Milwaukee Business Lawyer and Litigator

The short answer is potentially a fair amount of rights, though as with many things it depends. In general residential work, the main mechanism for enforcing payment for both general contractors and sub-contractors is through the use of construction liens. This may not always be the case in commercial projects as it makes a difference as to what type of project it is to determine what lien rights, if any, exist for sub-contractors and what notice is required to be given.

According to the Wisconsin Courts,

A subcontractor is a person whose relation to the prime contractor is substantially the same for a part of the work as the prime contractor’s is to the owner for the entire job.

Farmer v. St. Croix Power Co. 117Wis. 76, 93 N.W. 830 (1903).

 The Wisconsin Statutes, 779.01(3), sets out the extent of who has lien rights:

Any person who performs, furnishes, or procures any work, labor, service, materials, plans, or specifications, used or consumed for the improvement of land, and who complies with s. 779.02 shall have a lien therefore on all interests in the land belonging to its owners.

It is noteworthy that the statute defines it as “any person,” not limiting those rights just to General Contractors. Therefore, within the scope of the rest of the Wisconsin statutes, sub-contractors may have certain lien rights.

What those lien rights are and what notice requirements there are depends on the type of project. A “public works” project, defined as any improvement or work undertaken by a unit of government, will potentially have different lien rights and notice requirements  for sub-contractors than a “large private” project (which may have notice requirements as short as 5 months from the date the work is performed). “Privately bonded” cases may eliminate all lien rights and instead require any claims to be made pursuant to the bonding contract.

In any case, if you are a sub-contractor and you believe you might have lien rights on a project, it is important to contact an attorney right away as the specifics of your project will bear on whether you have lien rights and what you have to do to preserve them.

There are two key documents with regards to forming an LLC in Wisconsin. The first is the Articles of Organization, which is filed with the Wisconsin Department of Financial Institutions (WDFI). The second is the Operating Agreement, which outlines the agreement between the members (which could be thought of as the “partners” in the business.)

What purpose does the Articles of Organization serve?

The Articles of Organization is what is needed to actually create and register your LLC with the State. It is in effect putting the world on notice that you have created a separate and distinct entity, and as long as you follow the rules to ensure liability protection (see “Are you actually getting the personal liability protection from your LLC or Corporation?“), if there is any dispute regarding the business, it is between that person and the LLC, not the members personally.

What purpose does the Operating Agreement serve?

This document is what I describe as the internal agreement between the members. It sets out all sorts of important things such as

• who owns what percentage of the LLC?
• What percentage vote is needed to make certain decisions? (ie- hiring and firing, borrowing money, signing contracts, etc.)
• What happens if a member dies, or gets divorced, or files bankruptcy and a trustee is looking to take over their assets?
• How is the sale price of the membership interests determined?
• When can someone sell their interests? To whom?
• Do the other members get the right of first refusal?

A well drafted operating agreement will address a myriad of other issues that are best to be resolved in advance and in writing.

As has been mentioned in many articles on this website, it is always best to make sure your agreements are in writing before a dispute arises (See “Anatomy of a Contract“). An operating agreement, if properly drafted, will serve two purposes. One, it will help avert any potential disputes because the parties will have addressed some of the stickier issues associated with business ownership in advance, and two, in the event of a dispute, it will aid the parties in resolving said dispute as hopefully it will address the very issue at hand.

While getting the LLC filed with the WDFI is great, and creates the liability protection between the members and the public, a well drafted Operating Agreement is equally as important as it protects the members from each other. Halling & Cayo S.C. offers flat rates for many business formation services, if you have any questions be sure to call and ask for Attorney Sean M. Sweeney.

As a seller of residential (or commercial) real estate be very careful as to what you attempt to conceal or fail to disclose. The Wisconsin Appellate Court recently held that misrepresentations are not limited to oral or written declarations but also could include efforts to conceal defects, such as painting a basement wall to conceal whether it leaked.

