Bruner Corp. v. R.A. Bruner Co.

• Court: U.S. Court of Appeals — Seventh Circuit
• Writing for the Court: Before CUMMINGS, FLAUM, and KANNE; FLAUM
• Citation: Bruner Corp. v. R.A. Bruner Co., 133 F.3d 491 (7th Cir. 1998)
• Decision Date: 07 January 1998
• Docket Number: 96-3640,Nos. 96-3537,s. 96-3537
• Parties: RICO Bus.Disp.Guide 9406 BRUNER CORPORATION, Plaintiff-Appellee, Cross-Appellant, v. R.A. BRUNER COMPANY and Robert A. Bruner, Sr., Defendants-Appellants, Cross Appellees.

Page 491

133 F.3d 491

RICO Bus.Disp.Guide 9406

BRUNER CORPORATION, Plaintiff-Appellee, Cross-Appellant, v. R.A. BRUNER COMPANY and Robert A. Bruner, Sr. Defendants-Appellants, Cross Appellees.

Nos. 96-3537, 96-3640.

United States Court of Appeals Seventh Circuit.

Argued Sept. 18, 1997.

Decided Jan. 7, 1998.

Maureen A. McGinnity (argued), Brett H. Ludwig, Kevin Banasik, Foley & Lardner, Milwaukee, WI, for Plaintiff-Appellee/Cross-Appellant.

Gerardo H. Gonzalez (argued), Gonzalez, Saggio, Birdsall & Harlan, Milwaukee, WI, for Defendants-Appellants/Cross-Appellees in No. 96-3537.

Margaret A. Watt, Gerardo H. Gonzalez, Jennifer Anne Pflug, Gonzalez, Saggio, Birdsall & Harlan, Milwaukee, WI, for Defendants-Appellants/Cross-Appellees in No. 96-3640.

Before CUMMINGS, FLAUM, and KANNE, Circuit Judges.

FLAUM, Circuit Judge.

Bruner Corporation designs and manufactures water treatment systems. In the mid-1980s, a trusted Bruner Corporation employee named John Balogh began selling the Corporation's products to various retailers on his own and pocketing the profits. One of the purchasers of this stolen property was R.A. Bruner, a sole proprietorship run by the son of Bruner Corporation's founder. Bruner Corporation eventually discovered the scheme and sued R.A. Bruner, among others, ¹ for violations of the Racketeer-Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(c), the Wisconsin Organized Crime Control Act (WOCCA), Wis. Stat. § 946.83(3), and Wisconsin's civil conspiracy law, Wis. Stat. § 134.01. The complaint also contained a claim for conversion.

Both parties moved for summary judgment. The district court rejected Bruner Corporation's RICO, WOCCA, and civil conspiracy claims. However, the court entered judgment in favor of Bruner Corporation on the conversion charge and, finding that no genuine issue of material fact existed regarding the damages for conversion, the court calculated damages in the amount of $220,498.70. Both parties appeal the district court's decision.

In R.A. Bruner's appeal of the amount of conversion damages, we vacate the district court's award and remand for further proceedings to recalculate conversion damages. In Bruner Corporation's appeal of the dismissal of its RICO, WOCCA, and civil conspiracy claims, we reverse and remand for further proceedings, because genuine issues of material fact exist regarding R.A. Bruner's knowledge that the goods it purchased from John Balogh were stolen.

I. Background

A. Relationship Between Bruner Corporation and R.A. Bruner.

Until the late 1960s, Appellant Robert A. Bruner, Sr. worked for Bruner Corporation, which was founded in the 1940s by Ted Bruner, the appellant's father. In 1974, Robert Bruner formed a sole proprietorship, operating under the name "R.A. Bruner," to sell and service the products of Bruner Corporation and other manufacturers. Bruner Corporation is no longer owned by the Bruner family. The Corporation has changed hands several times over the years; the current management took control of the company in April 1990.

Starting in the mid-1980s, R.A. Bruner purchased Bruner Corporation products both directly from the Corporation's customer service department and indirectly through John Balogh, a long-time Corporation employee who served as a liaison to the retailers of Corporation products. At that time, Bruner Corporation sold its products to consumers through official manufacturer's representatives as well as through independent retailers. Although R.A. Bruner was an independent retailer, it bought Bruner Corporation products at the same discounted rate--40% below the list price--as the official manufacturer's representatives.

This arrangement changed when new management took over Bruner Corporation in 1990. The new management decided to make direct sales only to official manufacturer's representatives, who would continue to receive a 40% discount. Accordingly, management told R.A. Bruner and other independent retailers that they would no longer be able to buy directly from Bruner Corporation.

