My client sought return of the money under, among other things, a theory of unjust enrichment.  The trial court agreed that stolen money should be returned, and granted summary judgment to my client directing repayment.  The court reasoned that stolen money, if it can reasonably be identified as the stolen money, should be returned to its proper owner, much like any other type of property.  To permit a party to keep stolen money is bad public policy — for instance, it encourages serial thefts, and encourages people to “look the other way” when they knew or should have known about a crime.

This outcome is fair, even when the receiving party didn’t know at the time of receipt that the money was stolen.  After-acquired knowledge of the source of the mony is sufficient to fulfill the elements of unjust enrichment.

Photo courtesy of  CarbonNYC  under this license.

On June 14, 2011, the Wisconsin District III Court of Appeals agreed with the defendants:

In Wisconsin, a plaintiff does not have a personal injury claim until he or she has suffered “actual” injury or damage. Increased risk of future harm is not an actual injury under Wisconsin law.

In an exhaustive review of applicable case law, the Court of Appeals confirms Wisconsin’s requirement of actual injury or damages.  This case, while written in the context of a personal injury, can certainly be applied in other contexts, as demonstrated by the breadth of case law interpreted by the court in its analysis.  As plaintiff’s lawyers become more creative in their approaches, this case is certain to be useful in limiting claims that include risk of damage.

Before Governor Scott Walker signed the bill into law, Wisconsin did not statutorily limit punitive damages awards.  Now, for all cases filed after February 1, 2011, punitive damages cannot exceed twice the amount of compensatory damages recovered by the plaintiff, or $200,000, whichever is greater.

Unchanged is the basis for awarding punitive damages:  a plaintiff must still show that the defendant acted maliciously toward the plaintiff or in an intentional disregard of the plaintiff’s rights.

The appellate court recited the damages possibilities for property damages:

There are multiple ways to calculate damages in a lawsuit over injury to property. One is the cost to repair the property (i.e., replace the bricks). A second is the cost to restore the property (i.e., re-stain the bricks). A third way to measure damages is the diminished value calculation–”the difference between the value the building would have had if properly constructed and the value that the building does have as constructed.” W. G. Slugg Seed & Fertilizer, Inc. v. Paulsen Lumber, Inc., 62 Wis. 2d 220, 226, 214 N.W.2d 413 (1974). Any party may submit estimates of the cost of repair/restoration or diminished property value. Laska, 69 Wis. 2d at 314. The plaintiff is entitled to the smaller amount. Id.

It also discussed the economic waste rule:

The rationale for the economic waste rule is that if the cost to repair or restore a defect is so high as to exceed the diminished value of the property based on the defect, a party is unlikely to use the extra money to fix the defect. Instead, the party will keep the money and receive a windfall. See Nischke, 187 Wis. 2d at 118. Typically, this rule comes into play because the defendant, believing cost of repair evidence submitted by the plaintiff to be too high, submits evidence of diminished value for the fact finder to consider.

The application of the economic waste rule is not limited solely to a comparison of the diminished value measure of damages versus a cost to repair measure of damages. A fact finder presented with estimates for both a cost of repair and a cost to restore may determine whether the repair or restore option would result in unreasonable destruction to the property.

Because the economic waste rule did not require that the court consider diminished value, the appellate court upheld the trial court’s award.

Bricks photo courtesy TheArtGuy’s flickr gallery via this creative commons license.

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 first issue concerns a party’s continuous invocation of the Fifth Amendment privilege against self-incrimination in a civil action where that party later waives the privilege in the middle of trial when all discovery and preparation for trial is complete and the other party’s theory of the case has been established.  Federal case law instructs that this decision requires the trial court to balance the prejudice to both parties.  And one of the most important factors in the balancing test is the timing of the request to withdraw because invoking during discovery and then waiting until trial to withdraw runs the danger of undermining the purpose of discovery.  We find this authority persuasive and adopt it in Wisconsin. 

Second, the court addressed the duty to mitigate in intentional tort cases:

We again adopt persuasive federal case law which explains that expanding the duty to mitigate in such a way as to place a burden on the victim to investigate whether warning signals existed would allow tortfeasors to purposely exploit a victim’s weak internal investigation mechanism and then use it as an affirmative defense at trial.  We conclude that adopting Russell and Buske’s position would place too high a burden on victims.  Thus, as the trial court ruled, actual knowledge is required for the duty of mitigation to apply.

Finally, the court analyzed the damages provision of WOCCA:

And third, is the multiple damages provision of the Wisconsin Organized Crime Control Act (WOCCA) remedial such that the entire damage award is doubled?  The answer is “yes” because that provision, like its federal counterpart, is a remedy to address the private economic injury aspect of the violation, not the penal, criminal feature.  Therefore, we again affirm the trial court, and thus uphold its doubling of the entire damage award.

