Fore Way Exp., Inc. v. Bast
| Decision Date | 22 June 1993 |
| Docket Number | No. 92-3116,92-3116 |
| Citation | 178 Wis.2d 693,505 N.W.2d 408 |
| Parties | FORE WAY EXPRESS, INC., Plaintiff-Counterclaim-Defendant-Appellant, v. Gordon BAST, Jr., James Godeck, William J. Hill, Gary Kaye, Betty Levandoski, Nunzio J. Maniaci, William A. Peters, Anton F. Przybylski, Ken Scheuer, Leroy Sobieszczyk and Robert Van Handel, Defendants-Counter Claimants-Respondents, d v. David J. NARLOCH, Robert P. Brown, Stephen P. Steffke, Allen D. Betz, Joel D. Breitzman, and Fore Way Services, Inc., f/k/a Regency Enterprises, Ltd., a Wisconsin corporation, Additional-Counterclaim-Defendants-Appellants, Howard Reinhart, Additional-Counterclaim-Defendant. . Oral Argument |
| Court | Wisconsin Court of Appeals |
Before CANE, P.J., and LaROCQUE and MYSE, JJ.
Fore Way Express, Inc., and several of its officers (collectively, Fore Way) appeal a summary judgment declaring that the Fore Way Express Profit Sharing Plan (the Plan) is a security required to be registered under sec. 551.21, Stats., and awarding the respondents $138,873.46 in damages and prejudgment interest and $180,553.82 in costs and attorney fees. Fore Way contends that the trial court erred by refusing to grant summary judgment in its favor because the undisputed facts demonstrate that the Plan is neither a profit sharing agreement nor an investment contract within the meaning of sec. 551.02(13)(a). Fore Way argues that the trial court misapplied the "economic realities" test to determine whether the substance of an instrument constitutes a profit sharing agreement or an investment contract. In the alternative, Fore Way argues that disputed issues of material fact precluded summary judgment. Fore Way also contends that the Labor-Management Relations Act (LMRA), 29 U.S.C. § 185 (1978), preempts the respondents' state law claims and LMRA, 29 U.S.C. § 173 (1978), requires the respondents to submit their claims to arbitration before seeking judicial relief. Fore Way argues that the Plan was a valid amendment to its Collective Bargaining Agreement (CBA) with the Teamsters Union and therefore was subject to CBA's arbitration provisions and the LMRA.
We conclude that there are no disputed facts precluding summary judgment. We further conclude that the proper test for determining whether the Plan is either a certificate of participation in a profit sharing agreement or an investment contract is to examine the facts underlying the Plan to determine if it is consistent with the economic realities commonly underlying those two types of security. Because the Plan involves no underlying securities, no pooling of assets and does not constitute a certificate of participation in a profit sharing agreement independent of the employment relationship, we conclude that the facts are inconsistent with the economic reality underlying a certificate of participation in a profit sharing agreement. Because the respondents' interest in the Plan is not an independent financial interest that has the substantial characteristics of a security and because the respondents failed to demonstrate a reasonable expectation of a benefit over and above the value of their conceded wages, we conclude that the facts are inconsistent with the economic reality underlying an investment contract. Because Fore Way has prevailed on this basis, we need not address Fore Way's preemption and necessity of arbitration claims. The judgment is reversed.
Fore Way is a closely-held trucking corporation. In January 1985, Fore Way's management unsuccessfully attempted to negotiate a compulsory unilateral wage reduction with the union representing 70% of its employees, citing a precarious financial situation due to increased operating costs and decreased profits. With the union's permission, Fore Way then submitted what it called a wage concession plan titled "15% Employee Profit-Sharing Plan" to its employees. Participation in the Plan was voluntary, with a minimum participation contingency of 85% of full-time employees. Although the union did not formally approve the Plan, it agreed to "step aside" and allow the employees to make individual decisions whether to participate in the Plan.
The Plan, "for the benefit of employees," provided for a 15% wage reduction. The term of the plan was from October 1, 1985 to December 31, 1987. During the period of the Plan, a portion of the conceded wages would be recovered through pro rata distributions of operating profits. The percent of operating profits available for distribution to employees depended upon the achievement of certain operating ratios.
