PAMELA PEPPER, District Judge.
This case turns on the question of whether plaintiff Nicholas Zillges was a hero or a villain. Defendants Kenneth Biel, Thomas Tice, Jerry Gagerman, Kris Axberg, Thomas Anderson, and Robert Atwell hired Zillges to correct banking issues and to bring defendants Kenney Bank & Trust, iTeam Companies Inc., and iStream Financial Services Inc. into compliance with state and federal regulations. The relationship soured, however, resulting in the plaintiff's termination. The parties do not agree on the reason for the termination, or the motive of the terminating defendants. The plaintiff alleges that the defendants terminated him for reporting violations to the FDIC, and has filed a motion for partial summary judgment on three counts of his first amended complaint and on all counts of iStream's counterclaim. The defendants, asserting that the plaintiff was terminated for making risky and unauthorized investments, filed a motion for summary judgment on all remaining counts of the plaintiff's first amended complaint. The court addresses both motions here, and finds that, for the most part, it is the province of a jury to determine which characterization of Zillges the facts support.
Defendant iTeam "is a bank holding company, incorporated in . . . Delaware" whose principal place of business is in Wisconsin. Dkt. No. 74 at ¶1. Defendant iStream is a Wisconsin corporation whose principal place of business is also in Wisconsin. Dkt. No. 74 at ¶2. iStream provides services to banks, including "remote deposit capture (RDC), automated clearing house (ACH) payments, check cashing, tax refund processing, remittance processing, and direct deposit services (iDD)."
While KBT employed the plaintiff, "defendant Kenneth Biel, now deceased, served as Chairman, President and CEO of iTeam and Chairman and CEO of iStream." Dkt. No. 74 at ¶9. "[D]efendant Thomas Tice served [as] Chairman of KBT and [as] a director of iTeam and iStream." Dkt. No. 74 at ¶10. "[D]efendant Jerome Gagerman served as a Director of KBT." Dkt. No. 74 at ¶11. "[D]efendant Kris Axberg served as CFO, Vice President, and Treasurer of iTeam, iStream, and KBT, and Director of KBT." Dkt. No. 74 at ¶12. "[D]efendant Anderson was a Director of iTeam and iStream." Dkt. No. 74 at ¶13. "[D]efendant Robert Atwell served as a Director of iTeam and iStream." Dkt. No. 74 at ¶14.
On June 3, 2011, the FDIC and the State of Illinois Department of Financial and Professional Regulation, Division of Banking (IDFPR) (the regulators) "issued KBT a consent order relating to Bank Secrecy Act Violations and its involvement with Advent Financial Services, a high-risk tax refund service provider." Dkt. No. 74 at ¶25. On May 4, 2012, the regulators issued "a separate consent order relating to [KBT's] weak Compliance and Community Reinvestment Act (CRA) rating." Dkt. No. 74 at ¶26. The consent orders "directed KBT's board of directors to assume full responsibility for the approval of sound policies and objectives and for the supervision of all of [KBT's] activities, and to provide adequate oversight over [KBT's] third-party relationships . . . ." Dkt. No. 77 at ¶18. The regulators issued another amended consent order on October 29, 2013, dkt. No. 77 at ¶19, which "emphasized that KBT needed to bring in qualified management to address the regulatory problems." Dkt. No. 77 at ¶20.
On October 11, 2011, to comply with the order, the defendants hired the plaintiff to work for KBT. Dkt. No. 74 at ¶19. During his employment, the plaintiff served as a director, president, and CEO. Dkt. No. 74 at ¶18. Eleven months into his employment, on August 8, 2012, the plaintiff and KBT entered into an initial employment agreement. Dkt. No. 74 at ¶20. The parties signed a revised version on September 19, 2012.
The plaintiff's "primary job duties included . . . overseeing [KBT's] financial planning[,] budget management functions . . ., benchmarks for measuring the financial[,] operating performance[,] . . . and financial analysis of the [Asset/Liability Committee (ALCO)]." Dkt. No. 74 at ¶22. The duties also included responsibility "for all regulatory compliance matters . . . and communications with . . . regulators; lifting" consent orders, "and bringing KBT into full compliance with banking regulations." Dkt. No. 74 at ¶22.
According to iStream, in 2012 "the [r]egulators conducted two exams of" KBT. Dkt. No. 7 at 39. By that time, the regulators had already placed the bank under one consent order, and one of the 2012 exams determined whether or not the regulators would lift that order.
