author: CRIPPEN, Judge.

text:
    Tawfiq KHAWAJA, Respondent, v. STATE FARM INSURANCE COMPANIES, Appellant.
    No. C9-00-1698.
    Court of Appeals of Minnesota.
    July 10, 2001.
    Review Denied Sept. 25, 2001.

      Todd P. Young, Roseville, MN, (for respondent).
    James C. Selmer, Marc M. Berg, James C. Selmer & Associates, Minneapolis, MN, (for appellant).
    Sharon L. Van Dyck, Sehwebel, Goetz & Sieben, P.A., Minneapolis, MN, (for amicus Minnesota Trial Lawyers Association).
    Considered and decided by CRIPPEN, Presiding Judge, KLAPHAKE, Judge, and STONEBURNER, Judge.

       STRINGER, J., took no part in the consideration or decision of this case.

   OPINION

CRIPPEN, Judge.

Appellant State Farm Insurance Companies challenges a trial court order vacating an arbitrator’s denial of respondent Tawfiq Khawaja’s claim for benefits from appellant, arguing, inter alia, that Scheibel v. Illinois Farmers Ins. Co., 615 N.W.2d 34 (Minn.2000), issued after the arbitrator’s decision, requires an insured to exhaust the no-fault policy limit for the second of two motor vehicle accidents before appellant, the insurer for the first accident, is liable for additional medical expenses. Appellant also claims that because respondent settled with his second no-fault insurer for an amount less than the policy limit, he is not entitled to benefits from appellant.

We affirm because Scheibel does not bar an insured’s medical-expense recovery from the first insurer for amounts in excess of the second-accident coverage limit that are attributable to the first accident. But we modify the trial court’s order to eliminate any reference to a credit due to appellant on remand to the arbitrator.

FACTS

The parties dispute appellant’s no-fault insurance obligation for the first of two motor vehicle accidents in which respondent was injured. After the first accident in 1994, respondent complained of neck pain and received medical care. Appellant was the no-fault insurer for this accident and paid out $3,900 in medical-expense benefits on respondent’s behalf.

A different insurer, Titan Indemnity, covered respondent at the time of his second accident in 1996. After the 1996 accident, respondent complained of pain in the neck, shoulder, thigh, hip, and lower back and received substantial medical care. Titan paid out approximately $17,300 in benefits over the following year. In 1997, Titan requested that respondent get an independent medical examination. Respondent refused, and Titan suspended respondent’s benefits.

Soon thereafter, respondent and Titan reached a settlement in which the insurer paid respondent $2,593 in exchange for his waiver of any future claims of no-fault benefits. Titan ended up paying out a total of $19,896.69, which included the settlement, since the second accident; $103.31 less than respondent’s no-fault policy limit of $20,000.

Respondent, however, continued to incur medical expenses, bringing his total claims after the second accident to approximately $28,000. Respondent sought reimbursement from appellant for these expenses and filed a petition for mandatory no-fault arbitration, claiming that appellant, as insurer for the first accident, should be responsible for the remaining unpaid medical expenses.

At the arbitration hearing, appellant cited Great West Cas. Co. v. Northland Ins. Co., 548 N.W.2d 279 (Minn.1996), to assert that only Titan Indemnity, as respondent’s insurer for the second accident, could be liable for medical expenses following that accident. In support, appellant cited this court’s unpublished opinion in Scheibel v. Illinois Farmers Ins. Co., 615 N.W.2d 34 (Minn.App.1999), but noted that the case was before the Minnesota Supreme Court for review.

The arbitrator issued a decision denying respondent’s claim. Although the arbitrator found that at least some of the injuries from the first accident were exacerbated by the second accident, he denied the claim because

the parties agree that under present Minnesota case law the supreme court has prohibited arbitrators from apportioning no-fault between accidents and that the party can only receive no-fault protection from the last accident.

Respondent then filed a motion with the trial court to vacate the arbitration award on the ground that the arbitrator exceeded his authority, but did not schedule a hearing date. Appellant later filed a motion to confirm the arbitration award and scheduled a hearing.

At the hearing, appellant argued that it was entitled to an order confirming the award, regardless of Scheibel because respondent’s motion to vacate was not heard within 90 days of the delivery of the award. The trial court took the matter under advisement until the supreme court issued its Scheibel decision.

After Scheibel was released, the trial court issued an order vacating the arbitration award and remanding the matter to the arbitrator. The court evidently agreed with appellant’s argument that Scheibel contains an exhaustion requirement — a demand that respondent recover the limits of his Titan coverage before stating any claim against appellant — but concluded that it would be inequitable to impose the requirement on respondent because at the time of his settlement with Titan Indemnity, Scheibel was still pending. The court reasoned that had respondent known that his claim against appellant might be barred because he did not exhaust the full $20,000 of Titan Indemnity’s coverage of his second accident, he would not have settled for $103.31 less than the policy limit. The court ordered that the arbitrator, on remand, credit appellant the $103.31 difference between the total paid by Titan Indemnity and the policy limit. The court also ruled that Scheibel applies retroactively and that respondent brought his motion to vacate in a timely manner.

Appellant filed a petition for discretionary review of the trial court order, which this court granted.

ISSUE

Does Scheibel require that an insured exhaust the no-fault policy limit for the second of two accidents before seeking additional benefits under the policy for the first accident?

ANALYSIS

1. Scheibel

Respondent and amicus Minnesota Trial Lawyers Association argue that the trial court erred in concluding that Scheibel v. Illinois Farmers Ins. Co., 615 N.W.2d 34 (Minn.2000), contains an exhaustion requirement such that the insurer for the first accident is not obligated to pay for unreimbursed medical expenses attributable to that accident in the event that the insured settles with an insurer for the second accident for an amount less than the policy limit for that accident. The trial court’s interpretation of a supreme court decision presents a question of law subject to de novo review. State v. Camacho, 561 N.W.2d 160, 170 (Minn.1997).

In Scheibel, the supreme court considered the application of the Minnesota No-fault Automobile Insurance Act to a situation in which an insured was involved in two automobile accidents that cumulatively caused injuries. 615 N.W.2d at 39. After the second accident, insurer paid the $20,000 policy limit, leaving approximately $6,500 in unpaid medical expenses. Id. at 36 n. 1. The supreme court concluded that (1) the insurer for the second accident was obligated to pay the maximum policy limit for the insured’s injuries regardless of the extent to which each accident contributed to the injuries; and (2) the insurer for the first accident was liable up to its policy limit for additional unreimbursed medical expenses for which the insured still had a viable claim for injuries attributable to that accident. Id. at 39.

The trial court interpreted Scheibel to require that an insured exhaust the policy limit for the second accident before the insurer for the first accident is liable for any unreimbursed medical expenses. The trial court relied on specific language in Scheibel that the insured is entitled to payment for medical expenses attributable to the first accident “after the $20,000 policy limit for the second accident has been paid.” Id. The trial court noted that Titan Indemnity, as insurer for respondent’s second accident, did not pay the policy limit because the parties settled for less than the $20,000 limit. The trial court concluded that because respondent did not exhaust the policy limit he ordinarily would be barred from seeking additional benefits from appellant.

But amicus insists that the supreme court’s conclusions in Scheibel must be read in light of the facts of the case and the issue before the court. The association points out that because the policy limit for the second accident in Scheibel had already been paid before the case reached the supreme court, the question of how to handle a less-than-limits settlement of claims arising from the second accident was not considered by the court. As a result, amicus contends, the focus of the supreme court’s conclusion that the insured is entitled to payment for medical expenses that remain unreimbursed “after the $20,000 policy limit for the second accident has been paid,” Scheibel, 615 N.W.2d at 39, is not a decision that the limit has been paid in full but that the insured is entitled to collect additional benefits from uncompensated economic loss. Therefore, amicus argues, Scheibel should not be read so literally as to contain an exhaustion requirement. This represents a proper reading of Scheibel.

The Scheibel court considered the stated purpose of the no-fault act because it was presented with an issue the act had not addressed: What happens when multiple accidents cumulatively cause injuries to an insured? Id. at 38. The court observed its earlier determination that the “primary purpose of the no-fault act is to promote full but not over-compensation of injured persons” and stressed it was critical that the court “keep this over-arching policy of full compensation in mind.” Id. (citations omitted).

The court went on to examine the “key principles” of the no-fault act enunciated in Great West Cas. Co. v. Northland Ins. Co., 548 N.W.2d 279 (Minn.1996). Id. The court noted that it emphasized in Great West that the act is “intended to promote the efficient administration of justice and provide an insured prompt payment.” Id. (citation omitted). Observing that “[i]t would be an absurd result to cut off recovery for an injury from the first accident merely because an intervening accident aggravates the same injury,” the court first concluded, “consistent with [its] language in Great West,” that the insurer for the second accident is “obligated to pay the maximum policy limit” for the insured’s injuries regardless of the extent to which each accident contributed to the injuries. Id. at 38-39.

The supreme court also concluded that the insured is entitled to payment from the insurer for the first accident “after the $20,000 policy limit for the second accident has been paid.” Id. at 39. The language in this conclusion reflects the Great West obligation of the insurer for the second accident to pay the policy limit. It is evident that the emphasis is on the obligation of the second insurer to pay the policy limit, not that the policy limit must in fact be paid; Scheibel holds that the obligation of the first insurer is not affected by the actual recovery from the second insurer. Therefore, we conclude that the trial court erred when it read Scheibel to contain an exhaustion requirement.

But this does not end our inquiry. In Scheibel, the insurer for the second accident fully discharged its obligation to pay the maximum policy limit of $20,000 because it reimbursed the insured in that amount. Here, in contrast, respondent settled with Titan, the insurer for the second accident, for an amount less than the policy limit. Thus, we turn to the question of the effect such a settlement has on the Scheibel obligation of appellant, the insurer for the first accident, to pay for respondent’s unreimbursed medical expenses attributable to that accident.

We find clear guidance for this issue in Scheibel. The supreme court held that after the second insurer has discharged its obligation to pay the maximum policy limit, an insured is entitled to “additional reimbursement” under the insured’s policy with the first insurer for damages attributable to the first accident. Id. Thus, to the extent that the insured has medical expenses attributable to the first accident that remain unreimbursed after the second insurer has discharged its obligation, the first insurer’s liability under its policy with the insured is confined to those expenses that are above the insured’s policy limit for the second accident.

