1125 (8th Cir. 1974). Although the election of remedies is considered a “harsh” doctrine, Lear v.Equitable Life Assurance Soc’y, 798 F.2d 1128, 1134 (8th Cir. 1986), it is basicallyan outmoded form of collateral estoppel. Unfortunately, the breadth implied by itsname can cause parties to attempt to apply the doctrine in situations where it does notfit. See Medcom, 984 F.2d at 228. Election of remedies has no application where aparty “has different remedies for the enforcement of different and distinct rights or theredress of different and distinct wrongs.” Hormel, 212 N.W. at 740. The federal district court held that although parallel fraud and valuation actionscould have proceeded initially, once the Dissenters collected their respective judgmentsin the valuation proceeding, the Dissenters were barred from pursuing the fraud claim.This was the precise holding of the district court. Appellees cite Northwestern StateBank v. Foss, 197 N.W.2d 662, 666 (Minn. 1972), which observes that “once anavailable remedy is taken to its conclusion, the party cannot thereafter assert a newtheory to enhance recovery.” We do not dispute the viability of this position; however,we are not convinced of its application in this instance. The district court found that although the state court dismissed the counterclaimsuit without prejudice, the Dissenters should have filed a motion to stay the valuationsuit until the fraud action had been litigated. It is tenuous at best for ASI to rest itsargument on what the Dissenters hypothetically could have done when ASI presentsnothing that suggests a motion to stay would have been granted by the state districtcourt had the Dissenters chosen to bring it. Furthermore, it was the state district courtthat found the fraud proceeding to be outside the scope of the limited appraisalproceeding and dismissed the fraud counterclaim without prejudice. Obviously, if thecourt had deemed it appropriate to first pursue the fraud action, it could have ordereda stay of the valuation suit; however, since the two suits were found not to involve thesame issues or to be inconsistent with one another, the state court simply bifurcated theclaims, stated its jurisdiction was limited in the valuation suit, and proceededaccordingly.
[FOOTNOTE 10] We emphasize that although the present fraud suit has now beenremoved to federal court, it nevertheless is governed by Minnesota law. As we havepointed out, both Judge Howard of the state district court and the Minnesota Court ofAppeals in Sharecom II, recognized that under Minnesota law an action for commonlaw fraud is available to the Dissenters notwithstanding the completion of the appraisalproceeding.
[FOOTNOTE 11] Hence, contrary to the federal district court’s holding, we are notconvinced that the Dissenters were required to secure a stay in order to preserve theirfraud action. In JCA Partnership v. Wenzel Plumbing & Heating, Inc., 978 F.2d 1056 (8th Cir.1992), this court refused to apply the election of remedies doctrine to a breach ofcontract claim that was brought following a settlement in a fraudulent conveyanceproceeding. The appellant, a foreclosed-upon mortgagor/vendee, sued its mortgageefor fraudulent conveyance, claiming the mortgagee purchased the foreclosed propertyat the sheriff’s sale at an unreasonably low price. Before a settlement was finalized, theappellant sued for breach of contract based on the vendor’s failure to deliver possessionof the property at issue after the appellant cured its default. This court rejected theapplication of election of remedies, stating that the two actions dealt with separate anddistinct wrongs and, moreover, the vendor was not a party to the fraudulent conveyanceaction. Thus, the two actions addressed separate wrongs and involved separate parties,making the doctrine of election of remedies altogether inapplicable. See JCA, 978F.2d at 1061. We feel the case at bar is similar to JCA. In the valuation proceeding, the wrongto be addressed was the undervaluation of Corporation stock as of May 8, 1992. Herein the fraud proceeding, on the other hand, the wrong to be addressed is the allegedscheme by ASI to illegally gain control of all of the Corporation’s stock, force out allother shareholders, sell the Corporation at a huge profit, and defraud the Dissenters andthe state district and appellate courts. Thus, the election of remedies doctrine is notimplicated, as its purpose is to prevent double recovery on the same wrong.Furthermore, only the Corporation was a party to the valuation proceeding. Simon,Weinert, and King were not named parties in that action. For all these reasons, theelection of remedies doctrine is not applicable under these facts. 