Rao v. Wma Securities, Inc.

Decision Date27 June 2008
Docket NumberNo. 2006AP813.,2006AP813.
Citation752 N.W.2d 220,2008 WI 73
PartiesRamachandra RAO, M.D., Plaintiff-Respondent-Cross-Appellant, v. WMA SECURITIES, INC., Defendant-Appellant-Cross-Respondent-Petitioner, World Group Securities, Inc., IDEX Investor Services, Inc., State Street Bank & Trust Company and David Novak, Defendants.
CourtWisconsin Supreme Court

For the defendant-appellant-cross-respondent-petitioner there were briefs by Sean Lanphier and Mallery & Zimmerman, S.C., Milwaukee, and oral argument by Sean Lanphier.

For the plaintiff-respondent-cross-appellant there was a brief by Sara L. Gehrig and Nowlan & Mouat L.L.P., Janesville, and oral argument by Sara L. Gehrig.

¶ 1 SHIRLEY S. ABRAHAMSON, Chief Justice

The defendant, WMA Securities, Inc., seeks review of an unpublished court of appeals decision affirming in part and reversing in part a judgment and an order of the Circuit Court for Rock County, James Welker, Judge.1 After the defendant continuously failed to comply with the circuit court's discovery orders, the circuit court issued an order striking the defendant's pleadings and awarding judgment by default to the plaintiff, Ramachandra Rao, M.D., against the defendant.

¶ 2 The circuit court ordered a hearing on damages, denying the defendant's request for a jury trial on this issue. The court of appeals affirmed the circuit court's ruling denying a jury trial.2

¶ 3 The circuit court denied the plaintiff's request for punitive damages under Wis. Stat. § 895.043 (2005-06).3 The court of appeals reversed the circuit court's denial of punitive damages, remanding the issue to the circuit court to exercise its discretion in determining the nature of the hearing on punitive damages and to determine whether punitive damages are warranted.4

¶ 4 Two issues are presented on review of the decision of the court of appeals:5

I. Did the circuit court violate the defendant's right of trial by jury under Article I, Section 5 of the Wisconsin Constitution when it denied the defendant's motion for a jury trial on the issue of damages after it ordered a judgment by default against the defendant?

II. Did the circuit court err in denying the plaintiff's punitive damages claim?

¶ 5 We conclude that the circuit court did not violate the defendant's right of trial by jury under Article I, Section 5 of the Wisconsin Constitution when it denied the defendant's motion for a jury trial on the issue of damages. The defendant waived its right of trial by jury in the manner set forth in Wis. Stat. §§ (Rule) 804.12(2) and 806.02. We further conclude that the circuit court erred in denying the plaintiff's claim for punitive damages solely on the basis of allegations in the complaint and in denying the plaintiff an opportunity to prove additional facts in support of the punitive damages claim.

¶ 6 Accordingly, we affirm the decision of the court of appeals. We affirm, as did the court of appeals, the circuit court's denial of the defendant's request for a jury trial on the issue of damages. We reverse, as did the court of appeals, the circuit court's ruling denying punitive damages, and remand the issue of punitive damages to the circuit court to exercise its discretion in determining the nature of the hearing on punitive damages and to determine whether punitive damages are warranted. We affirm the decision of the court of appeals remanding the cause to the circuit court.

¶ 7 We briefly summarize the facts giving rise to the instant case and present additional facts relating to each issue when we address that issue. The facts are more fully stated in the decision of the court of appeals.

¶ 8 The plaintiff brought an action against the defendant, an employee of the defendant, and three additional co-defendants alleging that the employee unlawfully converted hundreds of thousands of dollars from an investment account that the plaintiff maintained with the defendant. The plaintiff asserted that the defendant terminated the employee's employment but took no action to inform the plaintiff that the employment had been terminated or that the termination was for forgery and theft. The circuit court entered judgment by default against the employee. Each of the remaining co-defendants was eventually dismissed from the action.

¶ 9 The plaintiff alleged that the defendant is liable to the plaintiff for (1) vicarious liability for the employee's unlawful acts of conversion, (2) intentional misrepresentation, (3) strict responsibility misrepresentation, (4) negligent misrepresentation, (5) breach of fiduciary duty, (6) negligence, (7) breach of the implied duty of good faith in performance of a contract, and (8) breach of contract. The plaintiff demanded damages from the defendant, including compensatory damages and punitive damages.