We construe this language to exclude the possibility that an insured may recover from the first insurer the difference, if any, between the policy limit for the second accident and the total amount, including settlement proceeds, paid out by the second insurer. The amount of the insured’s recovery from the insurer for the first of two accidents must be reduced by the amount of medical expenses that could have been, but were not, recovered by the insurer for the second accident.

Because there is no exhaustion requirement in Scheibel, we need not address the trial court’s equitable-exception ruling.

2. Other Claims

a. Retroactive effect of Scheibel

Appellant claims that the trial court erred when it determined that Schei-bel applies retroactively. Whether a judicial decision will apply retroactively is a question of law, which this court reviews de novo. Summers v. R & D Agency, Inc., 593 N.W.2d 241, 243-44 (Minn.App.1999).

Under the general rule, absent special circumstances or a court’s specific pronouncement that a decision is to be applied prospectively only, a decision will be given retroactive effect. Hoff v. Kempton, 317 N.W.2d 361, 363 (Minn.1982). The Scheibel court did not indicate that its decision should be applied prospectively only. But appellant contends that there are special circumstances that preclude retroactive application of Scheibel.

To determine whether special circumstances require that a decision be applied prospectively only, this court applies a three-part test, examining (1) whether the decision establishes a new principle of law, either by overruling clear past precedent or by deciding an issue of first impression, whose resolution was not clearly foreshadowed; (2) whether retroactive operation will further or retard the rule’s operation, keeping in mind the purpose and effect of the rule; and (3) how the application matches with concerns about equity, justice, and hardship. Casper v. Casper, 593 N.W.2d 709, 712 (Minn.App.1999) (citing Hoff, 317 N.W.2d at 363 (citations omitted)). When the second and third factors weigh in favor of retroactivity and the first does not, a decision will be given retroactive application. Summers, 593 N.W.2d at 245-46.

For the second factor, appellant argues that retroactive application would retard operation of the Scheibel first-insurer-exposure rule by requiring an insurer to keep files open indefinitely in the anticipation that a claimant might return to seek benefits from one accident after being involved in a second accident with a different insurer. But we can not imagine how concern for retaining files could override the purpose of the no-fault act to provide “reimbursement for all loss suffered through injury arising out of the maintenance or use of a motor vehicle.” Scheibel, 615 N.W.2d at 38 (quoting Minn.Stat. § 65B.44, subd. 1 (1998)). Applying Schei- bel retroactively to injured persons who otherwise would not be fully reimbursed for medical expenses would further, not retard, the Scheibel rule.

The third factor involves weighing the equities involved in a retroactive application of Scheibel. The obvious equity in respondent’s favor is that he may be reimbursed for medical expenses that he otherwise would not receive. Appellant argues that retroactive application would be inequitable because (1) generally, insurers would be confronted with new claims from claimants whose files have been closed, and (2) specifically, appellant would need to evaluate the reasonableness and necessity of medical expenses incurred after respondent received medical care for injuries not attributable to the first accident. But appellant offers no facts that suggest that new claims under the Scheibel rule would be a significant administrative or financial hardship. Nor does appellant explain how .evaluating respondent’s medical expenses would be more difficult than a typical multiple-injury evaluation.

Because factors two and three clearly weigh in favor of retroactive application, we conclude that the trial court did not err when it determined that Scheibel applies retroactively.

b. Timeliness of motion to vacate

Appellant argues that the trial court erred in determining that respondent brought the motion to vacate the arbitration award in a timely fashion within the meaning of the Minnesota Uniform Arbitration Act (UAA), Minn.Stat. § 572.19 (2000). The construction of a statute is a question of law subject to de novo review. Lolling v. Midwest Patrol, 545 N.W.2d 372, 375 (Minn.1996).

The procedures in the uniform act govern motions to vacate no-fault arbitration awards. Minn.R. No Fault Arb. 38. A motion to vacate an award must be brought within 90 days of the delivery of the award. Minn.Stat. § 572.19, subd. 2. Respondent does not base his motion on corruption, fraud, or other undue means, the only exceptions to the 90-day requirement. Id.

Appellant acknowledges that respondent’s motion was filed within 90 days of the delivery of the award but contends that it was untimely because it was not heard within the 90 day period. Appellant points to language in the uniform act providing that

[u]pon application of a party, the court shall confirm an award, unless within the time limits hereinafter imposed grounds are urged for vacating or modifying or correcting the award.

Minn.Stat. § 572.18 (2000). Appellant argues that the phrase “grounds are urged” is best understood to require that a motion must be heard to be timely.

But the statute also provides that an application to the court under this chapter shall be by motion and shall be heard in the manner and upon the notice provided by law or rule of court for the making and hearing of motions.

Minn.Stat. § 572.23 (2000). And motions are generally considered timely when they are filed within a prescribed period of time. Minn. R. Gen. Pract. 115.01. The prescribed period of time for a motion to vacate an arbitration award is 90 days from the delivery of the award. Minn. Stat. § 572.19, subd. 2. Appellant inappropriately disregards the instruction of Minn.Stat. § 572.23 that the necessary motion be heard as provided by rules of the court. “A goal of any statutory interpretation is to avoid rendering portions of a statute superfluous.” In re Estate of Jobe, 590 N.W.2d 162, 166 (Minn.App.1999), review denied (Minn. May 26, 1999).

Finally, appellant argues that if a party is allowed to serve and file a motion to vacate an arbitration award but is not required to schedule a hearing, there would in effect be no time limit on bringing a motion to vacate. And with no time limit, there would be opportunity for manipulation and abuse of the judicial process.

A party filing a motion to vacate is required to obtain a hearing date. Minn. R. Gen. Pract. 115.02. Respondent did not do so when he filed his motion because, evidently, he saw little point in scheduling a hearing before Scheibel was issued. The trial court apparently agreed; at the hearing scheduled after appellant brought its motion to confirm the award, the court noted that Scheibel had not yet been issued and deferred the matter until after the decision was released. Appellant has failed to demonstrate that any technical noncompliance with Minn. R. Gen. Pract. 115.02 was prejudicial. See Midway Ctr. Assocs. v. Midway Ctr., Inc., 306 Minn. 352, 356, 237 N.W.2d 76, 78 (1975) (stating appellant must show both error and prejudice to obtain reversal).

c. Credit

Appellant contends that it should be credited $2,593, the full amount of the last payment to respondent by Titan Indemnity, to the extent that the money was not used to pay outstanding medical bills. But we do not have the facts necessary to consider this issue because the arbitrator made no findings on the allocation of expenses between the first and second accidents, the amount of respondent’s incurred medical expenses, and the amount of actual available coverage paid out from Titan Indemnity.

We modify the trial court’s order to eliminate any reference to a credit to be applied by the arbitrator. But we reiterate that respondent cannot recover the gap between the total amount paid out by Titan Indemnity and his $20,000 policy limit. The amount of any recovery from appellant must be reduced by the amount of medical expenses that could have been, but were not, recovered from Titan Indemnity.

DECISION

The trial court erred by determining that Scheibel contains an exhaustion requirement but properly granted respondent’s motion to vacate the arbitration award.

Affirmed as modified and remanded.


source: Caselaw Access Project

author: LANSING, Judge.

license: Public Domain

text:
    James L. MARSHALL, Appellant, v. The INN ON MADELINE ISLAND, Defendant, John Streitz and Susan Streitz, Respondents.
    No. C6-00-1478.
    Court of Appeals of Minnesota.
    July 17, 2001.
    Review Denied Sept. 25, 2001.

      Reuben A. Mjaanes, Edward M. Glen-non, Kim Ruckdaschel-Haley, Lindquist & Vennum, P.L.L.P., Minneapolis, MN, (for appellant).
    William L. Davidson, Thomas D. Jensen, Sarah E. Morris, Lind, Jensen, Sullivan & Peterson, P.A., Minneapolis, MN, (for respondents).
    Considered and decided by LANSING, Presiding Judge, ANDERSON and HALBROOKS, Judges.
   OPINION

LANSING, Judge.

James Marshall appeals from summary judgment dismissing his claim for injuries sustained in a fall from a collapsing dock located on Wisconsin property. The district court ruled that Marshall’s prior federal judgment against the property management corporation precluded his claim against the property owners, John and Susan Streitz. Applying Wisconsin law, we conclude that because the Streitzes, as third-party defendants on the management corporation’s contribution claim, were not actual adversaries to Marshall in the federal action, Marshall is not precluded from suing them in Minnesota state court. We further conclude that the federal judgment against the management corporation does not preclude the Streitzes from litigating the issues of causal fault and damages. Therefore, we reverse the summary judgment entered against Marshall, affirm the denial of Marshall’s motion for summary judgment, and remand.

FACTS

James Marshall sustained injuries when he fell from a collapsing dock. The dock was on Wisconsin property owned by John and Susan Streitz and managed by The Inn on Madeline Island, a Wisconsin corporation. Nearly three years later, Marshall sued the Streitzes and The Inn in Minnesota state court.

The Inn moved to dismiss the state action for lack of personal jurisdiction. To preserve his claim against the impending statute of limitations, Marshall invoked diversity jurisdiction and filed suit against The Inn in a Wisconsin federal court. Marshall requested that the federal court stay its proceedings pending the Minnesota district court’s decision on the motion to dismiss. But the federal court denied the request.

In response to Marshall’s complaint in the federal action, The Inn filed an answer and a third-party complaint against the Streitzes for contribution and indemnity. The Streitzes asserted the same claims against The Inn. Marshall brought no claim against the Streitzes in federal court, apparently to avoid destroying diversity.

The Minnesota district court subsequently denied The Inn’s motion to dismiss for lack of personal jurisdiction, holding that The Inn had sufficient contacts with the State of Minnesota to confer personal jurisdiction. In light of the ruling, Marshall asked the federal court to dismiss the federal action against The Inn without prejudice to avoid proceeding with two actions. The Inn and the Streitzes opposed the motion. The federal court denied the voluntary dismissal and scheduled the federal action for jury trial. ' The Inn then appealed the Minnesota district court’s denial of its motion to dismiss for lack of personal jurisdiction But the refusal to dismiss was upheld on appeal. Marshall v. Inn on Madeline Island, 610 N.W.2d 670 (Minn.App.2000).