The plaintiff and iStream entered into a Management Incentive Bonus Agreement on August 8, 2012. Dkt. No. 74 at ¶23. iStream and Zillges entered into the bonus agreement for the purpose of incentivizing Zillges' efforts to lift both consent orders. Dkt. No. 7 at 39-40. Under the terms of the agreement, the plaintiff would receive a "compliance bonus" if he brought KBT into compliance with various banking regulations and provisions. Dkt. No. 74 at ¶24. The plaintiff would receive "$50,000 upon the completion of 2012 . . . to be paid in four installments in 2013," and "two $30,000 compliance bonuses upon lifting, rescission, or other completion of the Consent Order[s]." Dkt. No. 35 at ¶148. The bonus agreement indicated that Zillges would not receive any bonus money unless "payable." Dkt. No. 74 at ¶24. The contract defined "payable" as "(i) all terms and conditions applicable to such bonus have been satisfied" by both parties and "(ii) [Zillges] has not sooner been terminated . . . for [c]ause nor resigned . . . without [g]ood [r]eason."
The parties do not agree on whether or not the consent orders ever were lifted, or whether the plaintiff brought the defendants into compliance with the consent orders.
A portion of the dispute focuses on the purchase of trust-preferred securities, or TruPS. On April 26, 2013, Jack Harrington, former Chairman of ALCO, purchased TruPS from Taylor Capital Group in an amount of $526,596.00. Dkt. No. 74 at ¶28. The purchase occurred "through broker FIG Partners." Dkt. No. 74 at ¶29. Subsequently, on May 28, 2013, ALCO "discussed" investing in Seacoast TruPS, but the committee did not approve the investment previously made by Harrington. Dkt. No. 74 at ¶¶31-32.
KBT had an "investment policy," that in relevant part "authorized" the president, vice president, and treasurer of KBT to "conduct investment transactions approved by" an internal committee. Dkt. No. 74 at ¶50. The policy also required the purchasing officer to conduct "a pre purchase analysis" and "present[] [it] to the Investment Committee."
"On June 20, 2013, Harrington purchased a second block of Taylor TruPS in the amount of $199,914.62 and a block of Seacost TruPS in the amount of $502,777.80." Dkt. No. 74 at ¶33. Harrington sought prior approval of these purchases "by telephoning" certain members of the defendant entities. Dkt. No. 74 at ¶39. At some point, Axberg received notice of the purchase and informed Tice, Dkt. No. 74 at ¶42, who "notified the remainder of the [iTeam] Board of the purchase," Dkt. No. 74 at ¶43. These purchases "concerned" Anderson, because they "might hinder the sale of KBT." Dkt. No. 74 at ¶46. "Mike Steppe, KBT's investment advisor," even "recommended against purchasing the Seacoast TruPS." Dkt. No. 74 at ¶49. On July 1, 2013, in an email to the plaintiff, Tice questioned the TruPS purchases. Dkt. No. 74 at ¶64. The plaintiff responded, "[The] TruPS purchase was made as a policy exception and was documented as such and approved by ALCO." Dkt. No. 74 at ¶65. The parties do not agree to what extent the plaintiff was involved in these purchases, or if they contributed to his termination.
As president of KBT, the plaintiff had direct contact with the FDIC, and had a duty "to be honest and forthcoming with regulators on issues within the bank." Dkt. No. 88 at ¶8. This included "a duty to self-report and cure" any internal violations he discovered. Dkt. No. 88 at ¶9. "On February 26, 2012, Anderson, Biel, Tice, [and two non-defendants] held a meeting to discuss" some of the communications that the plaintiff had had with the FDIC. Dkt. No. 77 at ¶25. Those individuals expressed some concern "about the correspondence" and about the plaintiff's "behavior." Dkt. No. 77 at ¶26. In June of that year, "the iTeam Board discussed a proposal to limit" KBT's right "to communicate with the regulators without prior approval of the iTeam Board." Dkt. No. 77 at ¶28.
Feasibility Analysis." Dkt. No. 94 at ¶59. He asserted that the regulators required this analysis because they "continue[d] to have issues with the business model of the company and the philosophy of the holding company and how the bank is to be used." Dkt. No. 88 at ¶2. The plaintiff "shared" the report with the regulators, Dkt. No. 77 at ¶33, and "circulated" the document to KBT's Board of Directors. Dkt. No. 88 at ¶6. He described "it as a business model feasibility study," Dkt. No. 94 at ¶60, that "include[d] four budget models" that "show[ed] how KBT revenue would be positively impacted by changing to a direct service structure," Dkt. No. 94 at ¶62. The plan "assumed" that KBT "would have RDC customers" taken directly from iStream. Dkt. No. 94 at ¶62. KBT would "charge retail transaction fee rates to those customers," would keep the profit from those transactions, and "pay a small processing fee to iStream."
