Bushard v. Reisman

• Decision Date: 30 June 2011
• Docket Number: No. 2009AP438.,2009AP438.
• Citation: 800 N.W.2d 373,2011 WI 51,334 Wis.2d 571
• Parties: David BUSHARD, Plaintiff–Respondent,v.Steven A. REISMAN and PressEnter, LLP, Defendants–Appellants–Petitioners.
• Court: Wisconsin Supreme Court

334 Wis.2d 571

800 N.W.2d 373

2011 WI 51

David BUSHARD, Plaintiff–Respondent,

v.Steven A. REISMAN and PressEnter, LLP, Defendants–Appellants–Petitioners.

No. 2009AP438.

Supreme Court of Wisconsin.

Argued April 14, 2011.Decided June 30, 2011.

For the defendants-appellants-petitioners there were briefs by J. Drew Ryberg and Michael J. Happe and Ryberg & Happe S.C. Eau Claire, and oral argument by J. Drew Ryberg.For the plaintiff-respondent there was a brief by Kay Nord Hunt, Thomas R. Jacobson, and Diane M. Odeen and Lomme, Abdo, Cole, King & Stageberg, P.A., Hudson, and oral argument by Thomas R. Jacobson.ANN WALSH BRADLEY, J.

The petitioners, Steven A. Reisman and PressEnter, L.L.P., seek review of an unpublished opinion of the court of appeals that affirmed orders of the circuit court requiring the equal distribution of PressEnter's profits to both partners, Reisman and David Bushard.¹ The circuit court determined that Reisman was not entitled to receive a salary as compensation for the services he rendered in winding up PressEnter. It ordered that the wind-up of the partnership be completed.

¶ 2 Reisman argues that the circuit court erred by failing to apply equitable considerations when it determined that the partners were entitled to share equally in the partnership's profits and losses. In addition, he asserts that the circuit court erred by ordering summary judgment without making the threshold determination of whether the dissolution resulted in a wind-up or a continuation of the partnership.

¶ 3 In the absence of an agreement to the contrary, we conclude that the distribution of PressEnter's profits and losses is governed by Wis. Stat. § 178.15,² and that Reisman's equitable arguments are insufficient to overcome the plain language of the statute. We also determine that because there was no genuine dispute of material fact, the circuit court correctly concluded that the dissolution of PressEnter resulted in a wind-up, and it appropriately ordered summary judgment in favor of Bushard. Accordingly, we affirm the court of appeals.

I

¶ 4 In 1995, David Bushard and Steven Reisman formed PressEnter, a partnership dedicated to providing dial-up internet service to subscribers in western Wisconsin.³ There was no written partnership agreement. Bushard and Reisman both contributed $15,000 in start-up capital, and they have been equal partners since PressEnter's inception.

¶ 5 It appears that the relationship between the partners began to deteriorate in 1999. Through his attorney, Bushard sent Reisman a document entitled “Notice of Dissolution of Partnership” on August 3, 1999:

Please be advised that Mr. Bushard has chosen to exercise his right to dissolve the partnership, PressEnter L.L.P., effective August 31, 1999. Mr. Bushard is taking this step because (1) he believes this is an optimal time for selling the business at maximum value, and (2) the relationship between the partners has deteriorated to the point where it is impracticable for the two of you to manage the business of the partnership jointly.

The effect of Bushard's letter was to dissolve the partnership, effective August 31, 1999.⁴

¶ 6 The letter advised that Bushard thought the partnership could be sold for $3 million, and it further advised: “In the event you wish to continue to run the business either individually or with a new partner or partners, Mr. Bushard is willing to sell his partnership interest to you for a comparable amount.” The letter concluded: “Please have your personal attorney contact me as soon as possible, so that we can arrange for an orderly wind-up or transition of the business.”

Around that time, Bushard courted Voyager.net as a potential buyer. Initially, Voyager.net expressed a willingness to purchase PressEnter for $3.5 million. Nevertheless, the attempt to sell PressEnter to Voyager.net was unsuccessful.

¶ 8 Bushard withdrew from participation in PressEnter. Reisman continued to run the day-to-day operations, and he made further attempts to sell the business.

¶ 9 After the 1999 dissolution of the partnership and Bushard's withdrawal from its day-to-day operations, Reisman continued to direct PressEnter to pay partnership draws (distributions) to both partners. Ultimately, PressEnter paid Reisman and Bushard approximately $2.3 million each in post-dissolution distributions.