In the Novell v. Migliaccio (2009AP1576) decision, the Appellate Court stated:

The only issue on this appeal is whether painting a basement wall can be a misrepresentation under § 100.18(1) if a jury believes that the painting was done to hide evidence that the basement leaked. We hold that it can and that there are genuine issues of material fact whether the Migliaccios painted their basement and, if so, thus misrepresented the basement’s condition. Accordingly, we reverse and remand for trial.

Wisconsin Statute § 100.18(1) states in relevant part:

No person … with intent to sell … real estate … shall make … [a] statement or representation of any kind to the public relating to such … sale … of such real estate … or to the terms or conditions thereof, which … statement or representation contains any assertion, representation or statement of fact which is untrue, deceptive or misleading.

While the case was dismissed (presumably due to settlement) after remand to the Circuit Court, the Appellate Court’s holding that actions taken to conceal defects can constitute misrepresentations under Wisconsin Statute § 100.18 (which carries with it severe penalties such as attorneys’ fees and in some situations, double damages) still remains.

As a seller, be very careful as to what you try and conceal about the nature of your house and the disclosures that you make.

If you are in business long enough, chances are at some point you will be served with a summons and complaint for a garnishee action, an attempt to collect money from your business for a debt that someone else owes. While earnings garnishments are relatively common, non-earnings garnishments are less so and carry with them a stiff penalty for the garnishee if an answer is not filed.

For collection purposes, if a person (or company) has a judgment against them, they are known as the “debtor”. The “creditor” is the person or company owed the money. One tool that an attorney attempting to collect a debt on behalf of a creditor has is a non-earnings garnishment. In a non-earnings garnishment, the creditor files a summons and complaint naming the creditor, the debtor, and a garnishee.

If your company is named as the garnishee, you must file an answer which indicates whether or not your company has control or possession of property belonging to the debtor and the gross value of said property. This includes any money that your company may owe to the debtor.

With that action comes an order to hold all funds (or property) your company may owe to the debtor until instructed by the courts otherwise. If you, as the garnishee, fail to answer the Non-earnings Garnishment summons and complaint within 20 days of being served with the action, your company will have a judgment entered against it for the full amount of the judgment that the creditor has against the debtor.

For example, if you are served with a non-earnings garnishment which states that ABC Bank has a judgment against XYZ company for $200,000 and you are named as the garnishee; if you fail to answer (even if that answer would be that you do not have any property or money belonging to XYZ company) then ABC Bank will be entitled to a judgment against your company for the entire $200,000.

So, if you are served with a garnishment summons and complaint be sure to contact an attorney right away, as the penalty for ignoring such a request can be dire.

A claim is not frivolous simply because there is failure of proof, a claim is later shown to be incorrect, or a claim is lost on the merits; however, a claim cannot be made reasonably or in good faith, even though possible in law, if there is no set of facts which could satisfy elements of a claim, or if party or attorney knows or should know that needed facts do not exist or cannot be developed.

Stern v. Thompson & Coates, Ltd., 185 Wis. 2d 220, 517 N.W.2d 658 (1994)

While your employees may not owe a duty of loyalty to you personally , the Wisconsin Supreme Court has held that employees do owe their employer a duty of loyalty.

In Burbank Grease Services, LLC v. Sokolowski, an employee was accused of stealing trade secrets of the Company while employed to benefit a competitor. The Court held that “A claim for the breach of an agent’s duty of loyalty may sound both in tort and in contract.” (“Tort” is a lawyer word for lawsuits involving negligence, fraud, or an injury to a person or business)
The question then becomes, what kind of duty does the employees owe to their employer? and at what point has it been breached? The Wisconsin Supreme Court explains in Burbank Grease that if they are a “key employee” then a fiduciary duty of loyalty exists.

What does this mean?

A fiduciary duty is the highest duty there is in the law. It is generally stated as the requirement that while acting in your capacity as an employee, you are required to put the interest of the company ahead of your own interests.

The practical implications of this are that your key employees need to be acting with the company’s best interests in mind while they are employed. This is not to say that anytime an employee makes a mistake you can sue them over it, as often times in business only with the benefit of hindsight can we see that a decision or action was a bad choice.

