Wisconsin Business and Commercial Litigation

Recently, I was reminded of the reasons that outside litigation counsel are an important addition to the legal services provided for an organization.  Like in-house counsel become adept at the many facets of contract and transactional practice, litigators, by virtue of experience, repetition, and volume, learn to identify potential problems in the litigation process and avoid them.  This is one reason, among others, that I believe litigation counsel should be the only contact with the opposing party until the litigation is completely concluded.

Even the negotiation of settlements can create problems for those who do not hammer out such agreements on a recurring basis.  In-house counsel (for those you who are reading this, I except you from this rank speculation) can forget that plaintiffs’ lawyers, unless you include in the original discussion something as simple as confidentiality, may demand additional compensation for adding a confidentiality provision later on.  Neglecting to negotiate this in the originally-agreed upon settlement package can needlessly increase the cost of the settlement.

You shouldn’t hire someone that you don’t trust to handle litigation.  Litigators expect, and we desire, that the client will have the final say on all matters important to a lawsuit, and particularly settlement terms.  But we also expect, and can serve you best, if you leave the communication with opposing parties entirely to us.

Once again, Northwestern Mutual Life is being sued by former representatives seeking overtime and wage pay protections under federal and state law.  The Milwaukee Business Journal article gives a more-detailed rundown of the current California-venued case and the history of this kind of claim against NML.

This kind of litigation is fairly common to organizations with large commissioned sales forces.  The challenge for these employers is to structure the relationships with an eye toward the various regulations by multiple layers of government.

A recent unpublished decision on dissolution and shareholder injury revisits the Supreme Court’s decision in Notz.  In Altergott v. Helene Altergott Family Corporation, 2008 AP1944 (June 16, 2009), the District 3 court of appeals cited Notz in its holding that the primary injury was to the corporation, rather than to the plaintiff shareholder. 

[O]ur definition of oppressive conduct “requires that those in control of a corporation willfully treated some of the shareholders in a wrongful manner to which other shareholders were not subjected.”

Step one in bringing (or defending) a shareholder oppression/dissolution claim must be to identify the primary injury and the injured.

In Parker v. Wisconsin Patients Compensation Fund, 2009 WI App 42, the District 4 Court of Appeals addressed the standards governing trial court scheduling order decisions.  The issue arose when the plaintiff argued that the key defense expert should have been barred from testifying because the defense failed to name the expert by the date.

For those worried about timely performance under scheduling orders, the most important discussion in the opinion is:

Consistent with Schneller II, we conclude that the excusable neglect standard set forth in Wis. Stat § 801.15(2)(a) does not apply to untimely motions to enlarge scheduling order deadlines. Rather, Wis. Stat. § 802.10 provides the “standards and procedures” courts apply to such motions. Moreover, requiring courts to evaluate untimely motions under the excusable neglect standard would infringe upon the circuit court’s broad discretion in addressing untimely motions to amend scheduling orders. See Teff, 265 Wis. 2d 703, ¶29; see also City of Sun Prairie v Davis, 226 Wis. 2d 738, 749-50, 595 N.W.2d 635 (1999) (courts have inherent authority to take actions that ensure their efficient and effective function).  As the supreme court explained in Schneller II, 162 Wis. 2d at 310, such discretion “permits the court to take steps ranging from granting the requested relief to dismissing the moving party’s case, [and] is absolutely essential to the court’s ability to efficiently and effectively administer its calendar.”

This comes as relatively good news to those who hope to convince a court that missing a scheduling order deadline shouldn’t interfere with the presentation of the case on the merits.  In that the decision is now committed even more firmly to the court’s discretion, knowledge of the judge is imperative.

In Krier v. Vilione, released on June 10, 2009, the Supreme Court revisited issues addressed in Notz, previously discussed below, of shareholder claims, derivative action, and shareholder standing.   The difference is that the shareholder claims in Krier depend upon a showing of accountant malpractice, and a corresponding requirement that the plaintiffs demonstrate standing to bring a claim based upon an accountant assisting his shareholder brother rip off the corporation, which arguably resulted in damage to the other shareholders. 

As with Notz, the Krier case is not a quick read, but worth a look for those interested in shareholder issues and professional liability.  Once again, Bradley and Abrahamson part ways with their colleagues, this time complaining that the court doesn’t follow the reasoning established in Notz (which, ironically, Bradley and Abrahamson dissented from, as well).