In April of 2013, prior to the plaintiff's termination, the regulators "conducted a Safety and Soundness Exam," Dkt. No. 94 at ¶66, and on June 14, 2013, "issued" an exam report, Dkt. No. 94 at ¶68. The regulators issued a similar report on October 22, 2014. Dkt. No. 94 at ¶73. One of these reports made a direct connection between "the 23B violation" and the plaintiff's feasibility report. Dkt. No. 88 at ¶15. According to the regulators' report, the feasibility "analysis `effectively details the nontraditional activities still performed by the bank' and `highlights the concerns that regulators have had [for] several years.'" Dkt. No. 88 at ¶16.
The findings in the report caused the regulators to "cite[] KBT for an apparent 23B violation as a result of its relationship with affiliated companies." Dkt. No. 77 at ¶36. This and further communications with the FDIC caused Biel and Anderson to become frustrated with the plaintiff. Dkt. No. 77 at ¶¶42-43. Tice even "prohibited" all "unauthorized communication of bank information by management or a director." Dkt. No. 77 at ¶44.
On July 22, 2013, at a shareholder meeting for KBT, iTeam decided not to "re-slate Zillges or Harrington to the KBT board of Directors." Dkt. No. 94 at ¶¶42-43. Later that same day, iTeam and KBT held a joint meeting of their board of directors. Dkt. No. 74 at ¶70. "Tice opened the meeting by asking for Zillge's resignation," Dkt. No. 74 at ¶71, but the plaintiff did not resign, Dkt. No. 74 at ¶73. KBT subsequently voted to "terminate[] Zillges by a 3-2 vote." Dkt. No. 74 at ¶78. Tice, Axberg, and Gagerman voted in favor of terminating the plaintiff, and two non-defendants voted against termination. Dkt. No. 74 at ¶78.
The plaintiff's "employment . . . terminated on July 22, 2013." Dkt. No. 77 at ¶46. This occurred without "written notice identifying the precise nature of any alleged breach, violation or failure." Dkt. No. 77 at ¶47. No one on the KBT Board "identified the precise corrective measures" that the plaintiff could have taken to avoid termination.
The parties do not agree on the status of the consent orders at the time of the plaintiff's termination. They agree that the plaintiff's job included, and the bonus agreement turned on, the lifting of the May 4, 2012 and the November 13, 2012 consent orders. Dkt. No. 74 at ¶¶25-27. In June of 2013, the regulators informed KBT that it had "complied with the majority of the provision[s] in the Consent Order . . . issued on November 13, 2012 and it has served its purpose." Dkt. No. 77 at ¶76. The regulators asked the KBT board to sign a memorandum of understanding (MOU).
The plaintiff asserts that, on June 14, 2013, he received a letter from the regulators, which indicated that KBT had "improved [its] risk profile and financial condition." Dkt. No. 76 at 16. As a result, the regulators asked KBT's board of directors to sign an MOU and return the original.
According to iStream, in June of 2013, "Zillges falsely represented to Axberg that the . . . Consent Order had been removed," knowing the statement was false, malicious, wanton or willful, and negligently or recklessly relayed the false information, because "he never sent the MOU to the [r]egulators."
The plaintiff filed the initial complaint on November 14, 2013. Dkt. No. 1. On December 6, 2013, the defendants filed an answer (which included counterclaims by iStream and KBT), Dkt. No. 7, and a motion to dismiss for failure to state a claim, Dkt. No. 8. On December 27, 2013, the plaintiff answered the counterclaims, Dkt. No. 11, and a brief in opposition to the motion to dismiss, Dkt. No. 12. Also on December 27, 2013, the plaintiff filed a motion to amend the complaint in an attempt to correct the issues raised in the motion to dismiss. Dkt. No. 13. On January 8, 2015, KBT and the plaintiff stipulated to the dismissal of KBT's counterclaim. Dkt. No. 57. This left active only iStream's counterclaim.
On May 12, 2014, the plaintiff filed an expedited motion for leave to file a second amended complaint. Dkt. No. 26. On June 4, 2014, the court issued a decision and order that addressed the defendants' motion to dismiss and both the plaintiff's first and second motions to amend the complaint. Dkt. No. 34. The court dismissed the plaintiff's claim for negligence (Count V).
The defendants answered the first amended complaint on June 18, 2014, Dkt. No. 38, but the answer did not specifically re-raise or re-plead the counterclaims. On the same day, KBT filed a motion to dismiss Count II (violation of the Consumer Financial Protection Act) of the first amended complaint for lack of jurisdiction. Dkt. No. 40. After the parties fully briefed the motion, Dkt. Nos. 48 and 49, the court granted the motion to dismiss Count II of the first amended complaint. Dkt. No. 51.