Meanwhile, the federal case proceeded to trial. The jury returned a verdict attributing 16 percent causal negligence to Marshall, 40 percent to The Inn, and 45 percent to the Streitzes. The jury found that Marshall’s damages amounted to $141,226.91. Under the Wisconsin joint- and-several-liability statute, the liability of each person whose causal negligence is less than 61% is limited to the percentage assigned by the jury. Wis. Stat. § 896.046 (1999). Thus, The Inn was not jointly and severally liable for the negligence attributed to the Streitzes. Because of the restriction on joint and several liability, Marshall could recover only 40% of his damages in the federal action, and judgment was entered against The Inn for that amount. Because the jury’s causal fault division left The Inn with no contribution claim against the Streitzes, the federal district court dismissed them in its judgment. Marshall later entered into a Pier-ringer release with The Inn.

After concluding the federal action, Marshall renewed the prosecution of his pending state action against the Streitzes. The Streitzes moved for summary judgment, claiming that the prior federal judgment precluded the state-court action. Marshall also moved for summary judgment, claiming that the federal action precluded the Streitzes from relitigating the issue of causal fault and damages and requesting that judgment be entered, applying the percentage of fault and total damages determined in the federal proceeding. The state court denied Marshall’s summary-judgment motion and granted summary judgment for the Streitzes, holding that the prior federal judgment against The Inn precluded Marshall’s state action. Marshall appeals from this judgment, challenging both rulings.

In their briefs to the court, both Marshall and The Inn argued their claims based on Minnesota law. But after the United States Supreme Court issued Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 121 S.Ct. 1021, 149 L.Ed.2d 32 (2001), this court ordered additional briefing to address the choice and substance of the law that governs the preclu-sive effect of the prior federal judgment.

ISSUES

I. Did the district court err in according the federal judgment claim-pre-clusive effect on Marshall’s state action against the Streitzes?

II. Did the district court err in declining to apply the doctrine of issue preclusion to the Streitzes’ causal fault and damages?

ANALYSIS

This case raises the issue of which law governs the claim-preclusive and issue-preclusive effect of a judgment entered in a diversity-jurisdiction case. Minnesota appellate courts have not previously addressed this issue. The district court, applying Minnesota law and relying on undisputed facts, determined that the federal judgment barred Marshall’s state-court action and entered summary judgment for the Streitzes.

On appeal from summary judgment on undisputed facts, appellate review is limited to determining whether the district court erred in its application of the law. Associated Builders & Contractors v. Ventura, 610 N.W.2d 293, 298 (Minn.2000).

I.

The United States Supreme Court has long held that in a federal-question, case, states cannot give the federal judgment the preclusive effect they would give their own judgments, but must accord the judgment the effect prescribed by the Supreme Court. Semtek, 531 U.S. at -, 121 S.Ct. at 1028. Whether federal common law governs the claim-preclusive effect of a federal-diversity-action judgment has not been well-settled, and state and federal appellate courts have been divided in their determinations on this issue. See Howard M. Erichson, Interjurisdictional Preclusion, 96 Mich. L.Rev. 945, 1008 (1998) (evaluating 286 federal-state preclusion cases); see also Richard H. Fallon et al., Hart and Wechsler’s The Federal Courts and the Federal System 1473 (4th ed.1996); Ronan E. Degnan, Federalized Res Judicata, 85 Yale L.J. 741, 766-773 (1976).

The U.S. Supreme Court conclusively settled the issue of which law governs the claim-preclusive effect of federal diversity judgments earlier this year. Semtek, 531 U.S. at -, 121 S.Ct. at 1028, 149 L.Ed.2d 32. Analyzing the effect of a judgment entered in a diversity action on a subsequent state-court action, the Supreme Court in Semtek held that federal common law governs the claim-preclusive effect of federal judgments based on a federal question or issued by a court sitting in diversity. The Supreme Court reasoned that this rule would preserve the integrity of judgments by ensuring that the court issuing the prior judgment had the authority to determine the force and effect of its judgment — even on subsequent proceedings that were not within its court system. See id. at 1027-28 (alluding to concept that issuing court should determine force and effect of its own judgments on future proceedings); see also Vol 18, James Wm. Moore, et al., Moore’s Federal Practice § 133.12[1] (3rd ed.2000) (stating that one concept served by preclusion doctrine is “respect for the integrity of the prior judgment and the rendering court” (footnote omitted)).q

The Court further held that although federal courts have the “last word” on the claim-preclusive effect of their judgments in diversity cases, federal law on claim preclusion incorporates the law of the state in which the federal court rendered the judgment. Semtek, 531 U.S. at -, 121 S.Ct. at 1028, 149 L.Ed.2d 32. In so holding, the Semtek Court reasoned that the adoption of the forum state’s law on claim preclusion would serve nationwide uniformity and prevent forum shopping.

For purposes of determining preclusive effect, Semtek has a procedural history that matches the federal judgment obtained by Marshall in this case. Id. In Semtek, a California federal court in a diversity ease dismissed a complaint on statute-of-limitations grounds. Id. at -, 121 S.Ct. at 1023. The plaintiff then filed the same action in state court in Maryland, where the longer limitations period had not yet expired. Id. at -, 121 S.Ct. at 1024. The Maryland court dismissed the second action on claim-preclusion grounds, reasoning that federal law governed the preclusive effect of the first dismissal, and that the first dismissal on limitations grounds would be considered judgment on the merits under federal common law governing claim preclusion. Id.

In their supplemental briefs, neither Marshall nor the Streitzes dispute the application of the Semtek holding to this case. Thus, in determining the claim-pre-clusive effect of the prior federal judgment, we apply the law of Wisconsin, the state in which the diversity court rendered its judgment.

Claim preclusion (also known as res judicata) bars a plaintiff from bringing multiple actions against the same defendant on the same claim. Landess v. Schmidt, 115 Wis.2d 186, 340 N.W.2d 213, 216 (1983) (citing DePratt v. West Bend Mut. Ins. Co., 113 Wis.2d 306, 334 N.W.2d 883, 885 (1983)). Under this doctrine, a prior final adjudication is conclusive between the parties and their privies on all matters that were litigated or might have been litigated. Leimert v. McCann, 79 Wis.2d 289, 255 N.W.2d 526, 528-29 (1977). The purpose of claim preclusion is to prevent repetitive litigation. Landess, 340 N.W.2d at 216.

Claim preclusion requires (1) a final adjudication in the first action; (2) an identity of claims between the first and second causes of action; and (3) an identity between the parties or their privies. Leimert, 255 N.W.2d at 529. Whether claim preclusion applies presents a question of law. Id.

The district court determined that the three elements of claim preclusion had been satisfied. We agree that the first two elements were satisfied. With respect to the first element, there was a final adjudication in the federal action that resulted in a judgment in favor of Marshall. With respect to the second element, we agree that the state action against the Streitzes is based on the same claims asserted against The Inn in the prior federal action, and both the federal and the state action involve the same set of factual circumstances, i.e., the sudden collapse of the dock and the resultant personal injuries. See Landess, 340 N.W.2d at 216 (stating that in applying this element of claim preclusion, the court should view the claim in factual terms and make it coterminous with the transaction regardless of the number of substantive theories or forms of relief available).

We conclude, however, that the third element of claim preclusion has not been satisfied. The third element requires that the parties in the second action be either the same parties or privies in the first action. But for the last eighty years, Wisconsin courts have interpreted this element to require that the parties in the first action must have been formally adverse to one another in that action. United States Fid. & Guar. Co. v. Goldblatt Bros., 142 Wis.2d 187, 417 N.W.2d 417, 419 (1987) (citing Bakula v. Schwab, 167 Wis. 546, 168 N.W. 378, 381 (1918)).

This adversity requirement involves an analysis of whether an issue crucial to the success of both causes of action was joined between the two parties, whether the parties were arrayed on opposite sides of the issue, and whether the issue was proffered by one and controverted by another. See Gies v. Nissen Corp., 57 Wis.2d 371, 204 N.W.2d 519, 525 (1973). The Wisconsin Supreme Court considers an issue to be “joined” between the parties when one party has served a formal pleading asking for relief against the other party. See id. (first co-defendant who served cross-claim for contribution on second co-defendant had joined the issue of their respective liability to the plaintiff; thus, first co-defendant was bound by judgment in that action, which dismissed second co-defendant). The formal-pleading requirement serves to ensure that the parties joined the issue between them by requesting relief, and that either party can enforce such requested relief. See, e.g., Goldblatt, 417 N.W.2d at 419 (holding that claim preclusion did not bar fire insurer from bringing a second action against its co-plaintiff in first action).

The Streitzes and Marshall were not formal adversaries in the prior federal proceeding. Marshall brought no direct claims against the Streitzes and, therefore, had no direct right of recovery against them. Under these circumstances, the issue of Marshall’s right to recover against the Streitzes was never joined between Marshall and the Streitzes. The Streitzes were only joined as third-party defendants by The Inn on a potential contribution or indemnity claim. Their only potential liability was to The Inn and hinged on the laws of contribution and the application of Wisconsin joint and several liability. See Unisys Med. Plan v. Timm, 98 F.3d 971, 973 (7th Cir.1996) (claim preclusion did not bar second suit when plaintiff and third-party defendant were not adversaries under pleadings in first suit).

Because these facts do not meet the same-parties requirement of claim preclusion under Wisconsin law, the district court erred in granting summary judgment for the Streitzes on claim-preclusion grounds.

II.

Marshall also maintains that the district court erred in failing to grant summary judgment in his favor on grounds of issue preclusion. Marshall claims that the jury findings in the federal action should bar the Streitzes from relitigating their causal fault for the accident and the amount of his damages. Because we are reversing and remanding this matter for further proceedings, we review this issue. See Minn. R. Civ.App. P. 103.04.

The doctrine of issue preclusion (also known as collateral estoppel) bars the relitigation of factual or legal issues that were actually litigated and essential to a valid and binding judgment. Restatement (Second) of Judgments § 27 (1982). But as with claim preclusion, the threshold issue is which law will determine whether the issues litigated in the prior federal proceeding will be given preclusive effect. Semtek did not involve issue preclusion. The analysis in Semtek, however, portends a similar holding on issue preclusion. Semtek relies on federalism principles and rejects the application of the Full Faith and Credit clause because by its terms it governs only the effect to be given to state-court judgments. See Semtek, 531 U.S. at -, 121 S.Ct. at 1028; see also U.S. Const. Art. IV, § 1; see generally 18 Wright, Miller & Cooper, Federal Practice and Procedure §§ 4468, 4472 (1981 & Supp.2001) (discussing application of the two preclusion concepts under different scenarios). Because the Semtek holding rests on the constitutional obligation of state courts to respect federal judgments — and not on the Full Faith and Credit clause — there is no reason to select among the res judicata features measuring claim preclusion by federal law and issue preclusion by state law. The federalism principles apply equally to claim preclusion and issue preclusion. See Degnan, supra, at 768. Thus Wisconsin law applies to Marshall’s argument on issue preclusion as well as claim preclusion.

