Druschel v. Cloeren, 2005AP2575.

Citation723 N.W.2d 430,2006 WI App 190
Decision Date01 August 2006
Docket NumberNo. 2005AP2575.,2005AP2575.
PartiesRobert L. DRUSCHEL, Plaintiff-Respondent, v. Peter F. CLOEREN, Defendant-Appellant.<SMALL><SUP>†</SUP></SMALL>
CourtCourt of Appeals of Wisconsin

On behalf of the defendant-appellant, the cause was submitted on the briefs of David J. Sisson, Troy M. Martell and Deborah J. Phillips of Reinhart Boerner Van Deuren S.C., Milwaukee.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Steven R. Cray of Wiley Law, S.C., Chippewa Falls.

Before CANE, C.J., HOOVER, P.J., and PETERSON, J.

¶ 1 PETERSON, J

Peter Cloeren appeals a summary judgment awarding Robert Druschel the entire outstanding balance Cloeren owed under a promissory note. Cloeren argues: (1) he is not subject to personal jurisdiction in Wisconsin; and (2) he is entitled to offset the amount of damages caused by Druschel's breaches of his employment and non-compete contracts. We conclude Cloeren is subject to personal jurisdiction in Wisconsin and he is not entitled to offsets for Druschel's alleged contractual breaches. Accordingly, we affirm the judgment.

BACKGROUND

¶ 2 Cloeren is a Texas resident and majority shareholder of The Cloeren Company, also known as Cloeren, Inc. In 1997, Cloeren and others, on behalf of Cloeren, Inc., sought to purchase a Wisconsin business, Production Components/Chippewa Valley Die, Inc. The company was owned by Druschel and two other stockholders. Druschel demanded a personal guarantee to complete the sale. Accordingly, Cloeren executed a secured promissory note in his individual capacity for partial payment of Druschel's stock. The note allowed for offsets as outlined in the stock purchase agreement. The sale was completed and the new company was called Production Components-Cloeren, Inc. At the time of the sale, Druschel also entered into two agreements with Production Components, an employment contract and a non-compete agreement.

¶ 3 In February 1998, Cloeren, in his individual capacity, signed a replacement secured promissory note to Druschel. Cloeren made several payments in accordance with the original and replacement notes between September 1997 and September 2002. In June 2003, Druschel notified Cloeren that he would exercise his right to full payment of the replacement note as of September 1, 2003. Cloeren made no payments after September 2002, and Druschel commenced this action in September 2003.

¶ 4 Cloeren moved to dismiss, contending the court lacked personal jurisdiction over him because he did not have sufficient contacts with Wisconsin. The circuit court denied Cloeren's motion, concluding it had jurisdiction by virtue of Wisconsin's long-arm statute, specifically WIS. STAT. § 801.05(1)(d),1 and that exercising jurisdiction did not violate due process.

¶ 5 The parties filed cross-motions for summary judgment in June 2005. Cloeren contended he was entitled to offsets on the note due to Druschel's violations of the employment contract and non-compete agreement. Druschel contended he was entitled to full payment. The circuit court denied Cloeren's motion and granted Druschel's motion. It concluded that, even if Cloeren were entitled to offsets, he was barred from obtaining them by claim preclusion. The court also concluded that Cloeren's claims were barred because he did not provide appropriate notice of his right to offset. Judgment was entered in Druschel's favor.

DISCUSSION
Personal Jurisdiction

¶ 6 Cloeren argues he is not subject to personal jurisdiction in Wisconsin. Whether a court has personal jurisdiction presents a question of law that we review independently. Capitol Fixture & Woodworking Group v. Woodma Distribs., Inc., 147 Wis.2d 157, 160, 432 N.W.2d 647 (Ct. App.1988). Questions of personal jurisdiction involve a two-step inquiry. Kopke v. A. Hartrodt S.R.L., 2001 WI 99, ¶ 8, 245 Wis.2d 396, 629 N.W.2d 662. First, we examine whether a defendant is subject to jurisdiction under Wisconsin's long-arm statute, WIS. STAT. § 801.05. Id. If the statutory requirements are satisfied, we examine whether Wisconsin's exercise of jurisdiction comports with federal due process requirements. Id.

A. Wisconsin's Long-Arm Statute

¶ 7 Cloeren argues he is not subject to personal jurisdiction under WIS. STAT. § 801.05(1)(d), which provides personal jurisdiction over a defendant who "[i]s engaged in substantial and not isolated activities within this state, whether such activities are wholly interstate, intrastate, or otherwise." Generally, a defendant has "substantial and not isolated" contacts with the state if the defendant "solicit[s], create[s], nuture[s], or maintain[s], whether through personal contacts or long-distance communications, a continuing business relationship with anyone in the state." Stauffacher v. Bennett, 969 F.2d 455, 457 (7th Cir.1992).