Cases of this size ($147 million damages finding remitted to $101.9 million) make it worthwhile for parties to chase down and elaborate novel issues.

municipal court judges 2001 photo courtesy Seattle Municipal Archives flickr gallery under this creative commons license

The first inquiry, where the injured party is self-employed and derives his income from the profits of a business, is to determine whether the profits of the business measure the injured plaintiff’s earning capacity, or the earning capacity of the business itself.  Featherly v. Continental Ins. Co., 73 Wis.2d 273, 276-77, 243 N.W.2d 806 (1976).  If the profits arise entirely or substantially out of the personal endeavors of the injured plaintiff, evidence of the diminution of profits may be received as bearing on the plaintiff’s lost earning capacity.  If, however, the income of the business is chiefly the result of the services of others or investments, the profits obtained by the business are inadmissible as evidence of the injured party’s earning ability.

A plaintiff seeking to establish business profits as evidence relating to a claim of loss of personal earning capacity must clearly connect the plaintiff’s injury with the lost profits of the plaintiff’s business.  Such foundational evidence includes the character and magnitude of the business including the number and value of other employees, fluctuations in value of the product and the market, the capital and assistance employed in the business, fluctuations in costs of labor and materials, the quality and value of the plaintiff’s services in the business before the accident, and the amount of profits of the business.

The idea is to prove the value of the plaintiff’s services before the injury, thus throwing light on the plaintiff’s earning earning capacity as connected to the profits of the business.  Evidence of the amount of profits should not be received until all the other necessary elements are shown.  The case law requires a clear causal relationship between the injury and the value of the lost earning capacity in order to compensate an injured plaintiff.

Businessman photo courtesy vandelizer’s flickr account via this creative commons license.

Damaged house courtesy abundantc flickr collection under creative commons license

Shadley sued Stys, seeking to recover about $100,000 in damages resulting from negligence and breach of contract when the Stys moved Shadley’s house.  Her damages included things like her dauther’s tuition, painting the house walls, and damage to a piano she left in the house for the move.  The Stys made a statutory offer to settle the case for $25,000, and at trial, the court awarded damages to Shadley in the amount of $14,976.

Shadley, of course, wanted her attorney fees paid, and so did the Stys, but the court was less than agreeable: 

Shadley’s definitions of “successful” reveal the contract’s apparent ambiguity. It does not seem to us that Shadley “bested” the Stys or that the result was “favorable” to her when she recovered only $14,976 after claiming a right to over $100,000. That her recovery was not “favorable” seems especially true in light of the Stys’ previous $25,000 settlement offer. Additionally, it seems unlikely that Shadley’s “aim or purpose” was to receive a $14,976 damages award after spending significantly more on attorney fees and turning down a $25,000 settlement offer. Accordingly, even adopting Shadley’s definitions of “successful party,” it is not at all clear to us that she is the party that satisfies them.

Nor is it clear that the Stys are the successful party using Shadley’s proposed definitions of “successful.” Surely it was the Stys’ “aim or purpose” to be free from liability on all counts. The trial court’s findings, that the Stys breached the contract and were negligent in some respects, are certainly not findings that are “favorable” or that demonstrate that the Stys “bested” Shadley.

In the end, the court reached what appears to be a baby-splitting decision:

A more rational reading of the provision would grant Shadley that proportion of her attorney fees that equate to her success at trial.  On remand, the trial court is directed to determine the total amount of damages Shadley sought to recover and calculate the percentage of that total on which she was successful, i.e., the amount Shadley actually recovered divided by the total amount of damages she sought to recover.  Allowing Shadley to recover her attorney fees only in proportion to her success seems to us the better reasoned and rational interpretation of the parties’ contract provision.  The Stys in turn, should receive that percentage of their attorney fees on which they were successful.  That is the portion of Shadley’s claim on which Shadley was not successful.  For instance, if the trial court were to determine that Shadley recovered only 20% of the total amount of damages she sought, she should receive 20% of her requested attorney fees and the Stys should receive 80% of theirs, for a total of 100%.   With these directions, we remand the case back to the trial court to redetermine attorney fees and statutory costs.

Two lessons are immediately apparent.  First, when drafting or signing a contract that contains an attorney fees provision, define your terms.  Second, if you hold an affirmative claim in a case where there is an attorney fees clause, take care in advancing damages beyond your expectation of ability to obtain them from the final fact finder.

THAT THE AMOUNT OF DAMAGES SOUGHT AND IN CONTROVERSY IS LESS THAN THE AMOUNT REQUIRED FOR REMOVAL TO THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WISCONSIN UNDER DIVERSITY OF CITIZENSHIP PURSUANT TO 28 USC 1332(A).

The appellate court disagreed:

The complaint clearly states Olson is seeking less than $75,000 in damages, not that she has, in fact, suffered less than $75,000 in damages.

The Court analogized the plaintiff’s position to that of a small claims plaintiff who proceeds in small claims court to obtain procedural benefits, even though the amount of damages might exceed the amount a small claims court may award. 

Cases like this emphasize the care that must be taken in word and phrase selection in pleadings and briefs.  Choosing phrases that don’t say exactly what you want to convey, no more and no less, can come back to haunt you.  Of course, even painstaking drafting cannot possibly take into account the endless possible issues that may later arise.  If you didn’t believe that writing is one of the most important crafts a lawyer can perfect, this case should convince you.

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.