However, if you come to find out that an employee, while employed has been working to further the interests of him or herself or a competitor at the company’s expense, you may be able to take action to prevent it or recover your losses as a result of the injury from both the employee and perhaps the competitor that induced them to breach their duty.

If you suspect that an employee or agent of your company has breached a duty of loyalty and caused harm to your company, you may have the ability to seek recourse through the courts and should contact an attorney right away.

Unfortunately, as is the case with many legal questions, the answer is maybe. There are a number of factors to look at before that question can be answered, and most likely you would need to see a lawyer to evaluate each individual case.

Generally speaking a party suing your business, if they obtain a judgment against your business, is going to be able to collect against the assets (or at least the unsecured assets) of your business.

This can vary from getting a receiver appointed to force the liquidation of company assets, to freezing business bank accounts, or even having the Sheriff go in and collect cash directly from the cash register to help satisfy the judgment. Thus, if your business has more value in assets than the potential judgment amount, it may be worth contesting the lawsuit or trying to reach a settlement. If not, then you can explore whether you can simply close up shop and move on.

Under Wisconsin law you are not allowed to simply close up shop and raid all of the assets of the business just to avoid a creditor. Neither are you allowed to sell all of the assets to a friend or relative (or anyone for that matter) for a severe discount just to avoid creditors. For example, if your business was Bob’s cleaning Company Inc. and your business were sued, you cannot simply sell all of your business assets to your brother for $1 and open up Joe’s Cleaning Company Inc. This would be known as a “fraudulent transfer” and is covered by Wis. Stat. Section 242.04

242.04 Transfers fraudulent as to present and future creditors.

(1) A transfer made or obligations incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

(a) With actual intent to hinder, delay or defraud any creditor of the debtor; or

The statute provides some guidelines for determining “intent to hinder, delay or defraud any creditor of the debtor.” Some of those include:

• The transfer or obligation was to an insider;
• The debtor retained possession or control of the property transferred after the transfer;
• Before the transfer was made or the obligation was incurred, the debtor had been sued or threatened with suit;
• The transfer occurred shortly before or shortly after a substantial debt was incurred; and
• The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

Additionally, it is considered to be a fraudulent transfer if the transfer is made:

242.04(1)(b) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
1. Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
2. Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.

Not only does this statute prevent you from intentionally disposing of assets to avoid creditors, it also raises issues if you are intending to legitimately sell your business’s assets and you have been sued or you have outstanding creditors. You need to ensure that the transfer cannot be categorized as a fraudulent one.

In any event, if you or your business is sued it is best to immediately see a lawyer who can explore your options with you. If you play your cards right though, one of those options may be to simply close your doors and move on to your next, hopefully more successful, venture.

After all of the discovery, motions, and attempts at settlement are completed it is time to go to trial, where the case will be decided.

I have seen numerous reports making varied estimate, but the general consensus seems to be that only 2-5% of cases actually go to trial, the other 95-98% are resolved in some fashion before trial.

However, for those cases that get there, the trial is the opportunity for the “facts” of the case to be determined. Either the Judge or a jury will be the fact finder, but in either case, both parties, through their attorneys will present evidence to the fact finder. This will be in the form of testimony and exhibits. This part of the litigation process is what everyone imagines court to be like, jurors sitting in the jury box, witnesses in the witness stand, and the attorneys questioning and cross-examining each witness.

After all parties have presented their evidence the fact finder will render their findings on a number of issues that have been submitted by the parties prior to the trial. Thus, the fact finder does not come out and declare a winner and loser, but rather indicates how they have decided the specific jury questions that have been submitted for them to answer.

Depending on the outcome of the trial, and the in-trial rulings of the Judge during the case, each party has to decide whether or not it wants to appeal the outcome.

Part 4 of 5, “Mediation”

While mediation is voluntary, in most counties in Wisconsin, including Milwaukee and Waukesha County, the Court will order the parties to attend mediation. This does not mean that the parties must settle at mediation, only that they will attend.

What Happens at Mediation?

Mediation usually takes place after most of the discovery has been completed in the case, but before final pre-trial hearings or preparations have been done. The idea is that when you go to mediation, both parties know about the other parties case, but still have not made the final investment for their attorneys to get ready for trial.

