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

Back on March 30th I wrote that homebuyers needed to act fast to meet the then fast approaching expiring deadline for closing on the purchase of a residence.  Since then, Congress has acted once again by extending the closing deadline from June 30 to September 30, 2010, for eligible homebuyers.  Again, for qualifying purchases in 2010, you have the option of claiming the credit on either your 2009 or 2010 return.

Deadlines

• You must have purchased, or entered into a binding contract to buy, a principal residence on or before April 30, 2010.
• If you entered into a binding contract by April 30, 2010, you must close (go to settlement) on the home on or before September 30, 2010.

Please consult your tax advisor as to the other details, requirements and qualifications that must be met to claim the credit. 

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In Roehl Transport v. Liberty Mutual, 2010 WI 49, the Wisconsin Supreme Court significantly expanded the tort of bad faith as it applies against insurance companies.  Insurers can engage in bad faith when improperly handling an insured's claim or a third party claim against an insured in certain circumstances.  In the past, the bad faith doctrine has been applied in situations where an insured is liable for an excess judgment (one beyond policy limits) due to such mishandling. 

The doctrine has now been extended to circumstances where an insured is forced to forfeit a large deductible.  In Roehl Transport, the deductible was very substantial--$500,000.00.  The insurer settled the matter within its policy limits, but in an amount in excess of the deductible.

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A recent Wisconsin Supreme Court opinion filed June 25, 2010, Ehlinger v. Hauser and Evald Moulding, Inc., 2010 WI 54, is a candid reminder that co-owners of a business should not only take the important step of entering into a written Buy/Sell Agreement to determine how important issues such as death, disability, divorce, bankruptcy, etc. will be dealt with between them, but also in doing so, should take the important steps of discussing fully the ramifications of their agreement so that they have a clear understanding of its key terms and conditions.

In Ehlinger, the Wisconsin Supreme Court upheld the lower courts' rulings that, among other things, a Buy/Sell Agreement between the co-owners of a Wisconsin Corporation was unenforceable because the court determined that the undefined term "book value" rendered it so.  The buyout agreement stated that if one of the shareholders becomes totally disabled, the non-disabled shareholder is entitled to purchase his shares at "book value."  In this case, the contract did not define "book value" and because the records of the corporation were so deficient that a special magistrate skilled in accounting could not determine a value which accurately reflected the corporation's assets and liabilities.  From the court record, the Supreme Court noted that not only was "book value" not defined and not determinable due to deficient corporate records, but it was also clear that the parties did not really understand each other when they entered into the buyout agreement as to what "book value" would actually mean should one of them become totally disabled.  Ultimately, this decision, after over seven (7) years of protracted litigation, resulted in the appointment of a receiver for the assets of the business.

Ehlinger again highlights the need for  co-owners of a business to take the time to ask each other the hard questions with the guidance of their accounting and legal professionals and come to a well considered agreement among themselves before moving ahead too far with the business operations.

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Wisconsin recently adopted a law which makes it unlawful for an employer to discriminate against an employee for "declining to attend a meeting or to participate in any communication about religious matters or political matters."  2010 Wisconsin Act 290, the law in question, was enacted on May 12, 2010.

The Act fails to define "religious matters" or "political matters", nor does it indicate what constitutes a "meeting" or "communication."  It may be anticipated that courts will use dictionary definitions in interpreting the law; therefore, the potential is that it may have broad application.  Encouraging employees to attend meetings or join in communications regarding political or religious issues would therefore appear unwise, as those who attend or join may be perceived as recipients of employment favoritism.  Employers may even want to exercise care in broadcasting their political or religious views at their places of business in light of this law.  It is an interesting question whether it may be claimed that this results in a "hostile workplace."

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Buying residential real estate in Wisconsin almost always entails using an "Offer to Purchase," also known as form WB-11. In a recent article written for the March issue of the Wisconsin Lawyer magazine, entitled "Using the New, Flawed Residential Offer Form," Richard J. Staff criticized the current draft of the form which requires mandatory use by real estate licensees in Wisconsin after March 1, 2010.