When Fore Way presented the Plan to the employees through a series of meetings, it indicated that it was experiencing financial difficulty and that the Plan was an alternative to layoffs. At one of the meetings, Fore Way presented a table showing the percent of wages that would be recovered, assuming participation by 100% of the employees, at different operating ratios. The table indicated that, assuming all of the employees participated in the 15% wage reduction program, they would recover 100% of their conceded wages if the operating ratio was approximately 86. However, the historical operating ratios presented to the employees demonstrated that the best ratio ever achieved was 88 in 1976 and that the best realistic operating ratio forecast during the Plan was 95, meaning only 31% of the total conceded wages would be recovered.
Approximately 86% of Fore Way's employees elected to participate in the Plan. During the Plan's term, Fore Way distributed "Profit Grams" showing the operating ratio and the percent of profit sharing return, detailing the favorable and unfavorable factors and commenting on the results. At the end of the term, a cumulative total of only 15.5% of the total conceded wages was restored.
During the Plan's term, Nunzio Maniaci registered a complaint regarding the Plan with the Wisconsin Commissioner of Securities. In response, a staff attorney from the commissioner's office informed Fore Way that the Plan was an unregistered, non-exempt security. However, the commissioner's office later informed Fore Way that it did not intend to take any formal action. Thus, there was no formal hearing, and the commissioner made no formal findings of fact or conclusions of law concerning the Plan.
Fore Way then commenced an action seeking a declaratory judgment that the Plan is not a security. The respondents counterclaimed, seeking rescission plus interest and attorney fees. Both sides moved the trial court for summary judgment, and the court granted the respondents' motion. The trial court rejected Fore Way's argument that the respondents' state law claims are preempted by the National Labor Relations Act, 29 U.S.C. § 185(a) (1978) and that the respondents are required to exhaust the grievance/arbitration procedures provided in the collective bargaining agreements (CBA). The trial court ultimately concluded that the Plan is a security under sec. 551.02(13)(a), Stats., because it is both a profit sharing agreement and an investment contract.
When reviewing a grant of summary judgment, appellate courts independently apply the same methodology as the trial court. Grotelueschen v. American Family Mut. Ins. Co., 171 Wis.2d 437, 446, 492 N.W.2d 131, 134 (1992). That methodology has been set forth numerous times, and we need not repeat it here. See Grams v. Boss, 97 Wis.2d 332, 338, 294 N.W.2d 473, 476 (1980).
Whether the Plan is a security within the meaning of sec. 551.02(13)(a), Stats., involves interpretation and application of statutes and regulations to undisputed facts, which is a question of law appropriate for summary judgment. See Brandt v. LIRC, 160 Wis.2d 353, 361, 466 N.W.2d 673, 676 (Ct.App.1991). Grotelueschen, 171 Wis.2d at 446-47, 492 N.W.2d at 134 (citations omitted).
Fore Way argues that it is entitled to summary judgment based on the undisputed facts. In the alternative, Fore Way argues that because different inferences could reasonably be drawn from the undisputed facts, summary judgment is inappropriate. Fore Way argues that disputes exist concerning "the circumstances under which the Plan arose, the method in which it was presented to the employees, the manner in which it was implemented, the nature of the employees' interests under the Plan, the expectations of the employees with respect thereto and the reasonableness of such expectations." While we agree that Grotelueschen precludes summary judgment where more than one inference can reasonably be drawn from the disputed facts, it is assertions of disputed fact, not inferences, that underlie Fore Way's position. At trial, Fore Way moved the trial court for summary judgment and thereby asserted that the material facts are undisputed. See id. Because a motion for summary judgment amounts to an explicit assertion that the material facts are undisputed, a party who moves for summary judgment is precluded from later asserting that disputed material facts entitle it to a jury trial. Id. at 447, 492 N.W.2d at 134. We therefore conclude that when Fore Way filed its motion for summary judgment, it waived its right to present evidence concerning what it now alleges are disputed material facts and cannot claim entitlement to a hearing that it previously asserted was unnecessary.
Section 551.21(1), Stats., provides in part, "It is unlawful for any person to offer or sell any security ... unless it is registered under this chapter or the security or transaction is exempted under s. 551.22, 551.23 or 551.235." The statutory...
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