Thomson v. United Water Services Milwaukee

• Decision Date: 09 October 2001
• Docket Number: 00-3332
• Citation: 248 Wis. 2d 982,638 N.W.2d 393
• Parties: This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. James C. Thomson, Plaintiff-Appellant, v. United Water Services Milwaukee, LLC, and United Water Resources, Inc., Defendants-Respondents.STATE OF WISCONSIN IN COURT OF APPEALS DISTRICT I
• Court: Wisconsin Court of Appeals

This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports.

A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62

James C. Thomson, Plaintiff-Appellant v United Water Services Milwaukee, LLC, and United Water Resources, Inc., Defendants-Respondents

No. 00-3332

STATE OF WISCONSIN IN COURT OF APPEALS DISTRICT I

October 9, 2001

APPEAL from a judgment of the circuit court for Milwaukee County: THOMAS P. DONEGAN, Judge. Reversed and cause remanded with directions.

Before Wedemeyer, P.J., Fine and Curley, JJ.

¶1. PER CURIAM.

James C. Thomson appeals from the grant of summary judgment awarded to United Water Services Milwaukee, LLC, and United Water Resources, Inc. (collectively, UW), dismissing his breach of contract action. Thomson contends that the circuit court erred in granting summary judgment where genuine issues of material fact remained in dispute and in denying his motion to compel discovery. Thomson claims that material issues of fact exist as to whether: (1) he was either a party or third-party beneficiary to a contract between Milwaukee Metropolitan Sewerage District (MMSD) and UW; (2) he was laid off in violation of the contract; and (3)he was dismissed from his employment as part of an overall workforce downsizing. We conclude that the circuit court prematurely granted summary judgment because discovery was necessary to determine whether UW laid off Thomson in violation of the contract. Further, the trial court should have granted Thomson's motion to compel discovery to permit Thomson an opportunity to prove his contentions.

I. Background.

¶2. On May 21, 1990, Thomson was hired by MMSD. In 1998, part of MMSD's business was privatized when United Water Services Milwaukee, LLC, a subsidiary of United Water Resources, Inc., took over certain MMSD operations. The transfer of operations was governed by a number of contractual agreements.

¶3. One of the contracts MMSD entered into with UW required UW to agree to continue the employment of non-represented employees. Specifically, the contract stated that UW would not "layoff" former MMSD employees for a ten-year period from the commencement of business operations.

¶4. Slightly more than a year later, on February 10, 1999, UW offered early retirement to Thomson. He declined to accept and was subsequently offered early retirement again in July of 1999 and March of 2000. Finally, UW terminated Thomson on March 29, 2000. Thomson then commenced the present breach of contract action on April 12, 2000.

¶5. After filing his lawsuit, Thomson served the defendants with written interrogatories and document requests. Specifically, Thomson requested all information related to UW's optimum staffing considerations, employee attrition schedule and staff reduction expectations. The defendants refused to produce the requested documents claiming they were irrelevant to the contract dispute. Thomson filed a motion to compel discovery while UW moved for summary judgment. The circuit court denied Thomson's motion to compel discovery and granted UW's motion for summary judgment.

II. Analysis.

¶6. This appeal involves issues decided pursuant to summary judgment as well as the circuit court's decision to deny Thomson's motion to compel discovery. Our review of the circuit court's decision to grant summary judgment is de novo. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315-16, 401 N.W.2d 816 (1987). However, a decision to grant or deny a motion to compel discovery is within the trial court's discretion. Franzen v. Children's Hosp., 169 Wis. 2d 366, 376, 485 N.W.2d 603 (Ct. App. 1992).

¶7. Summary judgment must be granted if the evidence demonstrates "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Wis. Stat. Rule 802.08(2). Our methodology is the same as the circuit court's. Preloznik v. City of Madison, 113 Wis. 2d 112, 116, 334 N.W.2d 580 (Ct. App. 1983). We must first determine whether the complaint states a claim. Green Spring Farms, 136 Wis. 2d at 315. If the plaintiff has stated a claim and the pleadings show the existence of factual issues, then we must examine whether the moving party has presented a defense that would defeat the claim. Preloznik, 113 Wis. 2d at 116. If the defendant has made a prima facie case for summary judgment, the court examines the pleadings, affidavits, depositions, answers to interrogatories, and admissions on file to determine whether a genuine issue exists as to any material fact, or whether reasonable conflicting inferences may be drawn from undisputed facts, therefore requiring a trial. Green Spring Farms, 136 Wis. 2d at 315.

