09/29/2026
DA 25-0839
Case Number: DA 25-0839
IN THE SUPREME COURT OF THE STATE OF MONTANA
2026 MT 230
COPPER CITY GAMING, INC.,
Plaintiff and Appellant,
v.
ERIC ALLEN,
Defendant and Appellee.
APPEAL FROM: District Court of the Second Judicial District,
In and For the County of Butte-Silver Bow, Cause No. DV-2024-206
Honorable Luke Berger, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Lawrence E. Henke, Henke Law Office, PLLC, Philipsburg, Montana
For Appellee:
Mark Seghers, Montana Business Law, PLLC, Bozeman, Montana
Submitted on Briefs: August 5, 2026
Decided: September 29, 2026
Filed:
Clerk
Justice Katherine M. Bidegaray delivered the Opinion of the Court.
¶1 Copper City Gaming, Inc. appeals from the November 4, 2025 order of the Montana
Second Judicial District Court, Butte-Silver Bow County, which granted Appellee’s
motion to dismiss under M. R. Civ. P. 12(b)(6) on collateral estoppel grounds.
¶2 We address the following restated issues:
1. Whether the District Court erred by granting Eric Allen’s motion to dismiss
under M. R. Civ. P. 12(b)(6) on collateral estoppel grounds.
2. Whether the District Court erred under M. R. Civ. P. 12(d) by considering
matters outside the pleadings and resolving disputed factual inferences without
converting the motion to one for summary judgment and affording Copper City
a reasonable opportunity to present pertinent material.
¶3 The former settlement, upon which the collateral estoppel defense is based, shows
that the litigants agreed to waive some dispute involving storage-unit fees. It does not
conclusively show that the former tribunal actually or necessarily decided the factual issues
underlying the claims Copper City Gaming, Inc. (Copper City) raises against Eric Allen
(Eric). The District Court reached the opposite conclusion by resolving disputed inferences
from records outside the complaint without following M. R. Civ. P. 12(d). We reverse and
remand for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
¶4 Copper City alleges that, in July 2022, Eric entered into a lease agreement with
Copper City, acting through Russ Allen (Russ), who was one of the Copper City
shareholders at the time, for Copper City’s use of storage space that Eric was leasing.
Copper City alleges that Russ authorized four $3,600 payments, totaling $14,400, from
Copper City to Eric under the lease agreement. Copper City’s complaint alleges the lease
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agreement and payments were fraudulent and part of a conspiracy between Eric and Russ
and asserts Eric is liable for: (1) fraud; (2) violation of the Montana Consumer Protection
Act; (3) breach of contract; (4) unjust enrichment; and (5) civil conspiracy. Specifically,
Copper City alleges the lease used the wrong address and corporate name, Eric either
lacked authority to sublease the space or failed to provide usable space, and Copper City
did not store any property there.
¶5 The former action, DV-22-206, involved competing claims that both shareholder
groups mismanaged Copper City or misused corporate money. The action began in Copper
City’s name, but the court did not decide whether Russ had authority to sue without board
approval. Instead, by order dated February 16, 2023, the court substituted Russ and Camy
Allen as plaintiffs and declared the authority question moot. Copper City therefore was no
longer a named plaintiff, and the court left unresolved the extent of Russ’s authority to
prosecute claims on Copper City’s behalf. In later pleadings and the settlement documents,
Russ and Camy purported to act on Copper City’s behalf.
¶6 After the parties reached a mediated settlement in the former action, DV-22-206,
they stipulated under M. R. Civ. P. 53 and § 3-5-113, MCA, to the appointment of retired
Judge Gregory G. Pinski as Special Master to resolve disputes concerning the settlement
documents and the settlement’s implementation through dismissal. On December 1, 2023,
the Special Master signed an Order Resolving Settlement Disputes, which was filed
December 5, 2023. The Order required the parties to execute the attached Mutual General
Release and Settlement Agreement and other settlement documents. Under the settlement
documents, the McGraths purchased the Allens’ Copper City shares, and the parties
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accounted for corporate revenue, expenses, liabilities, and distributions through
September 30, 2023. Paragraph 10 of the Special Master’s Order—not the Mutual
Release—provided: “Any other disputes raised by the parties concerning various past
business decisions or expenses incurred by the other party or the Company (e.g. storage
unit fees, retained cash for collectors, expense disputes, etc.) are waived under the
Release.” The separate Mutual Release broadly covered the parties’ mutual claims in the
former action, including claims arising from Copper City’s operation and claims belonging
to the corporation, but it did not itself specifically identify storage-unit fees.