On January 7, 2015, the defendants filed a request that the court "declare that [their] counterclaims [were] properly before the court." Dkt. No. 53. With the motion, they sought to amend the answer as a form of alternative relief. Dkt. Nos. 54-55. On January 23, 2014, the plaintiff responded to the motion, Dkt. No. 59, and the defendants replied on February 6, 2015, Dkt. No. 81. On March 2, 2015, the court heard oral arguments, "adopted the functional approach," and "conclude[ed] that it [would] not require the defendants . . . to re-plead" the counterclaims. Dkt. No. 105 at 2-3. The court found "that the defendants' counterclaims were properly before the court."
On April 16, 2015, the parties filed a stipulation, indicating that on February 25, 2015, iStream had made an offer of judgment to the plaintiff on the breach of contract claim in Count VII of the first amended complaint. Dkt. No. 125. The stipulation indicated that on March 10, 2015, the plaintiff had accepted the offer, and asked the court to enter judgment against iStream.
On January 30, 2015, the defendants filed a motion for summary judgment on the remaining counts of the plaintiff's first amended complaint. Dkt. Nos. 70-71.
The plaintiff resides in Wisconsin. The defendants KBT, iTeam, and iStream each have a principal place of business in Wisconsin. Defendants Biel, Axberg, and Atwell live in Wisconsin. Defendants Tice and Gagerman reside in Illinois. Defendant Anderson lives in Indiana. The parties have not addressed the issue of choice of law, but each cites Wisconsin law when arguing their motions. The court finds no basis to apply another state's law and will apply Wisconsin law.
Fed. R. Civ. P. 56 governs motions for summary judgment. It allows a party to "move for summary judgment, identifying each claim or defense . . . on which" the party seeks summary judgment. Fed. R. Civ. P. 56(a). If the moving party can show "that there is no genuine dispute as to any material fact" and that that party "is entitled to judgment as a matter of law," the "court shall grant summary judgment," stating "on the record the reasons for granting or denying the motion."
To prove that there are no genuine, factual disputes, the moving party must support the motion with "particular parts . . . in the record," such as "depositions, documents . . . affidavits or declarations, stipulations," etc. Fed. R. Civ. P. 56(c)(1)(a). The moving party may show "that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1)(b). The court, however, "may consider other materials in the record," and not just those cited by the parties. Fed. R. Civ. P. 56(c)(3).
In 1986, the Supreme Court decided two cases which provided guidance to the lower courts in determining whether genuine issues of material fact exist. First, in
Second, in
Civil Local Rule 56 for the Eastern District of Wisconsin provides additional guidelines for parties filing motions for summary judgment. It requires the moving party to file the following documents with its motion:
Civ. L. Rule 56(b). Further, the opposing party has thirty days from service of the motion to file a response or objection, and the movant has fourteen days from service of the response to file a reply.
1. There are genuine disputes of material fact regarding the plaintiff's claim in Count I that defendant KBT violated the Federal Deposit Insurance Act, and thus the court will deny the defendants' motion as to Count I. In Count I of the amended complaint, the plaintiff alleges that defendant
KBT violated the Federal Deposit Insurance Act. Dkt. No. 35 at 18. Chapter 16 of Title 12 of the United States Code created the Federal Deposit Insurance Corporation. 12 U.S.C. §§1811-1835a. The FDIC "insure[s] . . . the deposits of all banks and savings associations which are entitled to the benefits of insurance under [Chapter 16]." 12 U.S.C. §1811(a). The plaintiff alleges that KBT violated 12 U.S.C. §1831j, which prohibits an "insured depository institution" from:
12 U.S.C. §1831j(a)(1).
The Whistleblower Protection Act governs "[t]he legal burdens of proof that prevail under" this section. 12 U.S.C. §1831j(f). The Whistleblower Protection Act states:
5 U.S.C. §1221(e)(1).
"Once a plaintiff makes out a prima facie case of retaliation under §1837j, the defendant must articulate, by clear and convincing evidence, a legitimate, non-discriminatory reason for the termination."
The plaintiff has alleged that he "provided information to the FDIC regarding possible violations of law." Dkt. No. 35 at ¶106. The parties do not dispute that the defendants knew about these disclosures. The plaintiff alleges that, as a result of the disclosures, and in violation of 12 U.S.C. §1831j, defendant KBT fired the plaintiff.