2. Duplicitous Damages ASI also seeks to invoke the election of remedies doctrine by arguing that thedamages sought in this fraud action are duplicitous of damages awarded in the valuationproceeding. In determining damages in fraud and misrepresentation actions, Minnesotafollows the out-of-pocket rule. See B.F. Goodrich Co. v. Mesabi Tire Co., 430 N.W.2d180, 182 (Minn. 1988). The out-of-pocket rule calculates damages as “the differencebetween the actual value of the property received and the price paid for the property,along with any special damages naturally and proximately caused by the fraud prior toits discovery . . . .” Mesabi, 430 N.W.2d at 182. See also Commercial PropertyInvestments, Inc. v. Quality Inns Int’l, Inc., 61 F.3d 639, 647 (8th Cir.1995) (definingthe out-of-pocket rule as “‘the difference between what the defrauded party paid andwhat he or she actually received, together with other damages proximately caused bythe fraud . . . .’”) (quoting Nave v. Dovolos, 395 N.W.2d 393, 398 n.1 (Minn. Ct. App.1986)). ASI opines that the application of the out-of-pocket rule to this case leads tothe conclusion that the Dissenters have already recovered any damages resulting fromthe alleged fraud through the appraisal judgment. It thus argues that allowing the fraudclaim to proceed would result in a duplicitous recovery. Minnesota courts have taken a broad approach to the concept of out-of-pocketdamages, upholding the recovery of consequential damages proximately caused by thefraud or misrepresentation. See Commercial Property, 61 F.3d at 647. Furthermore,in Estate of Jones v. Kvamme, 449 N.W.2d 428 (Minn. 1989), the Minnesota SupremeCourt recognized that there are situations where an unyielding application of the out-of-pocketrule fails to fully compensate victims of fraud. A prime example of this, albeitfrom another circuit, is Janigan v. Taylor, 344 F.2d 781 (1st Cir. 1965). The plaintiffsin Janigan were former stockholders who sued the corporation’s president in connectionwith an alleged misrepresentation the president made regarding material changes in theaffairs of the company. The shareholders claimed the president unlawfully purchasedvirtually all of the company’s outstanding stock and sold it two years later at atremendous profit. In discussing the appropriate damages, the court made a distinctionbetween cases where one is fraudulently induced to buy and those where one isfraudulently induced to convey property. In the former case, the court found thatdamages are to be calculated simply as the difference between the value of the propertyat sale and the price paid for it, plus interest and other damages legitimately caused bythe defendant’s conduct. “[T]he expected fruits of an unrealized speculation” are notincluded as damages for the fraudulent inducement to buy, however. Janigan, 344 F.2dat 786 (citation omitted). Alternatively,
if the property is not bought from, but sold to the fraudulent party, futureaccretions not foreseeable at the time of the transfer even on the true facts,and hence speculative, are subject to another factor, viz., that they accruedto the fraudulent party. It may, as in the case at bar, be entirelyspeculative whether, had plaintiffs not sold, the series of fortunateoccurrences would have happened in the same way, and to their sameprofit. However, there can be no speculation but that the defendantactually made the profit and, once it is found that he acquired the propertyby fraud, that the profit was the proximate consequence of the fraud,whether foreseeable or not. It is more appropriate to give the defraudedparty the benefit even of windfalls than to let the fraudulent party keepthem.
Id. The court relied on principles of “simple equity” to fashion a remedy for fraud thatwent beyond simple out-of-pocket loss. Id. It is altogether possible that the districtcourt could follow the same course of action in the case at bar. While it may be too latefor the Dissenters to rescind the merger (given the fact that the Dissenters have not heldASI stock for several years), it is not too late for them to seek consequential damagesproximately caused by ASI’s allegedly fraudulent activities. Indeed, the interpretationof the out-of-pocket rule in Minnesota expressly permits such damages. We note that the principle underlying the election of remedies doctrine is theprevention of prejudice to the defendant. See Medcom, 984 F.2d at 229. In fact, thiscourt has refused to apply the doctrine in situations where the defendant has not beensubstantially prejudiced. See Lear, 798 F.2d at 1134. Here, it is difficult to see howASI is prejudiced by the Dissenters’ assertion of their common law fraud claims. Italready paid the Dissenters the value of their stock, which it would have had to do ifthe fraud claims were brought first (assuming they were successful). Further, ASI hasknown from the inception of this dispute that the Dissenters’ alleged fraudulent conducton the part of the controlling shareholders to effectuate the merger.[FOOTNOTE 12] Thus, theprevention of prejudice to ASI is not a serious consideration in this case. Additionally, the Dissenters note that � 302A.471(4), the Minnesota statuteregulating Dissenters’ rights, provides that dissenting shareholders “do not have a rightat law or in equity to have a corporate action . . . set aside or rescinded, except whenthe corporate action is fraudulent with regard to the complaining shareholder or thecorporation.” MINN. STAT. � 302A.471(4) (emphasis added). In Sifferle v. MicomCorp., 384 N.W.2d 503, 506 (Minn. Ct. App. 1986), the Minnesota Court of Appealsstated that “the appraisal right of a frozen-out shareholder is his exclusive remedyunless the merger is ‘fraudulent’ to him or the corporation.” Moreover, the court foundthat “[i]t is generally held that there is no bar to instituting an appraisal proceeding inaddition to challenging the merger in an equitable proceeding on the grounds of fraud.”Sifferle, 384 N.W.2d at 509. The Dissenters rely on this language as support for thepropriety of pursuing their present fraud action. ASI states that this language permitsnothing more than the simultaneous assertion of inconsistent claims until the claimantrecovers on one or the other. It urges, however, as