¶7 On February 23, 2024, counsel for the Allens and the McGraths signed a stipulation
authorizing the Special Master to dismiss “the above-entitled matter including any
counterclaims” with prejudice as “fully settled upon the merits,” with each party bearing
its own costs and attorney fees. Acting pursuant to the stipulation, the Special Master
entered an order on February 26, 2024, dismissing the former action and all counterclaims
with prejudice. The stipulation was filed the following day.
¶8 On July 22, 2024, Copper City filed the present complaint. Eric filed an answer to
the complaint on October 30, 2024. On March 6, 2025, Eric filed a motion to dismiss,
asserting that collateral estoppel (issue preclusion) barred Copper City’s claims.1 On
November 4, 2025, the District Court granted Eric’s motion to dismiss on the grounds he
raised. The court concluded that all four elements of issue preclusion were satisfied
1
Although Eric filed his answer before moving to dismiss, the parties and the District Court treated the motion as one under Rule 12(b)(6), and neither party challenges that characterization on appeal. We address the motion as the parties have presented it.
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because the former and present actions involved an identical issue concerning the
legitimacy of the storage-unit payments; the dismissal with prejudice constituted a final
judgment on the merits; Copper City was in privity with the McGraths; and Copper City
had a full and fair opportunity to litigate the issue in the former action.
STANDARD OF REVIEW
¶9 We review a ruling on a M. R. Civ. P. 12(b)(6) motion to dismiss de novo. Adams
v. Two Rivers Apartments, LLLP, 2019 MT 157, ¶ 5, 396 Mont. 315, 444 P.3d 415. We
likewise review a district court’s application of issue preclusion de novo for correctness.
Reisbeck v. Farmers Ins. Exch., 2020 MT 171, ¶ 10, 400 Mont. 345, 467 P.3d 557.
¶10 A decision whether to convert a motion to dismiss into one for summary judgment
under M. R. Civ. P. 12(d) is reviewed for abuse of discretion. Roaring Lion Ranch, LLC
v. YC Properties, 2026 MT 60, ¶ 10, 427 Mont. 201, 586 P.3d 278.
DISCUSSION
¶11 1. Whether the District Court erred by granting Eric Allen’s motion to dismiss
under M. R. Civ. P. 12(b)(6) on collateral estoppel grounds.
¶12 A motion grounded in M. R. Civ. P. 12(b)(6) admits well-pleaded facts and requires
all reasonable inferences in Copper City’s favor. Roaring Lion, ¶ 23. The court may reject
legal conclusions or speculation, but it may not select among competing factual
explanations. Roaring Lion, ¶ 23. Collateral estoppel is an affirmative defense under
M. R. Civ. P. 8(c)(1). A court may resolve issue preclusion under Rule 12(b)(6) only when
the defense can be determined from the complaint and information the court properly may
consider without conversion. Plouffe v. State, 2003 MT 62, ¶¶ 13-17, 314 Mont. 413,
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66 P.3d 316; Roaring Lion, ¶ 11. Claim and issue preclusion are distinct. Claim preclusion
generally reaches claims that were or could have been litigated, whereas issue preclusion
bars an identical issue actually or necessarily decided in a former adjudication. In other
words, claim preclusion involves the same cause of action, whereas issue preclusion bars
relitigating issues in a second suit based upon a different cause of action. Reisbeck,
¶¶ 14-15. A new label does not avoid preclusion, but the court still must identify the issue
the first tribunal determined. Reisbeck, ¶¶ 13-15; Baltrusch v. Baltrusch, 2006 MT 51,
¶ 25, 331 Mont. 281, 130 P.3d 1267. Four elements must be met for issue preclusion to
apply: (1) the identical issue at hand was decided in a prior adjudication; (2) the prior
adjudication resulted in a final judgment on the merits; (3) the party against whom
collateral estoppel is asserted was a party or in privity with a party to the prior adjudication;
and (4) the party against whom collateral estoppel is asserted had a full and fair opportunity
to litigate the issue in the prior adjudication. Benton v. Babcock, 2025 MT 277, ¶ 14,