In their motion for summary judgment, the defendants argue that KBT had other reasons for terminating the plaintiff. They state that "[t]he principal factor in the decision to request Zillges's resignation and subsequent termination was his involvement in the purchase of risky investments outside of and in violation of several provisions [of the] investment policy." Dkt. No. 72 at 15. They allege that "Tice voted to terminate [the plaintiff] because he no longer trusted Zillges," "Axberg also voted to terminate because of Zillge's conduct . . . and . . . shortcomings with respect to lending," and "Gagerman voted to terminate because he believed the relationship between the parties was irreparable."
The parties clearly and genuinely dispute the justification or motive for the plaintiff's termination, which is material to the question of whether KBT violated 12 U.S.C. §1831j. Because a genuine dispute as to a material fact exists, the court will deny the defendants' motion for summary judgment on Count I of the amended complaint.
The court notes that the defendants conclude their motion for summary judgment with a section asserting that the court "should declare that Zillges is not entitled to an award of attorneys' fees under 12 U.S.C. §1831j should he prevail in this litigation." Dkt. No. 72 at 29-30. They go on to state, "Zillges claims that he is entitled to an award of attorneys' fees under 12 U.S.C. §1831j even though the statute does not contain a fee shifting provision." The court has reviewed the prayer for relief in the amended complaint; the only reference to attorneys' fees is a general request for "all costs, disbursements and attorney's fees." Dkt. No. 35 at 26. The source of the defendants' claim that the plaintiff is seeking attorneys' fees under §1831j is not clear to the court.
Regardless, the court declines the invitation to issue a declaratory judgment on the question of attorneys' fees. Because the court is denying the parties' motions for summary judgment on several of the claims in the complaint, it is premature for the court to consider the plaintiff's general request for attorneys' fees, and the court will not consider a specific request under a specific statutory provision until the question of liability on that statutory provision has been established.
Count III of the first amended complaint alleges that defendants iTeam, iStream, Biel, Tice, Axberg, Anderson and Atwell conspired to injure the plaintiff's business. Dkt. No. 35 at 20. Wisconsin law prohibits two or more people from
Wis. Stat. §134.01. The Wisconsin Supreme Court first laid out the standards for a claim under Wis. Stat. §134.01 in Radue v. Dill, 74 Wis.2d 239 (1976). To prove a claim under §134.01, "a plaintiff must prove that (1) the defendants acted together; (2) with a common purpose to injure the plaintiff's reputation or business; (3) with malice; and (4) the plaintiff suffered financial harm."
The plaintiff has asserted that "Biel, individually and as an agent of iTeam and iStream, induced members of the KBT Board to discharge and defame" the plaintiff. Dkt. No. 35 at ¶119. He alleges that "Tice, individually and as Chairman of KBT and pursuant to his dual persona as an iTeam Director, worked with Biel to secure Zillges' termination and defame him."
In their motion for summary judgment, the defendants deny any wrongful motive in discharging the plaintiff, and deny any intent to injure him. They argue that "Zillges was terminated for his involvement in an out-of-policy and unapproved purchase of risky securities," and "the termination was lawful." Dkt. No. 72 at 19. The defendants assert that the corporate entities agreed to terminate the KBT-iStream "payments business."
One of the elements of conspiracy to injure business requires the plaintiff to prove that the defendants did whatever they did "with a common purpose to injure the plaintiff's reputation or business."
In Count IV of the amended complaint, the plaintiff alleges that defendants iTeam, iStream, Biel, Tice, Gagerman, Axberg, Anderson and Atwell tortuously interfered with his prospective business. Dkt. No. 35 at 21. In Wisconsin, the law relating to interference with a business relationship has been described in terms of an existing or prospective contractual relationship.
To prove tortious interference with prospective business, the plaintiff must show "(1) a contractual relationship on behalf of the plaintiff; (2) knowledge by the defendant of the existence of the contractual relationship; (3) intentional acts on the part of the defendant to disrupt the relationship; (4) actual disruption of the relationship causing damages; and (5) lack of privilege or justification for defendant's interference."
The plaintiff asserts that he had a business relationship with KBT. Dkt. No. 35 at ¶129. He states that as a result of that relationship, he "had a reasonable expectation of economic gain," including bonuses and stock options.
In their motion for summary judgment, the defendants do not dispute that the plaintiff had a business relationship with KBT, based on an employment contract. Dkt. No. 72 at 24. The defendants argue, however, that they did not interfere with this relationship, because "iTeam, iStream, Biel, Anderson, and Atwell did not have a vote or vote on Zillge's termination," nor did they "mandate that Tice request Zillges's resignation or call a vote if he refuse[d]."
The last element of a claim for tortious interference with prospective business requires the plaintiff to prove "lack of privilege or justification for defendant's interference."
