Voyageurs Retreat Community Association, et al., Appellants,

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A22-0074

Voyageurs Retreat Community Association, et al.,
Appellants,

vs.

City of Biwabik, a Municipal Corporation,
Defendant ,

and

Town of White, a duly organized Minnesota Township,
Respondent.

Filed September 19, 2022
Reversed and remanded
Bryan, Judge

St. Louis County District Court
File No. 69DU-CV-20-1599

Karla M. Vehrs, Jenna K. Johnson, Ballard Spahr LLP, Minneapolis, Minnesota (for
appellants)

Jason J. Kuboushek, Andrew A. Wolf, Iverson Reuvers, Bloomington, Minnesota (for
respondent)

Cassandra C. Wolfgram, Robert B. Bauer, Dougherty, Molenda, Solfest, Hills & Bauer,
P.A., Apple Valley, Minnesota; and

Larry C. Minton, Law Offices of Larry C. Minton, Howard, Minnesota ( for defendant )

Considered and decided by Gaïtas, Presiding Judge; Cochran, Judge; and Bryan,
Judge.
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NONPRECEDENTIAL OPINION
BRYAN, Judge
In this action seeking to invalidate a perpetual revenue -sharing agreement betwee n
two municipalities, a ppellant-taxpayers challenge the district court’s grant of summary
judgment in favor of respondent -township. Appellants argue that the district court erred
by determining that their claims were barred by collateral estoppel, and they urge this court
to hold that the revenue -sharing agreement is void. We conclude that the district court
erred in determining that collateral estoppel applied , and we therefore reverse summary
judgment. We decline to reach the merits of appellants’ challenge to the validity of the
revenue-sharing agreement , remanding the case to the district court.
FACTS
In September 2020, appellants —taxpaying property owners in Biwabik—
commenced this action against the City of Biwabik and neighboring White Township. The
lawsuit sought declaration that a 2002 revenue-sharing agreement (RSA) between Biwabik
and White is void because it violate s Minnesota statutes, Biwabik’s city charter, and the
Minnesota Constitution. The district court granted summary j udgment for White,
concluding that appellants’ action was barred by collateral estoppel because Biwabik
previously challenged the validity of the RSA in a 2011 action against White. This appeal
follows. Given the arguments on appeal, we discuss the 2002 revenue-sharing agreement,
the previous litigation in 2011, and the claims in appellants’ complaint.
Biwabik and White are municipalities located in St. Louis County. Biwabik is a
home-rule charter city with a population of just under 1,000, and White is a township
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covering 36 square miles with a population of approximately 1,492. In April 2001,
Biwabik sought t o annex unincorporated adjoining property located within White. In
September 2002, Biwabik and White entered into a joint resolution to accomplish the
annexation of these areas. The joint resolution included the RSA, which obligated Biwabik
to perpetually reimburse White for the tax revenue that White would lose as a result of the
annexation. The joint resolution stated, “This revenue sharing plan shall be perpetual, and
the parties specifically intend to be contractually bound hereby.”
The joint resolution stated that Biwabik and White were “aware that certain
provisions of this Joint Resolution may appear to contravene relevant Minnes ota law .”
Specifically, the provisions of Minnesota Statutes section 414.036 (2002) restrict
municipalities from reimbursing townships for tax revenues for more than six years after
annexation. Accordingly, t he parties jointly pursue d enactment of specia l legislation
permitting the revenue -sharing provisions of the resolution. In May 2003, the state
legislature passed, and the governor signed, legislation authorizing the RSA. 2003 Minn.
Laws ch. 119, § 2 at 706. The legislation provided that “the city of Biwabik may reimburse
the town of White for orderly annexed property for a period of time and in amounts agreed
to by the city and town under an orderly annexation agreement.” Id.
Biwabik and White proceeded under the terms of the joint resolution for several
years. In 2006, Biwabik started withholding money owed under the joint resolution. White
objected to Biwabik’s withholding of payment s and the parties periodically discussed the
amount owed. In December 2011, White commenced an action against Biwabik for breach
of contract, seeking to recover the full amount outstanding under the joint resolution.
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Biwabik filed a counterclaim against White, asking the district court to declare the joint
resolution illegal and void.
After learning about the lawsuit between White and Biwabik, Voyageurs Retreat
Community Association (VRCA) —an appellant in the present action —filed a motion to
