Eau Claire County v. Softscape, Inc.

• Decision Date: 14 July 2011
• Docket Number: Appeal No. 2009AP2610,Cir. Ct. No. 2006CV188
• Parties: EAU CLAIRE COUNTY, PLAINTIFF-APPELLANT-CROSS-RESPONDENT, v. SOFTSCAPE, INC., DEFENDANT-RESPONDENT-CROSS-APPELLANT.
• Court: Wisconsin Court of Appeals

EAU CLAIRE COUNTY, PLAINTIFF-APPELLANT-CROSS-RESPONDENT, v. SOFTSCAPE, INC., DEFENDANT-RESPONDENT-CROSS-APPELLANT.

Appeal No. 2009AP2610

Cir. Ct. No. 2006CV188

STATE OF WISCONSIN IN COURT OF APPEALS DISTRICT III

July 14, 2011

A. John Voelker

Acting Clerk of Court of Appeals

NOTICE

This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports.

A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See WIS. STAT. § 808.10 and RULE 809.62.

APPEAL and CROSS-APPEAL from a judgment and an order of the circuit court for Eau Claire County: BENJAMIN D. PROCTOR, Judge. Affirmed in part; reversed in part and cause remanded for proceedings consistent with this opinion.

Before Vergeront, P.J., Sherman, and Blanchard, JJ. ¶1 BLANCHARD, J. This appeal presents a "new claim" relation-back issue under WIS. STAT. § 802.09(3) (2009-10).¹ The question is whether a claim made for the first time in an amended complaint filed after expiration of the applicable statute of limitations period relates back to factual allegations made in an earlier complaint that was filed within the limitations period. If so, the new claim in the later filed complaint is deemed to have been filed within the limitations period only when the earlier complaint contained sufficient notice of potential claims.

¶2 Eau Claire County (the County) initially sued Softscape, Inc., on contract claims only, and then filed a series of amended complaints. The County's Third Amended Complaint alleged, for the first time, a claim of fraudulent advertising in violation of WIS. STAT. § 100.18. The Third Amended Complaint was filed after the three-year statute of limitations period had lapsed. The circuit court concluded that the Third Amended Complaint did not relate back to allegations contained in the original complaint. As result of the court's relation-back decision, the court determined that the County is not entitled to recover statutory fees and costs on its § 100.18 claim, on which the County had prevailed in a jury trial.

¶3 We conclude that our standard of review on this issue is de novo, because the trial court did not grant Softscape's motion on the grounds that the amended complaint was untimely. Instead, the court granted the motion on the basis of a legal determination that in order for the WIS. STAT. § 100.18 claim in theamended complaint to relate back to the original complaint, the County needed to have alleged in its original complaint specific misrepresentations inducing the County to enter into a contract. We conclude that the circuit court erred, because the original complaint need only allege a "transaction, occurrence, or event" out of which the § 100.18 claim "arose," and the County made such an allegation in its original complaint.

¶4 In addition, we conclude that: (1) because of our resolution of the relation-back issue summarized above, we need not address the County's additional argument that Softscape waived its statute of limitations defense; (2) the court did not erroneously exercise its discretion in allowing taxable costs and disbursements to Softscape on both its defense against the County's claims and its pursuit of a counterclaim against the County; and (3) Softscape's argument on cross-appeal that the County's statutory offer of settlement was ambiguous and unenforceable is untimely, and therefore we do not address it.

¶5 Accordingly, we: reverse those portions of the Supplemental Order Regarding Motions After Verdict challenged by the County ordering that the Third Amended Complaint does not relate back to the original complaint and that the County may not recover actual attorneys' fees and costs under WIS. STAT. § 100.18; affirm that portion of the court's amended judgment challenged by the County awarding costs and disbursements to Softscape; and remand for proceedings consistent with this opinion.

BACKGROUND FACTS REGARDING RELATION BACK

¶6 The County contracted with Softscape to develop a computer information system, a project which was to involve converting pre-existing data of the County's human services department to a new system for that department.Disputes arose between the two parties. This lawsuit was ultimately tried to a jury. In the following paragraphs we summarize the allegations made by the County in its original and amended complaints, which were filed over the course of thirty-three months. A focus of this appeal is the County's Third Amended Complaint, filed four months in advance of jury trial.

