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  • WisBar News
    March 21, 2017

    Wisconsin Supreme Court Equally Divided in Fiduciary Duty Case

    Joe Forward

    Supreme Court chamber in Wisconsin State Capitol

    March 21, 2017 – The Wisconsin Supreme Court recently split 3-3 in a fiduciary duty case involving two business partners, meaning one partner will get $499,000 in compensatory damages from the other but will not receive punitive damages.

    Justice Daniel Kelly did not participate in the case and the six other justices split equally, meaning the judgment of the lower appeals court is affirmed.

    The supreme court’s per curiam opinion in Smith v. Kleynerman, 2017 WI 22 (March 21, 21, 2017) simply stated the court was equally divided without any indication of how the participating justices voted. Justice Shirley Abrahamson wrote a concurring opinion, stating that nondisclosure of votes changes “recent and historically dominant practice.”

    “From my perspective, consistency is important,” she wrote. “If a court is not consistent in its practice about reporting tie votes then I believe the court should explain why the voting information is revealed in a particular case and in another it is not.”

    This particular case began with a 2009 transaction in which two 50/50 business partners sold their business. More than two years later, one accused the other of breaching a fiduciary duty and making material misrepresentations with respect to the transaction.

    Ultimately, a jury found that Greg Kleynerman breached a fiduciary duty and awarded Scott Smith $499,000 in compensatory damages. The jury found no intentional misrepresentations but awarded $200,000 in punitive damages for misrepresentation.

    Joe ForwardJoe Forward, Saint Louis Univ. School of Law 2010, is a legal writer for the State Bar of Wisconsin, Madison. He can be reached by email or by phone at (608) 250-6161.

    Upon post-verdict motions, the circuit court judge struck the punitive damages award as legally inconsistent with a finding that Kleynerman’s representations were not untrue. Both parties appealed, and the District I Appeals Court affirmed the lower court rulings.

    The appeals court agreed that Kleynerman owed Smith a fiduciary duty, the claim was not barred by the statute of limitations, Kleynerman breached the duty, and Smith presented credible evidence that the breach caused Smith to suffer pecuniary loss.

    The appeals court also concluded that Smith had standing to sue, despite Kleynerman’s argument that any damages claim belonged to the former company they owned.

    But the appeals court rejected Smith’s cross-appeal for punitive damages on intentional misrepresentation, concluding there was “credible evidence supporting the jury’s verdict that the representations were not untrue at the time they were made.”

    Finally, the court of appeals declined to grant Smith a new trial on the intentional misrepresentation claim despite his argument that the jury was confused.

    “Here, the answers as to punitive damages were superfluous, in that they were legally impossible, not logically inconsistent,” the appeals court wrote in a per curiam opinion.

    The Wisconsin Supreme Court accepted the case for review but the votes were evenly divided, with one nonparticipating justice. Thus, the court affirmed the appeals court.

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