Under Wisconsin law, the doctrine of issue preclusion prevents the relitigation of an issue that has been contested in a prior proceeding between same or different parties. Michelle T. v. Crozier, 173 Wis.2d 681, 495 N.W.2d 327, 329 (1993). But issue preclusion will only bar the relit-igation of an issue whose determination is essential to the resultant judgment. Landless, 340 N.W.2d at 220-21 (determination of the issue must be “essential to the judgment” (quoting Restatement, supra, § 27)). An issue that is not essential to the resultant judgment has the characteristic of “dicta” and typically cannot be appealed by the party against whom the issue was decided. Restatement, supra, § 27 cmt. h; see also id., § 28 (even if issue is essential to the resultant judgment, preclusion should not apply against party who could not obtain review of judgment).

The jury finding on the Streitzes’ causal fault was not “necessary and essential” to the federal judgment. The final judgment was based on the causal fault of The Inn and the damages determination. More important, because judgment was not entered against them, the Streitzes could not appeal from the federal judgment. Consequently, they were denied the right to litigate the issues of fault and damages through the appellate level.

We recognize that retrial does not advance litigational efficiency or consistency. When litigants engage in excessive procedural maneuvering, courts are overburdened, lawyers are overcompensated, and the application of legal principles is overly intricate. Each of the litigants suggests that the other caused the interjurisdictional complexities. Although we would have preferred that the entire controversy be resolved in one action, we are not persuaded that the litigants should be separately faulted for the duplicative course of litigation.

DECISION

Because Marshall and the Streitzes were not actual adversaries in the prior federal action, the district court erred in granting summary judgment for the Streitzes on claim-preclusion grounds.

But because the finding of causal fault against the Streitzes in the federal action was not necessary and essential to the resulting federal judgment, and the Streitzes had no right to appeal from the adverse finding of causal fault, the district court correctly denied summary judgment to Marshall.

Affirmed in part, reversed in part, and remanded.


author: PARKER, Judge

text:
    Harlan ANDERSON, Appellant, v. CITY OF COKATO, a Minnesota municipal corporation, Respondent.
    No. C3-01-265.
    Court of Appeals of Minnesota.
    July 17, 2001.
    Review Denied Sept. 25, 2001.

      Larry J. Peterson, Larry J. Peterson & Associates, St. Paul, MN, (for appellant).
    George C. Hoff, Paula A. Callies, Hoff, Barry & Kuderer, P.A., Eden Prairie, MN, (for respondent).
    Considered and decided by HARTEN, Presiding Judge, PARKER and FOLEY, Judges.

       Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const, art. VI, § 10.

   OPINION

PARKER, Judge

Appellant Harlan Anderson challenges the district court’s determination that Minn.Stat. § 117.195, subd. 2 (2000), did not provide a remedy for appellant when the condemning authority changed its purpose for condemning appellant’s former land. We affirm.

FACTS

Respondent City of Cokato petitioned for condemnation of appellant Harlan Anderson’s entire tract of real estate for the purpose of storm water management. Respondent then amended the petition to include the purpose of economic development. At a later hearing, respondent again amended the petition eliminating the purpose of economic development. On April 5, 1996, the district court granted the condemnation petition, giving respondent approval to condemn appellant’s property for storm water management purposes. The court-appointed commissioners awarded appellant $40,000 in damages. Anderson appealed to the district court, and after trial, he received $83,500 in damages and costs, and $18,575.93 in interest. Respondent received possession and title to appellant’s property on July 17, 1997. Respondent satisfied the judgment on April 20, 1998.

During the condemnation proceedings, respondent approved the hiring of a technical assistance person to develop a grant application for the construction of a water tower. On April 13, 1998, respondent hired a person to write a grant application for a new water tower. In September 1998, the city decided to build the water tower on what was formerly appellant’s land.

In August 2000, appellant sued under Minn.Stat. § 117.195, subd. 2 (2000), to recover attorney fees and costs associated with the condemnation of his property. Appellant alleged that respondent discontinued its condemnation action when it decided to build the water tower on his former land. The district court granted summary judgment in favor of respondent. This appeal follows.

ISSUE

Is a condemnation considered discontinued under Minn.Stat. § 117.195, subd. 2 (2000), upon condemnor’s subsequent change in purpose for the use of the acquired land?

ANALYSIS

On an appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the lower courts erred in their application of the law.

State by Cooper v. French, 460 N.W.2d 2, 4 (Minn.1990) (citation omitted). This court must “view the evidence in the light most favorable to the party against whom judgment was granted.” Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn.1993) (citation omitted). Appellant contends that there is a material fact in dispute because respondent denies changing its purpose for condemning appellant’s land. Because we review the evidence in the light most favorable to appellant, we will accept that respondent changed its purpose for condemning appellant’s former land.

“Attorneys’ fees are allowed in •eminent domain proceedings only where authorized by statute.” Sipe v. Kalitowski, 390 N.W.2d 910, 912 (Minn.App.1986) (citation omitted), revieio denied (Minn. Sept. 24, 1986). The interpretation of a statute is a question of law that this court reviews de novo. Opus N.W., L.L.C. v. Minneapolis Cmty. Dev. Agency, 599 N.W.2d 582, 583 (Minn.App.1999).

Appellant requests attorney fees and costs from the condemnation of his property based on Minn.Stat. § 117.195, subd. 2 (2000), which provides that

[w]hen the proceeding is dismissed for nonpayment or discontinued by the petitioner, the owner may recover from the petitioner reasonable costs and expenses including attorneys’ fees.

This eminent domain proceeding was not dismissed because the condemnor made full payment on the judgment and the landowner accepted payment. Moreover, the hearing was not discontinued because the entire tract was taken and respondent gained possession and title. From a plain reading of the statute, appellant is not entitled to attorney fees and costs based on section 117.195, subd. 2.

Despite the plain language of the statute, appellant requests that our court interpret the phrase “discontinued by the petitioner” to provide a remedy when the condemning authority uses the property for a purpose different from that announced in the petition for condemnation. A similar extension of the definition of Minn.Stat. § 117.195, subd. 2 was sought in County of Freeborn v. Bryson, 294 N.W.2d 851 (Minn.1980). In Bryson, landowners in an eminent domain proceeding argued that the phrase “discontinued by the petitioner” should be extended to situations where the district court discontinues the hearing based on the Environmental Rights Act. Id. at 852. The supreme court stated that it was “sympathetic” to the landowners’ position but refused to “go beyond the clear limitations of section 117.195.” Id. at 853. Here, as in Bryson, there is nothing in the statutory language providing appellant the remedy he requests.

Appellant fails to cite authority that supports extending the plain statutory language of section 117.195 to include situations where the condemning authority changes its purpose for property it has acquired by eminent domain. See Tereault v. Palmer, 413 N.W.2d 283, 286 (Minn.App.1987) (stating “the task of extending existing law falls to the supreme court or the legislature but it does not fall to this court”), review denied (Minn. Dec. 18, 1987).

DECISION

The plain language of Minn.Stat. § 117.195, subd 2 (2000), does not provide a remedy when, after the judgment has been satisfied, the condemning authority changes its purpose for property taken by eminent domain.

Affirmed.


author: SANDSTROM, Justice. RICHARD W. GROSZ, District Judge,

text:
    2001 ND 130
    US BANK NATIONAL ASSOCIATION, as personal representative of the Estate of Roy E. Hackman, deceased, Plaintiff and Appellee, v. Karen ARNOLD, as personal representative of the Estate of Dennis Arnold, deceased, Defendant and Appellant.
    No. 20010071.
    Supreme Court of North Dakota.
    July 13, 2001.

      Michael Geiermann, Rolfson Schulz Ler-vick & Geiermann Law Offices, P.C., Bismarck, for plaintiff and appellee.
    Todd A. Sattler (argued) and David S. Maring (on brief), Bismarck, for defendant and appellant.
   SANDSTROM, Justice.

[¶ 1] Dennis Arnold appealed from an order denying his motion to vacate default judgment. Concluding the district court’s findings of fact were not clearly erroneous and the district court did not abuse its discretion in denying the motion to vacate default judgment, we affirm.

I

[¶ 2] Arnold, who owned and operated Denny’s Lumber in Steele, North Dakota, was a longtime acquaintance of Roy Hack-man, then an 84-year-old resident of a Steele nursing home. In March 1999, Hackman issued a $50,000 check to Arnold, apparently as payment for Arnold to begin construction of a four-unit apartment building in Steele. After receiving the check, Arnold ordered materials, made arrangements with contractors, and prepared blueprints for the apartment.

[¶ 3] After discovering the $50,000 payment to Arnold, a social worker at Hack-man’s nursing home filed an ex parte petition for appointment of a guardian and conservator for Hackman. On .July 1, 1999, the district court appointed an employee of U.S. Bank (“the Bank”) as temporary guardian and conservator for Hack-man.

[¶ 4] On July 3, 1999, the Bank sent Arnold a letter advising him of the guardianship and instructing him to halt construction of the apartment until a meeting could be held. Arnold met with representatives of the Bank on July 13, 1999. Apparently, as a result of the meeting, further construction was not authorized. On November 20, 1999, Hackman died, and according to his will, the Bank was appointed personal representative of his estate.

[If 5) On August 11, 2000, the Bank sent Arnold a certified letter instructing him to repay $50,000 to Hackman’s estate or litigation would follow. Arnold received the letter but did not respond. The Bank sent a second certified letter, requesting that Arnold remove lumber from lots owned by the Bank. Arnold received the letter but again did not respond.

[¶ 6] The Bank initiated litigation, serving Arnold with a summons and complaint on September 12, 2000. Arnold did not file an answer or otherwise respond. The Bank applied for default judgment and notified Arnold of the application. On October 13, 2000, attorney Jerry Ren-ner telephoned attorney Michael Geier-mann, counsel for the Bank. Renner, after stating Arnold was in his office, inquired whether Geiermann had received an order for default judgment. Geiermann responded that the order was on the judge’s desk. The parties otherwise dispute the purpose, content, and general nature of the telephone conversation.

