DeWitt Ross & Stevens v. Galaxy Gaming and Racing

• Decision Date: 01 July 2004
• Docket Number: No. 02-0359.,02-0359.
• Court: Wisconsin Supreme Court
• Parties: DeWitt Ross & Stevens, S.C., Plaintiff-Respondent-Cross-Appellant-Petitioner, v. Galaxy Gaming and Racing Limited Partnership, and Galaxy Casinos, Inc., Defendants-Co-Appellants-Cross-Respondents-Cross Petitioners, Southwest Florida Enterprises, Inc., Defendant-Appellant-Cross-Respondent-Cross Petitioner.

273 Wis.2d 577

2004 WI 92

682 N.W.2d 839

DeWitt Ross & Stevens, S.C., Plaintiff-Respondent-Cross-Appellant-Petitioner, v. Galaxy Gaming and Racing Limited Partnership, and Galaxy Casinos, Inc., Defendants-Co-Appellants-Cross-Respondents-Cross Petitioners, Southwest Florida Enterprises, Inc., Defendant-Appellant-Cross-Respondent-Cross Petitioner.

No. 02-0359.

Supreme Court of Wisconsin.

Oral argument April 8, 2004.

Decided July 1, 2004.

For the plaintiff-respondent-cross-appellant-petitioner there were briefs by Anthony R. Varda and DeWitt Ross & Stevens, S.C., Madison, and oral argument by Anthony R. Varda.

For the defendants-co-appellants-cross-respondents-cross petitioners there were briefs by Robert H. Friebert, S. Todd Farris, Jennifer L. Bolger and Friebert, Finerty & St. John, S.C., Milwaukee, and oral argument by Robert H. Friebert.

¶ 1. ANN WALSH BRADLEY, J.

This case arises out of a dispute over the collection of a legal bill. The petitioner, DeWitt Ross & Stevens, S.C., seeks review of a published decision of the court of appeals that affirmed in part and reversed in part a judgment of the circuit court.¹ DeWitt asserts that the court of appeals erred in denying it an award of prejudgment interest under the offer of settlement statutes, Wis. Stat. § 807.01(3) and 807.01(4).²

¶ 2. Cross-petitioners Galaxy Gaming and Racing L.P., Galaxy Casinos, Inc., and Southwest Florida Enterprises, Inc. also seek review of the court of appeals' decision. They assert that the court erred in ruling that DeWitt made a valid Wis. Stat. § 807.01(3) offer of settlement. Additionally, they contend that the court erred in concluding that Southwest's guaranty on behalf of Galaxy included a guarantee to pay interest due on the outstanding account, that DeWitt could charge interest retroactive to January 1, 1997, and that DeWitt could recover as statutory costs the expense of having both a videographer and a court reporter record the same deposition.

¶ 3. We conclude that DeWitt did not make a valid Wis. Stat. § 807.01(3) offer of settlement.³ We also conclude that the court of appeals properly determined that Southwest's guaranty on behalf of Galaxy included a guarantee to pay interest, that DeWitt could charge interest retroactive to January 1, 1997, and that DeWitt could recover as statutory costs the expenses of both its videographer and court reporter. Accordingly, we affirm in part, reverse in part, and remand the cause to the circuit court.

I

¶ 4. For over five years, the law firm of DeWitt Ross & Stevens, S.C. (hereinafter "DeWitt") provided legal services to Galaxy Gaming & Racing L.P and Galaxy Casinos, Inc. (hereinafter collectively referred to as "Galaxy Partnership"). The legal services were rendered in connection with Galaxy Partnership's litigation with the City of Hudson.

¶ 5. Galaxy Partnership sought to obtain approval for an Indian casino at the St. Croix Meadows dog track in Hudson. As part of this effort, Galaxy Partnership negotiated an agreement with the City for governmental services. While Galaxy Partnership's application was awaiting final approval from the federal government, the City communicated with the government, indicating that it opposed the proposed casino. In the federal government's decision denying approval of the casino, it cited the City's opposition as a factor. Galaxy Partnership considered the City's opposition a breach of the agreement and retained DeWitt to represent it.

¶ 6. Fred Havenick, president of Galaxy Partnership, signed a retainer letter with DeWitt.⁴ The letter provided that DeWitt would bill Galaxy Partnership on a monthly basis for services rendered and expenses incurred. It also indicated that the monthly statement would be payable upon receipt. Finally, the letter stated that DeWitt "reserve[d] the right to charge interest at the rate of 18% per annum (1 1/2% per month) on all statements not paid within 20 days after their date." ¶ 7. Because Galaxy Partnership had no assets or means of earning income, the letter required payment of either a cash retainer in the amount of $25,000 or a guaranty of payment. Galaxy Partnership chose the latter option. Havenick, the president of Galaxy Partnership, was also the president of Southwest Florida Enterprises, Inc (hereinafter "Southwest"). The guaranty was executed by Southwest, which wholly owned Galaxy Casinos, the general partner of Galaxy Gaming (we will periodically refer to all three entities as simply "the Companies").