Despite this change in official policy, John Balogh continued to sell the Corporation's products to R.A. Bruner after 1990. At some point during this period, R.A. Bruner began to receive an even greater discount (46% off list price) from Balogh, purportedly to allow it to remain competitive with the local official manufacturer's representative, Stickler & Associates. Many, if not all, of the Balogh sales were unauthorized; John Balogh was stealing Corporation products, selling them on the side to his retailer customers, and keeping the profits for himself. ²

B. Disposition Below

Bruner Corporation filed this damages suit against R.A. Bruner alleging common-law conversion and violations of RICO, WOCCA, and Wisconsin's civil conspiracy law. The district court granted summary judgment in favor of R.A. Bruner and its codefendant (another retailer) on all counts except the conversion claim. The court held that "the record clearly shows these defendants were unaware that the Bruner [Corporation] products they purchased from John Balogh had been stolen" and therefore "the mens rea required for a finding that they violated RICO, WOCCA or Wisconsin's civil conspiracy law is absent." ³

The court granted summary judgment in favor of Bruner Corporation, however, on the conversion cause of action, ⁴ holding that R.A. Bruner is liable for conversion as a purchaser of stolen goods even though it did not know that the goods were stolen. The court relied on the list prices of the stolen goods in calculating damages and ordered R.A. Bruner to pay $220,498.70.

R.A. Bruner filed a motion to amend the judgment and a motion for relief from the judgment. As part of these motions, R.A. Bruner argued that a clause in the settlement agreement between John Balogh and Bruner Corporation negated the conversion damages owed by R.A. Bruner. This clause consisted of a so-called "Pierringer release," which under Wisconsin law is an instrument by which a tort plaintiff settles with a tortfeasor, reserves its right to pursue claims against other joint tortfeasors, and agrees to indemnify the settling tortfeasor for any claims for contribution that non-settling tortfeasors might bring against the settling tortfeasor. See Pierringer v. Hoger, 21 Wis.2d 182, 124 N.W.2d 106 (1963).

In its post-judgment motions, R.A. Bruner seized on the Pierringer release as a way to nullify its liability for conversion. R.A. Bruner argues that it owes damages based on its joint and several liability with John Balogh, the seller of the stolen property. In apportioning liability between the joint tortfeasors, R.A. Bruner asserts that the court should attribute 100% of the liability to Balogh, for only Balogh acted intentionally. Thus, if R.A. Bruner owes $220,498.70 to Bruner Corporation, as the district court found, then Balogh owes R.A. Bruner 100% of this amount in contribution.

The Pierringer release, however, provides that Bruner Corporation will indemnify Balogh against claims for contribution brought by his joint tortfeasors. Thus, if Balogh owes R.A. Bruner $220,498.70 in contribution, the argument runs, then Bruner Corporation must owe Balogh that same amount. The upshot of this argument is that the $220,498.70 in conversion damages owed by R.A. Bruner to Bruner Corporation is actually owed by Bruner Corporation to itself. The district court dismissed this argument as untimely because it was not raised as part of the parties' motions for summary judgment.

Both Bruner Corporation and R.A. Bruner appeal from the district court's decision on their motions for summary judgment. Bruner Corporation asks this court to reinstate its RICO, WOCCA, and civil conspiracy claims, which the district court had rejected based on the defendant's ignorance that the goods were stolen. ⁵ R.A. Bruner repeats its Pierringer release argument on appeal, and it also challenges the district court's reliance on the list prices of the stolen Bruner Corporation products in calculating conversion damages. We address each of the parties' contentions below.

II. Bruner Corporation's Appeals

We review de novo a district court's decision to grant summary judgment, construing the evidence in the light most favorable to the nonmovant and drawing all reasonable inferences in its favor. O'Connor v. DePaul Univ., 123 F.3d 665, 669 (7th Cir.1997). Summary judgment is appropriate if "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." FED.R.CIV.P. 56(c). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Newell v. Westinghouse Elec. Corp., 36 F.3d 576, 578 (7th Cir.1994) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986)).

Bruner Corporation appeals from the district court's summary judgment decision denying relief on the company's RICO, WOCCA, and civil conspiracy claims. As the district court explained, in order to satisfy the mens rea requirements of RICO, WOCCA, and Wisconsin's civil conspiracy statute, Bruner Corporation must prove that R.A. Bruner knew that the goods it purchased from John Balogh were stolen. See supra note 3. Bruner Corporation argues that a genuine issue of material fact exists as to R.A. Bruner's knowledge that the goods were stolen, for three reasons: (1) R.A. Bruner was aware that its purchases from Balogh deviated from official company procedures; (2) it knew that the prices charged by Balogh were below the factory direct prices paid by official manufacturer's representatives; and (3) it had been told by Bruner Corporation that it could not purchase directly from Balogh.

Bruner Corporation's first argument is based on the different payment and invoicing procedures used when R.A. Bruner purchased from John Balogh as opposed to when it purchased from Bruner...