¶ 10 After hearing the parties on the question whether the defendant had disobeyed discovery orders, the circuit court agreed with the plaintiff's characterization of the defendant's conduct during discovery, and, as a sanction for the defendant's violating discovery orders, the circuit court ordered the defendant's pleadings struck and granted the plaintiff's motion for judgment by default pursuant to Wis. Stat. § (Rule) 804.12(2)(a) authorizing a circuit court to sanction a party for failure to comply with discovery orders.

¶ 11 No judgment by default was rendered or entered because damages had not been determined. Thus the circuit court's order also provided that the defendant would be entitled to participate in an evidentiary hearing to determine the amount of damages. Approximately two weeks after holding the evidentiary hearing, the circuit court rendered a default judgment against the defendant for the plaintiff's damages as determined by the circuit court.6 The judgment was then entered three days after it was rendered.7

I

¶ 12 We examine first the defendant's argument that the circuit court violated the defendant's right of trial by jury under Article I, Section 5 of the Wisconsin Constitution when it denied the defendant's motion for a jury trial on the issue of damages.

¶ 13 The defendant's motion for a jury trial on the issue of damages came after the circuit court granted the plaintiff's motion for judgment by default against the defendant as a sanction, pursuant to Wis. Stat. § (Rule) 804.12(2)(a), for failing to comply with discovery orders and ordered an evidentiary hearing on damages. The defendant had neither demanded a jury trial in the circuit court nor paid the jury fee in a timely fashion before the pleadings were struck. A co-defendant, however, did demand a jury trial and did pay the jury fee timely.8 The co-defendant was later dismissed from the case. Because neither party in the instant case raised or briefed the issue, the question whether a co-defendant's timely demand for a jury trial and timely payment of the jury fee suffices to enable the defendant to claim a constitutional right of trial by jury is not before the court. We assume (without deciding) that for purposes of the instant review the co-defendant's demand for trial by jury and payment of the jury fee can be attributed to the defendant.

¶ 14 Article I, Section 5 of the Wisconsin Constitution provides in full as follows:

The right of trial by jury shall remain inviolate, and shall extend to all cases at law without regard to the amount in controversy; but a jury trial may be waived by the parties in all cases in the manner prescribed by law. Provided, however, that the legislature may, from time to time, by statute provide that a valid verdict, in civil cases, may be based on the votes of a specified number of the jury, not less than five-sixths thereof.

¶ 15 Interpretation of the Wisconsin Constitution presents a question of law that this court determines independently of the circuit court and court of appeals but benefiting from their analyses.9

¶ 16 The defendant argues that if its constitutional right of trial by jury is to remain inviolate, it cannot be denied a jury trial on the issue of damages in the present case.

¶ 17 We agree with the defendant that the Article I, Section 5 right of trial by jury extends to the issue of damages. In Jennings v. Safeguard Ins. Co., 13 Wis.2d 427, 109 N.W.2d 90 (1961), this court held that the right of trial by jury under Article I, Section 5 extends to "all issues of fact, including that of damages."10 Nevertheless, a party may waive a trial by jury on the issue of damages "in the manner prescribed by law."

¶ 18 The question presented is whether the defendant waived its right of trial by jury in the manner prescribed by law. The court has addressed waiver in previous cases. The court has declared that a defendant "has no vested right under art. I, sec. 5 [of the Wisconsin Constitution], to the manner or time in which [the right of trial by jury] may be exercised or waived, since these are merely procedural matters to be determined by law."11

¶ 19 The manner in which the Article I, Section 5 right of trial by jury may be waived is governed principally by Wis. Stat. § (Rule) 805.01(3).12 Section (Rule) 805.01(3) sets forth two ways in which the right of trial by jury may be waived. First, a party's failure to demand a jury trial timely in accordance with § (Rule) 805.01(2) constitutes a waiver of the jury trial right. Second, the parties or their attorneys of record may waive the right by written stipulation filed with the court or by oral stipulation made in open court and entered in the record.

¶ 20 Wisconsin Stat. § (Rule) 805.01(3) is not the exclusive provision governing the manner in which the state constitutional right of trial by jury may be waived. Under § 814.61(4), for example, a party may waive the jury trial right by failing to pay the jury fee timely. Section 814.61(4) states that if the jury fee is not paid timely, "no jury may be called in the action, and the action may be tried to the court without a jury."13

¶ 21 More...

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