Feerick v. Matrix Moving Systems, Inc.

• Decision Date: 10 April 2007
• Docket Number: No. 2006AP776.,2006AP776.
• Citation: 736 N.W.2d 172,2007 WI App 143
• Parties: In the Matter of Sanctions in William FEERICK, plaintiff, v. MATRIX MOVING SYSTEMS, INC., defendant. Gatzke & Ruppelt, S.C., Appellant, v. William Feerick, Respondent.
• Court: Wisconsin Court of Appeals

736 N.W.2d 172

2007 WI App 143

In the Matter of Sanctions in William FEERICK, plaintiff, v. MATRIX MOVING SYSTEMS, INC., defendant.

Gatzke & Ruppelt, S.C., Appellant, v. William Feerick, Respondent.

No. 2006AP776.

Court of Appeals of Wisconsin.

Submitted on Briefs February 6, 2007.

Opinion Filed April 10, 2007.

On behalf of the appellant, the cause was submitted on the briefs of Monte E. Weiss and Charles W. Kramer of Deutch & Weiss, LLC, of Milwaukee.

On behalf of the respondent, the cause was submitted on the brief of Edward R. Harness of Harness Law Offices, LLC, of Milwaukee.

Before FINE, CURLEY and KESSLER, JJ.

¶ 1 CURLEY, J

Gatzke & Ruppelt, S.C. appeals from an order finding it in contempt of court and ordering it to pay an arbitration award, fees and sanctions, as well as from the underlying order for confirmation of the arbitration award. This appeal arises out of a lawsuit in which Matrix Moving Systems Inc. (Matrix) was sued by William Feerick. The law firm of Gatzke & Ruppelt represented Matrix. That dispute was arbitrated and resulted in an arbitration award against Matrix. Gatzke & Ruppelt twice stated that Matrix had tendered the amount of the arbitration award into its client trust account; however, after the trial court issued the order for confirmation of the arbitration award, Gatzke & Ruppelt said it never received the money. The court determined that Gatzke & Ruppelt was judicially estopped from claiming that it did not have the money, found the law firm in contempt for failure to pay, and ordered it to pay the arbitration award as well as attorney's fees, interest and sanctions.

¶ 2 Gatzke & Ruppelt contends that the trial court erred in applying the doctrine of judicial estoppel, erred in imposing sanctions, and should have granted it relief. We conclude that the trial court erred in determining that Gatzke & Ruppelt was judicially estopped from stating that Matrix had failed to transfer the arbitration award into its trust account, and, as a result, erred in finding Gatzke & Ruppelt in contempt and in ordering sanctions against the firm. We therefore reverse the order for contempt, and the order to pay the arbitration award, fees and sanctions. Further, because the factual issue of whether Matrix ever paid Gatzke & Ruppelt was never resolved, we remand the matter for an evidentiary hearing.

I. BACKGROUND.

¶ 3 In 2002, William and Georgellen Feerick entered into a contract with Matrix, a moving service, to move their belongings from Brown Deer, Wisconsin to Hernando, Florida. A dispute arose between Matrix and the Feericks over the amount the Feericks owed Matrix for the move, and William Feerick sued Matrix, alleging that Matrix had charged them $15,456.44 more than previously agreed to. Matrix retained the law firm of Gatzke & Ruppelt to represent it in the dispute. The parties agreed to arbitrate the matter, and an arbitration hearing, conducted by a Better Business Bureau arbitrator, was held on March 29, 2005. The arbitrator rendered a decision in favor of Feerick and awarded him $15,456.44 and $6,652.37 in attorney's fees.

¶ 4 Gatzke & Ruppelt, on behalf of Matrix, sought clarification of the decision but was dissatisfied with the clarification it received. James Gatzke, of Gatzke & Ruppelt, informed Feerick by letter dated April 29, 2005, that Matrix would request judicial review in federal court of the arbitrator's decision and seek to have the award set aside on grounds that the decision was inconsistent with the relevant law and reflected the arbitrator's unfamiliarity with the law.¹ The letter further explained that Matrix "will not pay the award suggested by the arbitrator," but also stated:

As a measure of good faith, Matrix has, however, deposited the amount of the award in the trust account of Gatzke & Ruppelt, S.C., where it is intended to be held until such time as the Court makes a competent and just determination as to any damages due and owing either party in this matter.

¶ 5 Whether Gatzke's representation in the letter that the amount of the award had been deposited into Gatzke & Ruppelt's trust account was true, is a disputed issue on appeal. Gatzke & Ruppelt has since filed affidavits indicating that the information was incorrect, and the result of a conversation between Gatzke and one of Gatzke & Ruppelt's associate attorneys Basil Loeb, where Loeb indicated to Gatzke, based on a statement from Matrix, that Matrix would be depositing the amount into the account, and Gatzke mistakenly understood it to mean that it already had been deposited. Apparently the same information was also represented on an internal memorandum at Gatzke & Ruppelt. Soon after Loeb's conversation with Gatzke, Loeb left Gatzke & Ruppelt and another associate attorney, Chad Levanetz, took over the case.

