Wisconsin Business Law Blog : Waukesha, New Berlin, Oconomowoc Corporate & Real Estate Lawyer & Attorney

Businesses sometimes seek to appear in court through their officers or other employees, and wonder whether this can be done.

The Wisconsin Constitution provides that any individual may represent himself/herself in court.  Unless licensed as an attorney in the state, however, no person may represent another person, corporation, partnership, association or organization in court; doing so constitutes the unauthorized practice of law according to Sec. 757.30(2) of the Wisconsin Statutes..

A business may be represented by a duly authorized employee in small claims court, by statutory exemption.  Otherwise, a nonlawyers' representation of a business in ccourt, regardless of its form (unless it is a sole proprietorship, of course) is punishable as a misdemeanor, and can constitute contempt of court.

It may also lead to the dismissal of an action commenced by the business represented by a nonlawyer, or default judgment against a business which seeks to defend itself through a nonlawyer.  This is because the pleadings signed by the nonlawyer are considered fundamentally defective.

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In Frank D. Gillitzer Electric Co.v. Andersen, a Wisconsin Appellate Court found that a provision in an employment contract that required an employee to repay certain training costs if the employee did not stay with the employer for four years after the training was completed did not violate Wis. Stats. § 103.465.  This was the case even though there appeared to be no disagreement that the “separate” explicit noncompete portion of the employment contract was overbroad and did violate §103.465.  This decision follows a the recent Wisconsin Supreme Court decision in Star Direct v. Dal Pra where the court appears to look more favorably about reading divisibility into employment contracts (as opposed to striking all restrictive covenants in an agreement containing an overbroad covenant). This holding brings up some interesting questions to consider when drafting or litigating noncompetes. What would the result be if the employer would set forth in the employment agreement that 10% of an employee's earnings during first 5 years of employment were really excess payments (or training costs) and if she leaves during that 5 year period, she owes the company 10% of her earnings during her employment?

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When a business is sued, it should report the action to its insurance company, as soon as possible.  Sometimes, an insurer will deny coverage of the claim, asserting that a certain exclusion in its policy is applicable, or other policy defenses.

In Wisconsin, however, this is not necessarily the end of the story.  If there is any possibility that coverage may exist given the terms of the claim made against its insured, the insurer is required to provide its insured with a defense attorney at its cost, and seek a stay of the action while the court determines whether it owes coverage under its policy.  It's failure to do so may result in it being held liable for the claim and its insured's defense costs, regardless of whether coverage actually exists under the policy.

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For over 50 years, Wisconsin has been deciding cases related to covenants not to compete in working relationships under Wisconsin Stat. § 103.465. On July 14, 2009, in an opinion authored by Justice Michael J. Gableman, Wisconsin’s Supreme Court changed the way that statute will work, much to the benefit of employers. Here’s what they did.

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In a recent decision, Harvot v. Solo Cup Company, 2009 WI 85, the Wisconsin Supreme Court determined there is no right to a jury trial under Wisconsin's Family and Medical Leave Act.

The Court rejected the argument that a jury trial should be provided in Wisconsin because it is available under the Federal Act, noting that the Wisconsin Act is different in several respects from the Federal version.  It noted that the Wisconsin Act does not expressly provide for jury trials, and held that such a right cannot be implied.  Finally, it determined where no jury trial is provided for by statute, a constitutional right to a jury trial exists in Wisconsin only as to causes of action recognized in the common law prior to adoption of the Wisconsin Constitution in 1848.

Employers faced with a civil action for damages based on Wisconsin's Family and Medical Leave Act therefore will not have to face a jury, which may be more influenced by emotion and sympathy for a plaintiff than a trial judge.

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In a recent decision, Star Direct, Inc. v. Del Pra  www.wisbar.org/res/sup/2007ap000617.htm the Wisconsin Supreme Court determined that where an employment contract contains restrictive covenants which address separate specific interests of employers, the fact that one of those covenants is overbroad and therefore illegal does not necessarily render other covenants unenforceable.

The contract in that case contained provisions restricting the employee from engaging in business similar to that of the employer, restricting him from contacting past and present customers of the employer, and requiring the employee to hold certain information derived from the employer confidential.  The court determined that the covenant restricting the employee from engaging in similar business was overbroad, but that the other covenants addressed separate legitimate concerns of the employer which would remain enforceable.  Therefore, those covenants are divisible from the invalid covenant.

