Johnson v. Deguelle

• Decision Date: 05 June 2013
• Docket Number: No. 2011AP2427.,2011AP2427.
• Citation: 2013 WI App 94,835 N.W.2d 290,349 Wis.2d 524
• Court: Wisconsin Court of Appeals
• Parties: S.C. JOHNSON & SON, INC., Plaintiff–Respondent, v. Michael J. DeGUELLE, Defendant–Appellant.

349 Wis.2d 524

835 N.W.2d 290

2013 WI App 94

S.C. JOHNSON & SON, INC., Plaintiff–Respondent,

v.Michael J. DeGUELLE, Defendant–Appellant.

No. 2011AP2427.

Court of Appeals of Wisconsin.

June 5, 2013.

OPINION TEXT STARTS HEREAppeal from a judgment of the circuit court for Racine County: Gerald P. Ptacek, Judge. Affirmed.

Before BROWN, C.J., REILLY and GUNDRUM, JJ.¶ 1PER CURIAM.

Michael J. DeGuelle appeals from a judgment entered in favor of S.C. Johnson & Son, Inc. (SCJ).¹ DeGuelle argues that the trial court improperly limited discovery and granted summary judgment. He also contends that the trial court erred by denying his motion for judicial recusal and in determining the admissibility of evidence at the damages trial. We affirm.

¶ 2 DeGuelle was employed by SCJ as a state tax manager and had access to SCJ's confidential tax and financial records solely by virtue of his employment. DeGuelle signed an Agreement to Maintain Secrecy and Assign Inventions, in which he agreed to not disclose SCJ documents or use them for his own benefit and to return all SCJ documents and copies upon termination.

¶ 3 In 2007, after receiving a negative performance review, DeGuelle alleged to SCJ personnel that he had witnessed his supervisor engaging in tax improprieties. SCJ retained an outside law firm, Kirkland and Ellis (K & E), to independently investigate DeGuelle's claims. K & E was asked to review the documents DeGuelle provided, to interview DeGuelle for additional details, and to make an independent judgment whether there had been criminal or fraudulent activity by SCJ's tax department. K & E investigated each of the three areas DeGuelle brought to their attention: the destruction of certain documents; the handling of an IRS error; and the completion of a specific tax form. After completing its analysis, K & E reported that even assuming the truth of DeGuelle's factual allegations, SCJ's actions were neither criminal nor fraudulent.

¶ 4 DeGuelle then filed a whistleblower complaint with the U.S. Department of Labor (DOL) asserting that SCJ's negative performance reviews were in response to his allegations of fraud.² SCJ learned that DeGuelle had attached to his DOL complaint confidential financial documents belonging to SCJ. SCJ again retained K & E to investigate the alleged improprieties in light of any new information and provided a detailed March 19, 2009 memo written by DeGuelle. K & E concluded that the additional facts only supported their original conclusion: “We found no evidence, or even indication, of any fraudulent or criminal conduct by SCJ's tax department.” The IRS later reviewed the matter, found no illegal activity, and expressed satisfaction with the way SCJ handled the tax matters.

¶ 5 In addition to the confidential documents disclosed to the DOL, SCJ discovered that DeGuelle previously sent confidential documents to his personal home computer via email. Two SCJ employees met with DeGuelle and he unequivocally stated that he had never taken nor disclosed SCJ documents. DeGuelle also denied attaching any SCJ tax returns or records to his DOL complaint. On April 10, 2009, DeGuelle was terminated for taking and disclosing confidential documents and for lying to SCJ about these actions.

¶ 6 After his termination, DeGuelle refused to comply with SCJ's repeated demands to return company documents. SCJ filed an action in the Racine County Circuit Court to compel the return of documents, alleging claims for replevin, breach of contract, and conversion. After learning that DeGuelle made statements to the press that SCJ was committing “criminal fraud,” SCJ amended its complaint to allege defamation.

¶ 7 DeGuelle retained counsel and filed counterclaims alleging breach of contract, wrongful termination, and defamation. DeGuelle's attorney returned to SCJ over 3000 pages of its private documents which were previously in DeGuelle's possession. The parties stipulated to two protective orders requiring that confidential documents be filed under seal and creating a special category of documents deemed “Confidential–Attorney's Eyes Only.” ³ DeGuelle's attorney eventually turned over additional SCJ documents from DeGuelle's possession. Soon thereafter, over DeGuelle's objection, his attorney was permitted to withdraw and DeGuelle proceeded pro se.