¶ 6 On June 30, 2005, Feerick filed a complaint requesting confirmation of the arbitration award. Matrix filed an answer on August 12, 2005. On December 6, 2005, Matrix, through Levanetz, filed a supplemental brief opposing confirmation of the arbitration award. Levanetz stated in the background section of the brief that Matrix had deposited the amount of the award into Gatzke & Ruppelt's trust account. According to a later affidavit, Levanetz included the sentence in the background section based entirely on the information contained in Gatzke's April 29, 2005 letter and was unaware that the information in it was incorrect.

¶ 7 On December 19, 2005, the trial court confirmed the arbitration award, and on December 20, 2005, Feerick's attorneys submitted a proposed order to the trial court. Gatzke & Ruppelt did not object to the proposed order. According to Gatzke & Ruppelt, it was at this time that it discovered that the funds were not in its trust account. Feerick does not dispute that Gatzke then informed Feerick's counsel that the funds were not in Gatzke & Ruppelt's possession. Gatzke & Ruppelt withdrew as counsel for Matrix, and Matrix retained the law firm of Hinshaw & Culbertson, LLP, to represent it. On January 6, 2006, consistent with the proposed order from December 20, 2005, the trial court issued an order for confirmation of the arbitration award and ordered Gatzke & Ruppelt to release the funds. Gatzke informed Hinshaw & Culbertson that Matrix had not paid Gatzke & Ruppelt the arbitration award.

¶ 8 On February 2, 2006, Feerick filed a motion for civil contempt against Matrix and Gatzke & Ruppelt, requesting that Gatzke & Ruppelt be ordered to immediately release the arbitration award. On February 10, 2006, Matrix, through Hinshaw & Culbertson, filed a motion opposing Feerick's motion for contempt with respect to Matrix on grounds that Matrix had tendered the full amount of the arbitration award to Gatzke & Ruppelt to be held in Gatzke & Ruppelt's trust account.

¶ 9 At a hearing on the contempt motion, Matrix's counsel insisted that Matrix had "tendered the whole amount of the arbitration award to the Gatzke and Ruppelt firm to be deposited in its client trust account." As support, Matrix's attorneys cited Gatzke's April 29, 2005 letter, as well as Levanetz's December 6, 2005 supplemental brief that referenced the presence of the funds in the account and argued that Gatzke & Ruppelt should be judicially estopped from claiming otherwise. Matrix's attorneys also presented the court with an unsigned affidavit² from Kevin Rude of Matrix that provided in part:

5. Mr. Gatzke requested that Matrix deposit the full amount of the arbitration award in his firm's client trust account, as a show of good faith, pending the outcome of his challenge to the BBB's decision.

6. As confirmed in Mr. Gatzke's correspondence to Mr. Harness of April 29, 2005, as well as the representations made by Attorney Chad Levanetz in Defendant's Supplemental Brief, filed December 6, 2005, Matrix tendered the full amount of the arbitration award to Mr. Gatzke for deposit in the Gatzke & Ruppelt, S.C. client trust account.

¶ 10 Gatzke & Ruppelt, represented in court by another associate attorney, stated that the firm never received the funds from Matrix. As support, it presented affidavits from Gatzke, Loeb and Levanetz explaining that Gatzke & Ruppelt's previous representations in the April 29, 2005 letter and the December 6, 2005 brief, that the firm had received the funds, were not true. The affidavits explained that the incorrect representations were due to a miscommunication between Gatzke and Loeb and an incorrect internal memorandum, and that after Loeb left the firm, the mistake was simply perpetuated by Levanetz.

¶ 11 The trial court determined that because it and the other parties "relied" on the representations in the April 29, 2005 letter and the December 6, 2005 supplemental brief, Gatzke & Ruppelt was judicially estopped from denying that it had the funds in its possession, and emphasized that Gatzke & Ruppelt had failed to object to the proposed order for the confirmation of the award. The court found Gatzke & Ruppelt in contempt for failure to turn over the money and determined that Gatzke & Ruppelt should pay the entire arbitration award and attorney's fees associated with it, $22,109.11, reasonable attorney's fees and post-judgment interest for the contempt motion, as well as an additional $1,000 for every day the firm fails to pay after the order is entered. The court did not find Matrix in contempt.

¶ 12 Gatzke & Ruppelt, now represented by counsel, filed a motion for reconsideration of the contempt finding, to stay the proceedings pending appeal, and for permission to pay the funds into the court. The motion was heard on March 7, 2006. Gatzke & Ruppelt asserted that judicial estoppel was erroneously applied because the firm was only trying to correct a mistake, and requested an evidentiary hearing because the question of where the money was had yet to be resolved. Matrix opposed the motion, claiming that the court did not need to solve the disputed question of fact...