¶8. The present dispute centers on the contract between MMSD and UW protecting former MMSD employees from being laid off within ten years of UW's initial date of operation. Thomson claims that: (1) he was a party to the contract rather than a third-party beneficiary, and (2) even if he is only a third-party beneficiary, his rights as such were violated when he was laid off.

¶9. In its simplest sense, a "contract" is "[a]n agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law." Black's Law Dictionary 318 (7th ed. 1999) (emphasis added). Offer, acceptance and consideration are the cornerstones of an enforceable contract. N.B.Z., Inc. v. Pilarski, 185 Wis. 2d 827, 837, 520 N.W.2d 93 (Ct. App. 1994). A contract exists only if "[t]he minds of the parties ... meet on essential terms." Messner Manor Assocs. v. Wisc. Hous. and Econ. Dev. Auth., 204 Wis. 2d 492, 498, 555 N.W.2d 156 (Ct. App. 1996) (emphasis added).

¶10. Privity of contract is the relationship that exists between the parties to a contract. City of La Crosse v. Schubert, 72 Wis. 2d 38, 41, 240 N.W.2d 124 (1976), overruled on other grounds by Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis.2d 395, 573 N.W.2d 842 (1998). A "party" is defined as "[o]ne who takes part in a transaction." Black's Law Dictionary 1144 (7th ed. 1999). Therefore, privity to a contract implies "a connection, mutuality of will, and interaction" between those who take part in the transaction. See Wrenshall State Bank v. Shutt, 202 Wis. 281, 283, 232 N.W. 530 (1930).

¶11. Here, Thomson is not a party to the contract. The following three individuals signed the contract in question: (1) Donald J. Voith, the chairman of MMSD; (2) David R. Sherman, the president of UW; and (3) Michael McCabe, legal counsel for MMSD. These individuals, not Thomson, negotiated the essential terms and executed the document as representatives of their respective companies. Thus, we conclude Thomson is not a party to the contract because he is not in privity with UW.

¶12. Generally, a contract is not binding on persons who are not in privity to it. Prinsen v. Russos, 194 Wis. 142, 145, 215 N.W. 905 (1927). However, a third party may recover upon a contract if "the contract indicates an intention to secure some benefit to him." Peters v. Peters Auto Sales, 37 Wis. 2d 346, 351, 155 N.W.2d 85 (1967) (citations omitted). InState Dept. of Pub. Welfare v. Schmidt, 255 Wis. 452, 39 N.W.2d 392 (1949), the supreme court stated: "[T]o entitle the third person to recover upon a contract made between other parties, there must not only be an intent to secure some benefit to such third person, but the contract must have been entered into directly and primarily for his benefit." Id. at 455 (citation omitted).

¶13. The "no layoff" provision in the present contract clearly indicates an intention to secure employment security and benefits for former non-represented MMSD employees such as Thomson.(FN1) The provision states:

[UW] agrees to offer continued employment to [MMSD] non-represented employees who transfer from [MMSD] employment to employment with [UW] pursuant to the Agreement for Operations and Maintenance Services between [UW] and [MMSD] (with no break in continuity of employment), not to lay any such employees off for the ten-year period following the commencement date of the Agreement....

Additionally, the remaining provisions of this agreement deal exclusively with other rights, benefits and terms of employment regarding former MMSD employees.

¶14. We are satisfied that MMSD and UW entered into this contract directly and primarily for the benefit of former MMSD employees like Thomson. Indeed, UW concedes that he is a third-party beneficiary. Accordingly, we conclude that Thomson is a third-party beneficiary entitled to recovery under the contract. See Journal/Sentinel, Inc. v. Pleva, 155 Wis. 2d 704, 706, 456 N.W.2d 359 (1990) (holding that public had standing to sue to enforce provisions of contract between city and festival promoter which incorporated the open meetings law).

¶15. Next, in order to decide whether Thomson was laid off in violation of the contract, we must first determine the intent of the parties regarding the definition of a "layoff." We will not create a legal obligation or legal duty that was unknown to both parties and not in contemplation of either party when the contract was made. See Goossen v. Estate of Standaert, 189 Wis. 2d 237, 246, 525 N.W.2d 314 (Ct. App. 1994). Therefore, for a term to be part of a contract, the term must have been contemplated by the parties and the parties must have had a meeting of the minds as to its meaning. Id.

¶16. In an affidavit submitted to the circuit court, MMSD's legal counsel, who negotiated, drafted, and signed the contract on behalf of MMSD, stated:

During the negotiations ... MMSD proposed and [UW] agreed that, as a condition of the takeover, [UW] would not "layoff" any existing MMSD employees.... The parties intended the term "layoff" to mean that [UW] may not arbitrarily terminate an individual's employment if, for...