Count VI of the amended complaint alleges that KBT violated Wis. Stat. §109.03 by failing to pay him wages accrued since his termination. Dkt. No. 35 at 22. Wisconsin law requires an employer to pay "[a]ny employee . . . who is discharged from employment . . . in full by no later than the date on which the employee regularly would have been paid under the employer's established payroll schedule or [monthly], whichever is earlier." Wis. Stat. §109.03. Wages include "remuneration payable to an employee for personal services, including salaries, commissions, holiday and vacation pay, overtime pay, severance pay or dismissal pay . . . bonuses and any other similar advantages agreed upon [by the parties] or provided by the employer . . . as an established policy." Wis. Stat. §109.01(3). The statute defines an "employee" as "any person employed by an employer, except that `employee' does not include an officer or director of a corporation . . . or a person employed in a[n] . . . executive . . . capacity . . . or in a capacity in which the person is privy to confidential matters involving the employer-employee relationship . . . ." Wis. Stat. §109.01(1r) (emphasis added).
According to the plaintiff, KBT has "fail[ed] to compensate [him] his unpaid wages since his termination." Dkt. No. 35-1 at 23. The defendants respond that as a matter of law, §109.03 does not afford the plaintiff a remedy, because he was not an "employee" of KBT, as that term is defined by the statute. Dkt. No. 72 at 25. Rather, the plaintiff served "as President, CEO, and Director of KBT."
The plaintiff himself asserts in the amended complaint that he "served as KBT's President and Chief Executive Officer from October 11, 2011 until his termination on July 22, 2013." Dkt. No. 35 at ¶14. Thus, there is no genuine dispute that the plaintiff was an "officer or director" of KBT. Section 109.03 specifically provides that officer or directors are not employees, and the statute provides a remedy only for employees. Therefore, the court will grant the defendants' motion for summary judgment as to Count VI of the amended complaint.
In a footnote in his response to the defendants' motion for summary judgment, the plaintiff asks the court for leave to file a motion to amend the complaint if it finds that he "is unable to recover under Chapter 109 because he is not an `employee.'" Dkt. No. 86 at 32 n.10. "Rule 15(a) provides that after a party has amended its pleading once by right, `a party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.'"
The plaintiff amended the complaint once, and moved to amend a second time. The court denied the motion to file a second amended complaint. Dkt. No. 34. Now, in a footnote in a document filed nine months after the court denied the second motion to amend, the plaintiff makes the equivalent of a third motion to amend, seeking to re-allege the claim as a claim for breach of contract against KBT. He argues that he ought to be able to do this because "Defendants have previously acknowledged that they believe Zillges' employment contract governs this claim." Dkt. No. 86 at 32 n.10.
The plaintiff had the opportunity to allege a breach of contract claim against KBT in his original complaint in November 2013, and again in the amended complaint in June 2014. He could have pled the §109.03 claim and the breach of contract claim in the alternative. Instead, he elected to bring only the §109.03 claim, and seeks to bring the breach of contract claim only after the defendants pointed out a flaw in the claim he chose to bring.
This effort flouts the goals of the Rules of Civil Procedure, which "provide that they are to be construed to secure the just, speedy, and inexpensive determination of every action."
Count VIII of the amended complaint alleges that iStream would be unjustly enriched if it were allowed to retain the benefits of the plaintiff's services without paying him. Dkt. No. 35 at 24. A successful action for unjust enrichment requires the plaintiff to show (1) that he "conferred" a benefit on the defendant; (2) that the defendant "appreciated" the benefit; and "(3) `acceptance and retention' of the benefit by the defendant, under circumstances such that it would be `inequitable to retain the benefit without payment of the value thereof.'"
The plaintiff alleges that he and "iStream entered into the Bonus agreement pursuant to which" he conferred a benefit on the defendant by "render[ing] valuable services . . . including progress toward removing the Consent Orders." Dkt. No. 35 at ¶153. He states that the defendant "would be unjustly enriched if allowed to retain the benefits of [his] services without paying" the $25,000 that remains unpaid from the 2012 bonus and the $30,000 remaining from the consent-order bonus.
The plaintiff's own characterization of his claim concedes that his relationship with iStream was based on the "Bonus agreement"—a contract. Because Wisconsin law does not recognize a claim for unjust enrichment based on a contract or agreement between parties, the court will grant the defendants' motion for summary judgment as to Count VIII of the amended complaint.
The plaintiff's amended complaint contains two defamation claims—one against defendant Kenneth Biel, the other against defendant Thomas Tice. Dkt. No. 35 at 24-26. In Count IX, the plaintiff claims that "[i]n or about August 2013, Defendant Biel made several false statements to iTeam employees about Zillges, including that Zillges made false statements to the FDIC and was personally responsible for the FDIC's finding of 23B violations."