Staff points out problems with the new form that relate to:

• closing prorations
• financing contingencies
• the "gap" endorsement
• conveyance of title

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Expiring Deadline

Unless Congress acts soon, the Homebuyer Credit that was extended and expanded last November by the Worker, Homeownership and Business Assistance Act of 2009, is set to expire. Under that act, in order for “first time homebuyers” to take advantage of the up to $8,000 tax credit and for certain “qualified repeat homebuyers” to take advantage of the up to $6,500 tax credit, they must meet one of the following timing deadlines to be eligible for their applicable credit:

                (1) must have purchased the new home on or before April 30, 2010 (which means the date that the taxpayer closed on the transaction and title to the property transfers to the taxpayer homebuyer);

                OR

                 (2) (a) the purchasing taxpayer homebuyer must have entered into a binding contract for the purchase of a home on or before April 30, 2010; AND (b) must close on the home on or before June 30, 2010.

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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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A recent Court of Appeals case, Town of Cross Plains v. Kitt's Korner, Inc. 2008AP546 illustrates the risk involved in opening a new business on the assumption that a possible change in zoning will not effect its operation if the business is already up and running.

In that case, an adult entertainment business was opened on a parcel which, at the time it commenced operation, was zoned in such a fashion that such a business was not a prohibited use.  The owner of the business naturally incurred costs in the start up of the business.  The owner was aware of the fact that an ordinance amending the zoning to prohibit such a business on the land in question was coming up for vote, but apparently believed that his expenditure, and the actual operation of the business for a period of time prior to any adoption of the proposed ordinance, would create a situation in which his business would be "grandfathered in" even if the amendment to the zoning ordinance was adopted.

Although the law does recognize that, in certain fairly rare circumstances, expenditure of funds based on a reasonable reliance that zoning will not be changed can create vested rights which will not be impacted by zoning changes, the Court of Appeals held in this case that there could be no reasonable reliance because the owner was aware of the pending vote on the ordinance amendment, but chose open the business regardless.  Expenditures made were made despite the fact that the owner new that zoning prohibiting the business was contemplated and could be adopted.

When opening a business, it would be prudent not only to review current zoning, but also to inquire whether any modifications in zoning are being considered.

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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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 Minority and Majority Shareholders Beware – Lessons from Notz v. Everett Smith Group, Ltd. 2009 WI 30 

In the recent Wisconsin Supreme Court case Notz v. Everett Smith Group, Ltd. 2009 WI 30, there are important lessons for both majority and minority shareholders.

Lessons for Minority Shareholders. If you are a minority shareholder in a corporation and you believe that the majority has breached its fiduciary duty to you and caused you harm by foregoing a corporate opportunity, make sure that you allege and can demonstrate with evidence that it harmed you specifically and be able to allege and show that you were not just harmed the same as all other shareholders. Failure to allege and show specific harm will result in failure or dismissal of your claim, according to the Wisconsin Supreme court. Specifically, the court held that “the loss of a corporate opportunity and the sale of a subsidiary with high growth potential - - caused harm primarily to the corporation . . .” Notz at para. 38, and therefore the court affirmed the dismissal of Notz’s (the minority shareholder) claim for breach of fiduciary duty against the board of directors and majority shareholder. 

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Twitter is a relatively new social networking site that allows its users to communicate using "tweets" that are no more than 140 characters. When I first joined Twitter, I had a hard time understanding how such communication could benefit the users. Now, I am not only convinced it is something that is really huge and is here to stay, I am slowly finding people who have seen the light on it and can point the direction. One such person is Rush Nigut, an Iowa attorney. Rush has an excellent article on his Iowa business blog entitled "More on Twitter in the Workplace." I'd highly recommend it not only for lawyers, but for everyone, since its impact will be felt by us all. Follow Rush on Twitter.

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