Teff v. Unity Health Plans Ins. Corp.

• Decision Date: 29 May 2003
• Docket Number: No. 02-1319.,02-1319.
• Citation: 666 N.W.2d 38,2003 WI App 115,265 Wis.2d 703
• Parties: Joseph TEFF, D.C. d/b/a Teff Chiropractic, and Soderholm-Wilder Chiropractic Clinic, S.C., d/b/a Madison Chiropractic-East, Plaintiffs-Respondents-Cross-Appellants, v. UNITY HEALTH PLANS INSURANCE CORPORATION d/b/a Unity Health Plans, Defendant-Appellant-Cross-Respondent.
• Court: Wisconsin Court of Appeals

265 Wis.2d 703

2003 WI App 115

666 N.W.2d 38

Joseph TEFF, D.C. d/b/a Teff Chiropractic, and Soderholm-Wilder Chiropractic Clinic, S.C., d/b/a Madison Chiropractic-East, Plaintiffs-Respondents-Cross-Appellants, v. UNITY HEALTH PLANS INSURANCE CORPORATION d/b/a Unity Health Plans, Defendant-Appellant-Cross-Respondent.

No. 02-1319.

Court of Appeals of Wisconsin.

Submitted on briefs February 7, 2003.

Decided May 29, 2003.

On behalf of the defendant-appellant-cross-respondent, the cause was submitted on the briefs of Thomas M. Pyper of Whyte Hirschboeck Dudek S.C., Madison.

On behalf of the plaintiffs-respondents-cross-appellants, the cause was submitted on the briefs of Mark Frankel and James D. Peterson of LaFollette Godfrey & Kahn, Madison, and Charles W. Giesen of Giesen Law Offices, S.C., Madison.

Before Vergeront, P.J., Dykman and Lundsten, JJ.

¶ 1. VERGERONT, P.J.

This case concerns a dispute over contracts between Unity Health Plans Insurance Corporation, a health maintenance organization, and two providers of chiropractic services: Dr. Joseph Teff and Soderholm-Wilder Chiropractic Clinic. After entering a default judgment against Unity on liability, the trial court held an evidentiary hearing on damages. It awarded $449,447.81 in damages plus prejudgment interest to Teff and $234,306.85 in damages plus prejudgment interest to Soderholm-Wilder. Unity appeals, contending the trial court erred in: (1) entering a default judgment on liability, (2) construing the 1995 contract, (3) not permitting Unity to call expert witnesses, (4) not reducing lost revenues for 1997 by the amount that loss was "mitigated," (5) awarding damages for defamation, and (6) awarding prejudgment interest. We conclude that on the first five points, the trial court did not err. With respect to prejudgment interest, we conclude the court correctly awarded prejudgment interest for the damages for 1995 and for the services performed in the first month of 1997, but that it erred in awarding prejudgment interest on the damages for lost revenues for 1997 because those damages were neither liquid nor liquidable.

¶ 2. Teff and Soderholm-Wilder cross-appeal the trial court's dismissal of their claim for promissory estoppel. We conclude the court correctly ruled that their claim for promissory estoppel was barred because their contract with Unity covered all the essential terms of the business relationship with Unity.

¶ 3. Accordingly, we reverse the judgment insofar as it awards prejudgment interest on lost revenues for 1997, affirm the judgment in all other respects, and remand for a recalculation of prejudgment interest consistent with this decision.

BACKGROUND

¶ 4. Teff and Soderholm-Wilder entered into a contract with Unity to provide chiropractic services to its members for the year 1995. The contract was renewed for 1996 under the provision for automatic renewal for another year if neither party notified the other of the intent to terminate within 180 days before the expiration of the current term. In December 1996, Unity terminated the contract effective January 1, 1997, although Teff and Soderholm-Wilder provided services to Unity members for a short time thereafter on a fee-for-service basis. ¶ 5. Teff and Soderholm-Wilder filed this action alleging various contract claims—that Unity had wrongfully terminated the 1996 contract because it had not given the required notice, had failed to make payments as required under the contracts for 1995 and 1996, and had failed to pay for services provided in January 1997. The complaint also alleged a number of tort claims, some of which were dismissed by partial summary judgment. The contract claims and claims for defamation, interference with prospective business advantage, and promissory estoppel were scheduled for trial beginning on June 25, 2000. The October 18, 1999 scheduling order required Teff and Soderholm-Wilder to name experts and provide reports by December 15, 1999, and Unity to do so by January 31, 2000. The order provided that any witness not disclosed as required by the order would not be permitted to testify at trial except for good cause, and failure to comply with the terms of the order would be cause for imposing sanctions, including dismissal and default judgment.