[¶ 7] Judgment by default was entered on October 18, 2000, and notice of entry of the default judgment was served on Arnold and Renner on October 19, 2000. Arnold moved to vacate the default judgment on October 30, 2000. In his affidavit in support of the motion to vacate default judgment, Arnold recited the details of his agreement with Hackman. Arnold also averred that in 1998 he was diagnosed as clinically depressed and in August 2000, under the direction of a physician, he was taking anti-depressant medication. Arnold attributed his depression to a series of traumatic events: in 1997 his wife was diagnosed with cancer, and his son committed suicide; in 1998 Arnold suffered a heart attack; and, in July 2000 his brother was diagnosed with terminal cancer.

[¶.8] Arnold also alleged that in his capacity as sole owner of Denny’s Lumber, he was overwhelmed with work between August and October of 2000 — the.period of the litigation. In his affidavit, Arnold admitted he did not respond to the summons and complaint “even though [he] disagreed with the allegations in the Complaint.” Arnold alleged he “was not completely aware that [he] had been sued or that there could be any consequences if [he] did not respond to the Complaint.” Arnold also alleged that after meeting with Ren-ner and after contacting counsel for the Bank, he thought he “had three weeks to attempt to settle the matter.”

[¶ 9] On November 16, 2000, Arnold’s motion to vacate the default judgment was heard. On December 18, 2000, the district court denied the motion. Arnold’s appeal was timely. On appeal, Arnold alleges Renner’s telephone call to counsel for the Bank constituted an appearance, entitling him to eight days’ notice of the application for default judgment. Alternatively, Arnold argues the district court erred in concluding that excusable neglect had not been proven.

[¶ 10] The district court had jurisdiction under N.D.C.C. § 27-05-06. This Court has jurisdiction under N.D. Const, art. VI, § 6, and N.D.C.C. § 28-27-01.

II

[¶ 11] Arnold argues that attorney Renner’s telephone call to counsel for the Bank constituted an appearance, entitling him to notice before entry of default judgment. Arnold further argues that because he did not receive notice, the default judgment must be vacated. Rule 55(a)(3), N.D.R.Civ.P., provides, “If the party against whom judgment by default is sought has appeared in the action, the party ... must be served with written notice of the application for judgment at least 8 days before the hearing on the application.”

A

[¶ 12] “Whether particular conduct is an ‘appearance’ for purposes of NDRCivP 55 is a question of law.” Hatch v. Hatch, 484 N.W.2d 283, 286 (N.D.1992). A party must factually demonstrate an appearance in order to obtain relief from judgment. Id. In N.D.R.Civ.P. 55 cases in which the underlying facts used to support the conclusion of an appearance are undisputed, we address only the legal question of whether, as a matter of law, a party has appeared. See, e.g., Perdue v. Sherman, 246 N.W.2d 491, 494 (N.D.1976) (a telephone call constitutes an appearance when the attorney says he is appearing on behalf of a defendant and the plaintiff does not refute that statement). In cases similar to this one, this Court has reviewed the district court’s factual findings to determine whether particular conduct constitutes an appearance. See Wilson v. Wilson, 364 N.W.2d 113, 114-15 (N.D.1985) (discussing the district court’s findings of fact in relation to an appearance). If the district court’s interpretation of disputed facts is not clearly erroneous, we fully review whether the facts support the ultimate legal conclusion of an appearance. Cf. Wheeling v. Director, North Dakota Dep’t of Transp., 1997 ND 193, ¶ 5, 569 N.W.2d 273 (whether facts constitute probable cause is a fully renewable question of law).

[¶ 13] A finding of fact will be set aside on appeal only if it is induced by an erroneous view of the law, if no evidence exists to support it, or if the reviewing court, on the entire evidence, is left with a definite and firm conviction that a mistake has been made. Albrecht v. Metro Area Ambulance, 2001 ND 61, ¶ 6, 623 N.W.2d 367.

B

[¶ 14] Demonstrating a preference for adjudication of proceedings on the merits, this Court broadly interprets the term “appearance.” Federal Land Bank of St. Paul v. Lillehaugen, 370 N.W.2d 517, 519 (N.D.1985); Hatch, 484 N.W.2d at 285. A formal written document is not required for an appearance, and this Court has recognized a telephone conversation may suffice as an appearance. Lillehaugen, 370 N.W.2d at 519. Even though we broadly interpret whether a person has appeared, relief is denied when a party is unable to factually demonstrate an appearance. See Hatch, 484 N.W.2d at 286 (concluding an appearance was not proven); see also Lillehaugen, 370 N.W.2d at 519 (identifying several cases in which this Court considered whether there was an appearance).

[¶ 15] The district court found attorney Renner called counsel for the Bank for the purpose of delaying execution of the judgment, not for the purpose of appearing. The court noted Renner did not indicate he was representing Arnold, nor did Ren-ner suggest Arnold was seeking to appear. Distinguishing the facts of this case from previous decisions of this Court, the district court stated:

Here, there was no indication by Mr. Renner that he wished Mr. Geiermann to consider the telephone call an appearance, that he was representing Mr. Arnold, or that he or Mr. Arnold intended to contest either the default judgment or the underlying merits of the case.
Had any of those assertions been made during the telephone call or even shortly thereafter in correspondence or other form, it is likely the Court would, in broadly defining appearance, find that Mr. Arnold had appeared on October 13, 2000.

The district court also found “the topic of discussion between Mr. Renner and Mr. Geiermann was the potential for a delay of execution and an opportunity for the parties to work out a payment arrangement.”

[¶ 16] In reaching the conclusion that Arnold had not appeared, the district court considered the affidavits of Arnold and Geiermann. In his affidavit reciting his account of the telephone conversation, Geiermann alleged:

At no time during the conversation did Mr. Renner indicate that he was representing Mr. Arnold, that he was going to file either a Notice of Appearance or an Answer on Mr. Arnold’s behalf, or that Mr. Arnold was going to contest the claim. The only request I received from Mr. Renner was to hold off on execution of the Judgment until a meeting could be held.

[¶ 17] At oral argument, counsel for Arnold agreed that the content of the conversation between Geiermann and Renner is a question of fact. By suggesting Arnold believed he had three weeks after the telephone call to “attempt to settle the matter,” Arnold’s affidavit only tangentially hints at the possibility of an appearance. Otherwise, the record contains no testimony or affidavits to dispute the critical factual issues determined by the district court.

[¶ 18] Arnold presented no evidence to rebut allegations that Renner was not representing him, that no appearance was intended by the telephone call, and that the entire purpose of the call was to negotiate the means by which the judgment against him would be executed. Because no evidence was introduced to rebut Geier-mann’s affidavit, we cannot conclude the district court’s findings of fact were clearly erroneous under N.D.R.Civ.P. 52(a).

[¶ 19] Consequently, we conclude the underlying factual determinations of the district court aptly support the ultimate legal conclusion that Arnold did not appear. See Hatch v. Hatch, 484 N.W.2d 283, 286 (N.D.1992) (whether particular conduct is an appearance under N.D.R.Civ.P. 55 is a question of law, and an appearance must be factually demonstrated). Because Arnold did not appear, the Bank was not required to provide him eight days’ notice under N.D.R.Civ.P. 55.

Ill

[¶ 20] We next address whether the district court erred in denying Arnold’s motion to vacate the default judgment. Arnold argues multiple tragic circumstances require vacating the judgment. Because Arnold failed to establish a nexus between those circumstances and his failure to respond to the lawsuit, we conclude the district court did not abuse its discretion in denying the motion.

A

[¶ 21] On appeal, to establish a basis for relief from a district court’s denial of a motion for relief from a default judgment under N.D.R.Civ.P. 60(b), a party must demonstrate the district court abused its discretion. Federal Land Bank of St. Paul v. Lillehaugen, 370 N.W.2d 517, 518 (N.D.1985). “A district court abuses its discretion when it acts in ‘an arbitrary, unreasonable, or unconscionable manner, or when it misinterprets or misapplies the law.’ ” T.F. James Co. v. Vakoch, 2001 ND 112, ¶ 5, 628 N.W.2d 298 (quoting Berg v. Berg, 2000 ND 37, ¶ 10, 606 N.W.2d 903).

[¶ 22] Based on this Court’s preference for adjudication of claims on the merits, Arnold argues the district court has “limited discretion” to deny a motion to vacate default judgment. See First Nat’l Bank of Crosby v. Bjorgen, 389 N.W.2d 789, 795 (N.D.1986) (adjudication on the merits is preferred). Based on the competing interest of finality of judgment, the Bank argues this Court “will not overturn the trial court’s decision [on a Rule 60(b) motion] merely because it is not the one we might have made had we decided the original motion.” Greenwood v. American Family Ins. Co., 398 N.W.2d 108, 110 (N.D.1986).

[¶ 23] The Bank has more appropriately defined our standard of review. On appeal, a party seeking to disturb the finality of judgment under Rule 60(b) bears a heavy burden, which this Court has previously addressed:

An abuse of discretion by the trial court is never assumed and must be affirmatively established. An abuse of discretion is defined as an unreasonable, arbitrary, or unconscionable attitude on the part of the trial court. A movant for relief under Rule 60(b) has a burden of establishing sufficient grounds for disturbing the finality of the judgment. The moving party must also show more than that the lower court made a “poor” decision, but that it positively abused the discretion it has in administering the rule. We will not overturn that court’s decision merely because it is not the one we may have made if we were deciding the motion.

Bjorgen, 389 N.W.2d at 794-95 (citations omitted).

B

[¶ 24] In deciding Arnold was not entitled to relief from judgment under N.D.R.Civ.P. 60(b), the district court applied this Court’s three-part test for vacating judgment. See Bender v. Liebelt, 303 N.W.2d 316, 318 (N.D.1981) (judgments may be reopened when a motion is promptly made, when the grounds stated satisfy the requirements of Rule 60, and when an answer appearing to state a meritorious defense is presented). The district court concluded Arnold’s motion was timely and he presented a meritorious defense. The district court also concluded that Arnold failed to satisfy the requirements of N.D.R.Civ.P. 60(b).