intervene in the 2011 action. VRCA is an association that administers a common-interest
community in Biwabik. The association consists of individual unit owners who pay
property taxes. In its motion to intervene, VRCA argued that it “has a genuine interest in
the [RSA] . . . because that ‘revenue sharing’ arrangement results in a substantial amount
of the property taxes paid by [VRCA] and its members going into the coffers of [White] in
exchange for no municipal services or value whatsoever.” The district court denied
VRCA’s motion to intervene in an April 10, 2013 order. The district court concluded that
VRCA’s interests “are adequately represented by the City of Biwabik” because VRCA
advanced the same legal arguments and requested the same relief as Biwabik. VRCA did
not appeal the district court’s denial of its motion to intervene.
Biwabik and White brought cross -motions f or summary judgment. In a
September 30, 2013 order, the district court denied Biwabik’s motion to dismiss and for
summary judgment, and it granted White’s motion for partial summary judgment. The
district court rejected Biwabik’s arguments that the RSA i n the 2002 joint resolution was
illegal or contrary to public policy. Specifically, the district court determined that (1) the
RSA did not violate the Minnesota Constitution by modifying Biwabik’s power to tax;
(2) the RSA was not preempted by Minnesota S tatutes section 414.036; and (3) the 2003
special legislation applied to the joint resolution. After a three -day court trial, the district
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court issued its findings of fact, conclusions of law, order for judgment, and judgment on
June 5, 2014, in which it reiterated its determination that the RSA was valid. The district
court addressed White’s breach -of-contract claim against Biwabik, entered judgment in
favor of White, and ordered Biwabik to pay $1,092,488.88 to White.
In October 2014, Biwabik and White entered into a mediated settlement agreement
to settle their outstanding claims. Under the terms of the settlement agreement, Biwabik
agreed to continue making payments to White as required under the RSA. The settlement
agreement did not change the perpe tuity language of the RSA. Biwabik also agreed not to
appeal any decision made by the district court in that action , and White agreed to certain
maintenance obligations. This agreement brought an end to the 2011 action.
In September 2020, a ppellants commenced the present action against Biwabik and
White. Appellants are VRCA, Giants Ridge Lake Villas Resort Association, Giants Ridge
Woodlands Homeowners Association, and three individuals (who are also members of
VRCA). The members of these associati ons own property located in Biwabik and pay
taxes assessed on the property. The complaint sought declaratory judgment regarding both
the RSA and the 2014 settlement: “Biwabik does not have the authority to disburse public
funds to White Township pursuant to the 2002 Resolution or the 2014 Settlement
Agreement and declaring such provisions void.” Appellants moved for summary
judgment, raising several issues, including the following: (1) whether the RSA violat ed
Minnesota Statutes section 414.0325 (2002); ( 2) whether the RSA violated Minnesota
Statutes section 414.036, in light of In re Annexation of Certain Real Prop. to City of
Proctor from Midway Twp., 925 N.W.2d 216, 220 (Minn. 2019) (concluding that section
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414.0325 does not preempt application of other sections of the statute to nonparties);
(3) whether Biwabik exceeded its authority under state law and Biwabik’s charter when it
ratified the 2014 settlement agreement; (4) whether the RSA violated Biwabik’s charter by
requiring funds to be appropriated before any obligation could be incurred; (5) whether the
RSA satisfied the requirements of the 2003 special legislation; and (6) whether the RSA
violated the Minnesota Constitution because it required Biwabik to spend public funds
without a public purpose . White also moved for summary judgment. White argued that
appellants’ claims were barred by the doctrines of res judicata and collateral estoppel and
that the settlement agreement was authorized by statute and the 2003 legislation. The
district court gra nted summary judgment for White and denied summary judgment for
appellants in a November 19, 2021 order. The district court agreed with White that
collateral estoppel barred appellants’ claims and entered judgment for White.
DECISION
Appellants argue that the district court erred when it granted summary judgment for
White based on collateral estoppel. Because appellants were not parties or in privity with
the parties to the 2011 action, 1 we conclude that collateral estoppel does not preclude this
action and summary judgment was , therefore, inappropriate.