To prevail on a state-law defamation claim, the plaintiff must show the existence of "a false and defamatory statement concerning another, an unprivileged publication to a third party, and fault amounting to at least negligence on the part of the publisher."
In the defendants' motion for summary judgment, defendant Biel asserts that the plaintiff does not have any personal knowledge of whether Biel made the statements the plaintiff claims he made, provides no testimony supporting the allegations, and attaches no evidence that Biel ever made such claims. Dkt. No. 72 at 27. The defendants ask the court to dismiss the defamation claim due to lack of evidence.
This argument sounds to the court like a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6). The time has long passed for filing such a motion. This is a summary judgment motion; the standard the court applies is not whether there is evidence sufficient to support a claim, but whether a genuine dispute exists as to a material fact. The court will not dismiss the defamation claim against Biel.
The defendants make a similar argument with regard to the Count X allegations against Tice. The defendants argue that the plaintiff has not pled the actual statements, and they urge the court to dismiss Count X for failure to state a claim. Dkt. No. 72 at 28.
The court construes the defendants' allegation that the plaintiff provides no evidence that Biel made these statements as a constructive denial that he did so. This constitutes a genuine dispute as to a material fact. The court will deny the defendants' motion for summary judgment as to Count IX of the amended complaint.
The defendants are correct that the plaintiff fails to provide the actual language used in these allegedly defamatory statements. Instead, the plaintiff generally describes the statements made by both Tice and Biel. Dkt. No. 35 at 17-18. He does not provide the statements in his proposed statement of undisputed facts. Dkt. No. 77. He did not quote the alleged defamatory language in his proposed findings of fact filed in support of his opposition to the defendants' motion for summary judgment. Dkt. No. 88.
But again, this is not a motion to dismiss for failure to state a claim, and the time for filing such a motion has passed. Further, in support of their argument that the court should dismiss Count X because the plaintiff didn't plead the actual statements, the defendants cite Wis. Stat. §802.03(6), the Wisconsin statute that requires heightened pleading for libel and slander. The Wisconsin statute does not govern the pleading standard in federal court. ". . . [i]t is well settled that a federal court sitting in diversity applies federal pleading requirements even when the claim pleaded arises under state rather than federal law."
The defendants also argue that "[Tice's] statements, if made, were true," and "truth is an absolute defense." Dkt. No. 72 at 28. (citations omitted). The defendants are correct that "truth is an absolute defense to a defamation claim."
The plaintiff argues that the court should grant summary judgment in his favor on Count I of the first amended complaint because his statements to the FDIC "were a contributing factor in his termination." Dkt. No. 76 at 9. The plaintiff himself acknowledges, however, that the defendants gave four other reasons for terminating him: "1) the unauthorized purchase of trust-preferred securities; 2) the taking of an unauthorized bonus; 3) inherent conflict of interest due to [the plaintiff's] desire to buy [KBT]; and 4) his handling of the alleged violation of 23(b)." Dkt. No. 76 at 10. As the court already has determined in denying the defendants' motion for summary judgment on Count I, a genuine dispute exists as to this material fact, precluding the court from granting summary judgment in the plaintiff's favor.
The parties also dispute the nature of the statements that the plaintiff made to the FDIC. While the plaintiff asserts that he reported violations of the Federal Reserve Act, the defendants allege that those statements were "false" and that the plaintiff made the "false statement[s] knowingly and recklessly." Dkt. No. 92 at 5.
As the court discussed in section IV(C)(1) above, in order to prove that KBT violated the Federal Deposit Insurance Act, the plaintiff must show that he made statements to the FDIC, that the defendants knew about those statements, and that the statements played a role in the retaliatory conduct, here Zillges' termination. The parties agree that the plaintiff made statements to the FDIC and that the defendants knew about the conversations between Zillges and the FDIC. But the parties strongly disagree about the role those statements played in in the plaintiff's termination, and about the nature of the statements. Again, the parties' motions and accompanying pleadings demonstrate the existence of a genuine dispute regarding these material facts. Therefore, the court will deny the plaintiff's motion for summary judgment on Count I of the first amended complaint.
In his motion for partial summary judgment, the plaintiff seeks judgment on Count VI of the complaint for his "accrued and unused vacation pay." Dkt. No. 75 at 15. He seeks this compensation under Wis. Stat. §109.03. In addition, he seeks attorney fees under Wis. Stat. §109.03(6). As a matter of law he cannot recover either of these monies, because he was not an "employee" as defined in §109.01(1r).
iStream's counterclaim focuses on whether the plaintiff made a misrepresentation when he told defendant Axberg in a June 20, 2013 email that the regulators lifted the November 13, 2012 consent order, in order to induce iStream to pay him the $30,000 compliance bonus due under the bonus agreement between the plaintiff and iStream. Dkt. No. 7 at 41-43.