we have previously indicated, oncethe appraisal suit is completed and the judgment satisfied, there can be no furtherrecovery for fraud. At least as to the common law action for fraud presently before us,this position is directly refuted by the Court of Appeals’ statements in Sharecom II, 553N.W.2d 433. Both sides rely on Cede & Co. v. Technicolor, Inc., 542 A.2d 1182 (Del. 1988),for support. In that case, Cede & Co. dissented from a cash-out merger of the minorityshareholders of Technicolor. Cede & Co. first brought an appraisal action and laterfiled a fraud action. Similar to the present case, Cede & Co. brought the subsequentfraud action only after unearthing evidence of wrongdoing in connection with themerger, which was determined during the course of appraisal discovery. Technicolormoved to dismiss the fraud claim and the trial court ruled that the claimant would haveto choose between the two suits after completing discovery on both. The Delaware Supreme Court reversed, stating that the actions should beconsolidated for trial and, if Cede & Co. was successful, the court could determine andaward the appropriate remedies at that time. The court stated that the election ofremedies had no application in the case, as Cede & Co.’s alternative causes were notinconsistent claims for relief based on the same facts. The Delaware court qualifiedits holding, however, stating:
During the consolidated proceeding, if it is determined that the mergershould not have occurred due to fraud, breach of fiduciary duty, or otherwrongdoing on the part of the defendants, then [Cede & Co.'s] appraisalaction will be rendered moot and [Cede & Co.] will be entitled to receiverescissory damages. If such wrongdoing on the part of the defendants isnot found, and the merger was properly authorized, then [Cede & Co.]will be entitled to collect the fair value of its Technicolor shares pursuantto statutory appraisal and its fraud action will be dismissed. Under eitherscenario, [Cede & Co.] will be limited to a single recovery judgment.
Cede, 542 A.2d at 1191 (emphasis added). In the present case, the Dissenters argue that Cede supports their positionbecause it shows that an appraisal action is not the exclusive remedy of frozen-outshareholders. ASI, in turn, argues that this case substantiates the argument that theappraisal proceeding trumps the fraud action where the former comes to judgmentbefore the latter. We disagree with ASI on this point, and we do not feel that theabove-quoted language compels us to find otherwise. The argument that a successfulfraud action moots a subsequent appraisal proceeding does not necessarily mean asuccessful appraisal proceeding moots a subsequent fraud action. To restate, theplaintiffs would be entitled to at least the fair value of their shares regardless of theform of recovery, assuming they were successful. To allow the claimants to collect onthe fair value in the fraud action and then again in the appraisal action would be doublerecovery, since the only recovery available in an appraisal proceeding is the fair valueof the shares. The opposite is not necessarily the case, however, as a successful fraudaction may entitle the claimant to more than fair value under Minnesota’s consequentialdamages provision of the out-of-pocket rule. Hence, one could potentially recover thefair value in the appraisal proceeding, bring a fraud claim, and recover fair value plusconsequential damages. As long as the court offsets the previously awarded fair value,there can be no double recovery. The language in Cede is based on the assumption that the existence of fraud hasbeen considered and rejected, thereby necessitating the dismissal of the fraud action.We do not read this language as saying once an appraisal action is brought and won,a fraud action is necessarily dismissed. Rather, the express language provides that theDissenters are still entitled to an appraisal proceeding once a fraud action is provenuntenable. In this case, we do not know if fraud is out of the picture because the issuehas never been tried; hence, the language in Cede does not support the assertion thatthe appraisal necessarily moots the fraud action in this situation. Finally, we urge ASI to keep in mind that any and all of the Dissenters’ allegeddamages must be sufficiently connected to ASI’s behavior so as to pass therequirements of causation under the law. Our decision is not intended to speak to theissue of causation, which is a factual question beyond the scope of this court’s review.See Peter v. Jax, 187 F.3d 829, 834 (8th Cir. 1999). The issue facing this court iswhether the election of remedies doctrine bars the Dissenters’ fraud claims, and we findit does not. B. Collateral Estoppel The district court also found the Dissenters’ claims barred by collateral estoppel,in that the Dissenters had a “full and fair opportunity” to stay the valuation proceedingand litigate the fraud claim but voluntarily chose not to do so. We cannot accept thisanalysis. First of all, the federal district court relied solely on the following fourelements of collateral estoppel as stated in Bechtold v. City of Rosemount, 104 F.3d1062, 1066-67 (8th Cir. 1997):
(1) the issue was identical to one in a prior adjudication; (2) there was afinal judgment on the merits; (3) the estopped party was a party or inprivity with a party to the prior adjudication; and (4) the estopped partywas given a full and fair opportunity to be heard on the adjudicated issue.