1 White also argues that the doctrine of res judicata applies. Both doctrines require
demonstration that a new action involved the same parties or privies to parties in a prior
action. Hauschildt v. Beckingham, 686 N.W.2d 829, 840 (Minn. 2004) (noting that res
judicata applies if “the earlier claim involved the same parties or their privies”). Given our
decision that collateral estoppel does not ap ply because appellants were neither parties nor
in privity with the parties to the 2011 action, we need not separately address the elements
of res judicata.
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The doctrine of collateral estoppel “prevent[s] litigants from relitigating in
subsequent actions identical issues that were determined in a prior action.” Heine v. Simon,
702 N.W.2d 752, 761 (Minn. 2005). Also known as “issue preclusion,” collateral estoppel
“applies to specific legal issues that have been adjudicated.” Hauschildt, 686 N.W.2d at
837. For collateral estoppel to apply, all of the following four elements must be met :
(1) the issue to be addressed is identical to an issue in a prior
adjudication; (2) there was a final judgment on the merits in
the prior adjudication; (3) the estopped party was a party to or
in privity with a party to the prior adjudication; and (4) the
estopped party received a full and fair opportunity to be heard
on the adjudicated issue.
State Farm Mut. Auto. Ins. Co. v. Lennartson, 872 N.W.2d 524, 534 (Minn. 2015). Courts
should not rigidly apply collateral estoppel, but rather should focus on whether application
of the doctrine “would work an injustice on the party against whom [collateral estoppel] is
urged.” Hauschildt, 686 N.W.2d at 837. The party asserting collateral estoppel has the
burden to establish all four eleme nts. Id. Whether collateral estoppel applies is a mixed
question of fact and law, which we review de novo. Id .
Here, appellants argue that the district court’s decision is erroneous because the first,
third, and fourth elements of collateral estoppel ar e not met. We conclude that the third
element is not satisfied because appellants were not parties to or in privity with a party to
the 2011 action. 2 Under the “parties or privity” element, the party in the present action

2 We have additional concerns regarding whether White can establish t he first element
because the specific legal issues appellants raise in th e present action are distinguishable
from those raised in the 2011 action. Although in the broadest terms, appellants challenge
the validity of the RSA, just as Biwabik did in the 2011 action, appellants’ arguments raise
new and different specific legal issues, including (among other arguments) that Biwabik
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must have been a party to the prior action or in privity with a party to the prior action.
Lennartson, 872 N.W.2d at 534. Persons are in privity with the parties to an action when,
even though they “are not parties to an action ,” they are nevertheless “connected with the
parties . . . as to be identified with them in interest , and consequently to be affected with
them by the litigation.” Rucker v. Schmidt, 794 N.W.2d 114, 118 (Minn. 2011) (quotation
omitted). We determine whether privity exists by exami ning the particular circumstances
of each case. Margo-Kraft Distribs., Inc. v. Minneapolis Gas Co., 200 N.W.2d 45, 47
(Minn. 1972).
Persons may be in privity with another party under various circumstances, including
when “(1) they control an action despite not being a named party to it, (2) a party represents
their interests in an action, or (3) they are successors in interest to persons with derivative
claims.” Ward v. El Rancho Manana, Inc., 945 N.W.2d 439, 447 (Minn. App. 2020) (citing
Margo-Kraft Distribs., 200 N.W.2d at 47), rev. denied (Minn. Oct. 1, 2020) . Privity also
may exist when a party is “so identified in interest with another that he represents the same
legal right.” Rucker, 794 N.W.2d at 118 (quotation omitted). The focus in determining

exceeded its authority when it ratified the 2014 settlement agreement and that the RSA is
void under the Biwabik charter, exceeds the scope of the 2003 special legislation, violates
section 414.036 in light of City of Proctor, 925 N.W.2d at 220, and violates the Minnesota
Constitution because the funds transferred from Biwabik to White are expended without a
“public purpose.” We also acknowledge the necessary overlap of the third and fourth
elements. See Crossman v. Lockwood, 713 N.W.2d 58, 62 (Minn. App. 2006) (noting that
the “rationale behind the requirement of privity is closely associated with the fourth
requirement of [collateral estoppe l], thus effectively merging consideration of the two”
(quotation omitted)). We need not determine whether the district court erred in its analysis
of the first or fourth elements of collateral estoppel, however, given our decision regarding
the third ele ment. See Hauschildt, 686 N.W.2d at 837 (requiring the party asserting
collateral estoppel to establish all four elements).
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whether privity exists “is on whether the legal rights of the party to be estopped were
adequately represented by the party to the first litigation.” State v. Lemmer , 736 N.W.2d
650, 661 (Minn. 2007); see also M argo-Kraft Distribs., 200 N.W.2d at 47 (holding that
third-party defendant in the first lawsuit was not estopped from commencing a second suit
involving the same parties because its “rights and liabilities were not expressly put in issue
in the first action”).
White argues that appellants were in privity with Biwabik, a defendant in the 2011
action. White also argues that this element is met by virtue of VRCA’s unsuccessful
motion to intervene in the 2011 action. 3 We are not convinced by either proposition.
We first conclude that appellants in the present action were not in privity with
Biwabik in the 2011 action. Unlike typical privies, appellants had no control of Biwabik’s
actions and are not successors in interest of Biwabik. See Ward, 945 N.W.2d at 447. In
addition, a s taxpayers, appellants have distinct interests from Biwabik, the municipality
collecting and spending tax revenue. Biwabik’s interest diverged from appellants’ interest
when it entered into the RSA with White , when it lobbied for the 2003 spec ial legislation,
and when it ratified the 2014 settlement agreement, which continued the perpetual payment
obligations that appellants so strongly oppose. Biwabik also promised not to appeal, a
decision that does not benefit or promote appellants’ stated interests. For these reasons,
appellants’ legal rights were not the same as Biwabik’s during the 2011 action and the