¶ 8 The discovery process was contentious and resulted in abundant paper filings and numerous hearings. During one such hearing, over SCJ's objection, the trial court reinstated the time for DeGuelle to name an expert witness. DeGuelle named Bruce Zagaris, an out-of-state tax law attorney, and identified a number of documents he wanted his expert to examine. SCJ expressed its intent to classify those documents as “attorney's eyes only.” The trial court approved a procedure whereby SCJ would immediately send a number of sensitive, confidential documents directly to Zagaris for his review, create a list of the documents provided to Zagaris, and retain a local attorney to enable DeGuelle to more conveniently review the documents and consult with his expert in a private room. Deguelle never reviewed the documents and no expert report was ever filed.

¶ 9 The trial court scheduled a hearing on summary judgment for April 11, 2011, and SCJ filed a timely motion. In response, DeGuelle filed a letter opposing summary judgment “based upon the lack of receiving any instructions [from] the judge to respond to the motion for summary judgment and the objections raised herein[.]” DeGuelle's response did not contain any affidavits.

¶ 10 At the hearing, SCJ moved for summary judgment based on DeGuelle's failure to file a timely and proper response. The trial court determined that even overlooking the untimeliness of DeGuelle's response, it contained no affidavits and was insufficient under Wis. Stat. § 802.08(3) (2011–12) ⁴ to defeat summary judgment:

Well, Mr. DeGuelle, you haven't responded to the affidavits. You haven't really provided—to be honest, you haven't provided anything other than your own opinion, not sworn to, that they committed a crime. These other individuals you mention, you don't have affidavits. You don't have any sworn testimony from them. You don't have anything.

¶ 11 The trial court granted summary judgment in favor of SCJ and dismissed DeGuelle's counterclaims. The trial court found that SCJ was entitled to $50,000 in damages.

The trial court properly exercised its discretion when it ordered that certain sensitive financial documents would be sent directly to DeGuelle's expert and that DeGuelle could review the documents at a local attorney's office.

¶ 12 During the time DeGuelle was represented by counsel, the parties stipulated to a protective order allowing for certain documents to be designated “attorney's eyes only.” This became an issue after DeGuelle named an expert and SCJ designated as “attorney's eyes only” the sensitive financial documents Zagaris would need to review in order to render an opinion.⁵ After considering that the documents contained highly confidential financial material and that in the past, DeGuelle had not respected confidentiality, ⁶ the trial court approved SCJ's request to send the documents directly to Zagaris. DeGuelle argues that the court's discovery procedure denied him access to discovery and prevented him from proving his affirmative defenses and counterclaims. We disagree.

¶ 13 The trial court has broad discretion in fashioning discovery orders, including whether to limit discovery through a protective order. Paige K.B. v. Steven G.B., 226 Wis.2d 210, 232, 594 N.W.2d 370 (1999). Where a movant shows good cause, Wis. Stat. § 804.01(3) permits the circuit court to make any order “to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.” Paige K.B.., 226 Wis.2d at 232, 594 N.W.2d 370. We review the trial court's decision for an erroneous exercise of discretion and will affirm as long as the trial court examined the relevant facts, applied the proper legal standard, and reached a reasonable conclusion. Id. at 232–33, 594 N.W.2d 370.

¶ 14 The trial court properly exercised its discretion when it tailored a protective order that considered the interests of both parties and was based on the specific facts of record. Its “good cause” finding was justified and the limited restrictions provided DeGuelle access to the documents through both his expert and his ability to privately review the papers and consult with the expert telephonically from the local attorney's office. The documents were primarily relevant to the issue of whether SCJ committed tax fraud, an issue only Zagaris was qualified to address. SCJ provided the documents immediately and directly to Zagaris. DeGuelle was not denied access to the 333 pages of discovery labeled “attorney's eyes only.” DeGuelle simply chose not to avail himself of the opportunity for inspection.

¶ 15 We reject DeGuelle's suggestion that the trial court's protective order prevented him from presenting a defense or proving his claims. Zagaris appeared telephonically and informed the court that though he had received the “attorney's eyes only” discovery, DeGuelle had instructed him not to open the envelope. Sensitive to DeGuelle's limited resources, the trial court listed the documents provided and ascertained Zagaris's opinion that the information would sufficiently enable him to render an initial opinion. When DeGuelle continued to protest, the trial court patiently told him to get started with the process and suggested that if Zagaris felt he needed more information or assistance from DeGuelle, the trial court would address the matter again. The trial court repeated this instruction multiple times: “Well, it's going to have to be [adequate] to start. We'll start with half a loaf, Mr. DeGuelle.” The trial court's procedure was an appropriate exercise of its broad discretion and DeGuelle made no effort to avail himself of the resources in place. He cannot now...