(citing Willems v. Commissioner of Pub. Safety, 333 N.W.2d 619, 621 (Minn. 1983)).Implicit within this test, however, is the universal recognition that collateral estoppel,which is perhaps better understood as issue preclusion, does not apply in any caseunless the disputed issue has actually been litigated and decided. See Schlichte v.Kielan, 599 N.W.2d 185, 188 (Minn. Ct. App. 1999). See also Williamson v.Guentzel, 584 N.W.2d 20, 23 (Minn. Ct. App. 1998) (“The principle of collateralestoppel (or issue preclusion) prevents the relitigation of an issue identical to oneactually litigated in a previous action.” (emphasis added)); Haavisto v. Perpich, 520N.W.2d 727, 731 (Minn. 1994) (“The doctrine of collateral estoppel mandates that’once an issue is actually and necessarily determined by a court of competentjurisdiction, that determination is conclusive in subsequent suits, based on a differentcause of action, involving a party to the prior litigation.’” (citation omitted) (emphasisadded)); RESTATEMENT (SECOND) OF JUDGMENTS � 27 (1980) (“When an issue of factor law is actually litigated and determined by a valid and final judgment, and thedetermination is essential to the judgment, the determination is conclusive in asubsequent action between the parties, whether on the same or a different claim.”(emphasis added)); G.A.W. v. D.M.W., 596 N.W.2d 284, 287 (Minn. Ct. App. 1999)(refusing to apply collateral estoppel to interspousal tort proceeding on basis thatstipulated divorce settlement between spouses took allegedly tortious actions intoconsideration; “the fact that an issue is the subject of stipulation between the partiesdoes not necessarily mean the issue has been litigated.”). This court perhaps bestsummarized the application of collateral estoppel in S.E.C. v. Ridenour, 913 F.2d 515,518 (8th Cir. 1990):
The doctrine of collateral estoppel applies only when the issue sought tobe precluded is the same as that involved in the prior litigation, the issuewas actually litigated and the party sought to be estopped was given a fulland fair opportunity to be heard on the issue, and determination of theissue was essential to a valid and final judgment.
(emphasis added). The doctrine is based on the contention that the judgment in a prioraction precludes the re-litigation of issues decided in the first action and necessary toits outcome. See Lane v. Peterson, 899 F.2d 737, 741 (8th Cir. 1990). It is indisputable that the issue of fraud was not actually litigated at the appraisalproceeding stage, as the state court specifically dismissed the Dissenters’ fraud claimswithout prejudice. To the extent that stock value was a common issue to theproceedings, the inquiries encompass different time periods and are, thus, not identical.The federal district court nonetheless held that the Dissenters were collaterally estoppedbecause they were given a full and fair opportunity to have their fraud claims heard inthe first suit. The district court found that the Dissenters had that opportunity byreasoning that they should have moved for a stay of the appraisal proceeding and triedthe fraud issue. We reject this approach. The hypothetical option of moving for a stay, which was suggested to theDissenters by neither the court in the valuation proceeding nor the state appellate courtin Sharecom II, hardly serves as a sufficient substitute for the actual litigation of thefraud claims. Our examination of the “full and fair opportunity” requirement indicatesthat this prong of the rule prevents the collateral estoppel of a party who was not givena full and fair opportunity to be heard on an issue that was actually adjudicated duringprior litigation. See generally, Colonial Ins. Co. v. Anderson, 588 N.W.2d 531, 533(Minn. Ct. App. 1999) (finding collateral estoppel does not apply because appellant’sbrain damage and the absence of a key witness at trial prevented appellant fromreceiving a full and fair opportunity to be heard); AFSCME Council No. 14 v.Washington County Bd. of Commissioners, 527 N.W.2d 127, 130-31 (Minn. Ct. App.1995) (finding no collateral estoppel bar because the party was denied a full and fairopportunity to be heard; the party was given only three days notice of prior hearing, nomemoranda were prepared, no findings or conclusions issued, and the issue was not”fully litigated”); Haavisto, 520 N.W.2d at 732 (noting that because the allegedlyestopped party was dismissed from the prior action without prejudice and without beinggiven a full and fair opportunity to be heard on the issue at hand, collateral estoppel didnot apply); Clapper v. Budget Oil Co., 437 N.W.2d 722, 726 (Minn. Ct. App. 1989)(finding that an administrative hearing before a department referee, where the rules ofevidence are not followed, legal representation is subject to the department’s oversight,and the emphasis of the hearing is a speedy resolution “does not constitute a full andfair opportunity to be heard for purposes of applying collateral estoppel to the resultingdetermination.”). We do not view the “full and fair opportunity” requirement as a method for theparty asserting estoppel to avoid the actual litigation rule. This rule is that the partyagainst whom estoppel is asserted may use the “full and fair opportunity” requirementto rebut allegations of estoppel. By showing it did not have a full and fair opportunityto be heard on the adjudicated issue, the party avoids the application of collateralestoppel. The rule is there to protect the allegedly estopped party, not to punish it. Furthermore, it is clear from the language quoted by the federal district court thatactual litigation is a prerequisite to the consideration of whether there existed a full andfair opportunity to be heard. The requirement states that the allegedly estopped partymust be “given a full and fair opportunity to be heard on the adjudicated issue.”Bechtold, 104 F.3d at 1067 (emphasis added). Hence, by definition, the issue at handmust have been actually adjudicated before the full and fair opportunity prong comesinto play.