3 Although the district court did not decide the collateral -estoppel issue on this basis, we
consider White’s alternative argument because we are reviewing a grant of summary
judgment. See Doe v. Archdiocese of St. Paul , 817 N.W.2d 150, 163 (Minn. 2012)
(affirming summary judgment decision on grounds not addressed by the district court).
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negotiation of the 2014 settlement agreement, and appellants’ interests were not adequately
represented by Biwabik or put in issue in the prior litigation. See Ward, 945 N.W.2d at
447; Margo-Kraft Distribs., 200 N.W.2d at 46- 47; Lemmer, 736 N.W.2d at 661.
We also conclude that the “parties or privity” element cannot be met based on
VRCA’s motion to intervene in the 2011 action and on the alignment of VRCA’s interests
with that of the other, remaining appellants . To support this alternative argument, White
asserts that rule 24 of the Minnesota Rules of Civil Procedure refers to a person seeking to
intervene as a “party.” Minn. R. Civ. P. 24.03 (“Within 30 days after service upon the
party seeking to intervene of a notice of objection to intervention, the party shall serve a
motion to intervene upon all parties as provided in Rule 5.” (emphasis added)). White cites
no authority, however, and we are aware of none, establishing that the use of the word
“party” in rule 24 relates to our analysis of privity for purposes of collateral estoppel .
Indeed, as noted above, the Minnesota Supreme Court has iterated the proper analysis to
decide whether parties are in privity, requiring “a careful examination of the circumstances
of each case,” Rucker, 794 N.W.2d at 118, and a determination of whether the rights and
liabilities of the party to be estopped were “expressly put in issue in the first action,”
Margo-Kraft Distribs., 200 N.W.2d at 47; Lemmer, 736 N.W.2d at 661. We decline to
hold that rule 24 limits or abrogates the holdings in Rucker, Margo-Kraft, an d Lemmer in
favor of a new, per se rule applying automatically to all putative intervenors.
Finally, in reaching our decision, we conclude equitable considerations weigh
against applying collateral estoppel. The supreme court has warned that collateral estoppel
is not to be “rigidly applied.” Hauschildt , 686 N.W.2d at 837; see also AFSCME
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Council 96 v. Arrowhead Reg’l Corr. Bd., 356 N.W.2d 295, 299 (Minn. 1984) (recognizing
that collateral estoppel should be “qualified or rejected when [its] application w ould
contravene an overriding public policy” (quotation omitted)). Because collateral estoppel
is a “flexible doctrine,” the focus in such an inquiry “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). Here, Biwabik taxpayers are
directly affected by the RSA and no taxpayers have ever had the opportunity to challenge
the propriety of the RSA or Biwabik’s actions . Although VRCA previously tried to
intervene in the 2011 litigation, we do not believe that one taxpayer’s unsuccessful attempt
to intervene should bar all taxpayers from raising future challenges. Based on appellants’
interests in this case, we conclude t hat application of collateral estoppel here would work
an injustice.
For these reasons, we conclude that the district court erred by determining that
collateral estoppel app lied to an d barred appellants’ claims. Accordingly, we reverse the
district court’s grant of summary judgment for White. Although appellants urge this court
to reach the merits of their arguments and to declare the RSA void , we decline to do so in
this appeal. This court generally does not decide issues that were not presented to the
district court, especially when the unaddressed issue may involve questions of fact. In re
A.D., 883 N.W.2d 251, 261 (Minn. 2016) ; Thiele v. Stich , 425 N.W.2d 580, 582 (Minn.
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1988). Because th e issues raised by appellants could involve factual disputes, remand is
appropriate.4
Reversed and remanded.

4 Appellants argue that, if we remand this case, we should remand it to a district court in a
different county because of “possible political ramifications” if the case were decided by a
judge elected in the same county as Biwabik and White. Appellants d id not file a motion
for change of venue with the district court , and there is no decision from the district court
regarding venue for us to review . See Minn. Stat. §§ 542.01 (providing that every civil
action is to be tried “in the county in which it was be gun”), .11 (listing grounds for which
venue of a civil action “may be changed by order of the court”) (2020). Thus, it is not
appropriate for this court to grant appellants’ request. See Thiele, 425 N.W.2d at 582.