In the first cause of action of its counterclaim, iStream alleges that the plaintiff committed theft by false representation.
Under Wisconsin law, a person commits theft by false representation when he or she "[o]btains title to property of another person by intentionally deceiving the person with a false representation which is known to be false, made with intent to defraud, and which does defraud the person to whom it is made." Wis. Stat. §943.20(1)(d). If, as a result of the false representation committed in violation of §943.20, the person "suffer[ed] damage or loss by reason of intentional conduct that occur[ed] on or after November 1, 1995," the victim "has a cause of action against the person who caused the damage or loss." Wis. Stat. §895.446(1).
To find liability for civil theft under Wis. Stat. §895.446(1), "a court must first find the existence of a theft under Wis. Stat. §943.20(1)(d)."
To prove negligent misrepresentation, a plaintiff must show:
To prove an intentional false representation or an intentional misrepresentation, iStream must prove
Each of iStream's three misrepresentation claims turns on the plaintiff's knowledge and intent at the time he informed Axberg that the regulators had lifted the November 2012 consent order. For an intentional misrepresentation, "the defendant must either have known the representation was untrue or have made the representation recklessly without caring whether it was true or false" and he "must have made the representation with the intent to deceive and induce the plaintiff to act . . . to the plaintiff's pecuniary damage."
The parties have presented competing evidence on the question of what the plaintiff knew, and what he intended. This competing evidence demonstrates that there are genuine disputes as to these material facts. And again, determining intent requires the court to make a credibility determination; "[o]n summary judgment a court may not make credibility determinations, weigh the evidence, or decide which inferences to draw from the facts; these are jobs for the factfinder."
The fourth cause of action in iStream's counterclaim alleges that when the plaintiff accepted the $30,000 compliance bonus despite "the bonus not being payable" and converted that money to his own use, he committed conversion. Dkt. No. 7 at 44. "The elements of tortious conversion comprise: (1) intentionally controlling/taking property belonging to another; (2) controlling/taking property without the owner's consent; and (3) those acts resulting in serious interference with the rights of the owner to possess the property," but this "does not include wrongful intent or knowledge that what is being taken rightfully belongs to another."
On November 17, 2014, the defendants filed a suggestion of death in compliance with Fed. R. Civ. P. 25. Dkt. No. 52. The pleading indicated that defendant Kenneth W. Biel had passed away on November 14, 2014,
As discussed above, the amended complaint contains three claims against defendant Biel: Count III (conspiracy to injure business), Count IV (tortious interference with business), and Count IX (defamation). In their motion for summary judgment, the defendants ask the court to dismiss defendant Biel, because his death extinguished all of the claims against him. Dkt. No. 72 at 28-29.
"Whether an action survives the death of a party must be determined by looking to the law, state or federal, under which the cause of action arose."
Each of the three claims against defendant Biel arises under Wisconsin law. In 2008, Wisconsin's survival statute, Wis. Stat. §895.01, went into effect. The statute is entitled "What actions survive; actions not to abate." Subsection (1)(am) states that, "[i]n addition to the causes of action that survive at common law, all of the following also survive," and provides a list of causes of action that live on after a party's death. The defendants assert that "[a]t common law, torts do not survive the death of a defendant," citing
What the
Wis. Stat. §895.01 does not list conspiracy to injure reputation or business, tortious interference with prospective business, or defamation. "It is well settled that the list of causes enumerated in sec. 895.01(1) is exclusive because `it was never the legislative intent that all actions should survive.'"
The plaintiff argues, however, that the three causes of action he alleged against Biel survive under Wis. Stat. §895.01(8), which provides for the survival of "[c]auses of action for all damage done to the property rights or interests of another" to survive. As far as the court can tell, no Wisconsin court has ruled on subsection (8) of the survival statute. Wisconsin courts have, however, opined on the meaning of "property rights or interests."
In
The list goes on, but the consistent theme that runs through each of these decisions and others is that a "property right or interest" is a right or interest in some specific, quantifiable property which one could transfer or sell to someone else for value. As the defendants point out in their reply brief, the plaintiff has not identified such property. The plaintiff could not sell, or transfer to someone else, his right not to have his business or reputation injured, or his right to future business, or his right not to be defamed.
The court disagrees with the plaintiff that the three claims he alleged against Biel survive under §895.01(8). Therefore, the court will dismiss defendant Biel. This requires the court to dismiss Count IX of the amended complaint, because Biel is the only defendant named in that claim.
The court
The court
The court
The court