[FOOTNOTE 13] Finally, we recognize that the Dissenters’ failure to appeal Judge Howard’sdismissal of the fraud counterclaim could give rise to claim preclusion if thecounterclaim is properly deemed compulsory. Judge Howard specifically found that thefraud counterclaim was not compulsory, using the “logical relationship” standard andciting Fox Chemical Co. v. Amsoil, Inc., 445 F.Supp. 1355 (D. Minn. 1978).Minnesota Rule of Civil Procedure 13.01 defines a compulsory counterclaim as a claimthat “arises out of the transaction that is the subject matter of the opposing party’s claimand does not require for its adjudication the presence of third parties over whom thecourt cannot acquire jurisdiction . . . .” MINN. R. CIV. P. 13.01 (2000). In FoxChemical, the federal district court found the claimant’s libel counterclaim to “stemfrom the same aggregate of operative facts” as a previously asserted Lanham Act claim,as both causes of action concerned allegedly false representations by the defendantabout its product. Fox Chemical, 445 F.Supp. at 1361. In the case at bar, the appraisalproceeding dealt with a limited transaction, i.e., the exchange of money for stock onMay 8, 1992. The method employed by the Corporation to secure the funds to purchasethe stock was not a concern in that proceeding. Thus, we agree with Judge Howard thatthe fraud counterclaim was not compulsory and it did not “arise out of the transaction”of the appraisal proceeding nor did it “stem from the same aggregate of operative facts.” C. Collateral Attack The federal district court found that because all of the Dissenters’ alleged frauddamages were tied to the issue of stock value, which had been litigated to determinationin the valuation proceeding, the fraud claims improperly collaterally attacked the earliervaluation judgment. Because we do not understand the Dissenters’ present fraud claimsto challenge the outcome of the appraisal proceeding, we reject this contention. An action with an independent purpose and contemplative of another form ofrelief that depends on the overruling of a prior judgment is a collateral attack. SeeElbow Lake Cooperative Grain Co. v. Commodity Credit Corp., 144 F.Supp. 54, 61(D.Minn. 1956). It is well-settled in Minnesota that a facially valid judgment is notsubject to collateral attack. See Fidelity and Deposit Co. v. Riopelle, 216 N.W.2d 674,677 (Minn. 1974). See also Nussbaumer v. Fetrow, 556 N.W.2d 595, 599 (Minn. Ct.App. 1996). When a judgment is alleged to be simply erroneous or attacked on thebasis of anomalies unrelated to the court’s jurisdiction, collateral attack is not an option.See Nussbaumer, 556 N.W.2d at 599. The collateral attack doctrine encourages finalityin judgments and justifies reliance on orders of the court. See id. In Adams v. Resolution Trust Corp., 927 F.2d 348 (8th Cir. 1991), this courtaffirmed summary judgment on the ground that the claimant sought to collaterally attacka previous decision by the Federal Home Loan Bank Board (“Bank Board”). Theclaimant, a purchaser of subordinated debenture securities from a subsequentlyinsolvent savings and loan association (S & L), sought to collect on theories of securitiesfraud and common law fraud following a determination by the Bank Board that the S & Lwas insolvent and could not generate sufficient funds to satisfy the claims ofsubordinated debt and equity interests. This court found the subsequent fraud claimsto be an impermissible collateral attack on the Bank Board’s prior determination.Similarly, in Kelly v. Kelly, 229 N.W.2d 526 (Minn. 1975), the general guardian of award sued the former guardian’s estate, alleging that the former guardian hadimproperly purchased his ward’s foreclosed property after allowing the redemptionperiod to lapse. In a previous action, the probate court had granted the formerguardian’s motion to let the redemption period lapse and, in an amended order,permitted the former guardian to purchase the property. The basis of the newguardian’s action was that the purchase itself was fraudulent, not that the probatecourt’s order permitting the purchase was procured by fraud. The court found theaction to be a wrongful collateral attack, “for the essential requirement of allegationsthat the order itself was procured by fraud [had] not been satisfied.” Kelly, 229 N.W.2dat 529. The case at bar is distinguishable. The claims of fraud arising during thevaluation proceeding clearly fall under the above-quoted language in Kelly, as theyindeed allege that the valuation order was procured by fraud.