Rice County District Court File No. C5001115
Considered and decided by Lansing, Presiding Judge, Shumaker, Judge, and
The opinion of the court was delivered by: Wright, Judge
In this appeal from a judgment in favor of respondent, appellant argues that the district court erred in (1) concluding that collateral estoppel does not apply to the Department of Commerce's determination in a cease-and-desist order that the distribution agreement between Hogin and Barnmaster is a franchise under Minn. Stat. §á80C.02 and (2) determining that a franchise was not created because Hogin did not pay a franchise fee to Barnmaster. We affirm.
On April 9, 1996, appellant James Hogin entered into a distributorship agreement to sell Barnmaster products with respondent Barnmaster, Inc., a California company that manufactures and sells modular horse barns. Under the distributorship agreement, Hogin was required to purchase and maintain a display barn and stock Barnmaster products with a minimum total value of $1,000. It was Barnmaster's preference to have the display barn located on "the freeway or heavily traveled highway." Under the agreement, Barnmaster was not "responsible to [Hogin] for any business expenses incurred by [Hogin] unless specifically approved and agreed to in advance by Barnmaster." The agreement could be terminated by either party with 30 days' written notice. In the event of litigation arising from the terms of the distributorship agreement, the prevailing party would be awarded reasonable attorney fees.
Barnmaster provided optional training to its distributors on how to erect its barns. Hogin paid $2,996 for two Barnmaster employees to travel from Texas to Minnesota to provide this training. Between 1996 and 1998, Hogin sold three barns. Concerned over Hogin's low sales volume, Barnmaster's vice president of marketing and sales visited Hogin in 1998. The Barnmaster official recommended that Hogin move his display barn to a "high traffic location," which Hogin declined to do. In May 1999, Barnmaster warned Hogin, "without your commitment to re-establish your display I will be forced to do something if a qualified individual comes along." Four months later, Barnmaster terminated the distributorship agreement with Hogin.
Hogin reported Barnmaster's actions to the Minnesota Department of Commerce (DOC). The DOC assigned an investigator to determine whether Barnmaster's actions were lawful. In its March 8, 2000, cease-and-desist order, the DOC determined that (1) the distributorship agreement between Barnmaster and Hogin was a "franchise" within the meaning of Minn. Stat. § 80C.01 and (2) Barnmaster, which was not registered to sell franchises in Minnesota, had violated Minn. Stat. § 80C.02 by selling an unregistered franchise. The DOC ordered Barnmaster to cease and desist from offering or selling any franchises in Minnesota. The order advised Barnmaster of its right to request a hearing and contest the DOC ruling. Barnmaster chose not to do so.
Alleging that the termination of the distribution agreement was an unfair franchise business practice, in violation of Minn. Stat. § 80C.14, Hogin sued Barnmaster to recover costs, disbursements, and attorney fees. Following a two-day bench trial, the district court determined that (1) the distributorship agreement between the parties does not constitute a franchise as defined under Minn. Stat. § 80C.01, subd. 4(a); (2) Hogin is not entitled to money damages because the Minnesota Franchise Act does not apply; and (3) under the distribution agreement, which controls, "Barnmaster acted properly in terminating the contract on thirty (30) days notice."
Hogin moved for a new trial, arguing that the district court erred by not giving collateral-estoppel effect to the DOC's determination that the distributorship agreement created a franchise. The district court denied the motion for a new trial, and this appeal followed.
The doctrine of collateral estoppel, or issue preclusion, prevents "parties to an action from relitigating in subsequent actions issues that were determined in the prior action." Nelson v. Am. Family Ins. Group, 651 N.W.2d 499, 511 (Minn. 2002) (quoting In re Vill. of Byron, 255 N.W.2d 226, 228 (Minn. 1977)). "As a flexible doctrine, the focus is on whether its application would work an injustice on the party against whom estoppel is urged." Johnson v. Consol. Freightways, Inc., 420 N.W.2d 608, 613-14 (Minn. 1988) (citation omitted). Whether collateral estoppel applies is a mixed question ...