Riggert v. Reed

Decision Date08 November 2018
Docket NumberAppeal No. 2017AP2369
Citation923 N.W.2d 179 (Table),385 Wis.2d 212,2019 WI App 1
Parties Jeffrey A. RIGGERT, Plaintiff-Respondent-Cross-Appellant, v. John H. REED, Defendant-Appellant-Cross-Respondent.
CourtWisconsin Court of Appeals

PER CURIAM.

¶1 Jeffrey Riggert brought multiple claims against John Reed under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 (2012)1 et seq ., and under state law. The dispute centered on Riggert's employment at Innovologie, LLC, a company solely owned and managed by Reed. Riggert alleged that Reed had failed to deposit both Riggert's and Innovologie's mandatory retirement contributions into Riggert's Individual Retirement Account during his employment at Innovologie. After the circuit court decided Riggert's first motion for summary judgment resolving the claims pleaded in his first amended complaint, the court allowed Riggert to amend the first amended complaint to plead a claim for denial of benefits under ERISA. The court then granted Riggert's second motion for summary judgment, determining that Reed was individually liable for Riggert's claim for denial of benefits under ERISA and calculating Riggert's damages to be $84,494.83. Additionally, the court awarded Riggert attorney fees and expenses in the amount of $57,626.11.

¶2 On appeal, Reed argues that the circuit court erred when it: (1) allowed Riggert to amend his first amended complaint to plead a claim for denial of benefits under ERISA after deciding Riggert's first motion for summary judgment resolving the other claims that Riggert had pleaded2 ; and (2) ruled on Riggert's second motion for summary judgment that Reed was individually liable for Riggert's claim. Riggert cross-appeals, arguing that the court selected an incorrect method to calculate damages and that the court misused its discretion in failing to award Riggert the full amount of his request for attorney fees.

¶3 We conclude that the circuit court erroneously exercised its discretion in allowing Riggert to amend his first amended complaint because the court did so after it decided Riggert's first motion for summary judgment resolving the claims pleaded in his first amended complaint and did not apply the legal standard that applies to a post-summary judgment motion to amend. Following Mach v. Allison , 2003 WI App 11, ¶ 2, 259 Wis. 2d 686, 656 N.W.2d 766 (2002), we reverse the court's ruling allowing Riggert to amend and remand with directions, to allow the court the opportunity to exercise its discretion while applying the correct legal standard. We retain jurisdiction over both the appeal and the cross-appeal.

BACKGROUND

¶4 The following facts are undisputed. We recite additional facts as needed in the discussion below.

¶5 Reed organized Innovologie, LLC in 2003. During the times pertinent to this lawsuit, Reed was the sole member and manager of Innovologie, he controlled all of the company's finances, and he made all of its management decisions.

¶6 Innovologie offered its employees an IRA retirement plan, referred to as the Innovologie Plan, which permitted an employee to request that Innovologie withhold a defined amount from the employee's paycheck to deposit into the employee's retirement account. The Innovologie Plan also provided that Innovologie would contribute an additional 3% of an employee's compensation to the retirement account.

¶7 Riggert worked for Innovologie between 2003 and December 2013 and participated in the Innovologie Plan during that time. Beginning around 2009, Innovologie continued to deduct contributions from Riggert's paychecks, but ceased depositing the employee and employer contributions in Riggert's retirement account.

¶8 Riggert sued Reed in December 2014, seeking to recover the value of the employee and employer deposits that had not been paid since December 2008. The December 2014 complaint alleged that Reed had committed civil theft under Wisconsin law. See WIS. STAT. § 895.446(3) (2015-16).3 In August 2015, following a federal Department of Labor investigation, Riggert amended his complaint, repeating his state law civil theft claim and adding a breach of fiduciary duty claim under ERISA.

¶9 Riggert moved for summary judgment on the claims in his first amended complaint. In what we will refer to as its first summary judgment ruling, the circuit court dismissed Riggert's state law civil theft claim as pre-empted by ERISA, but granted summary judgment in favor of Riggert on his claim that Reed had breached his fiduciary duty under ERISA.4 The court applied the three-year statute of limitations contained in 29 U.S.C. § 1113(2) to Riggert's breach of fiduciary duty claim and calculated Riggert's damages based on the amounts of the contributions that were not deposited after November 2011.