Each party to the litigation, along with their attorneys, and the agreed upon mediator meet at a location they all agree on (usually one of the attorney’s offices or the mediators office) to discuss settling their case.

Each party usually submits a mediation report to the mediator, setting out the key high points of their case and the low points of the opposing party’s case. The mediator is not there to render a decision, but rather to encourage the parties to settle their dispute. This does not mean that the mediator will not express his/her opinion, or indicate how s/he thinks s/he would have decided the case. Most mediators are lawyers, and many are ex-judges.

By the end of the mediation session, the parties have either reached a voluntary agreement to settle the case, or they continue with the litigation and most likely begin preparing for trial. There are varying statistics, but various reports indicate that mediation is successful more often than not. From an attorneys standpoint mediation is always worthwhile, it either results in a settlement of the case or at the very least you get to learn something about the other side, and their position in the case.

Part 3 of 5, “Motions”

While there are a number of motions that may be filed during and after the discovery process, such as motions to compel discovery, or motions for protective orders, what I want to talk about are motions which directly effect the outcome of the case. So even though the title of this section is titled “Motions” it should probably be titled “Dispositive Motions”.

The most common question that I am asked by my clients during litigation is a variation on “can’t the judge just decide this case?” This is especially true when one side feels the other side’s case is completely without merit (as opposed to those cases where there is merely a dispute about how much one party owes another, not “if” one party owes something to the other.) Like many things in the law, the answer is that it depends; there are times when the Judge may make dispositive decisions regarding the case, and times when he/she may not. (This explanation is regarding Judges making decision prior to trial in the case of a Court trial case)

The rule of thumb is that for any dispositive motions, the Judge cannot decide issues of fact, but rather can decide issues of law. Therefore, the only time that dispositive motions, such as a motion for summary judgment is appropriate, is when your attorney believes that through the pleadings or discovery process they can show to the Judge that there are no material issues of fact relating to the claim at issue.

A simple example of a claim for summary judgment would be in an instance where there are two claims and three defendants. The claims are Breach of Contract and Intentional Misrepresentation/Fraud against all three defendants. The Defendants are ABC, LLC, Mr. X and Mr. Y both co-owners of the company. A claim of Fraud can be pled directly against an individual, because it is an intentional tort, and therefore Mr. X and Mr. Y cannot hide behind the liability protection of the LLC. However, through the Discovery process it turns out that the Plaintiff only alleges that there was conduct on the part of Mr. X that would constitute Fraud. This may mean that there are no facts alleged against Mr. Y to meet the elements of the claim for Fraud, and therefore it may be appropriate to bring a motion for Summary Judgment in which the Judge could rule that the Fraud claim against Mr. Y is dismissed.

So, while the Judge may be able to address the claims alleged against Mr. Y, he/she is not allowed to determine the sufficiency or the validity of the claims against Mr. X. If the plaintiff through Discovery has alleged that Mr. X has made specific fraudulent representations, it will be up to the trier of fact to determine at trial whether or not those allegations are true, not the Judge at Summary Judgment.

For obvious reasons motions for Summary Judgment can be a powerful tool. The more you are able to narrow your opponents claims or get a decision on your own claims, the more leverage you may have to try and settle the case in mediation

Part 2 of 5, “Discovery”

Part 4 of 5, “Mediation”

After the initial pleadings are entered, there will generally be a scheduling conference between the Attorneys and the Judge to set the schedule for the case. Part of that schedule will include a date in which all discovery must be completed.

Litigation has been described as playing poker with everyone’s cards face up. While this is a decent analogy, I would say its more appropriate to say you get to see the other person’s cards only if you ask the right questions. Discovery is the opportunity for each party to ask questions and demand documents from the other side. In this way it is up to the attorneys to ensure that they ask the right questions and in the right way to ensure that they get everything they want. Conversely, it is the responding attorney’s job to comply with the requests in a way that reveals what is required, but does not give away more than what was requested.

This creates a back and forth situation where each attorney is trying to get as much information from the other side as possible while at the same time trying their best not to reveal more than the other side actually asked for.