425 Mont. 166, 580 P.3d 58 (citing Adams, ¶ 9).
Issue Identicality
¶13 The District Court concluded that the present storage-unit dispute was identical to
an issue resolved in the former action because the Mutual Release identified the McGraths
as acting individually and on behalf of Copper City and extended to claims of Copper City,
while paragraph 10 of the Special Master’s Order expressly referred to “storage unit fees.”
The settlement documents, however, did not identify Eric, the lease at issue, the address
listed in the lease, the four lease payments, the alleged inability to sublease, the alleged
failure to provide space, or any alleged misrepresentation. The proper question is not
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whether the McGraths could have discovered the transaction, joined Eric, or asserted
claims against him, but whether the former adjudication decided an issue Copper City must
establish here.
¶14 The present issues concern Eric’s alleged representations, intent, authority,
performance, receipt and retention of the money, and agreement with Russ. While the prior
and present actions share business background, factual overlap does not substitute for a
prior determination of the later issue. See Victory Ins. Co. v. Downing, 2023 MT 139,
¶¶ 19-20, 413 Mont. 80, 532 P.3d 850. Paragraph 10 of the Special Master’s Order
establishes a waiver of some storage-fee dispute, but it does not identify this transaction or
state that the Special Master found the payments legitimate or illegitimate. The District
Court had to infer both that paragraph 10 of the Special Master’s Order necessarily referred
to this lease, and that waiver of the dispute amounted to adjudication of the underlying
facts. Neither inference was compelled in Eric’s favor at the pleading stage.
¶15 The no-admission of liability clause found in the Mutual Release reinforces the
difference between compromise and adjudication, although this is not to say that a
settlement agreement can never support issue preclusion. Although Eric relied on the
statement in paragraph 10 of the Special Master’s Order that certain disputes were “waived
under the Release,” his motion sought dismissal only under issue preclusion and did not
present waiver or release as an independent contractual defense. The former litigants’
agreement to waive a dispute may bear on the settlement’s scope, but it does not
conclusively establish that the former adjudication actually or necessarily decided the
factual issues concerning Eric’s conduct. A consent judgment may foreclose an issue when
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the agreement clearly manifests that intent. Linder v. Missoula County, 251 Mont. 292,
296-97, 824 P.2d 1004, 1006-07 (1992). Whatever independent contractual effect the
settlement documents may have—a question we do not decide—they do not conclusively
establish adjudication of Eric’s conduct.
¶16 In Baltrusch, the first trials and judgments determined the misappropriations and
amounts; the later case added only a party’s participation. Baltrusch, ¶¶ 3-8, 27-28. Here,
no comparable factual finding adjudicated the lease between Copper City and Eric, the
$14,400, or Eric’s conduct. In Adams, the entity and its general partners pursued the same
defendant based on the same alleged negligent construction, but here, the former Copper
City case asserted no claim against Eric and did not determine his conduct. Adams,
¶¶ 2-4, 15-16, 23. Additionally, in Shelton v. State, 2025 MT 71, ¶¶ 30-33, 421 Mont. 327,
567 P.3d 285, a Utah court held an evidentiary hearing and expressly decided the same
issue later presented in Montana. No former order expressly decided Eric’s alleged fraud,
breach, unjust enrichment, or conspiracy.
¶17 The former proceeding must actually or necessarily decide the determinative facts;
related conduct alone is not enough. Brishka v. Dep’t of Transp., 2021 MT 129, ¶¶ 11-12,
404 Mont. 228, 487 P.3d 771. Copper City’s conspiracy claim against Eric includes Russ,
but that does not make every issue concerning Eric identical to the former shareholder
dispute. Although the actions share factual background, the complaint and materials
properly considered without conversion did not establish as a matter of law that the former
adjudication decided the issues concerning Eric’s alleged conduct.