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According to Section 19.36(3) of the Wisconsin Statutes, the records of those entering into contracts with government constitute public records, and therefore open to public inspection upon request, subject to specific exemptions set forth in the law.  As governments generally, and particularly local governments, look more and more to private contractors to perform or assist in performing public services, businesses that enter into such agreements must be aware of the ramifications of this statute.

This statute has not been construed to apply to any record of a public contractor, but rather to records which are specifically related to performance of the contract.  As those records are deemed public records, they should not be destroyed except in accordance with the law (normally, public records are to be retained at least 7 years).  Also, since such records are, in effect, presumptively open for inspection by the public, businesses which contract with government must understand that a public records request applicable to such records may be used as an informal discovery device by parties seeking to make a claim against the business or the government.

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The court battle between IBM and Dell over the employment of former IBM M&A chief David Johnson provides even more evidence that Noncompete Agreements are highly unique contracts that often lead to some highly unique arguments in litgation. It appears Mr. Johnson is arguing that because he “intentionally” signed the noncompete on the wrong line, it is not valid.  In other types of transactions (and maybe this one too) this type of admission would most likely lead to a misrepresentation, fraudulent inducement, or similar common law claim that could open up a party to significant liability.

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The current dispute involving the University of Kentucky and its former men's basketball coach, Billy Gillispie, is an example of a not so uncommon problem with informal agreements. In general, “agreements to agree” (aka “letters of intent” or “agreements in principle) are not binding contracts under Wisconsin law. Instead, they are tools used to clarify significant points of a transaction in order to more easily draft the “final” documents. Unfortunately, the “final” documents are not always drafted and signed. As in the Gillispie situation, this often leads to one side of the transaction arguing that the letter of intent was actually a binding contract. A good practice is to make it absolutely clear in any letter of intent that it is not binding and then, of course, to formalize any agreement in a definitive document or clearly terminate the letter of intent with some type of writing.

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Buried deep within Wisconsin's massive 2009 Biennial Budget Bill, Assembly Bill 75, are proposed changes to the contributory negligence law which could create extensive liability for businesses which are only minimally involved in causing injury to a plaintiff.

Currently, the law provides that a plaintiff may recover from a defendant all of his damages only if the defendant is found to be more than 51% negligent.  Such a defendant is jointly and severally liable for the plaintiff's injuries.  Assembly Bill 75, however, would change the law so that a defendant would be jointly and severally liable for all injuries, and therefore all damages, if the defendant is found to have been as negligent or more negligent than the plaintiff.

The implications are obvious and potentially devastating.  If an employee of a business participates in causing injury, and it is determined that his negligence represents, for example,  only 5% of total causal negligence, his employer could be liable for all damages sustained by the plaintiff if it is determined that the plaintiff was 5% negligent or less than 5% negligent.

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Legislation allowing employees bringing successful discrimination claims against businesses to obtain compensatory and punitive damages along with reimbursement for back pay, reinstatement, costs and attorneys fees, has been adopted by the Wisconsin Legislature and sent to the Governor for signature.  2009 Senate Bill 20, www.legis.state.wi.us/2009/data/SB20-SSA1.pdf, previously commented on in this blog, will apply to acts of employment discrimination which are first committed on the effective date of the act, which will be the day after its publication, or on the second day after publication of the 2009-11 biennial budget, whichever occurs later.

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Proposed legislation would dramatically increase damages available in Wisconsin in employment discrimination cases.  Currently, Wisconsin law only allows a successful claimant the remedies of reinstatement (or front pay), back pay, attorneys fees and costs.  2009 Senate Bill 20, if enacted, would also permit a person discriminated against to bring a circuit court action to recover compensatory and punitive damages, and attorneys fees and costs related to the action.  The circuit court action could be brought after completion of administrative proceedings before the Department of Workforce Development Equal Rights Division and the Labor and Industry Review Commission.

The legislation would provide that no such action could be brought against the state, state agencies, local governmental units or employers employing fewer than 15 individuals.

The legislation would put caps on the amount of damages awarded based on the number of employees employed by the defendant, as follows: $50,000 if there are 100 or fewer employees; $100,000 if there are more than 100 but fewer than 201 employees; $200,000 if there are more than 200 but less than 501 employees; and $300,000 if the defendant employs more than 500 employees.