[FOOTNOTE 14] As the Minnesota Court of Appeals stated in Sharecom II, the Dissenters’ only available remedy, in light of thesatisfaction of the valuation judgment, is a common law fraud action. We thereforehold the doctrine of collateral attack does not bar the claims of fraud arising during theappraisal proceeding. The fraud claims directed towards pre-merger activity also are not intended toundermine Judge Howard’s valuation of the shares on the date of the merger. Rather,the Dissenters seek to show that they were otherwise harmed prior to the mergeroutside of the initial (pre-appraisal) undervaluation by the Corporation. These claimssay nothing about the accuracy of the valuation as of May 8, 1992; rather, they onlyseek damages for actions by ASI that they allege prevented them from subsequentlyrealizing a greater profit on their stock. Thus, it is equally improper to dismiss theseclaims on the basis of collateral attack. Some might argue that the Dissenters’ satisfaction of the valuation judgmentconstitutes an accord and satisfaction with regard to the fraud claims. “UnderMinnesota law, an accord and satisfaction may occur ‘when a creditor accepts partpayment of an unliquidated debt which the debtor tenders in full satisfaction of the debt. . . and the creditor accepts that offer.’” Northwest Airlines, Inc. v. Astraea AviationServices, Inc., 111 F.3d 1386, 1391 (8th Cir. 1997) (quoting Don Kral Inc. v.Lindstrom, 286 Minn. 37, 173 N.W.2d 921, 923 (1970)). Satisfaction of the debt canbe expressed or implied, but the circumstances must clearly indicate the parties’ intent.See Northwest Airlines, 111 F.3d at 1391. Arguments of subjective intent do not trumpplain language of objective intent. See id. at 1391-92. Here, nothing in the satisfaction of the earlier judgment evinces the Dissenters’intent to accept the valuation judgment as full compensation for that claim and anyothers that may arise. The Dissenters served ASI with a complaint in the fraud actionprior to receiving Judge Howard’s ruling and six months before the judgment wassatisfied. If the Dissenters intended to work an accord and satisfaction of the fraudclaims, their intent to do so would likely have been clearly presented in the Satisfactionof Judgment. There is no such suggestion of deserting the fraud claims, of which allparties were fully aware from nearly the inception of the dispute. As such, we are ofthe opinion that the facts and circumstances show neither an express nor an impliedintent to accept the valuation judgment as a final resolution of the pending fraud claims.Accordingly, we reverse and remand the common law fraud claims. D. RICO The lower court dismissed the Dissenters’ RICO claim on the same theory as thecommon law fraud claims. Because we reject this analysis, we cannot affirm the districtcourt’s application of it to the RICO claim. However, in an attempt to dispose of theRICO claim on other grounds, ASI argues that the Private Securities Litigation ReformAct of 1995 (PSLRA), Pub. L. No. 104-67; � 107, 109 Stat. 737, 758 (1995), bars theDissenters’ claim. ASI brought this argument before the district court in its motion forsummary judgment, but the court declined to reach the merits of the argument since itfound the RICO claims barred on other grounds. Hence, we abstain from consideringthe applicability of the PSLRA to this case, as the district court never passed upon theissue. See Anderson v. Unisys Corp., 52 F.3d 764, 765 (8th Cir. 1995) (“[B]ecause thedistrict court never passed upon this issue, we decline to consider it here.”); Daisy Mfg.Co. v. NCR Corp., 29 F.3d 389, 395 (8th Cir. 1994) (“Ordinarily, we do not decideissues that the district court did not adjudicate.”); North Dakota v. Merchants Nat’lBank and Trust Co., 579 F.2d 1112, 1115 (8th Cir. 1978) (“Generally we do not decideissues that were not passed upon by the trial court.”). The application of the PSLRAremains an issue for the district court to decide, should it see fit to so do. We reverseand remand the RICO claim on the same basis as the common law fraud claims. E. State Statutory Claims The Dissenters also appeal the magistrate court’s denial of their timely motionto file a Third Amended Complaint adding two state law causes of action. The courtdenied the motion on the same basis as the dismissal of the fraud and RICO claims,stating that the claims were futile because “[p]laintiffs have been paid the judiciallydetermined value of the stock, and cannot now claim the stock was stolen.” (Order at4 (Mar. 5, 1998).) Because we reject this line of reasoning, we reverse the court’sdenial of the Dissenters’ motion. A trial court’s decision whether to permit an amendment of the pleadings isreviewed by this court for an abuse of discretion. See Thompson-El v. Jones, 876 F.2d66, 67 (8th Cir. 1989). Federal Rule of Civil Procedure 15(a) governs a party’s rightto amend its pleadings and the rule declares that leave to amend “shall be freely givenwhen justice so requires.” FED. R. CIV. P. 15(a) (1999). Given the courts’ liberalviewpoint towards leave to amend, it should normally be granted absent good reasonfor a denial. See Thompson-El, 876 F.2d at 67. The classic “good reasons” forrejecting an amendment are: “undue delay, bad faith or dilatory motive, repeated failureto cure deficiencies by amendments previously allowed, undue prejudice to the non-movingparty, or futility of amendment . . . .” Id. (citing Foman v. Davis, 371 U.S. 178,182 (1962)). Generally speaking, reviewing courts have found an abuse of discretion in caseswhere the district court denied amendments based on facts similar to those comprisingthe original complaint. See Bell v. Allstate Life Ins. Co., 160 F.3d 452, 454 (8th Cir.1998) (citing Sanders v. Clemco Indus., 823 F.2d 214, 216-17 (8th Cir. 1987); Buderv. Merrill Lynch, Pierce, Fenner & Smith, Inc., 644 F.2d 690, 694 (8th Cir. 1981)). Theinclusion of a claim based on facts already known or available to both sides does notprejudice the non-moving party. See Buder, 644 F.2d at 694. A liberal amendmentpolicy, however, is in no way an absolute right to amend. See Thompson-El, 876 F.2d.at 67. Where an amendment would likely result in the burdens of additional discoveryand delay to the proceedings, a court usually does not abuse its discretion in denyingleave to amend. See id. at 68 (upholding lower court’s refusal of motion to amend outof concern for extra discovery requirements and attendant delay). The Dissenters seek to add claims under two Minnesota statutes: � 609.53Receiving stolen property; and � 332.51 Civil liability for theft.