Wisconsin Business and Commercial Litigation

In Ciccantelli v. Bishop’s Grove Condo Association, 2011 WI 36, the Supreme Court addressed a challenge by Bishop’s Grove to the attorney representing the Ciccantellis.  Opposing parties often make noise about conflicts of interest, but typically, unless there’s a current conflict or past representation on an issue directly related to the case, it goes nowhere.  Here, though, the Supreme Court broadened the standing requirements for parties to disqualify opposing counsel. 

The main issue was whether a nonclient party (one who is not a former or current client of opposing counsel) had standing to to move for disqulification of opposing counsel.  The court, in a bit of a fractured opinion, found that they do, but disagreed about how to make that decision.  Justices Abrahamson, Bradley, and Crooks, joined in part by Justice Prosser, effectively broadened the standing requirements to include nonclient parties.  Justices Roggensack, Gableman, and Ziegler agreed that the requirements should be broadened, but disagreed on the analysis required for the determination. 

In short, this case means that nonclient parties can move to disqualify opposing counsel when opposing counsel (or his or her firm) has has represented a nonparty on matters closely tied to the case.  For more analysis of the decision, have a look at Joe Forward’s article for the State Bar of Wisconsin.  This decision is sure to bring a rise in disqualification motions as parties and lawyers test the parameters of the new standards.

Writing for the State Bar, Timothy Edwards does a good job of breaking down the new language relating to awards of costs and fees for a frivolous action.  While the language relating to payment (assuming a finding of frivolousness) now makes award of costs and fees mandatory, I don’t expect to see a big change in the impact of the law.  The determination of frivolousness still requires a higher burden of proof (clear and convincing), and the typical finding that the claim or claims are without any factual or legal support.  Judges haven’t been very anxious to exercise their power in this way in the past, and there’s no reason to think this new language will alter that approach.

Due to a recent decision on the business records exception to the hearsay rule, this has been something of a hot topic.  A fellow southeastern Wisconsin blogger recently wrote about the subject, giving a thorough and typically well-thought-out explanation of the exception.  He discusses the recent Palisades Collection case and the often-missed hearsay-within-hearsay that can appear in business records.  From what I’ve seen of Milwaukee County Circuit Judge DiMotto’s blog “Bench and Bar Experiences,” it’s been a review of various rules of evidence, and the Judge’s take on them.  If you get into the courtroom, have a look at it.  It’s definitely worth the time.

In Johnson v. Cintas Corp. No. 2, the District II court of appeal reviewed a default judgment entered by Judge Bastianelli in Kenosha County.  The  plaintiff’s summons named Cintas Corp. as the defendant, and was served on Cintas Corp.’s registered agent.  When Cintas Corp. didn’t answer, the plaintiff moved for a default judgment.  At the hearing on the default, Cintas Corp. informed the judge that the correct party was a different entity — Cintas Corp. No. 2 (a wholly-owned subsidiary of Cintas Corp.), the plaintiff’s employer.  The court granted the plaintiff’s oral motion to amend the summons to name Cintas No. 2, and immediately granted the motion for default judgment against Cintas No. 2. 

The court of appeal reversed the default judgment, reasoning that Cintas No. 2 had never been properly served:

A Wisconsin court obtains personal jurisdiction through correct service of process upon a defendant. See WIS. STAT. 801.05.  The United States Constitution requires that a court have personal jurisdiction over a defendant in order to render a judgment in a civil suit.  See Haselow v. Gauthier, 212 Wis. 2d 580, 586, 569 N.W.2d 97 (Ct. App. 1997); see also U.S. CONST. amend XIV.  In order to comply with due process, Wisconsin law mandates a strict compliance with all procedural elements of service.  Mech v. Borowski, 116 Wis. 2d 683, 686, 342 N.W.2d 759 (Ct. App. 1983) (“Wisconsin requires strict compliance with its rules of statutory service, even though the consequences may appear to be harsh.”).  These requirements include naming the defendant in the summons and complaint. WIS. STAT. §§ 801.02(1), 801.09(1).