¶10 Riggert filed what he titled a motion for reconsideration of the first summary judgment ruling. In the motion he asserted that, although "not fully addressed in the briefing" on his first summary judgment motion, the first amended complaint had pleaded an ERISA claim for denial of benefits in addition to a claim for breach of fiduciary duty. Thus, Riggert argued, the circuit court should have applied the six-year statute of limitations that governs a denial of benefits claim under 29 U.S.C. § 1132(a)(1)(B), rather than the three-year limitations period in 29 U.S.C. § 1113(2) that applies to a breach of fiduciary duty claim. In his reply brief in support of his motion, Riggert argued that, even if the court found that he had only pleaded a breach of fiduciary duty claim, he should be allowed to amend his first amended complaint to include a claim for denial of benefits. In response to Riggert's motion, the court did not alter its first summary judgment ruling, but allowed Riggert to amend his first amended complaint and reopened the damages calculation as it might apply to any newly pleaded claims.

¶11 In his second amended complaint Riggert repeated his claims for breach of fiduciary duty under ERISA and civil theft under state law and added a separate claim alleging denial of benefits under ERISA. Both sides moved for summary judgment.

¶12 In what we refer to as its second summary judgment ruling, the circuit court entered summary judgment against Reed personally on the denial of benefits claim and applied a six-year statute of limitations. Further, the court dismissed the breach of fiduciary duty claim for lack of subject matter jurisdiction.5 In calculating damages for the denial of benefits claim, the court looked to the amount that had not been deposited into Riggert's retirement account since November 2008 and applied the average rate of interest that the Innovologie Plan earned from November 2008 to December 2013, arriving at a damages figure of $84,494.83.

¶13 Riggert then moved for an award of $104,341.69 in attorney fees and costs under the fee-shifting provision in 29 U.S.C. § 1132(g)(1). The circuit court awarded Riggert $57,626.11 in fees and costs, for a total judgment of $142,120.94.

DISCUSSION

¶14 Reed argues that the circuit court's first summary judgment ruling disposed of all of the claims that Riggert pleaded in his first amended complaint, and that the court erred in allowing Riggert to amend his first amended complaint to plead a claim for denial of benefits after issuing that first summary judgment ruling. Reed also argues that the court erred in determining that Reed was individually liable for the denial of benefits claim in its second summary judgment ruling. Riggert cross-appeals, arguing that the court selected an incorrect method of calculating damages and that the court misused its discretion in failing to award Riggert his full request for attorney fees. We address only Reed's first argument on appeal, remand for the circuit court to exercise its discretion while applying the correct legal standard to Riggert's post-summary judgment motion to amend, and retain jurisdiction over the remainder of the appeal and the cross-appeal.

¶15 Reed challenges the circuit court's decision allowing Riggert to amend his first amended complaint to plead an ERISA denial of benefits claim. The court allowed Riggert to amend after Riggert asked to amend in his reply brief in support of what he titled his motion for reconsideration. It appears that as a result, Reed largely frames his challenge as a challenge to the court's "reconsideration" of the first summary judgment ruling. However, our review of the record indicates that the court never reconsidered its first summary judgment ruling finding Reed liable for breach of fiduciary duty and dismissing Riggert's state law claim. In fact, at the hearing on the motion for reconsideration, the court specifically stated that its initial ruling on the breach of fiduciary duty claim was correct; and at a subsequent hearing the court confirmed that it had not granted a motion for reconsideration. The upshot of the court's decision on what Riggert titled a motion for reconsideration was simply that Riggert was allowed to amend his complaint to plead a claim for denial of benefits. We accordingly interpret Reed's appeal as a challenge to the court's decision to permit Riggert to plead the claim for denial of benefits after the other claims that Riggert had pleaded had been resolved by summary judgment.6

¶16 The decision whether to allow a plaintiff to amend a complaint lies within the circuit court’s discretion. Mach v. Allison , ¶ 20. Failure to apply the correct legal standard constitutes an erroneous exercise of discretion. Borreson v. Yunto , 2006 WI App 63, ¶ 6, 292 Wis. 2d 231, 713 N.W.2d 656.

¶17 A party may amend its pleading once as a matter of course within six months of the filing of the summons and complaint. WIS. STAT. § 802.09(1). After that period, a party may amend the pleadings only by leave of the court or by written consent of the adverse party. Id. While leave to amend should be freely given when justice so requires, id. , a higher...

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