The Discovery process includes interrogatories, requests to admit, requests for production of documents, depositions, and various other means of finding out information. While all of these methods of obtaining information are used by attorneys with varying frequency, if you, or your business, is a party to a litigation, at some point you will almost certainly be deposed.

In a deposition the other party’s attorney gets to ask you whatever questions they like (within reason, but they are given a lot of leeway) about yourself, your business, and the events surrounding the dispute. Unlike in trial where there are rules regarding hearsay or relevance of questions, in a deposition, even if your attorney objects to the question, you generally are still required to answer. You are put under oath and there is a court reporter there to take down in writing everything that is said.

After depositions there may be additional interrogatories (written questions) or document production requests, but at some point each party will be satisfied that they will have obtained all of the information they can reasonably get about the case. As the discovery process winds down either party may choose to amend their pleadings and add allegations, or file a cross or counterclaim, but once the pleadings and discovery process winds up, it is time for any motions to be filed.

Part 1 of 5, “Pleadings”

Part 3 of 5, “Motions”

The pleadings stage is the initial stage of any litigation. The Plaintiff (or the person bringing the action) will file a summons and a complaint. The summons will indicate that the Defendant(s) have either 20 or 45 days (depending on the allegations made) to answer the complaint.

The complaint will contain all of the allegations that the Plaintiff says the defendant(s) did or did not do. For example you may see a complaint containing several counts, one may be breach of contract and another may be Fraud or Misrepresentation although they may all be referring to the same facts.

As a defendant you have the obligation to file an answer either 20 or 45 days (depending on what is plead) of being served with the summons and complaint. If you do not answer, a default judgment may be entered against you. (Plaintiff automatically wins). If you are a corporation or an LLC, you have to get a lawyer to enter an appearance and file an answer for you.

Your answer to the complaint is not the time for you to make your case as to why you are right and they are wrong, but rather is simply a format for admitting or denying each allegation made by the Plaintiff. Additionally the defendant(s) will take this opportunity to indicate any affirmative defenses and put forward any counterclaims or cross claims that they may have.

Once all of the pleadings have been filed, and any necessary amendments have been made, the discovery phase of litigation begins.

Part 2 of 5, “Discovery”

If you run a business, sooner or later you will have a disagreement with a customer, contractor, or vendor that may lead to litigation. For many business owners litigation, and what is entailed, is clouded in mystery. The next few articles are going to attempt to illuminate some of those mysteries and explain the process, in general terms, for litigation with a bend towards the local rules and practices of Milwaukee County.

Please realize that each individual case is going to have its own intricacies and variables, and I certainly would not recommend using these articles as a road map to represent yourself, as this outline will be very broad and may be missing key elements that are essential for your case.

The basic steps of any litigation are the following:

– Pleadings
– Discovery
– Motions
– Mediation
- Trial

While most cases never make it all the way to trial, you can expect anywhere from 18-24 months to go from initial filing to Jury trial.

The next five articles will review each of the above steps and try and give you an overview of what is involved.

Part 1 of 5, “Pleadings”

In an ideal world we would always get what we pay for, and people would always live up to their obligations. Unfortunately in both residential and commercial buildings, the contractor does not always provide the quality of work that was contracted for. Often litigation arises to resolve the dispute. The focus of the litigation is going to be whether or not the contractor breached his or her contract, but underlying the entire case is the question of what the damages are if the contract was breached.
Do you tear down the building and build a new one? Do you simply get the money it would cost to repair it? Do you get the difference in value of what the building would be worth if was built correctly?

In every case the facts will vary as to what the proper solution is, but Wisconsin Jury Insturction 3700 gives us a clue. Jury Instruction 3700 suggests dealing with damages in the case of a breach of a building contract in the following way:

1. Can the building be repaired? If it can, what is the reasonable cost of repairs?

2. If the building cannot be repaired, what would the value of the building have been if it had been built correctly? What is the current value of the building having been built incorrectly? (The difference would be the damages)

These remedies may not be wholly adequate in every case, and these jury instructions are mandatory, though Wisconsin Courts do prefer to use the model jury instructions, but it can be helpful to know what ultimate question the jury may be facing at the beginning of your dispute as it may help inform the decisions you make in trying to resolve the matter prior to litigation.

