S.C. Johnson & Son, Inc. v. Morris

• Decision Date: 02 December 2009
• Docket Number: No. 2008AP1647.,2008AP1647.
• Citation: 2010 WI App 6,779 N.W.2d 19
• Parties: S.C. JOHNSON & SON, INC., Plaintiff-Respondent, v. Milton E. MORRIS and Katherine Scheller, Defendants, Buske Lines, Inc., Buske Intermodal, LLC and Thomas H. Buske, Defendants-Appellants, Tom Russell, Transportation Associates, Inc., d/b/a JMP Co. and JMP Intermodal, Inc., Defendants-Co-Appellants.<SMALL><SUP>&#x2020;</SUP></SMALL>
• Court: Wisconsin Court of Appeals

779 N.W.2d 19

2010 WI App 6

S.C. JOHNSON & SON, INC., Plaintiff-Respondent, v. Milton E. MORRIS and Katherine Scheller, Defendants Buske Lines, Inc., Buske Intermodal, LLC and Thomas H. Buske, Defendants-Appellants Tom Russell, Transportation Associates, Inc., d/b/a JMP Co. and JMP Intermodal, Inc., Defendants-Co-Appellants.^†

No. 2008AP1647.

Court of Appeals of Wisconsin.

Submitted on Briefs September 24, 2009.

Opinion Filed December 2, 2009.

On behalf of the defendants-appellants, the cause was submitted on the briefs of James T. Murray, Jr., and Michael J. Wirth of Peterson, Johnson & Murray S.C. of Milwaukee.

On behalf of the defendants-co-appellants, the cause was submitted on the briefs of Franklyn M. Gimbel, Kathryn A. Keppel and Steven C. McGaver of Gimbel, Reilly, Guerin & Brown of Milwaukee.

On behalf of the plaintiff-respondent, the cause was submitted on the briefs of Jeffrey L. William, Donna M. Welch, Michael D. Foster, Sarah J. Donnell and Lawrence M. Griffin of Kirkland & Ellis LLP, pro hac vice, of Chicago and Mark A. Cameli of Reinhart Boerner Van Deuren S.C. of Milwaukee.

Before BROWN, C.J., ANDERSON and SNYDER, JJ.

¶ 1 BROWN, C.J

Tom Russell and Thomas H. Buske raise a host of issues, most of them without merit. But three issues are novel and require us to discuss them at length. We will identify these three issues and give our brief answer first and then discuss them seriatim. After that, we will deal with the meritless issues. Ultimately, we affirm the trial court in all respects.

¶ 2 The first issue concerns a party's continuous invocation of the Fifth Amendment privilege against self-incrimination in a civil action where that party later waives the privilege in the middle of trial when all discovery and preparation for trial is complete and the other party's theory of the case has been established. Federal case law instructs that this decision requires the trial court to balance the prejudice to both parties. And one of the most important factors in the balancing test is the timing of the request to withdraw because invoking during discovery and then waiting until trial to withdraw runs the danger of undermining the purpose of discovery. We find this authority persuasive and adopt it in Wisconsin. The trial court did not erroneously exercise its discretion in concluding that Russell's attempt to withdraw the privilege in the middle of trial would give S.C. Johnson & Son, Inc., no opportunity to conduct follow-up research or effectively cross-examine on a subject matter essential to its case. We affirm the denial.

¶ 3 Second, this action alleged the intentional torts of fraud and misrepresentation. Russell and Buske claim that S.C. Johnson had a duty to put a stop to the conspiracy at a much earlier date because it should have figured out for itself that something was amiss and duly mitigated the damage. We understand the issue to be whether S.C. Johnson had a duty to mitigate even in the absence of actual knowledge of the conspiracy. In other words, did S.C. Johnson have a duty to identify the warning signs that a conspiracy existed? We again adopt persuasive federal case law which explains that expanding the duty to mitigate in such a way as to place a burden on the victim to investigate whether warning signals existed would allow tortfeasors to purposely exploit a victim's weak internal investigation mechanism and then use it as an affirmative defense at trial. We conclude that adopting Russell and Buske's position would place too high a burden on victims. Thus, as the trial court ruled, actual knowledge is required for the duty of mitigation to apply.

¶ 4 And third, is the multiple damages provision of the Wisconsin Organized Crime Control Act (WOCCA) remedial such that the entire damage award is doubled? The answer is "yes" because that provision, like its federal counterpart, is a remedy to address the private economic injury aspect of the violation, not the penal, criminal feature. Therefore, we again affirm the trial court, and thus uphold its doubling of the entire damage award.

