State v. Johnson

• Decision Date: 24 August 2005
• Docket Number: No. 2004AP2059-CR.,2004AP2059-CR.
• Citation: 704 N.W.2d 625,287 Wis.2d 381,2005 WI App 201
• Parties: STATE of Wisconsin, Plaintiff-Respondent, v. Mark R. JOHNSON, Defendant-Appellant.
• Court: Wisconsin Court of Appeals

287 Wis.2d 381

2005 WI App 201

704 N.W.2d 625

STATE of Wisconsin, Plaintiff-Respondent, v. Mark R. JOHNSON, Defendant-Appellant.

No. 2004AP2059-CR.

Court of Appeals of Wisconsin.

Submitted on briefs June 22, 2005.

Decided August 24, 2005.

On behalf of the defendant-appellant, the cause was submitted on the briefs of Jefren E. Olsen, assistant state public defender, Madison.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of James M. Freimuth, assistant attorney general, and Peggy A. Lautenschlager, attorney general.

Before Anderson, P.J., Brown and Nettesheim, JJ.

¶ 1. ANDERSON, P.J.

Mark R. Johnson seeks to reduce his restitution obligation to the insurer of the local business he was convicted of burglarizing. The challenged amount represents the victim's lost profits on a prospective sale of products and services. While Johnson concedes that lost profits on a prospective sale may be imposed as restitution under WIS. STAT. § 973.20(5)(a) (2003-04),¹ he complains that the evidence failed to sufficiently demonstrate that a causal nexus existed between his criminal activity and the victim's claimed lost profits and that the victim's lost profits amounted to $34,800. We conclude the evidence establishes to the requisite degree of certainty that the victim's sale of software and consulting services to an identified customer would have occurred but for Johnson's criminal conduct. We further conclude that the victim and its insurer presented sufficient credible comparable evidence, business history and business experience to permit the trial court's finding that the victim was entitled to $34,800 in lost profits. We affirm.

FACTS

¶ 2. On January 4, 2001, the State filed a complaint against Johnson, charging him with two crimes: burglary of a building and theft of property. According to the complaint, on the night of October 11, 2000, Johnson allegedly broke into the offices of Puestow & Associates, Inc. in Pewaukee and stole computers and related equipment and accessories. In July 2001, Johnson pled no contest to the burglary charge and the charge of theft was dismissed and read in for sentencing purposes.² At the December 2001 sentencing hearing, the trial court imposed fourteen months' initial confinement and six years' extended supervision. The court did not set the restitution amount at the hearing. Instead, the court ordered that restitution was "to be determined by the Department of Corrections" within ninety days of Johnson's release to extended supervision.

¶ 3. At the conclusion of the restitution hearing held on August 11, 2003, the trial court ordered Johnson to pay restitution in the amount of $4500 to John Puestow, the president of Puestow & Associates, and $83,314.35 to CNA Insurance Companies, Puestow & Associates' insurer, to reimburse it for payments it had made to Puestow & Associates following the burglary. The $83,314.35 restitution obligation included $34,800 CNA had paid to Puestow & Associates' for lost profits resulting from the crime. Puestow & Associates' claim for lost profits was based on its prospective sale of computer software and consulting services to Apio, a California-based organization. This is the only portion of the restitution award that Johnson challenges on appeal.

¶ 4. The claim for lost profits rested primarily on the documentation Puestow & Associates provided CNA when it filed its claim for reimbursement for its losses stemming from the burglary and theft and on Peter Puestow's testimony at the restitution hearing. In the letter documenting Puestow & Associates' lost profits, Peter Puestow wrote that one of the software systems at issue, the Grower/Supplier Settlement system (GSS system), was a newly enhanced version which the company hoped would be more attractive to purchase. The development of the enhanced system had been completed shortly before the burglary and "[s]everal interested prospects were to be demoed the new system." The Lot Management System (LMS) is the other software system at issue.

¶ 5. Peter Puestow further stated:

One of the customers that we felt the software products would have been sold to was Apio. How the systems could have helped [sic] Apio is described in the attached document.... It also shows that the critical demo was to be conducted on October 16th. The information to be demoed was loaded into the demo system along with the customized power point presentation. All of those materials plus the software systems were stolen on October 11th. So we had to back out of the demo and additional presales activities because we could not guarantee when or if we could deliver the new . . . system.