A fascinating and enlightening article by Renee M. Mehl in the March 2009 edition of the Wisconsin Lawyer presents some interesting and note worthy observations about the law in Wisconsin regarding LLC’s and its members or managers representing the entities themselves.

You can see the entire article here

For whatever reason the legislature has never expressly addressed whether or not the members of an LLC can represent the LLC themselves. 

For Corporations, the officers or owners are not allowed to represent the corporation without the risk of violating the unauthorized practice of law statute, as a Corporation is its own separate entity. 

LLC’s provide the same type of liability protection as a Corporation, and it could be argued that therefore it is a separate entity and its members cannot represent it themselves. 

At the end of the day, if you choose to represent your LLC you may run the risk of not only violating Wisconsin’s unauthorized practice of law statutes, but also risk having any answer you submit being deemed invalid allowing the opposing side to obtain a default judgment against your LLC.

I have written in the past about the importance of a well written contract, but as my litigation practice expands I am constantly reminded about how important this is. The importance of not only including all of the legal boilerplate, but also making sure the specifics of dispute resolution are ironed out is paramount.

While this is certainly a problem with small businesses that are (understandably so) trying to save money by drafting contracts themselves, it also is a problem with large corporations that have Attorneys draft their contracts. It seems so often the Attorneys get caught up in the minutia of who is warranting and representing versus providing notice or knowledge, that they miss defining important practical aspects of the contract.

I am currently involved in a major arbitration proceedings that involves two large companies with a dispute about how to interpret a provision of the contract. The contract sets out all of the proper legal positions of each party, but fails to define a mechanism to determine who actually has what rights. (I cannot give specifics, but it has to do with calculations of different percentages of sales, and there is no method given to determine such calculation)

Now, instead of spending a few more attorney hours sorting this problem out in advance, both parties are spending tens of thousands of dollars arbitrating the dispute.

In many litigation cases, the question is not, “was there a breach”, but rather “what are my damages.” As smart business people, the decision must always be what is my likelihood of success combined with my likely award. Unfortunately, there are many times when one party is as right as rain, but if the damages are not sufficient to support the litigation, it may not be worth filing the complaint.

To determine what damages you may be entitled to, first we look to the Wisconsin Standard Jury Instructions: “3710 Consequential Damages for Breach of Contract.”

The law provides that a person who has been damaged by a breach of contract shall be fairly and reasonably compensated for his or her loss. In determining the damages, if any, you will allow an amount that will reasonably compensate the injured person for all losses that are the natural and probable results of the breach.

This leaves us with the instruction that damages are “all losses that are the natural and probable results of the breach,” but what does that mean? To figure that out, we look to the relevant case law to see how Wisconsin Courts have interpreted that term.

The Wisconsin Courts have really focused on “foreseeability” as the main component of determining damages. The Court, in Thorp Sales Corp. v. Gyuro Grading Co., 111 Wis.2d 431 held

An injured party is only entitled to the benefit of his or her agreement, which is the net gain he or she would have realized from the contract but for the breach. Thorp Sales Corp. v. Gyuro Grading Co., 111 Wis.2d 431, 438-39, 331 N.W.2d 342 (1983).

The Court has also explained how prospective profits, not prospective revenues, fall into that determination:

The long-established rule in Wisconsin, stated in Buxbaum v. G.H.P. Cigar Co., 188 Wis. 389, 392, 206 N.W. 59 (1925), holds that “prospective profits are a legitimate item of damages resulting from a breach of contract when the circumstances are such that the future profits may be computed with some reasonable certainty.” See also 2 The Law of Damages in Wisconsin § 26.16 (Russell M. Ware ed., 2d ed.1995).

The key is that the potential revenues must be shown and offset by the potential costs.

Prospective profits must be diminished by charges composing an essential element in the cost of manufacture or service. Schubert v. Midwest Broad. Co., 1 Wis.2d 497, 503, 85 N.W.2d 449 (1957).