BACKGROUND

¶ 5 A $203.8 million verdict in S.C. Johnson's favor was reached after substantial discovery, a four-week jury trial, and a series of motions brought before, during, and after the trial and verdict. Suffice it to say, the record in this case is voluminous, spanning thousands of pages, and the relevant facts depend on which issue we are addressing. So except to summarize the dispute, we will present only those facts which are pertinent.¹

¶ 6 For about a decade, certain S.C. Johnson employees invited bribes and kick-backs from transportation companies and, in exchange, submitted inflated invoices to S.C. Johnson on behalf of those transportation companies. In 2004 when S.C. Johnson discovered the conspiracy, it sued two employees, Milton E. Morris and Katherine M. Scheller, for breach of fiduciary duty; and it sued Russell, Buske, and several transportation companies for fraudulent misrepresentation, conspiracy to violate WIS. STAT. § 134.05, fraud, and violations of the WOCCA. Russell and Buske appeal from a final judgment finding that Russell, Buske, and their transportation companies,² along with the two S.C. Johnson employees (Morris and Scheller), had engaged in a civil conspiracy to overcharge S.C. Johnson for transportation services.

DISCUSSION

Withdrawing Fifth Amendment Rights in a Civil Action

¶ 7 The first issue we address is Russell's attempted withdrawal of his invocation of the Fifth Amendment privilege against self-incrimination in a civil action. Russell and Buske claim that the trial court wrongfully denied Russell's request to withdraw his privilege and testify during the final week of trial. The pertinent facts related to this issue are as follows.

¶ 8 During the discovery period, Russell testified as a corporate representative of his transportation companies, JMP Co. and JMP Intermodal, Inc. But, on his counsel's advice, he refused to answer questions on certain topics he claimed to be related to his individual exposure as opposed to his company's corporate exposure, on grounds that the answers might impact possible criminal prosecution. He based his refusal on the Fifth Amendment. And throughout the approximately three years of discovery, Russell continued to assert his Fifth Amendment privilege except when he answered questions in his corporate capacity.

¶ 9 Then shortly before trial, Russell's counsel disclosed Russell as a "may call" witness. S.C. Johnson filed an objection. This led to a hearing only days before the trial was scheduled wherein the trial court stated its intent to hear Russell's proffered testimony before ruling on S.C. Johnson's objection. But Russell's counsel stated he was not sure if Russell would testify, so the court held the issue in abeyance pending Russell's final decision.

¶ 10 On the Friday of the third week of trial, Russell's counsel made his decision. Russell would testify. The following Monday, during the final week of trial, Russell withdrew his Fifth Amendment invocation and made his proffer by testimony. After hearing the proffer and argument from both parties, the trial court denied Russell's motion to withdraw for reasons we will explain shortly.

1. The Legal Principles

¶ 11 Wisconsin has long recognized that a person may invoke the Fifth Amendment privilege against self-incrimination in a civil action as protection from the adverse use of such evidence in a subsequent criminal action. Grognet v. Fox Valley Trucking Serv., 45 Wis.2d 235, 239, 172 N.W.2d 812 (1969). But there is no Wisconsin law addressing when an opposing party may object if the person originally claiming the privilege in a civil action seeks to withdraw the privilege and testify. There are, however, several federal cases that have.

¶ 12 Federal case law explains that "courts, upon an appropriate motion, should seek out those ways that further the goal of permitting as much testimony as possible to be presented in the civil litigation, despite the assertion of the privilege." United States v. Certain Real Prop. and Premises Known as: 4003-4005 5th Ave., Brooklyn, N.Y., 55 F.3d 78, 84 (2d Cir.1995). The reason for this policy is that "all parties—those who invoke the Fifth Amendment and those who oppose them—should be afforded every reasonable opportunity to litigate a civil case fully and ... exercise of Fifth Amendment rights should not be made unnecessarily costly." Id. at 83-84. And because the privilege is constitutionally based, the detriment to the party asserting it should be no more than is necessary to prevent unfair and unnecessary prejudice to the other side. S.E.C. v. Graystone Nash, Inc., 25 F.3d 187, 192 (3d Cir.1994).

¶ 13 Based on this policy, the general rule is that if the claimant makes a timely request to the court, the court should explore all possible measures to select that means which strikes a fair balance and accommodates both parties. See id. at 191, 194; Certain Real Prop., 55 F.3d at 84. Striking a fair balance between both parties requires a careful assessment of each case's precise facts. Certain Real Prop., 55 F.3d at 85. The court should give due consideration to the nature of the proceeding and the potential for harm or prejudice to opposing parties. Id. at 84.

¶ 14 One of the most important factors in the balancing process is the timing of the withdrawal. See, e.g., id. at 84-85. "How" and "when" are two important questions to ask. Id. Timing can mean everything when determining whether the petitioner invoked the privilege primarily to abuse, manipulate or gain an unfair strategic advantage over opposing parties. See id. Invoking the privilege during discovery only to later withdraw the privilege may give the invoking party a decided advantage in that he or she can delay having to answer questions until after having had the opportunity to watch the adverse party's case develop. It allows the invoking pa...