Original Complaint

¶7 The original complaint, filed March 30, 2006, demanded a judgment terminating the contract between the parties, and returning to the County the money it had paid to date. As grounds, the County alleged that there had been no meeting of the minds and therefore rescission or equitable relief was appropriate. In the alternative, the County alleged that Softscape had repudiated the contract. The original complaint included the following allegations of fact.

¶8 On December 31, 2003, the County and Softscape entered into a written contract, a "Master Software Development, License and Service Agreement" (hereafter "the agreement"). The agreement addressed "professional services to be carried out by Softscape on behalf of the County." The parties contracted in the agreement for Softscape to develop and implement "a comprehensive, state-of-the-art Human Services Information System," which was to include, among other things, software sufficient to meet requirements of the Health Insurance Portability and Accountability Act of 1996, interface with other systems, and integrate case management software with the County, all at a flat fee to the County. The agreement contained a pricing schedule that "did not limit the amount of time to be offered" by Softscape "for data conversion and interface of the software" for the County.

¶9 The County further alleged in the original complaint that Softscape had "changed or attempted to change the rules of the agreement," by offering the County "Scope documents," under which the terms of the agreement would change. The County alleged that Softscape had refused to deliver the software as agreed. As examples, the County alleged that Softscape used "Scope documents" to limit its work on HIPAA compliance, on system functionality, and on necessary interfaces that had been included in the agreement. Softscape had also used "Scope documents" to "place hourly limits on time necessary for Softscape to make the system function" for the County, despite the fact that the agreement, which had an attached pricing schedule, called for a flat fee bid, with an hourly rate for "additional consulting beyond initial project scope." Attached to the complaint was a purported fifth iteration of the "Scope documents," dated January 7, 2005.

¶10 Softscape responded to the original complaint with a counterclaim alleging breach of the agreement by the County. Softscape alleged that the County had repeatedly attempted to change the agreement even after Softscape had made substantial efforts to perform under the agreement. Softscape alleged that the County had added "purported obligations that were not previously contemplated by the parties and not consistent with the original agreement."

First and Second Amended Complaints

¶11 On May 18, 2007, the County filed the first of its amended complaints, merely adding a cause of action and an additional prayer for relief not relevant to this appeal, without alleging any additional facts. On December 21, 2007, the County filed a Second Amended Complaint, again alleging no new facts, but specifically alleging that Softscape "made representations of fact," both undera strict liability theory and a negligence theory, "about its ability to deliver an integrated social service system" for the County, which were "not true," "in circumstances in which it necessarily ought to have known the untruth of the representation^]," and that the County relied on the false representations to its detriment.

Third Amended Complaint

¶12 On December 31, 2008, the County filed a Third Amended Complaint, re-alleging and incorporating by reference the allegations and claims made in its prior complaints, and this time adding a claim that Softscape violated the fraudulent advertising statute, WIS. STAT. § 100.18. By incorporating the contents of the Second Amended Complaint, the Third Amended Complaint realleged the strict responsibility and negligent misrepresentations referenced above.

¶13 In its answer to this complaint, Softscape alleged as an affirmative defense that the Third Amended Complaint was barred by the statute of limitations.²

Trial Events Related to WIS. STAT. § 100.18 Claim

¶14 In advance of trial, Softscape made no effort before the circuit court to pursue its affirmative defense that the WIS. STAT. § 100.18 claim was first alleged by the County after the statute of limitations had lapsed. Softscape did notraise with the court the issue of whether the § 100.18 claim was viable until the five-day jury trial was underway. At that time, Softscape argued that § 100.18 requires proof of a statement intended to induce the plaintiff to enter into a contractual relationship, and the County had failed to file a complaint alleging such inducement-through-deception by December 31, 2006, three years after formation of the agreement, December 31, 2003.³ Therefore, Softscape argued, the necessary allegation of fraudulent inducement to enter into the agreement on December 31, 2003, was not made before the statute of limitations had expired on December 31, 2006.

¶15 The County argued that the statute of limitations did not apply, and also noted that it was highly significant to the parties whether the WIS. STAT. § 100.18 claim was viable, because prevailing parties receive attorneys' fees under that statute. See § 100.18(11)(b)2.

¶16 The circuit court invited...