¶ 10 In addition to receiving a partnership draw, Reisman started taking a “guaranteed draw” (a salary) in 2004. Reisman's salary ranged from $150,000 to $160,000 annually. In total, Reisman received $704,700 in salary from PressEnter between January 2004 and November 2008.⁵

¶ 11 In his deposition, Reisman averred that he had consulted with an attorney prior to taking a salary, and that the attorney told Reisman that he could compensate himself for the work he was doing in furtherance of the business. Reisman acknowledged that he had not specifically informed Bushard of his intention to take a salary and that he had not obtained Bushard's consent prior to doing so. He explained that he did not believe Bushard's consent was necessary because Bushard had withdrawn from the business.

[800 N.W.2d 377 , 334 Wis.2d 578]

Bushard first learned that Reisman had been taking a salary in April of 2006 when he received a letter from Reisman detailing the efforts made to “keep the company viable in the face of the demise of [its] core business,” dial-up internet services. The letter explained that Reisman would forego any increase in salary.⁶ The letter further explained: “[L]ooking to the future, to preserve partner capital and minimize the risk of incurring debt, each partner's draw will be reduced to $7,500.00 per month, starting with the next distribution.”

¶ 13 Bushard's attorney notified Reisman by letter that Bushard objected to Reisman taking any salary: “As you should know, under Wisconsin law, no partner is entitled to remuneration for acting in the partnership business, except with the express consent of the other partners or when winding up the partnership affairs.” ⁷

¶ 14 In November of 2007, Bushard filed a complaint against Reisman and PressEnter, alleging breach of fiduciary duty and unjust enrichment. He demanded an accounting of all partnership business and affairs from 1999 through present. He further demanded a money judgment against Reisman “in an amount equal to all funds taken from the Partnership without authorization,” including Reisman's salary.

Reisman answered and counterclaimed with two counts of unjust enrichment, damage to business reputation, and breach of the duty of good faith and fair dealing.⁸ He alleged that he had not been adequately compensated “for the fruits of his labor that produced massive sums paid to” Bushard after Bushard dissolved the partnership effective August 31, 1999.

¶ 16 Reisman then moved for summary judgment. He asserted that “Mr. Bushard's dissolution of the partnership caused the business to be in wind-up mode as no continuation was consented to.” According to Reisman's brief to the circuit court, “Press Enter has remained in wind-up mode since August of 1999,” the date that Bushard “unilaterally and irrevocably caused the wind-up and dissolution of Press Enter, L.L.P.” Reisman contended that he “did not need the consent of Mr. Bushard under Wisconsin law in order to draw compensation for his labor in winding up the partnership following Mr. Bushard's unilateral dissolution of the partnership.” “Because the business is engaged in wind-up, not continuation,” Reisman argued, “Mr. Bushard will receive the value of his interest at the date of liquidation or final settlement which has yet to occur.”

¶ 17 Reisman argued that PressEnter's dissolution “is analogous to a deceased partner scenario” where the surviving partner is compensated for his services in winding up the partnership:

The rationale behind the Uniform Partnership Act and thus the rationale for Wis. Stat. § 178.15(6) is that it is just and proper that the surviving partner should receive a reasonable allowance for his skill and industry in conducting the business, for during that time the business has not received the care and labor of the deceased partner, as an equivalent for such services.

....

The 50/50 split of the partnership has been incredibly imbalanced in Mr. Bushard's favor since 1999. Although Mr. Bushard is not deceased, he has abandoned the partnership as though he were, leaving Mr. Reisman with all of the work in running the business while simultaneously winding-up Press Enter's affairs.

¶ 18 In an oral ruling, the circuit court denied Reisman's motion for summary judgment. It concluded: “[T]his is a wind-up situation, ... there is not a surviving partner situation. This isn't where one party died and the other partner survived and continued the business.” It further determined: “The law says the partner who stays in the partnership during wind-up is not entitled to compensation, and the law is very clear in that regard.” Accordingly, the court concluded that Reisman “is not entitled to any compensation for running the affairs of the partnership while the partnership is in wind-up status, pursuant to the Uniform Partnership Law and the law in the state of Wisconsin.”

¶ 19 The parties disagreed on the effect of the court's ruling. Bushard contended that there were no issues left for trial, and he moved the court for summary judgment and an order requiring that the wind-up of PressEnter be completed. Reisman contended that the court's order had not resolved his counterclaim that Bushard had been unjustly enriched by Reisman's efforts in support of the partnership.

¶ 20 In contrast with his earlier assertions in the circuit court, Reisman contended that “[a] fact question exists concerning whether PressEnter, LLP is in a wind-up mode or simply a continuation that has been consented to by Mr. Bushard.” Regardless of whether the dissolution had triggered a wind-up or a continuation, Reisman asserted that...