[¶ 25] The district court’s order cites Arnold’s affidavit, in which Arnold alleges he was suffering from clinical depression. The court noted the averment was neither supported by medical evidence nor disputed by the Bank. The district court continued:

Mr. Arnold’s Affidavit states his depression was caused by his wife having been diagnosed with cancer, his son’s suicide, his heart attack, and his brother’s diagnosis of terminal cancer. Mr. Arnold elaborates that his brother’s illness was “especially debilitating” mentally. Mr. Arnold says he spent much time thinking about his brother’s cancer, and spent much time making trips to his brother’s home ninety miles away from Steele. Mr. Arnold’s Affidavit also points to business pressures as contributing to his excusable neglect.
Mr. Arnold’s [sic] claims “The undisputed facts show that [he] was emotionally disabled and incapable of responding to U.S. Bank’s claims when he received the Complaint.” ... The facts themselves may be undisputed. There is, however, a dispute as to the significance of those facts. The Bank points to Mr. Arnold’s apparent ability to run his business as evidence that he was not incapacitated. The Court does not agree with the Bank’s argument, based on Thompson v. Goetz, 455 N.W.2d 580 (N.D.1990) that a mental disability has to be connected with the case or parties to establish excusable neglect. However, in Thompson the defendant presented medical evidence as to his condition and, what is more important, how his condition affected him in relation to his actions in dealing with the litigation filed against him. Here, Mr. Arnold simply states he was clinically depressed, and his counsel argues in his brief that this clinical depression caused him to be unable to respond to the Complaint. This Court believes a person must do more to avoid the consequences of the Rules of Civil Procedure. Mr. Arnold has not established excusable neglect justifying vacating the default judgment.

The district court’s rationale is clear: Arnold — the party with the burden — did not satisfactorily demonstrate that the multiple misfortunes he suffered led to excusable neglect, rendering him incapable of responding to the litigation.

[¶ 26] A person who is clinically depressed is not necessarily incapable of responding to litigation. Likewise, one who is busy at work or one who frequently travels to care for an ailing relative is not automatically incapable of responding to a summons and complaint. In his affidavit, Arnold stated:

Due to my depression, my brother’s medical condition and trips to my brother’s home to help care for him and the difficult and busy time at work, I did not respond to the Summons and Complaint, even though I disagreed with the allegations in the Complaint.

The district court concluded, although the unfortunate facts “may be undisputed,” there was a dispute regarding “the significance of those facts.” The court concluded Arnold’s simple statement that he was clinically depressed was insufficient.

[¶ 27] In Thompson v. Goetz, 455 N.W.2d 580, 588 (N.D.1990), this Court directed the trial court to vacate default judgment. The district court correctly stated that in Thompson, medical evidence was presented to establish a medical condition and to connect that condition with excusable neglect. Distinguishing Thompson from the present case, the district court stated that in Thompson, evidence was presented to establish “how his condition affected him in relation to his actions in dealing with the litigation filed against him.” We have recognized the necessity of presenting sufficient evidence to establish a medical condition that bears a relationship to exceptional circumstances required by N.D.R.Civ.P. 60(b):

Under Rule 60(b), a decision to submit only certain evidence at a stage in the proceedings generally cannot later constitute exceptional circumstances justifying relief from a judgment. “[A] Rule 60(b) motion is not to be used to relieve a party from free, calculated, and deliberate choices.” Such “[mjere misjudgment or careless failure to evaluate do[es] not suffice.” “A party remains under a duty to take legal steps to protect his own interests.”

Follman v. Upper Valley Special Educ. Unit, 2000 ND 72, ¶ 11, 609 N.W.2d 90 (citations omitted). In Follman, we concluded a personal affidavit of a medical condition was insufficient in the context of summary judgment. Id. at ¶ 12.

[¶ 28] Like evidence of a medical condition, evidence of an ailing relative or a heavy work schedule does not necessarily amount to excusable neglect. The burden of connecting sufficient evidence to excusable neglect rests on the moving party. Arnold was “under a duty to take legal steps to protect his own interests.” Id. at ¶ 11 (quoting 11 Charles Alan Wright et al., Federal Practice and Procedure § 2864, at 359 (2d ed.1995)). Arnold submitted only a personal affidavit. Without evidence connecting the affidavit aver-ments to excusable neglect, we cannot conclude the district court abused its discretion. Relief under N.D.R.Civ.P. 60(b) is. extraordinary. Under the circumstances of this case, the district court did not abuse its discretion in concluding Arnold failed to present sufficient evidence to justify extraordinary relief.

IV

[¶ 29] Arnold failed to prove he appeared, and therefore he was not entitled to eight days’ notice before entry of default judgment. The district court did not abuse its discretion in denying Arnold’s motion to vacate default judgment. The district court’s order denying Arnold’s motion to vacate default judgment is affirmed.

[¶ 30] WILLIAM A. NEUMANN, Acting C.J., CAROL RONNING KAPSNER, J., and GERALD G. GLASER, S.J.

[¶ 31] The Honorable RICHARD W. GROSZ, D.J., and the Honorable GERALD G. GLASER, S.J., sitting in place of MARING, J., and Vande WALLE, C.J., disqualified.

RICHARD W. GROSZ, District Judge,

concurring in part and dissenting in part.

[¶ 32] I concur with the majority’s conclusion that an appearance was not made by Arnold in this case thereby requiring notice by the Bank to Arnold prior to the Bank seeking default judgment. The Trial Court’s factual determination that the substance of the telephone call was an agreement to stay execution on the then pending Order for Default Judgment was not clearly erroneous. An appearance for purposes of Rule 55(a)(3), N.D.R.Civ.P., must, at minimum, contain some indication that the matter is being contested or disputed. Throndset v. Hawkenson, 532 N.W.2d 394, 397 (N.D.1995), citing Hatch v. Hatch, 484 N.W.2d 283, 285 (N.D.1992). Here, the telephone contact concerned only an agreement to stay execution on a judgment both parties contemplated being entered pending further settlement discussions.

[¶ 33] I dissent from the majority’s holding that the Trial Court did not abuse the Trial Court’s discretion in denying Arnold’s Rule 60(b) Motion to Vacate the Default Judgment. The Trial Court focused and ruled solely on one reason (clinical depression) proffered by Arnold for excusable neglect: “... Here, Mr. Arnold simply states he was clinically depressed, and his counsel argues in his brief that this clinical depression caused him to be unable to respond to the Complaint. This Court believes a person must do more to avoid the consequences of the Rules of Civil Procedure. Mr. Arnold has not established excusable neglect justifying vacating the default judgment.” The Trial Court did not rule on or utilize in any manner, the other proffered reasons given by Arnold for excusable neglect, specifically, Arnold’s brother’s terminal cancer in July, 2000, which “.. .was especially debilitating to me mentally and his condition occupied my thoughts much of the time. I also spent much time making trips .to my brother’s home in Esmond, North Dakota, a ninety minute trip from my home in Steele, to assist with his care and to spend time with his family...” and “.. .August, September, and October, 2000 also were very difficult and a busy time for me at Denny’s Lumber. As the sole owner of Denny’s Lumber and with only part-time help, all of the business affairs at Denny’s Lumber are handled exclusively by me. I was overwhelmed with work during this time.” The record indicates that Arnold’s clinical depression was diagnosed in May, 1998, well before Arnold’s brother’s cancer and Arnold’s work load in August through October, 2000.

[¶ 34] When one is unable to determine whether the Trial Court abused the Trial Court’s discretion because the Trial Court, without explanation, made no rulings on material and relevant factual issues, discretion has been abused.

[¶ 35] Arnold also proffered that before receiving copies of the default motion papers from the Bank’s Attorney, “... I was not completely aware that I had been sued or that there could be any consequences if I did not respond to the Complaint.” The Trial Court did not specifically rule on this factual assertion which, in essence, asserts the effect all of the proffered reasons for excusable neglect.

[¶ 36] There is no dispute that timely relief from default judgment was sought and the Trial Court ruled that a meritorious defense had been interposed by Arnold.

[¶ 37] “This court has long encouraged trial courts to be more lenient when entertaining Rule 60(b) motions to vacate default judgments as distinguished from “litigated” judgments, that is, judgments entered after trial on the merits. E.g., Suburban Sales v. District Court of Ramsey, 290 N.W.2d 247, 252 (N.D.1980); Perdue v. Sherman, 246 N.W.2d 491, 496 (N.D.1976). While a trial court certainly has discretion to grant or deny a Rule 60(b) motion to vacate a default judgment [First Federal Savings and Loan Ass’n v. Hulm, 328 N.W.2d 837 (N.D.1982) ], the range of that discretion is limited by three important considerations. See Schwab v. Bullock’s Inc., 508 F.2d 353, 355 (9th Cir.1974). First, Rule 60(b) is remedial in nature and should be liberally construed and applied. Sioux Falls Construction Co. v. Dakota Flooring, 109 N.W.2d 244, 247 (N.D.1961). Second, decisions on the merits are preferable to those by default. Bender v. Liebelt, 303 N.W.2d 316, 318 (N.D.1981). Third, as a consequence of the first two considerations, “ ‘[w]here timely relief is sought from a default judgment and the movant has a meritorious defense, doubt, if any, should be resolved in favor of the motion to set aside the judgment so that cases may be decided on their merits.’ ” King v. Montz, 219 N.W.2d 836, 839 (N.D.1974) [quoting 7 Moore’s Federal Practice ¶ 60.19, at p. 60-156].” CUNA Mortgage v. Aafedt, 459 N.W.2d 801, 803 (N.D.1990).

[¶ 38] Here, timely relief has been sought and a meritorious defense interposed. Doubt is present because the Trial Court did not rule on relevant and material factual issues and because of this doubt, Arnold’s Rule 60(b) Motion should be resolved in his favor and a resolution of the parties’ dispute should be made on the merits.

      . At oral argument, the Court was advised that Arnold died the week prior to argument. Under N.D.R.App.P. 43, Karen Arnold was later substituted as personal representative of Arnold's, estate.

      . The Bank notified Arnold of the application even though notice is not required under Rule 55, N.D.R.Civ.P. First Nat’l Bank v. Hoggarth, 331 N.W.2d 271, 273 (N.D.1983).


author: SANDSTROM, Justice.

text:
    2001 ND 137
    Interest of R.O., V.O. and J.H. Keith BERGER, Director Grand Forks County Social Services, Petitioner and Appellee, v. F.O., Respondent, and L.H., Respondent and Appellant. Interest of R.O., V.O., and J.H. Keith Berger, Director Grand Forks County Social Services, Petitioner and Appellee, v. F.O., Respondent and Appellant, and L.H., Respondent.
    Nos. 20000305, 20000307.
    Supreme Court of North Dakota.
    July 20, 2001.