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Finality
¶18 Section 3-5-113(1)(c), MCA, gives a special master’s civil order the same force and
effect as an order entered by the district court. The Special Master’s February 26, 2024
order dismissed the former action and all counterclaims with prejudice as fully settled on
the merits. We therefore conclude that the former action produced a final judgment on the
merits. That conclusion does not determine which issues the judgment resolved.
Privity
¶19 “Privity exists where ‘two parties are so closely aligned in interest that one is the
virtual representative of the other . . . .’” Denturist Ass’n of Mont. v. State, 2016 MT 119,
¶¶ 14-15, 383 Mont. 391, 372 P.3d 466 (internal citation omitted). Here, the relevant
question is whether Copper City—the party against whom Eric invokes nonmutual
defensive issue preclusion—participated in the former action or was adequately
represented by a party who did. Eric did not have to prove privity with Russ merely to
invoke the defense. Because Copper City was no longer the named plaintiff, Eric had to
establish that a party to the former action adequately represented Copper City’s interests
concerning this specific lease transaction. The McGraths’ eventual sole ownership,
economic interest in corporate assets, counterclaims, and execution of documents on
Copper City’s behalf give Eric a substantial argument. But the M. R. Civ. P. 12 record
does not conclusively establish who controlled the waiver, what the representatives knew
about Eric, or whether their personal settlement interests aligned with Copper City’s
interest in pursuing this transaction.
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Full and Fair Opportunity
¶20 Copper City bears the burden to show the absence of a full and fair opportunity to
litigate only after Eric establishes the first three elements. Baltrusch, ¶ 18. Although the
McGraths had access to Copper City records in the previous suit and therefore an ability to
investigate, that access does not conclusively establish that Copper City, through a legally
adequate representative, had a full and fair opportunity to litigate the issues concerning
Eric’s conduct. The assertion that the McGraths could have joined Eric confirms that they
did not. Copper City’s absence as a named party does not itself defeat issue preclusion;
rather, it makes adequate representation the controlling inquiry. On this Rule 12 record,
that representation was not conclusively established. In McDaniel v. State, 2009 MT 159,
¶ 45, 350 Mont. 422, 208 P.3d 817, we held that a party’s failure to raise particular defenses
does not establish the absence of a full and fair opportunity when the issue itself was raised,
briefed, and argued in the former proceeding. Here, the record does not conclusively
establish that a party adequately representing Copper City had a full and fair opportunity
to litigate Eric’s alleged representations, authority, performance, receipt and retention of
the payments, or agreement with Russ.
M. R. Civ. P. 12(b)(6) on Collateral Estoppel Grounds
¶21 Copper City’s complaint outlines concrete allegations—a written lease, identified
misrepresentations, lack of authority, no stored property at the storage unit, four payments
totaling $14,400, Eric’s receipt of the money, and concerted action with Russ. Whether
Copper City can prove the allegations is a later question. The District Court described the
allegations as “scant,” found no facts supporting Eric’s alleged leadership, called the claims
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suspicions, and concluded that only Eric’s degree of participation remained. It also drew
several inferences against Copper City: paragraph 10 of the Special Master’s Order
necessarily referred to this lease and these payments; the former parties’ access to records
meant they knew or should have known all material facts; the former accounting
encompassed the same $14,400 alleged loss, such that recovery against Eric would require
reconstructing the settlement accounting; and Eric’s alleged liability could not be
considered independently of Russ Allen’s conduct. Some of the District Court’s
propositions may prove true, but the complaint and the settlement documents did not
compel them. Discovery may show that the parties specifically discussed this lease, treated
the $14,400 in the accounting, or intended paragraph 10 of the Special Master’s Order to
resolve this particular transaction. Or discovery may show the opposite.
¶22 We reverse because the complaint and materials properly considered under
Rule 12(b)(6) did not conclusively establish that the former adjudication decided an
identical issue, that a party to the former action adequately represented Copper City
concerning this transaction, or that Copper City had a full and fair opportunity to litigate
the issues concerning Eric’s alleged representations, authority, performance, receipt and
retention of the payments, or agreement with Russ.
¶23 2. Whether the District Court erred under M. R. Civ. P. 12(d) by considering
matters outside the pleadings and resolving disputed factual inferences without
converting the motion to one for summary judgment and affording Copper City
a reasonable opportunity to present pertinent material.