Pursuant to WIS. STAT. § 801.02(1), “[A] civil action in which a personal judgment is sought is commenced as to any defendant when a summons and a complaint naming the person as defendant are filed with the court.”  WISCONSIN STAT. § 801.09(1) provides that the summons shall contain the names of the parties to the action.  “Proper commencement of an action serves two purposes: it gives notice and confers jurisdiction.”  American Family Mut. Ins. Co. v. Royal Ins. Co. of Am., 160 Wis. 2d 455, 459, 465 N.W.2d 841 (Ct. App. 1991).  Indeed, a court has jurisdiction only over the parties named.  This court has observed, “Citizens deserve the legal protection of being specified as a party to a lawsuit before jurisdiction attaches over them.  Any court action taken before the party is named is a deprivation of that protection.”  Bulik, 148 Wis. 2d at 446.

Because the summons and complaint that were served did not accurately name the defendant, and were not served on the proper defendant, the court lacked authority to enter default judgment. 

Even if you know what the dispute is all about, read the summons and complaint carefully, including the captions.  You never know what fun defenses you might find.

Astronaut twins photo courtesy oskay’s flickr gallery via this creative commons license.

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.

In Miller v. Hanover Ins. Co., the Wisconsin Supreme Court undertook a careful analysis of the law surrounding the re-opening of default judgments, particularly the five interest of justice factors under Wis. Stat. s. 806.07(1)(h).  Notably, the court determined that no finding of excusable neglect is required under (1)(h) to re-open a default judgment:

We conclude that M.L.B., and subsequent cases, unambiguously establish that a circuit court is to consider the five interest of justice factors in determining whether extraordinary circumstances are present under Wis. Stat. § 806.07(1)(h) such that relief from a judgment, including a default judgment, is appropriate. M.L.B., 122 Wis. 2d at 552­53; see Connor, 243 Wis. 2d 279, ¶41 (applying the five interest of justice factors to determine whether the circuit court properly exercised its discretion in denying relief from default judgment under para. (1)(h)); Johns v. Cnty. of Oneida, 201 Wis. 2d 600, 607­08, 549 N.W.2d 269 (Ct. App. 1996) (same). A finding of excusable neglect is not required under the extraordinary circumstances test to obtain relief from a default judgment under para. (1)(h). See generally M.L.B., 122 Wis. 2d 536.

The court went on to apply each of the five factors to the facts in the case, which will, of course, be of use to those of us who find ourselves behind a default judgment 8 ball.  There is a spirited concurrence from Justice Bradley, who reaches the same result for drastically different reasons, concentrating on the “extraordinary circumstances” phrase, arguing that the majority’s approach is too formulaic.

Upside down house courtesy Sideshow Bruce’s flickr gallery via this license.

In Simandl & Murray v. Mainstreet Homes, the appellate court reviewed Milwaukee County Judge Elsa Lamelas’s grant of summary judgment to a law firm suing to recover unpaid legal fees.  When the affidavits supporting the summary judgment motion didn’t attach or authenticate the bills, the circuit court relied on the bills that were attached to the complaint.  While the defendant had denied in its answer that the bills were accurate, and that the bills reflected reasonable work and fees, the court granted summary judgment anyway, and the appellate court upheld the decision.  I always thought that denials in the complaint were sufficient until the moving party proved up a prima facie case by evidence as defined in the statutes, but apparently, the standards are now a little more generous.