      Dale R. Rivard, Special Assistant State’s Attorney, Child Support Enforcement Unit, Grand Forks, ND, for petitioner and appellee.
    DeWayne Johnston, Olson Johnston Law Office, Grand Forks, ND, for respondent and appellant F.O.
    Steven M. Light (on brief), Larivee & Light LTD, Grand Forks, ND, for respondent and appellant L.H.
   SANDSTROM, Justice.

[¶ 1] The father, F.O., and the mother, L.H., separately appeal from a juvenile court order terminating their parental rights to three minor children. We conclude the juvenile court did not err in admitting into evidence the testimony and reports of certain individuals who treated the parents, and there is clear and convincing evidence to warrant termination of the parents’ parental rights. We affirm.

I

[¶ 2] The parents became involved with Grand Forks County Social Services in October 1995, with a child protection service report about physical neglect of their unborn oldest child. At that time, child protection services recommended the mother keep the home clean, safe, and sanitary. The oldest child was born in January 1996 and was placed in the care of the Grand Forks Social Service Board. In January 1997, Carol Schneweis, a therapist at Northeast Human Services Center, contacted Social Services about the mother’s use of Nuprin while she was pregnant with the parents’ second child. When Schnew-eis visited the home, the mother’s face was swollen, and the mother indicated the father had hit her. An assessment report said services were required because of indicators of neglect by the parents. Another child protection report was filed in June 1997, when law enforcement officers stopped the father’s vehicle. The second oldest child was with the father in the vehicle, and the officers found marijuana and marijuana paraphernalia belonging to the father in the vehicle.

[¶ 3] In January 1998, Social Services received additional reports of child abuse or neglect by the parents. Social Services investigated the parents’ home and documented concerns about the general lack of hygiene:

[T]he kitchen is full of dirty dishes, garbage, and old food. On one occasion there was a pan of vegetables on the stove that appeared to be rancid. Garbage was stacked everywhere and there were dirty diapers on the kitchen floor and on the floor in the childrens’ bedroom. Ashtrays within the childrens’ reach were piled high with cigarette butts, and the childrens’ bedroom was littered with dirty clothes and no path to walk. The sheets in the baby’s crib were urine and milk stained and filthy. The carpet is completely stained and the children crawl around on it.

[¶ 4] In April 1998, Social Services received additional reports of suspected child abuse or neglect in the parents’ home. After an investigation, an assessment report indicated services were required, based on physical neglect, inadequate supervision, and psychological maltreatment. In August 1998, another assessment report of child abuse or neglect was filed. In October 1998, the Grand Forks Police Department investigated the parents’ home for possible child neglect. The investigating officer described the home as extremely cluttered with the distinct smell of human waste.

[¶ 5] During the course of Social Services involvement with the parents, they received treatment from several individuals, including (1) Myron Veenstra, a psychologist at Northeast Human Services Center; (2) Don Newberry, a psychologist at Northeast Human Services Center; (3) Kim Miller, an addiction counselor at Northeast Human Services Center; (4) Vicky Morrissette, a counselor who facilitated a parenting Nurturing Program attended by the parents; and (5) Schneweis.

[¶ 6] A May 28, 1998, petition alleging child deprivation cited numerous formal reports of alleged child abuse or neglect against the parents since September 1995. In December 1998, based on a stipulation of the parents, the juvenile court found the children were deprived and placed them in the custody of the Director of the Grand Forks County Social Service Center for 18 months. In August 1999, the State petitioned to terminate the parents’ parental rights, alleging numerous incidents and reports of alleged child abuse or neglect.

[¶ 7] During a March 2000 trial, the State sought to introduce into evidence the testimony and reports of Veenstra, Newberry, Miller, Morrissette, and Schneweis. The court initially sustained the parents’ objections under N.D.R.Ev. 503 to the admission of testimony and reports of Veenstra, Newberry, and Mor-rissette and overruled the parents’ objection to the admission of testimony of Schneweis. The parents also objected to Miller’s report and testimony under federal law and Jane H. v. Rothe, 488 N.W.2d 879 (N.D.1992). The court indicated it would review Miller’s records before ruling on the objection, and Miller did not testify further at the March trial.

[¶ 8] The trial was continued for several months, and during the continuance, the State moved for admission of the testimony and reports of Veenstra, Newberry, Morrissette, and Miller under N.D.C.C. § 50-25.1-10. The court decided to allow the State to introduce the reports and testimony of those witnesses. After a further hearing, the court terminated the parents’ parental rights to their children, finding the children were deprived, the deprivation was likely to continue, and the children would suffer serious mental and emotional harm if the parents’ parental rights were not terminated. The court also decided the children had spent 634 out of the previous 660 days in foster care, and the parents’ parental rights could be terminated under N.D.C.C. § 27-20-44(l)(b)(2), which authorizes termination of parental rights when a child has spent 450 days out of the previous 600 days in foster care. The parents appealed.

[¶ 9] The juvenile court had jurisdiction under N.D.C.C. §§ 27-20-02(11) and 27-20-03(l)(b). The appeals are timely under N.D.C.C. § 27-20-56(1), N.D.R.App.P. 4(a), and B.R.T. v. Executive Dir. of Soc. Serv. Bd., 391 N.W.2d 594, 597 (N.D.1986). This Court has jurisdiction under N.D. Const. art. VI, §§ 2, 6, and N.D.C.C. § 27-20-56(1).

II

[¶ 10] A juvenile court may terminate parental rights if the court finds a child is deprived; if the conditions and causes of the deprivation are likely to continue or will not be remedied; and, if the child is suffering, or in the future will probably suffer, serious physical, mental, moral, or emotional harm. N.D.C.C. § 27-20-44(1)(b). See In Interest of A.S., 1998 ND 181, ¶ 15, 584 N.W.2d 853; In Interest of L.F., 1998 ND 129, ¶ 10, 580 N.W.2d 573. The State must prove the elements for termination by clear and convincing evidence. AS., at ¶ 15; L.F., at ¶10.

[¶ 11] We review a juvenile court’s decision to terminate parental rights in a manner similar to a trial de novo. AS., 1998 ND 181, ¶ 13, 584 N.W.2d 853; L.F., 1998 ND 129, ¶ 12, 580 N.W.2d 573. We review the “files, records, and minutes or transcript of the evidence of the juvenile court, giving appreciable weight to the findings of the juvenile court.” N.D.C.C. § 27-20-56(1). Although our review is similar to trial de novo, we give deference to the juvenile court’s decision because the court had the opportunity to observe the candor and demeanor of the witnesses. A.S., at ¶ 13; L.F., at ¶ 12.

Ill

A

[¶ 12] The parents argue the juvenile court erred in admitting into evidence the testimony and reports of the individuals involved with the parents’ treatment. The parents argue the reports and testimony were inadmissible under the physician-patient and psychotherapist-patient privilege in N.D.R.Ev. 503, and N.D.R.Ev. 503 is not abrogated by N.D.C.C. § 50-25.1-10.

[¶ 13] Under N.D.R.Ev. 402, “[a]ll relevant evidence is admissible, except as otherwise provided by the Constitutions of the United States or the State of North Dakota, by any applicable Act of Congress, by statutes of North Dakota, by these rules, or by other rules adopted by the Supreme Court of North Dakota.” Rule 501, N.D.R.Ev., says except as otherwise provided by constitution, statute, or these rules or other rules promulgated by the North Dakota Supreme Court, no person has a privilege to refuse to be a witness, or to refuse to disclose any matter. Rule 503(b), N.D.R.Ev., authorizes a patient to prevent any person from disclosing confidential communications made for the purpose of diagnosis or treatment of the patient’s physical, mental, or emotional condition, including alcohol or drug addiction.

[¶ 14] Chapter 50-25.1, N.D.C.C., outlines a procedure for reporting child abuse or neglect, and protects persons making and investigating the reports. Section 50-25.1-01, N.D.C.C., recognizes the purpose of Chapter 50-25.1 is to encourage reports about children who are known to be, or suspected of being, abused or neglected. Chapter 50-25.1, N.D.C.C., generally identifies persons, including mental health professionals and addiction counselors, who are required or permitted to report knowledge or incidents of known or suspected child abuse or neglect, see N.D.C.C. § 50-25.1-03; specifies the methods of reporting, see N.D.C.C. § 50-25.1-04; identifies the procedures for assessment of any report of child abuse or neglect, see N.D.C.C. § 50-25.1-05; and outlines the procedures for determining and implementing services required for abused or neglected children. See N.D.C.C. § 50-25.1-05.1. Under N.D.C.C. § 50-25.1-11(6), all reports of suspected child abuse or neglect are confidential and must be made available to “[a] court whenever it determines that the information is necessary for the determination of an issue before the court.” Section 50-25.1-10, N.D.C.C., abrogates privileged communications in cases involving reports of child abuse or neglect:

Any privilege of communication between husband and wife or between any professional person and the person’s patient or client, except between attorney and client, is abrogated and does not constitute grounds for preventing a report to be made or for excluding evidence in any proceeding regarding child abuse, neglect, or death resulting from abuse or neglect resulting from a report made under this chapter.

[¶ 15] In In Interest of R.D.S., 259 N.W.2d 636, 639 (N.D.1977), this Court discussed N.D.C.C. § 50-25.1-10 in the context of a doctor’s testimony in a termination case:

The dissent places great weight on the use of past history, expressing the view that this is “especially important and necessary if the rules of evidence are so construed as to prevent the testimony of medical personnel who could help shed more light on what the future may hold.” While the trial court did refuse to hear the testimony of a medical doctor, the petition before the court alleged deprivation. Such an allegation does not bring into play the statutory abrogation of all but the attorney-client privilege as found at § 50-25.1-10, NDCC. Had the petition alleged neglect, and had the proceeding resulted from a report of child abuse or neglect, pursuant to Chapter 50-25.1, NDCC, the Rule 503 physician and psychotherapist-patient privilege tvould have been abrogated.