In addition, the circuit court would be required to order the defendant to pay the court a fee 10% of the amount of damages awarded.  Fifty percent of that fee would be transferred to the Department of Administration and credited to the Department of Workforce Development which administers the fair employment law, and fifty percent would be retained by the county treasurer to pay for circuit costs operating costs.

The fee provision may arguably be in the nature of a penalty or forfeiture for discriminatory conduct, which raises various issues regarding its legality.  However, current Wisconsin case law allow government considerable latitude in imposing fees, where they can be shown to be reasonably related to the costs of operation of a regulatory system.

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The 2009 Wisconsin Budget Bill contains proposed changes in condemnation law which may substantially impact on the ability of business property owners to successfully challenge condemnation or contest the amount of compensation awarded.

The Wisconsin Department of Transportation is sponsoring the proposed modifications.  Currently, an owner of land subject to condemnation may recover attorneys fees incurred in litigation with a condemnor.  The DOT's proposal would limit the amount of an owner's attorneys fees paid by the condemnor to 1/3 of any increase in the amount proposed as an award by the condemnor prior to an attorney's involvement.  For example, if an owner is offered $50,000 for property, and through litigation the award is increased by settlement or judgment to $200,000, resulting in an increase of $150,000, the amount of attorneys fees for which the condemnor is liable will be $50,000.

The DOT claims that this change in the law will not result in any decrease in the amount an owner receives for the property being taken.  However, the likely result will be that property owners will be less likely to contest condemnation and condemnation awards, and more willing to accept the amount they are initially offered.

The fact that the law currently allows the owners of business property to recover all their attorneys fees provides owners with a great deal of leverage in negotiating successful compensation awards when their property is taken by the state.  If the law is changed as proposed, the governmental entity seeking compensation will be placed in a much better position, and property owners will be much more inclined to accept the governments offer rather than contest the matter through litigation.

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In business litigation, the question often arises which person among the employees of a corporation, limited liability company, partnership or association should be deposed in order to most effectively discover what information a business entity which is a party to the litigation has regarding the dispute, and what kind of testimony the entity would present at trial. Sometimes this can be obvious, as in cases where it is clear who was involved in the transaction at issue. Often it is not, however, and often a litigant does not become aware of important witnesses until depositions and discovery are well under way.

Wisconsin law (and the Federal Rules of Civil Procedure) provides a valuable tool which may be used by a litigant in these situations. Instead of seeking the deposition of a particular individual employee of an entity, a party seeking discovery may require the business entity itself to identify and produce the witnesses it considers best able to answer questions on particular topics. This is done by serving the business entity with a Notice of Deposition indicating that the entity’s testimony is sought regarding topics specifically identified in the Notice. The entity is then required to identify, and produce for deposition, those among its employees best qualified to answer questions on those topics.

There is an obvious benefit in utilizing this procedure. If a party seeks to depose a particular employee of the entity, believing that employee is knowledgeable of the issues being litigated, the employer-entity may maintain in the future that such employee is not really knowledgeable of the circumstances, or not as knowledgeable as another of its employees. It could also argue that the employee actually deposed lacked the authority to bind the entity by his testimony, rendering the deposition useless.

Once the entity has been required to select and identify the employees it considers best qualified to be deposed, however, it will not be in a position to claim later that those employees were not qualified, or were not authorized to serve as witnesses for the entity.

Any litigant involved in business litigation should give serious consideration to the use of this discovery tool.

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In D.L. Anderson’s Lakeside Leisure Co. v. Anderson, 2008 WI 126 (filed 2 Dec. 2008) the Wisconsin Supreme Court addressed the interplay between tradenames, noncompete agreeements, and tort law. Anderson involved an asset purchase agreement whereby Seller agreed to sell certain assets, including seller’s tradename, to buyer and seller agreed to a noncompete agreement with buyer. The lower court found that the Seller breached the noncompete agreement and infringed on the tradename that Buyer purchased. On appeal, the Seller argued that the noncompete agreement restricted the tradename rights the buyer purchased; thus, any action against defendant must be controlled by contract law, not tort law. The Buyer argued that the noncompetition clause prohibited other commercial use of the tradename not covered by tradename protection. The Supreme Court found that it was not reasonable to read the noncompetition clause language as Seller wants; “to do so would mean that the expiration of the noncompetition clause after seven years would render the tradename purchase meaningless” and that “the tradename infringement claim arises under the contract only in the sense that the contract is the instrument by which the tradename was purchased. A separate tort may be perpetrated once the tradename belongs to the purchaser.”
 

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