Mainstreet’s argument fails because it ignores the summary judgment procedure. The trial court was first obligated to look at the pleadings. The complaint stated that Simandl & Murray was retained by Mainstreet, Simandl & Murray provided legal services to Mainstreet which amounted to approximately $27,000, Simandl & Murray sent requests for payments along with itemized bills and no money was paid on the account, and Mainstreet did not object to the bills. In addition, the complaint contained the letter of engagement stating what work Simandl & Murray was to do for Mainstreet and the hourly rate of the lawyers. It also contained all the itemized bills sent to Mainstreet. The answer filed by Mainstreet denies knowledge or information sufficient to form a belief as to the truth of the averments, but also lists the following as affirmative defenses: improper service of process; lack of personal jurisdiction; that Mainstreet is a dissolving limited liability company and any distribution of its assets is subject to Chapter 184 of the Wisconsin Statutes; and finally, that Simandl & Murray breached the contract by engaging in a conflict of interest. Inasmuch as the pleadings state a claim, the trial court was required to then examine the moving party’s affidavits for evidentiary facts and other proof. Here, Attorney Simandl explained in his affidavit that his firm was hired by Mainstreet, that there was no conflict as the issue of a conflict was addressed in the letter of engagement, that work was done and monthly bills sent, and that Mainstreet failed to pay them.

It’s an interesting decision, and definitely worth reading the entire analysis.  I can tell you that my summary judgment submissions will not change as a result of this case, and I don’t think that most others will change theirs, either.  But it’s good to know that you’ve got options.

By the beginning of next year, Wisconsin will have new rules governing e-discovery.  In the Wisconsin Law Journal, Jack Zemlicka writes about the path and content of the new rules.  The rules aren’t final yet, and will require some additional tweaking, but they generally follow the outline of the federal rules on the same topic.

E-discovery, much discussed in the past five years or so, hasn’t made as much of a day-to-day impact as was predicted (buth then again, what ever does?  remember the swine flu epidemic, the avian flu, the year 2000, etc.?).  Nevertheless, in cases where e-discovery is important, it can become one of the central issues in the case, and certainly one of the most expensive components of discovery. 

In federal court, many lawyers have taken to using e-discovery as a crowbar to open opponents’ wallets and get a case resolved through financial blackmail rather than through consideration of the substance of the claims and defenses.  While I don’t at this time quibble much with the details of the suggested rule, my fervent hope is that Wisconsin courts will police the use of the rule in a way that preserves the facts of the case as the most important part of the dispute.

computer photo courtesy dlisbona’s flickr gallery via this creative commons license

In Loppnow v. Bielik, the court of appeals reversed the decision of Waukesha County Circuit Court Judge Michael Bohren that the plaintiff hadn’t exercised reasonable diligence in attempting to personally serve the defendant before resorting to service by publication.  The court of appeals explained its reasoning:

The guiding principle in these cases is that, when pursuing any leads or information reasonably calculated to make personal service possible, the plaintiff must not stop short of pursuing a viable lead–or in other words, stop short “of the place where if [the diligence] were continued might reasonably be expected to uncover an address of the person on whom service is sought.” Haselow, 212 Wis. 2d at 589. In West, the plaintiff stopped short of pursuing information he had about the defendant’s whereabouts, and also stopped short of making an inquiry to either his relatives or defendant’s relatives who were likely to know the defendant’s whereabouts. West, 82 Wis. 2d at 164-65. In Haselow, the plaintiff stopped short of attempting to locate the defendant in Hawaii despite information from the defendant’s father that he was living there. Here, there is simply no evidence that Loppnow “stopped short” in his pursuit of Bielik’s address, in Orlando or elsewhere.

If you’re like me, you’re wondering what good this definition of “reasonable diligence” is.  How can you ever tell when you’re at a place where if diligence were continued, you might find the address of the person you’re looking for?  Don’t you only know that if you’ve taken the step and it either succeeds or it doesn’t?  And if it doesn’t, how can you know whether the next thing you try won’t do the trick?   The next private investigator you hire may be the one who gets the information.

This isn’t the first time a court has given us the “I’ll know it when I see it” standard, though.  I think the court in this case was influenced by defense counsel’s close personal relationship with his client’s family and his related refusal to provide any information permitting service.

The court’s analysis (although short) of the adequacy of service by publication is also instructive.  While it doesn’t provide a wealth of guidance, this case should figure prominently in your next sufficiency-of-service argument.