Wisconsin Business and Commercial Litigation

There are all sorts of reasons to enter into, and continue with, litigation.  Not that anyone enjoys the process.  Much of the time, even plaintiffs feel as if they have been forced into it by the actions of others.  For many, however, business strategy demands certain litigation decisions and strategies.  This approach derives from a more complete view of the client and its goals.

For instance, certain insurance companies will take any case to trial that has a legitimate defense.  Likewise, many professionals choose to litigate rather than pay an early settlement demand.  The result for the plaintiff (and often, the defendant, as well) is the same, but the motivation, and business reasons for the decisions, are different. 

The insurance company develops a reputation as a tough defendant, and in the process hopes to obtain more favorable offers of settlement from future plaintiffs.  The professional protects his or her reputation (and perhaps a license). 

Civil litigants, when considering entering into, defending, or negotiating to conclude litigation, should be motivated first by their business goals.  Litigation should be used as a tool to protect hard-won marketplace positions, or to obtain a competitive advantage.  It is not an end in itself, but rather part of a complete strategy for business success.

In Yates v. Holt-Smith, May 14, 2009, the District 4 Court of Appeals confronts an issue that frequently arises in shareholder disputes, particularly in smaller companies that have grown significantly, or been otherwise successful:  When is a payment a dividend? 

In Yates, the company typically paid a year-end bonus to its two shareholders, based on annual profit over a certain amount.  Because this payment was based on the company’s profits, and paid based on ownership interest, rather than productivity, contribution, or the desire to retain either shareholder’s services, the payment was a dividend. 

The court goes on to discuss the existence and breach of fiduciary duty and the business judgment rule — less interesting, but still a good refresher.

It’s pretty apparent, even from a quick read, that neither of the two shareholders is a model citizen.  However, the trial court certainly found one more convincing than the other, which, I think, was the key to both the trial court and appellate court outcome.