In Krier, the majority decided that:

In summary: The plaintiffs do not have standing to assert these claims against the defendant for at least three reasons.  First, the plaintiffs’ claims are inconsistent with traditional corporate law principles and the damages sought are far beyond that afforded to a plaintiff in a derivative action.  In order to initiate a derivative action, a plaintiff must be a current shareholder of the subject corporation.  Second, the plaintiffs’ claims are quite distinguishable from accountant third-party liability jurisprudence, which has traditionally allowed claims for the foreseeable injuries resulting from the accountant’s negligent acts, i.e., the injuries that result when a third party takes action based upon reasonable reliance on misinformation provided by an accountant.  Third, the damages claimed by the plaintiffs do not correspond with the claims alleged

Bradley and Abrahamson argue that the majority’s reasoning is inconsistent with Notz:

This case and Notz are in direct conflict.  In Notz, one shareholder got a disproportionate financial benefit.  It was as though one shareholder was able to put money in its pocket while another was not.  The court concluded that because one shareholder did not receive the same financial benefit as the other, a direct claim could be maintained.  In this case, Michael Vilione actually did put corporate money in his pocket, yet the majority concludes that Krier, who did not receive the benefit, has no direct claim.  Ultimately, due to this conflict with Notz, the majority here confuses the law, giving practitioners and judges no real guidance.

 The plaintiff’s damage claim was also very creative, based upon an expert opinion of the future value of the company if the misappropriations had been prevented.

On June 12, 2009, Milwaukee County Judge Thomas Cooper concluded that the City of Milwaukee’s sick leave ordinance was both improperly enacted and an unconstitutional exercise of the City’s police powers.  The Journal-Sentinel more completely summarizes the decision and order.  The legal deficiencies identified by the court are fairly easily remedied, so even if the decision holds up on appeal, the legislation is likely to re-appear in the next couple of years.  The decision itself is worth a look, a little formulaic, but exhaustive and well-researched.  I can’t find the decision itself online yet.  When I do, I’ll try to post a link.

A recent e-discovery decision out of Minnesota federal district court (the Zurn Pex plumbing products litigation) reminded me of the high stakes involved in cases dependent upon electronic information.  The staggering cost of discovery of electronic information can alter the entire economic balance of a lawsuit. 

Plaintiffs request roughly 361 gigabytes of data. . . .  Zurn represents that by using the generally accepted standard of 75,000 pages per gigabyte, Plaintiffs’ request amounts to nearly 27 million pages of documents. . . .  If the K drive were not searched, the remaining data consists of 48 gigabytes.   Zurn also states that a search of the custodians’ emails and J drive files will require approximately seventeen weeks and cost $1,150,000, exclusive of vendor collection and processing costs, to review and process the data.

A couple other issues of note — the court mentions that counsel worked through discovery “amicably.”   It’s a sign of the declining level of professionalism in law practice when counsel who work amicably together are sufficiently anomolous to warrant comment. 

For clients, this decision provides something for you to consider.  Counsel who fight bitterly with opposing lawyers, while sometimes scratching an emotional itch on the part of the client, often succeed only in increasing the cost and length of litigation.  Professionalism and civility can make a distasteful event like a lawsuit a little less distasteful.  And as this decision proves, having counsel that are reasonable can, in the end, save millions in discovery and motion costs. 

In a recent, but unpublished, decision, the court of appeals interpreted the language of a contract that set a formula for calculating a bonus for a sales employee.  The dispute centered on the following contract term:

The Company will be the sole and final arbitrator with respect to interpretations and application of all aspects of this Plan including, but not limited to the amount of commission and/or bonus due any plan participant.

The company argued that the “sole and final arbitrator” phrase permitted it discretion in determining the amount to paid to the employee, despite the formulas established in the contract.  The employee agreed that the company reserved discretion, but argued that it exercised it unreasonably.  The court, however, disagreed with everyone: 

This language does not convey general discretion, limited or absolute, to determine a bonus amount. Rather, it states that if a dispute arises over the meaning of an agreed upon formula, CNH will be the final arbitrator of that dispute.

The decision is a fairly well-supported, if very literal, interpretation of the specific language.  However, it’s certainly worth reading, particularly if your company uses bonus contracts that attempt to reserve discretion in the calculation.  Take care with your language, and say what you want to say.  While contracts can never be written to cover every contingency, it’s best to get a few eyes on the language before you make any big decisions. 

The most tragic part of this case, from the clients’ points of view, is that the roughly $30,000 dispute ended up in the court of appeals.

Over the past few days, I’ve been reminded of the importance of obtaining proper service, and the sometime difficulty in doing so.  The courts in Wisconsin have been increasingly stringent on observing the formalities of proper service, particularly on corporations and other organizations.  It hasn’t been too long ago that a case was dismissed when the summons and complaint were served on an employee of the building in which the defendant’s headquarters was located, even when he said he was authorized to accept service.  This can be an overlooked area of potential advantage in early  motion practice.