Wisconsin Standard Jury Instruction 3735 “Damages: Loss of Expectation” sets out the standard described in the case law above:

The measure of damages for a breach of contract is the amount which will compensate the plaintiff for the loss suffered because of the breach. A party who is injured should, as far as it is possible to do by monetary award, be placed in the position in which he or she would have been had the contract been performed. The fundamental basis for an award of damages for breach of contract is just compensation for losses necessarily flowing from the breach. A party whose contract has been breached is not entitled to be placed in a better position because of the breach than the party would have been had the contract been performed. The injured party is entitled to the benefit of his or her agreement, which is the net gain he or she would have realized from the contract but for the failure of the other party to perform. Wis JI-Civil 3735 (emphasis added).

Thus, while it is going to differ in every case, and depend on the specific facts and the nature of the breach, it is important to realize that the only consequential damages that Wisconsin Courts are likely to award are those which you can prove were foreseeable losses and missed profit due to the breach. If you believe you may have a claim for a breach of contract, be sure to contact an attorney right away, as the statute of limitations may started to run sooner than you realize. (See “What is the statute of limitations for my business lawsuit”)

Generally speaking, in Wisconsin, the statute of limitations for a contract claim is 6 years. How that is interpreted however, can make a world of difference for your case.

The Wisconsin Courts have held that the six year statute of limitations for Breach of Contract claim is an absolute six years, running from the date of the breach, not when it is discovered.

The Court said in Williams v. Kaerek Builders, Inc. 212 Wis.2d 150, 568 N.W.2d 313 Wis.App.,1997 that

[Plaintiffs] were required to bring their breach of contract action within six years of the breach, regardless of whether they had knowledge of the breach or could have diligently discovered the breach. See CLL Assocs. Ltd. Partnership v. Arrowhead Pacific Corp., 174 Wis.2d 604, 617, 497 N.W.2d 115, 120 (1993).

What does this mean for your business and its possible lawsuits? It means that if there is any possibility of a claim, you need to bring them to an attorney right away. While you may think you have time, it may turn out that the breach occurred much earlier than you realize, and then your claim may be barred. Every case is different, and it is impossible to predict over the phone how the statute of limitations will apply in every case. Be sure to bring your matter right away to an attorney and inform them if you think there is any possibility that the breach took place at some point in the past.

The Wisconsin Law Journal brought a recent case to my attention about a man who wrote up a contract with his brother to try and cheat his now ex-wife out of some of the family assets.

The terms of the contract were that Stanley, who was thinking of getting divorced, transferred 20 acres of land to his brother at a steep discount to prevent his soon to be ex-wife from getting any of it. The deal was that after the divorce, Thomas would transfer the property back. Only, Thomas decided to keep the property instead. When Stanley sued to enforce the contract, the Court’s refused to uphold it and assist Stanley with his fraud.

The opinion stated,

Because the court does not reward the perpetrator of a fraud upon the court, we affirm the trial court’s decision to void the contract and permit the parcel to be titled in Thomas’ name.

Oddly enough this leaves the now ex-wife with no ability to recover for her half of the property. Perhaps she could go after Stanley for her half through Family Court.

Either way, it just goes to show that what goes around comes around, and if you intend to create fraudulent contracts, don’t expect Wisconsin Courts to help you enforce them.

I just came across a really well written article about non-compete clauses, you can read it here www.saleofbusinesslawblog.com . I am a big fan of Non-compete clauses to sweeten a deal. Chances are, that if you are selling the business, it is because you are no longer going to be performing that type of work anyway. But guaranteeing it with a non-compete clause can give the other side a sense of security and can be a nice bargaining chip to help sweeten the deal.

Of course you have to be sure that you do not want to continue in the business and be sure that the amount added to price is sufficient to cover the opportunity cost involved in no longer being able to pursue an industry that you are knowledgeable about.

Often these agreements are limited to 3-5 years. This gives the buyer enough security about the short term without permanently banning the seller from the industry. Keep in mind however that non-competes vary in large degrees and that there are many specific rules you must follow in order for your non-compete to be enforceable. In Wisconsin, often times non-competes against individuals are limited to around 2 years.