¶24 M. R. Civ. P. 12(d) requires conversion to summary judgment when the court
considers and does not exclude matters outside the pleadings. The court must notify the
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parties and give them a reasonable opportunity to present pertinent material. Roaring Lion,
¶ 13. The decision whether to convert a motion to dismiss to summary judgment is
reviewed for abuse of discretion. Roaring Lion, ¶ 10. In certain circumstances, a court
may consider information from related proceedings without conversion. Roaring Lion,
¶ 18. In Roaring Lion, the same parties and counsel participated in both actions, the later
claims necessarily required reference to the underlying action, the parties could not claim
surprise from consideration of that record, and the court gave no indication that it relied on
other outside materials. Roaring Lion, ¶¶ 18-19.
¶25 Those circumstances are not present here. The District Court relied on the former
pleadings, procedural and discovery orders, the Special Master’s order and its descriptions
of the parties’ submissions, company records, accounting calculations, the mutual release,
the dismissal order, and the stipulation. It used those materials to decide which storage
dispute the parties raised; what they knew or could discover; whom they represented;
whether their interests aligned; whether paragraph 10 of the Special Master’s Order
encompassed this transaction; whether the accountings resolved the same loss; and whether
Copper City had a full and fair opportunity to pursue Eric.
¶26 Those uses required factual interpretation, not merely recognition of the existence
and contents of the former records. Even assuming the District Court properly could
consider the prior records without conversion, it could not use them to resolve disputed
inferences concerning what the settlement encompassed. Paragraph 10 of the Special
Master’s Order established that the former parties waived a dispute or category of disputes
involving “storage unit fees”; it did not establish conclusively that the waiver encompassed
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this lease, these payments, or Eric’s alleged conduct. Roaring Lion is distinguishable
because the same parties and counsel participated in both actions, the later claims
necessarily required reference to the underlying action, and the court gave no indication
that it relied on any other outside material. Roaring Lion, ¶¶ 18-19. This case involves
different parties, Eric’s absence from the former action, and express reliance on an
expanded record to decide disputed aspects of the defense. Plouffe provides the closer
analogy. There, the district court relied on extensive records from former proceedings to
resolve preclusion and had to exclude the materials or convert the motion, give notice, and
allow a response. Plouffe, ¶¶ 13-16. Meagher v. Butte-Silver Bow City-County, 2007 MT
129, ¶¶ 16, 20, 337 Mont. 339, 160 P.3d 552, likewise explains that conversion protects
the opportunity to counter outside material and avoid surprise.
¶27 The District Court did not notify the parties that it would treat the motion as one for
summary judgment or afford them a reasonable opportunity under M. R. Civ. P. 56 to
present evidence concerning the settlement negotiations, the storage dispute referenced in
paragraph 10 of the Special Master’s Order, the treatment of the four payments in the
accounting, corporate authority, or the signatories’ knowledge. Those matters bear directly
on issue identity, privity, opportunity to litigate, and possible duplicate recovery.
¶28 We reverse and remand. The District Court abused its discretion by using prior-case
materials to decide which storage transaction the settlement covered, whom the former
parties represented, what they knew, Eric’s role, and whether recovery would duplicate the
prior accounting, without following M. R. Civ. P. 12(d). On remand, the District Court
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may address any developed-record defense after the parties receive the procedures
applicable to that defense.
CONCLUSION
¶29 We hold only that the complaint and materials properly considered under
M. R. Civ. P. 12(b)(6) did not establish issue preclusion conclusively and that the District
Court could not resolve the disputed questions necessary to that defense by relying on
matters outside the pleadings without following M. R. Civ. P. 12(d). We reverse the
November 4, 2025 order and remand for further proceedings. Nothing in this Opinion
forecloses the District Court from considering any defense properly raised and developed
on remand. We express no view on whether the settlement documents have any
independent contractual effect on Copper City’s claims.
/S/ KATHERINE M. BIDEGARAY
We Concur:
/S/ JAMES JEREMIAH SHEA
/S/ LAURIE McKINNON
/S/ BETH BAKER
/S/ INGRID GUSTAFSON
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