¶ 8. In his capacity as president of Southwest, Havenick signed the following guaranty, which was numbered page four of the retainer letter and executed simultaneously with it:

The undersigned, for valuable consideration and the willingness of ... DeWitt, Ross & Stevens, S.C. to represent [Galaxy] Partnership, all of which inures to my benefit, hereby personally guaranties the timely and full payment of all statements for services rendered and disbursements/expenses incurred on behalf of [Galaxy] Partnership. In the event of a failure of [Galaxy] Partnership to pay the monthly statements as they fall due, the undersigned agrees that the law firm[] may, in the first instance, look to the undersigned for payment without having to exercise or exhaust any remedies against [Galaxy] Partnership.

¶ 9. As legal services were provided, monthly statements were routinely submitted to Havenick. However, Galaxy Partnership did not stay current with its payments. By November 24, 1997, its unpaid bills totaled over $129,000. DeWitt wrote Havenick, demanding payment in full of Galaxy Partnership's entire obligation by December 1, 1997. In doing so, it alerted him that if payment were not timely made, DeWitt would charge the contractual 18 percent interest on the balance.

¶ 10. Shortly after December 1, 1997, Galaxy Partnership made a $50,000 payment to DeWitt. DeWitt responded to the payment by sending Havenick a letter dated December 8, 1997, in which it demanded payment of retroactive interest computed from January 1, 1997.⁵ At the time, Havenick did not object to the interest payment provision in the letter.

¶ 11. Over the next two years, Galaxy Partnership continued to make occasional payments to DeWitt. In those months when payment was made, DeWitt provided a payment application summary, indicating that the payments were applied first to accrued interest, then to principal. Again, Havenick did not object.

¶ 12. DeWitt submitted its final bill to Havenick at the conclusion of Galaxy Partnership's litigation with the City. The bill showed a total balance of $352,172.59, including $69,209.44 of accrued interest. When payment was not forthcoming, DeWitt sued the Companies to enforce the retainer letter and guaranty, claiming $396,847.86, which included interest through April 1, 2001.

¶ 13. On July 9, 2001, DeWitt made an offer of settlement pursuant to Wis. Stat. § 807.01(3). The offer required payment of $370,000 in full to be made within 15 days of acceptance. It stated:

Plaintiff DeWitt Ross & Stevens, S.C. hereby offers to settle and release all claims in the above-captioned matter, including claims for costs, sanctions, attorneys fees and interest for payment to it from any of the above-named Defendants, or any combination of the above-named Defendants, in the amount of $370,000 to be made within 15 days of acceptance of this offer. This offer shall expire within 10 days of this date, pursuant to Wis. Stat. § 807.01, and will not hereinafter be renewed.

¶ 14. After the offer was rejected, DeWitt moved for summary judgment on the question of Southwest's liability under the guaranty for principal and interest due. The circuit court determined that Southwest's obligation under the guaranty included payment of the contractual 18 percent interest. It also concluded that DeWitt was entitled to recover interest on the unpaid balance from December 1, 1997, the date DeWitt informed the Companies that it would begin assessing interest.

¶ 15. The circuit court entered judgment against the Companies in the amount of $407,498.79, awarding double costs pursuant to Wis. Stat. § 807.01(3). Although it concluded that the settlement offer was valid, the court declined to stack the statutory 12 percent prejudgment interest on top of the contractual 18 percent interest that DeWitt was entitled to receive. The court also declined to award costs for a transcript of Havenick's videotaped deposition. The Companies appealed and DeWitt cross-appealed.

¶ 16. The court of appeals affirmed in part and reversed in part the decision of the circuit court. DeWitt v. Galaxy Gaming, 2003 WI App 190, 267 Wis. 2d 233, 670 N.W.2d 74. Like the circuit court, it held that Southwest was liable for the contractual 18 percent interest, that DeWitt was entitled to double costs, and that DeWitt's offer of settlement was valid. Id., ¶¶4, 29. In discussing whether a Wis. Stat. § 807.01(3) offer of settlement may contain a 15-day payment condition, the court of appeals crafted a "reasonableness" test. Id., ¶ 31. It determined that a Wis. Stat. § 807.01(3) offer of settlement could contain such a condition provided that it was reasonable. Id.

¶ 17. In addition, the court of appeals agreed with the circuit court that Dewitt could not stack the statutory 12 percent prejudgment interest on top of its contractual 18 percent interest. Id., ¶ 63. The court determined the effective rate of interest in this case to be 35.9 percent had DeWitt prevailed. Id., ¶ 56, n. 8. It voiced concern that when faced with the prospect of incurring such interest, offerees might believe they have no choice but to capitulate. Id., ¶ 65. The court further determined that interest under the contract began to accrue on January 1, 1997, not December 1, 1997. Id., ¶ 4. Finally, it concluded that the circuit court erroneously excluded the deposition transcript as an item of costs. Id.

II

¶ 18. We review summary judgment decisions applying the same methodology...