[FOOTNOTE 15] While we admit thatthese claims are based on a legal theory heretofore absent from these proceedings (i.e.,theft), we nonetheless find that the lower court’s refusal to permit their additionamounted to an abuse of discretion. As we have stated throughout this opinion, wereject the contention that the Dissenters’ action is barred by the doctrines of election ofremedies, collateral estoppel, or collateral attack. Since we find these reasonsunacceptable, that leaves the lower court without a viable reason for its denial. Thestate law claims are based on the same set of facts as the common law fraud and RICOclaims, and the motion for leave to amend was timely filed, thereby invoking the liberalamendment policy of Fed. R. Civ. P. 15(a). Finally, ASI does not assert that it wouldbe prejudiced by the inclusion of these two claims. Rather, ASI’s brief concentrates onthe legal insufficiency of the statutory claims. This court stated in Buder that, indeciding whether to permit a proffered amendment, a court should not consider thelikelihood of success unless the claim is “clearly frivolous.” Buder, 644 F.2d at 695.As we are unwilling to make any such determination of frivolity in this situation, thestate statutory claims must stand. Thus, we reverse and remand for the addition of thesetwo claims. III. CONCLUSION For the foregoing reasons, we REVERSE the district court’s grant of partialdismissal and summary judgment, and we REMAND for proceedings consistent withthis decision. A true copy. Attest: CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT. :::FOOTNOTES::: FN1 At the outset of the proceedings culminating in this appeal, Popp was known as LDB International Corporation, Inc. FN2 “A ‘freeze-out’ merger is one which forces the minority interest to give up itsequity in the corporation in exchange for cash or senior securities while allowing thecontrolling interest to retain its equity.” Sifferle v. Micom Corp., 384 N.W.2d 503, 506n.1 (Minn. Ct. App. 1986). FN3 Prior to the merger, Popp stood as the Corporation’s second largest shareholder,owning 19% of the 228.775 outstanding shares. Humbird and Northern each ownedtwo shares, and Washington owned 2.025 shares. FN4 Minn. Stat. � 302A.471(1)(c) states:
Subdivision 1. Actions creating rights. A shareholder of acorporation may dissent from, and obtain payment for the fair value of theshareholder’s shares in the event of, any of the following corporateactions: . . . . (c) A plan of merger, whether under this chapter or under chapter322B, to which the corporation is a constituent organization . . . .
MINN. STAT. � 302A.471(1)(c) (Supp. 1999). FN5 The Honorable William R. Howard, Hennepin County District Court, FourthJudicial District, presiding. FN6 Minn. Stat. � 302A.473(7) states in relevant part:
Subd. 7. Petition; determination. If the corporation receives ademand [for supplemental payment], it shall, within 60 days afterreceiving the demand, either pay to the dissenter the amount demandedor agreed to by the dissenter after discussion with the corporation or filein court a petition requesting that the court determine the fair value of theshares, plus interest.
MINN. STAT. � 302A.473(7) (1998). FN7 Judge Howard’s order was amended for purposes not important to this appealon November 15, 1994. FN8 Rochester Telephone Corporation later changed its name to FrontierCorporation. As such, American Sharecom, Inc. also changed its name to FrontierCommunications-North Central Region, Inc. FN9 Because the court found the RICO claim so barred, it explicitly declined toaddress whether the claim was barred by the Private Securities Litigation Reform Actof 1995 (PSLRA), Pub. L. No. 104-67, � 107, 109 Stat. 737, 758 (1995). FN10 Applying Minnesota law, Judge Howard stated: “[T]he facts involved inresolving each action are distinctly different, and the inquiry involved in recession [sic]of the merger is beyond the scope of the appraisal action. The two actions are onlytangentially related and do not involve the same parties nor the same facts.” (Order andMem. at 16 (Feb. 24, 1993).) FN11 After the appraisal judgment was satisfied, the Dissenters sought to reopen thejudgment on the ground of fraud. Judge Howard granted the reopening. However, onappeal the Minnesota Court of Appeals said that the state district court lackedjurisdiction to reopen the appraisal judgment on fraud because the judgment had beensatisfied. Significantly, however, the court averred that the Dissenters could still bringa separate common law fraud suit (which they have now done). The court stated:
To affirm, as respondents urge, we would have to carve out an additionalexception to the Dorso rule that a satisfied judgment may be vacated forfraud. We decline to do so. Although we recognize the seriousness offraud, the need for such an exception is negated because respondents haveanother available remedy–they may bring a separate common law fraudaction. For a common law fraud action, a party must prove (1) a falserepresentation of a material fact that is susceptible of knowledge, (2)made with knowledge that it is false or made as if it is based on theperson’s own knowledge without knowing if it is true or false, (3) madewith the intention of inducing another to act in reliance, and (4) causingthe other party to act in reliance to its pecuniary damage. Burns v.Valene, 298 Minn. 257, 261, 214 N.W.2d 686, 689 (1974).