[¶ 16] In In Interest of J.A., 283 N.W.2d 83 (N.D.1979), this Court discussed a similar issue in the context of a doctor’s testimony in a termination case predicated on child abuse. This Court said, for the doctor’s testimony to be admissible and for N.D.C.C. § 50-25.1-10 to abrogate the privilege in N.D.R.Ev. 503, there must be “substantial compliance” with the requirement for a report or complaint of child abuse or neglect:

The parents appear to have argued in the juvenile court that the physician- and psychotherapist-patient privilege was not abrogated in this proceeding by Section 50-25.1-10, N.D.C.C., because in this case, according to them, the initial termination petition contained no specific allegation that the proceeding was brought pursuant to Chapter 50-25.1, N.D.C.C.
At the time of the hearing [seeking a] court-ordered examination [of the parents], a petition alleging deprivation was pending in juvenile court. That petition alleged that it was “based upon an investigation by the Grand Forks County Social Service Center and other reliable informants on a complaint of Abuse. ...” [Emphasis added.] Thus the suggestion in Interest of R.D.S., supra, that the provisions of Chapter 50-25.1 [Child Abuse and Neglect] apply to a deprivation proceeding only if there are specific allegations in the petition that the proceedings are held pursuant to that chapter and that the prerequisites of that statute have been met, was substantially complied with; it is apparent that the petition was based upon a complaint of abuse, and, although that complaint is not part of the record, Mrs. Wy Sheppard testified at the termination hearing that she made the complaint to the Social Service Center of Grand Forks County. The petition for termination of parental rights refers to the existence of the petition alleging deprivation and the proceedings resulting therefrom. Furthermore, notwithstanding the statements in Interest of R.D.S., supra, we do not necessarily conclude that the proceedings under Chapters 27-20 and 50-25.1, N.D.C.C., are entirely different. Chapter 50-25.1 sets forth a method for reporting child abuse and provides certain protections to the persons making such complaints and to the persons investigating those complaints. That chapter contemplates that a report of child abuse, followed by an investigation of that report, might result in proceedings under Chapter 27-20. See Sec. 50-25.1-08, N.D.C.C.

In Interest of J.A., 283 N.W.2d at 90-91.

[¶ 17] To the extent that Interest of R.D.S., 259 N.W.2d 636 (N.D.1977), attempted to distinguish allegations of deprivation from allegations of neglect for purposes of abrogating privileged communications, we hold the distinction is one without a difference. See In Interest of J.A., 283 N.W.2d at 90-91 (concluding proceedings under the Uniform Juvenile Court Act, N.D.C.C. ch. 27-20, are like proceedings alleging child abuse and neglect under N.D.C.C. ch. 50-25.1 because a report of child abuse or neglect may result in proceedings under the Uniform Juvenile Court Act). The interrelatedness of these two chapters is further demonstrated by the definition of “neglected child” in N.D.C.C. ch. 50-25.1. See N.D.C.C. § 50-25.1-02(8) (“Neglected child” means a deprived child as defined in chapter 27-20.). Although the parents claim the termination petition alleges only N.D.C.C. ch. 27-20 as a basis for the action, the petition alleges numerous reports of abuse or neglect that substantially comply with the requirement of reports of abuse or neglect under N.D.C.C. ch. 50-25.1. The August 1999 termination petition alleged, among other things, the October 1998 investigation by the Grand Forks Police Department of possible child neglect and subsequent report to Grand Forks County Social Services. We conclude N.D.C.C. § 50-25.1-10 abrogates the privilege in N.D.R.Ev. 503 in cases involving reports of alleged child abuse or neglect even when the termination petition alleges N.D.C.C. ch. 27-20 as a basis for the action. See In Interest of J.A., 283 N.W.2d at 90-91. We hold the juvenile court did not err in admitting into evidence the reports and testimony of Veenstra, Newber-ry, Schneweis, and Morrissette.

B

[¶ 18] The parents argue the psychotherapist-patient relationship is constitutionally protected as a right of privacy, and application of N.D.C.C. § 50-25.1-10 to this case is an unconstitutional invasion of their fundamental right to privacy.

[¶ 19] The parents did not raise this constitutional issue before the juvenile court. It is well established that issues not raised in the trial court, even constitutional issues, generally will not be addressed on appeal. Peters-Riemers v. Riemers, 2001 ND 62, ¶ 25, 624 N.W.2d 83; Moilan v. Moilan, 1999 ND 103, ¶ 32 n. 2, 598 N.W.2d 81; In Interest of A.E., 1997 ND 9, ¶ 17 n. 2, 559 N.W.2d 215. See also In Interest of A.G., 506 N.W.2d 402, 403-04 (N.D.1993) (stating issues not raised in juvenile court cannot be raised on appeal in which supreme court exercises standard of review similar to trial de novo). The parents have not preserved this constitutional issue for our review.

C

[¶ 20] The parents argue federal law prohibits the admission into evidence of the report and testimony of Kim Miller, an addiction counselor.

[¶ 21] Under our rules, all relevant evidence is generally admissible except as otherwise provided by the federal and state constitutions, by state statute or rule, and by any applicable Act of Congress. N.D.R.Ev. 402. Federal law provides a detailed scheme for restricting disclosure of a patient’s records about drug and alcohol treatment at a federally assisted facility. 42 U.S.C. § 290dd-2(a); 42 C.F.R. § 2.12. A court of competent jurisdiction may order disclosure for good cause. 42 U.S.C. § 290dd-2(b); 42 C.F.R. § 2.64. See Jane H. v. Rothe, 488 N.W.2d 879, 882-83 (N.D.1992). In Jane H., at 883-84, this Court described criteria for finding good cause and the procedures for disclosure of information regarding drug or alcohol treatment. If the court finds good cause for compelling disclosure of information, the court must restrict disclosure to the parts of a patient’s records that are essential. Id. at 883.

[¶ 22] Here, the juvenile court apparently conducted an in-camera review of Miller’s records and thereafter decided to allow her to testify and use her records. The court did not make a specific finding of good cause, and its order did not limit disclosure in any manner. Any deficiency in the juvenile court’s procedure does not affect the outcome in this case, however, because under our de novo review of the juvenile court proceedings, which are not open to the public, there is clear and convincing admissible evidence supporting termination of the parents’ parental rights, without the testimony of the addiction counselor.

IV

[¶ 23] Under N.D.C.C. § 27-20-44(l)(b)(l), a juvenile court may terminate parental rights if there is clear and convincing evidence the children are deprived, the deprivation is likely to continue, and the children will suffer serious mental and emotional harm if parental rights are not terminated. In Interest of A.L., 2001 ND 59, ¶ 5, 623 N.W.2d 418. We review a juvenile court’s decision to terminate parental rights in a manner similar to trial de novo. Id. at ¶ 6.

[¶ 24] Here, there is clear and convincing evidence to establish the abysmal and filthy living conditions that the parents provided for these children. Lack of cleanliness of the home does not alone establish deprivation. See Interest of J.K.S., 274 N.W.2d 244, 249 (N.D.1979); see also Interest of W.E., 2000 ND 208, ¶ 36, 619 N.W.2d 494 (“It is not reason enough to deprive parents of custody that their home is not the best, or even that they are not the best parents that could be offered to the child, so long as the child does not suffer physical or moral harm, or lack of food or clothing.”) (citation omitted). In this case, however, testimony established abhorrent and unsanitary conditions, creating serious health risks for the children. Rancid food, fecal matter on the carpet, and bed sheets covered with urine and spoiled milk in a sipper cup in the crib go beyond mere lack of cleanliness. Coupled with the other evidence, including the parents’ history and background, the father’s narcotics arrest while accompanied by his child, the overall lack of parental supervision, and psychological maltreatment of the children, the deprivation exceeded a simple lack of cleanliness. The parents’ indifference to the childrens’ welfare clearly and convincingly establishes the children are deprived and will suffer serious mental and emotional harm if parental rights are not terminated.

[¶ 25] Although evidence of past deprivation alone is not sufficient to terminate parental rights, evidence of the parents’ background, including previous abuse or deprivation, may be considered in determining whether deprivation is likely to continue. A.S., 1998 ND 181, ¶ 19, 584 N.W.2d 853. Because evidence of past deprivation alone is not enough to terminate parental rights, prognostic evidence is necessary to determine continued or future deprivation. Id. We have defined prognostic evidence as evidence that forms a basis for a reasonable prediction of future behavior. Id.

[¶ 26] The evidence of the parents’ background and history, coupled with the properly admitted testimony and reports of Veenstra, Newberry, Schneweis, and Morrissette, forms a basis for a reasonable prediction of the parents’ future behavior. The evidence clearly and convincingly establishes prognostic evidence the deprivation will continue. Under our de novo standard of review, we conclude there is clear and convincing evidence to support the termination of the parents’ parental rights under N.D.C.C. § 27-20-44(l)(b)(l).

[¶ 27] The juvenile court also decided the children had been in foster care for 634 out of the previous 660 days, which was sufficient to sustain the termination under N.D.C.C. § 27-20-44(1)(b)(2), which authorizes termination of parental rights when a child has spent 450 out of the previous 600 days in foster care. - The evidence clearly and convincingly establishes the children have been in foster care for more than 450 out of the previous 600 days. The juvenile court therefore did not err in terminating the parents’ parental rights under N.D.C.C. § 27-20-44(1)(b)(2).

V

[¶ 28] We affirm the juvenile court order terminating 'the parents’ parental rights.

[¶ 29] GERALD W. VANDE WALLE, C.J., and WILLIAM A. NEUMANN, MARY MUEHLEN MARING, CAROL RONNING KAPSNER, JJ., concur.

      . In 1994, the mother’s parental rights to two other children were terminated in Polk County, Minnesota.

      . The parents have not raised a separation-of-powers argument. See State v. Hanson, 558 N.W.2d 611 (N.D.1996).

      . The father's reply brief in this Court claims N.D.C.C. § 27-20-44(l)(b)(2) should be struck down "as being improper, overbroad, vague, and unconstitutional.” The father, however, did not raise the issue in the juvenile court, or in his initial brief to this Court. The father’s constitutional argument about N.D.C.C. § 27-20-44(1)(b)(2) is not properly before this Court. See Peters-Riemers, 2001 ND 62, ¶ 25, 624 N.W.2d 83 (declining to address constitutional issue not raised in trial court); Hendrickson v. Hendrickson, 2000 ND 1, ¶ 20, 603 N.W.2d 896 (declining to address issue raised for first time in reply brief).