¶ 8 Wisconsin courts consider five factors to determine whether activities are "substantial and not isolated" under WIS. STAT. § 801.05(1)(d): (1) the quantity of the contacts; (2) the nature and quality of the contacts; (3) the source of the contacts and their connection with the cause of action; (4) the interests of the State of Wisconsin; and (5) the convenience of the parties. Nagel v. Crain Cutter Co., 50 Wis.2d 638, 648-50, 184 N.W.2d 876 (1971).

¶ 9 Cloeren argues the quantity, quality and nature of his contacts with Wisconsin were minimal. He argues that he visited Wisconsin infrequently, that he was barely involved in the purchase of Druschel's stock, and that he did not travel to Wisconsin to negotiate the deal.

¶ 10 Druschel responds that the circuit court's factual findings support its conclusion it has personal jurisdiction. Regarding the quantity, quality and nature of the contacts, the circuit court found:

1. [Cloeren] has had six to eight visits to the State of Wisconsin since 1997. Said visits lasted from two to four days at a time;

2. [Cloeren] had approximately four conversations a week with Douglas Darrow while Douglas Darrow was in the State of Wisconsin. The topics of these conversations were sales, marketing, pending orders, employees, manifold designs for dies, and personal matters;

3. [Cloeren] had approximately two conversations a month with Leigh Darrow while Leigh Darrow was in the State of Wisconsin. The topics of these conversations generally regarded sales of Cloeren products;

4. [Cloeren] is involved in the management and owner of Cloeren, Inc.

5. Cloeren, Inc. is the owner of Production Components-Cloeren, Inc.

6. [Cloeren] is actively involved in the daily operation of Production-Components-Cloeren, Inc. located in the City of Eau Claire, Chippewa County, Wisconsin;

7. [Cloeren] has had continuous and systematic general business contacts with the State of Wisconsin.

These findings demonstrate that Cloeren made a significant number of contacts with Wisconsin, including six to eight personal visits and frequent telephone conversations with Wisconsin residents. Additionally, personal visits are the highest quality of contact. See Dorf v. Ron March Co., 99 F.Supp.2d 994, 997 (E.D.Wis.2000). "The next highest quality of contact is personal contact of another type." Id. Here, Cloeren made frequent personal contact by virtue of telephone calls to Wisconsin. The first and second Nagel factors weigh in favor of personal jurisdiction.

¶ 11 On the third Nagel factor, Cloeren argues that Druschel's claim has no connection to Cloeren's Wisconsin contacts and that most of his Wisconsin contacts were made after the note was executed. Druschel responds, and we agree, that Cloeren's contacts were the direct result of his personal stake in the business, evidenced by the promissory note he personally signed. The source of the contacts was the purchase and operation of the Wisconsin corporation, including the notes that are the subject of this litigation. Thus, the third Nagel factor weighs in favor of jurisdiction.

¶ 12 Regarding the fourth and fifth Nagel factors, Cloeren contends Wisconsin has no interest aside from one of its citizens being a party to the action and that Wisconsin is an inconvenient forum for him because it is located thousands of miles from his home state. However, Wisconsin has an interest in protecting its residents from breaches of contract. See Dorf, 99 F.Supp.2d at 998. Additionally, as Druschel argues, because the transactions here were largely "paper" transactions, the documentary evidence is equally available in either venue, with the relevant witnesses residing largely in Wisconsin. Thus, these Nagel factors also weigh in Wisconsin's favor. In sum, we conclude that Cloeren engaged in "substantial not isolated activities" in Wisconsin, and WIS. STAT. § 801.05(1)(d) provides personal jurisdiction.2

B. Due Process

¶ 13 Cloeren also argues that, even if Wisconsin's long-arm statute is satisfied, the exercise of personal jurisdiction over him in Wisconsin violates due process under the Fourteenth Amendment to the United States Constitution.

Due process analysis presents two inquiries. The first inquiry is whether the defendant purposefully established minimum contacts in the forum State. On this question, the plaintiff carries the burden. If this inquiry is answered affirmatively, then the defendant's forum-state contacts may be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with fair play and substantial justice. The defendant carries the burden on this question.

Kopke, 245 Wis.2d 396, ¶ 23, 629 N.W.2d 662 (quotations and citations omitted). Our conclusion that Cloeren falls within Wisconsin's long-arm statute creates a rebuttable presumption that federal due process is also satisfied. See Harley-Davidson Motor Co. v. Motor Sport, Inc., 960 F.Supp. 1386, 1391 (E.D.Wis.1997).

¶ 14 Minimum contacts require "the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being...

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