See American Sharecom, Inc. v. LDB Int’l Corp., 553 N.W.2d 433, 434 (Minn. Ct.App. 1996) (Sharecom II). FN12 In Myzel v. Fields, 386 F.2d 718 (8th Cir. 1967), (Lay, J.), cert. denied, 390U.S. 951 (1968), this court stated that, especially in a case where the disputed propertyis a fungible of fluctuating value, “a party upon notice of the grounds of recission mustimmediately elect to affirm or deny the contract.” Myzel, 386 F.2d at 740-41 n.15.The court explained that the choice must be made immediately in order to prevent saidparty from delaying its decision “without notification to the wrongdoer,” waiting for themarket to go up or down, and thereafter choosing to rescind or affirm accordingly. Id.at 741 n.15. In this case, it was ASI that sought to affirm the merger, as was its statutoryright. The Dissenters sought to counterclaim for rescission, but they were denied theforum by motion of ASI and the ruling of the state district judge. As such, ASIcertainly had notice of the Dissenters’ allegations of fraud. It cannot be argued that theDissenters attempted to dupe ASI by sitting on their fraud claims until they could reapthe most economic benefit, when ASI was fully aware of the impending claims almostfrom the start. FN13 It is important for courts to distinguish the concept of collateral estoppel (issuepreclusion) from that of res judicata (claim preclusion). The latter explicitly applies toclaims previously litigated as well as those which might have been litigated in theprevious action. See G.A.W., 596 N.W.2d at 287. The former applies only to issuesactually litigated. See Schlichte v. Kielan, 599 N.W.2d 185, 188 (Minn. Ct. App.1999). FN14 It is important to keep in mind that, although the claims allege fraudulentprocurement, the Dissenters do not allege it with the purpose of setting aside thevaluation judgment (although that might have been their original intention when theymoved the state court to reopen the valuation proceeding). FN15 These statutes state in relevant part:
609.53 RECEIVING STOLEN PROPERTY Subdivision 1. Penalty. Except as otherwise provided in section609.526, any person who receives, possesses, transfers, buys or concealsany stolen property or property obtained by robbery, knowing or havingreason to know the property was stolen or obtained by robbery, may besentenced in accordance with the provisions of section 609.52,subdivision 3. . . . . Subd. 4. Civil action; treble damages. Any person who has beeninjured by a violation of subdivision 1 or section 609.526 may bring anaction for three times the amount of actual damages sustained by theplaintiff or $1,500, whichever is greater, and the costs of suit andreasonable attorney’s fees.
MINN. STAT. � 609.53 (1998).
332.51 CIVIL LIABILITY FOR THEFT Subdivision 1. Liability for theft of property. A person who stealspersonal property from another is civilly liable to the owner of theproperty for its value when stolen plus punitive damages of either $50 orup to 100 percent of its value when stolen, whichever is greater. . . . . . . . Subd. 4. Criminal action. The filing of a criminal complaint,conviction, or guilty plea is not a prerequisite to liability under thissection. Payment or nonpayment may not be used as evidence in acriminal action.
MINN. STAT. � 332.51 (1998).
Popp Telecom v.American Sharecrom, Inc. United States Court of AppealsFOR THE EIGHTH CIRCUIT No. 98-3828 Popp Telcom, formerly known as LDB International Corporation, Inc., Plaintiff, Humbird Securities, Company; Northern Securities, Company, Plaintiffs-Appellants, Washington Sharecom, Inc., Plaintiff, v. American Sharecom, Inc.; Steven C. Simon; James J. Weinert; William J. King, Defendants-Appellees. Popp Telcom, formerly known as LDB International Corporation, Inc., Plaintiff-Appellant, Humbird Securities, Company; Northern Securities, Company, Plaintiffs, Washington Sharecom, Inc., Plaintiff-Appellant, v. American Sharecom, Inc.; Steven C. Simon; James J. Weinert; William J. King, Defendants-Appellees. Appeals from the United States District Court for the District of Minnesota. No. 98-3829 Submitted: November 19, 1999 Filed: April 21, 2000 Before WOLLMAN, Chief Judge, LAY, and HANSEN, Circuit Judges.
