Everyone just move along, there’s nothing to see here. This one sputtered and fizzled to a finish. The Supreme Court split evenly (3-3) on overturning or upholding the court of appeals, and so sent the case back to the court of appeals. A disappointment for those of us looking for a statement by the state’s high court.
In CA Investments v. Kelly (Oct. 19, 2010), the District III Court of Appeals reviewed the results of an Eau Claire County trial. The jury found that the defendants fraudulently conveyed assets to avoid a judgment previously obtained by the plaintiff, also found that the defendants acted in intentional disregard of the rights of the plaintiff, and awarded a total of $275,000 in punitive damages against the defendants.
The defendants appealed, arguing that Wisconsin law does not permit an award of punitive damages for an underlying violation of the Uniform Fraudulent Transfers Act. The court of appeals agreed:
Thus, the general rule in Wisconsin is that there can be no punitive damages without compensatory damages. Nothing in the Uniform Fraudulent Transfers Act changes this principle of law. The legislature is presumed to know the state of the law when it enacts or amends legislation. Eau Claire Cnty. v. General Teamsters Union Local No. 662, 228 Wis. 2d 640, 646, 599 N.W.2d 423 (Ct. App. 1999). In enacting the Uniform Fraudulent Transfers Act, the legislature could have provided an exception to the compensatory damages requirement for punitive damages, if it intended that result. Because the legislature did not do so, we conclude punitive damages are not available under the Act.
This holding, presumably, affects only those cases where the violation of the Act results in injunctive or other non-monetary, non-compensatory, relief.
The topic of privilege for in-house counsel continues to grab headlines, at least in the world of lawyers. Although the most recent case on the topic isn’t from Wisconsin, I wanted to share it, because it highlights a single element of the privilege that can go overlooked.
In Gucci America, Inc. v. Guess?, Inc., 2010 WL 2720015 (SDNY June 29, 2010), the court determined that because in-house counsel was not an active member of any state bar, communications between the corporate plaintiff and its counsel were not privileged. There’s a more full description in Hinshaw & Culbertson LLP’s “The Lawyer’s Lawyer” newsletter, including this recommendation for in-house counsel:
In-house counsel departments should institute the same kinds of controls that are customary in law firms to ensure that all those who are held out as lawyers within the entity are in fact licensed and duly admitted in each jurisdiction where they practice. Such procedures will protect the attorneys individually and collectively and also demonstrate the corporate employer-client’s interest in ensuring that all in-house counsel retain licensure.
Ensuring proper licensure may be complicated when in-house legal staff are required to travel to and advise in multiple jurisdictions on behalf of their employer or, as occurred in this case, the lawyer moves between legal and non-legal roles. A detailed understanding of the adoption (or not) of ABA Model Rule 5.5 (multijurisdictional practice) wherever in-house counsel regularly operate, and of the registration procedures for in-house lawyers now available in many states, are now essential for all general counsel.
That’s good advice.
Very recently, I won a summary judgment motion in the defense of a legal malpractice case. The court concluded that the plaintiff knew or should have known of her injury and the identity of the party who caused the injury more than six years before she brought her action. The plaintiff claimed that my client, a lawyer, failed to timely record a mortgage, causing her to lose priority and therefore value when the property was eventually foreclosed on and sold, paying off other mortgage holders before getting down the line to her.
The case was a little different than most, because my client sent a letter to the plaintiff telling her that the mortgage in question was recorded some 17 months after it was executed. I successfully argued that the case law attributed to her the knowledge that she would have obtained had she investigated what the 17-month delay meant. It was helpful for my case that Wisconsin case law is fairly liberal in attributing knowledge to a potential plaintiff.
So just a word of warning — if a person has reason to believe he/she might have been injured, that person is charged with knowledge of what a reasonable investigation would have uncovered. Don’t let the statute of limitations start to run on you without you knowing it. If you think there might be a problem, or you aren’t sure, get in touch with a lawyer and check it out. Or check it out yourself. Don’t let your cause of action die of old age because you put off reasonable investigation.
The procedural history recounted in a recent Wisconsin Court of Appeals decision reviewing a ruling by Waukesha County Circuit Court Judge Michael Bohren is Exhibit 1 in demonstrating that arbitrations are often as costly, if not more so, than litigation. The parties in Sewart v. Silvercryst Ltd. agreed to arbitrate their construction dispute (a leaky basement claim) in the Metropolitan Builders Association arbitration system.
Hilarious highjinks (if you’re not one of the parties) ensued, including the arbitration board’s order directing the 
contractor to fix the problem rather than pay for it, the contractor’s failure to timely remedy the problem, recurrent basement flooding, a reconsideration request by the contractor, a second written decision by the arbitration board, and eventually, resort to the courts to enforce the decision.
Regardless of the outcome, the point is that arbitration can often lead to either an exercise in Solomonic baby-splitting, or end up back in court trying to enforce an order that’s required substantial legal wrangling to obtain. Which isn’t to say that litigation’s always better — this case could potentially have had similar issues even before a court of law.
Arbitration isn’t to be avoided at all costs, and it has its place. However, such a decision should be made carefully and only after consideration of possible outcomes, both good and bad. In general, I favor litigation — it has become more streamlined as courts permit the parties to work out their disputes, often frame the issues themselves, and limit discovery as the parties see fit. There may be a particular dispute that lends itself to a more specialized decision-maker, but those instances are the exception rather than the rule.
Flooded basement photo courtesy Massachusettes Dept. of Environmental Protection photostream via this creative commons license.