¶ 6. In November 1999, Teff and Soderholm-Wilder moved to compel discovery on the ground that Unity had provided evasive interrogatory answers and failed to produce requested documents. This followed an earlier motion to compel discovery, after which the court directed the parties to resolve that discovery dispute. The court granted the second motion to compel and ordered Unity to provide the requested discovery by December 20, 1999. In February 2000, Teff and Soderholm-Wilder filed a third motion alleging that the material Unity provided in response to that order was evasive and non-responsive, as were responses to requests for admissions, and that Unity had not permitted review of documents that were relevant to the action. The motion asked as a sanction that the court strike Unity's answer and counterclaims. In another motion filed at the same time, they requested an order precluding Unity from calling any expert witnesses not disclosed as required by the scheduling order.

¶ 7. After a hearing on these motions on May 1, 2000, the court declined to grant the relief requested by Teff and Soderholm-Wilder, although it stated that it was "this close" to granting the motion and further disobedience of the court's orders would result in stronger sanctions, including default judgment. The court's order issued orally on that date, and later reduced to writing, directed that Unity provide a list of its trial witnesses by May 15, comply with the earlier order compelling discovery by May 31, and pay the movants $3,984.49 no later than May 31. The trial date was adjourned.

¶ 8. On May 19, 2000, Unity filed a notice of appearance of new counsel, an outside law firm, explaining that the in-house counsel who had been representing Unity left the employment of Unity's parent company on May 11, 2000. Shortly thereafter, Teff and Soderholm-Wilder moved for a default judgment because May 15 had passed without Unity providing a witness list. On May 30, Unity's new counsel filed a motion to amend the scheduling order and enlarge the time for discovery and sent a list of potential witnesses to Teff and Soderholm-Wilder. When the May 31 deadline passed without Unity complying with the order compelling discovery or paying the sanction, Teff and Soderholm-Wilder filed a motion for a default judgment on these additional grounds.

¶ 9. The court granted the motions for a default judgment on all the remaining claims, struck Unity's counterclaims, and set an evidentiary hearing on damages. In arriving at this conclusion, the court explained that it was considering not only the violation of the May 1 order, but the preceding repeated failures to comply with the scheduling order regarding witnesses and the discovery demands. The court commented on what it perceived to be Unity's failure to take the lawsuit seriously and give it the attention it deserved, in spite of having an entire staff of attorneys to attend to its legal needs. The court stated that it did not know what caused the departure of the attorney initially representing Unity, but it concluded that Unity, not the plaintiffs, should bear the burden of Unity's choice to continue to have that attorney represent it even after the numerous violations of discovery and scheduling orders.¹ The court acknowledged that a default judgment was the most stringent of remedies, but concluded that Teff and Soderholm-Wilder were entitled to this remedy.

¶ 10. After a lengthy evidentiary hearing, the court entered a written decision awarding the following damages: unpaid reconciliation payments for 1995— $109,217.13 to Teff and $41,818.37 to Soderholm-Wilder; fees for services provided in January 1997, which were not disputed—$10,595.05 to Teff and $6,130.66 to Soderholm-Wilder; lost revenues for 1997 —$319,635.63 to Teff and $176,357.82 to Soderholm-Wilder; and defamation—$10,000 to each. The court concluded that Teff and Soderholm-Wilder had not established that they were entitled to any additional reconciliation payments for 1996, had not established damages for interference with prospective patient relationships independent of damages for breach of contract, and, as a matter of law, the promissory estoppel claim was barred because of the existence of the contracts. The court also concluded that Teff and Soderholm-Wilder were entitled to prejudgment interest on all the damages except those for defamation, because with that exception, the damages were "liquid or liquidable."

DISCUSSION

Default Judgment

¶ 11. Unity contends that the trial court erroneously exercised its discretion in granting a default judgment because it applied the wrong legal standard in that it did not require that Unity act egregiously or in bad faith, but only that it lack a justifiable excuse. In addition, Unity asserts, the evidence established that it did have a justifiable excuse.

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¶ 12. The decisions whether to impose sanctions on a party and which sanctions to impose are committed to the trial court's discretion. See Schultz v. Sykes, 2001 WI App 255, ¶ 8, 248 Wis. 2d 746, 638 N.W.2d 604. We affirm discretionary decisions if the court examined the relevant facts, applied the proper legal standard, and reached a reasonable conclusion. Garfoot v. Fireman's Fund Ins. Co., 228 Wis. 2d 707, 717, 599 N.W.2d 411 (Ct. App. 1999). When the issue is whether the court applied the proper legal standard in exercising its discretion, we review that issue de novo. Sulzer v. Diedrich, 2002 WI App 278, ¶ 9, 258 Wis. 2d 684, 654 N.W.2d 67.

[4]

¶ 13. The parties both agree that a default judgment is an appropriate sanction for discovery violations if the court finds the noncomplying party's conduct is: (1)...