Puestow also quoted a "Typical Software Sales Price" for the two computer software systems Puestow & Associates expected to sell to Apio. Peter Puestow reported a typical sale price for the "GSS Base Module" as $40,000 and for the LMS as $75,000. He quoted an additional $15,000 for each system for customizations that would have been done. He therefore reported total revenue from the sale of the systems as being $145,000. He next estimated a sale of consulting services to Apio at $145,000, matching the sale price of the computer software. The prospective sale would therefore generate $290,000 in total revenue. He then estimated Puestow & Associates' profits on the prospective $290,000 sale to Apio to be $34,800, based on a percentage rate of twelve percent.

¶ 6. Attached to the letter was a ten-page document Puestow & Associates had prepared for Apio personnel to describe how its software package would meet Apio's business needs. The first page of this document reflected a five-stage review process of Puestow & Associates' products:

1. Initial Material Review (these materials) prior to the Conference Call

2. 9/26 Conference Call—10 am California time

—Review of materials sent with this document

—Further review of software functionality: high level and detail

—Additional discussion of Apio's Process and Requirements

—General Review of On Site Demo activities and Materials to be covered

3. Additional Follow-up Conference Calls and EMAILs

—Further Question and Answer Sessions

4. 10/16 Apio visit, software demonstration, and implementation task review 5. Refine Proposals and Costs

—Answer any remaining questions.

—Revise and finalize software proposal

—Refine Implementation Task and Cost estimate

¶ 7. At the restitution hearing, Peter Puestow testified about the relationship Puestow & Associates had with Apio at the time of the burglary and theft and about how the company had computed the amount of restitution for lost profits. Peter Puestow stated that Apio was "going to be purchasing the system if we could demo. Since the equipment was stolen, software was stolen, demo[s] were stolen, we were unable to demo so they did not. They backed out of the deal." Peter Puestow acknowledged that the parties had not entered into a contract, but stated in an exchange with Johnson's attorney:

[Johnson's attorney]: So you're saying GSS and LMS, Apio were going to buy?

[Peter Puestow]: Yes.

[Johnson's attorney]: They already agreed to pay this amount of money for the system?

[Peter Puestow]: If we were able to do the demo and move forward with the next step of the process, yes.

[Johnson's attorney]: I don't understand that answer. If you could do the demo?

[Peter Puestow]: They had agreed.

¶ 8. Peter Puestow testified that he personally put the numbers together for the lost profits calculation and that the estimates were "based on profits that [the company] ha[d] generated from the sales of similar material in the past." He stated that he had sold the GSS system base model six times and the $40,000 "represents the typical sales price to a company like Apio for the GSS system." He testified that he had sold the LMS to about eighty customers. He related that, while there had not been any customization done before the burglary, his numbers were based on an estimate for customization that Puestow & Associates had provided Apio. Regarding the lost profits from the sale of consulting services, Peter Puestow explained: "Our normal method of identifying revenues [is] for every dollar sold we get at least a dollar of consulting services .... We can usually generate a dollar of consulting services revenue not profit." Finally, as for the percentage rate he applied, Peter Puestow testified:

We have been selling software systems since '95 and we normally have a good feel what the profit revenue or minimum profit revenue can be from a software sale and usually it's 15 percent which is what was used or 12 percent that was used with this discussion.

We try to get 15 but we lowered it to 12 for this claim purposes and when we sell the software we get consulting services and we know roughly what the consulting service will be so we estimate from the loss consulting and can calculate the profitability loss from that also.

DISCUSSION

¶ 9. While Johnson concedes that lost profits are generally a compensable loss for purposes of WIS. STAT. § 973.20(5)(a), he argues that the trial court's award of lost profits as restitution in this case was improper. He first asserts that there is insufficient evidence of a causal nexus between his criminal acts and Puestow & Associates' alleged lost profits from the prospective sale to Apio. He next contends that there is insufficient evidence to support the trial court's determination that Puestow was entitled to lost profits in the amount of $34,800.

¶ 10. Standard of Review. Resolution of the first issue requires us to interpret and apply WIS. STAT. § 973.20. The interpretation of a statute and application to a given set of facts presents a question of law, which we review de novo. State v. Loutsch, 2003 WI App 16, ¶ 10, 259 Wis. 2d 901, 656 N.W.2d 781. However, trial courts have discretion in deciding on the amount of restitution and in determining whether the defendant's criminal activity was a...