Zastrow v. Journal Communications, Inc.

• Decision Date: 08 July 2005
• Docket Number: No. 2004AP276.,2004AP276.
• Citation: 286 Wis.2d 416,703 N.W.2d 673,2005 WI App 178
• Parties: David ZASTROW, the Employee Stockholders of Perry Printing, Larry J. Gocker, Neal C. Kopplin, Catherine Thompson and Eunice Weihert, Plaintiffs-Appellants-Cross-Respondents, v. JOURNAL COMMUNICATIONS, INC., Journal Employees Stock Trust (JESTA), and Trustees of Journal Employees Stock, Defendants-Respondents-Cross-Appellants, PERRY PRINTING DIVISION n/k/a Northstar Printgroup, Inc., Paul M. Bonaiuto, Keith M. Spore, Executive Risk Indemnity, Inc., Robert A. Kahlor, Steven J. Smith, Thomas M. Karavakis, Peter P. Jarzembinski and Douglas G. Kiel, Defendants-Respondents.
• Court: Wisconsin Court of Appeals

286 Wis.2d 416

2005 WI App 178

703 N.W.2d 673

David ZASTROW, the Employee Stockholders of Perry Printing, Larry J. Gocker, Neal C. Kopplin, Catherine Thompson and Eunice Weihert, Plaintiffs-Appellants-Cross-Respondents,¹ v. JOURNAL COMMUNICATIONS, INC., Journal Employees Stock Trust (JESTA), and Trustees of Journal Employees Stock, Defendants-Respondents-Cross-Appellants, PERRY PRINTING DIVISION n/k/a Northstar Printgroup, Inc., Paul M. Bonaiuto, Keith M. Spore, Executive Risk Indemnity, Inc., Robert A. Kahlor, Steven J. Smith, Thomas M. Karavakis, Peter P. Jarzembinski and Douglas G. Kiel, Defendants-Respondents.

No. 2004AP276.

Court of Appeals of Wisconsin.

Submitted on briefs May 23, 2005.

Decided July 8, 2005.

On behalf of the plaintiffs-appellants-cross-respondents, the cause was submitted on the brief of Thomas L. Frenn, Petrie & Stocking S.C., Milwaukee, and Kevin J. Demet and Donal M. Demet, Demet & Demet, SC, Milwaukee.

On behalf of the defendants-respondents-cross-appellants, the cause was submitted on the brief of Thomas J. Shriner, Jr. and David W. Simon, Foley & Lardner LLP, Milwaukee.

Before Dykman, Vergeront and Higginbotham, JJ.

¶ 1. VERGERONT, J.

This action involves a trust agreement under which employees of Journal Communications, Inc., and its subsidiaries can acquire units of beneficial interest in the stock of Journal Communications. After a trial to the court, the court found that the trustees had negligently failed to fulfill their fiduciary duty to disclose to a certain group of former employees the availability of a longer period for selling back their units if they chose to retire when the subsidiary that employed them was sold. The court entered judgment in favor of four of those employees in an amount totaling $130,479.52 plus their attorney fees. Journal Communications, Journal Employees Stock Trust, and the trustees appeal that judgment on a number of grounds. The dispositive issue is whether the circuit court correctly decided that the six-year statute of limitations in either WIS. STAT. §§ 893.52 or 893.53² applies to the breach of fiduciary duty claims.³

¶ 2. We conclude that under Beloit Liquidating Trust v. Grade, 2004 WI 39, 270 Wis. 2d 356, 677 N.W.2d 298, the two-year statute of limitations in WIS. STAT. § 893.57 applies to the breach of fiduciary duty claims. The employees do not argue that their breach of fiduciary duty claims are not barred if § 893.57 applies. Accordingly, we reverse the judgment of the circuit court and remand with directions to dismiss the complaint.

BACKGROUND

¶ 3. The trust was created in 1937 and, at all times relevant to this appeal, it owned 90% of Journal Communications' stock, with the remainder owned by one of the grantors or his heirs. The trust agreement provided that employees of Journal Communications and its subsidiaries could under certain circumstances purchase units of Journal Communications' stock at an "option price," which was established by formula. The agreement also provided that unit-owning employees whose employment with a Journal Communications company terminated for any reason other than retirement were required to immediately offer for sale all units at the then-current option price. If the reason for termination was retirement, however, the employee was permitted under the agreement to offer his or her units for sale over a period of ten years.

¶ 4. In 1995, the assets of one of Journal Communications' subsidiaries, Perry Printing Company (Perry), were sold. The sale agreement required the buyer to continue to operate the business and to offer similar positions with comparable compensation and benefits to all existing Perry employees. The position of the trustees was that the Perry employees were not leaving the employ of a Journal Communications' company by reason of retirement and, therefore, under the terms of the trust agreement all Perry unit-owning employees would have to immediately offer their units for sale. However, the trustees decided to allow Perry employees and others leaving a Journal Communications' company because of corporate restructuring to offer their units for sale for a period of up to five years, depending on how long they had owned units.

¶ 5. This action was filed in April 2000 as a class action on behalf of all former Perry employees who had been employed on the date of the sale and who had sold their units. As relevant to this appeal, the amended complaint alleged that the plaintiffs were entitled under the trust agreement to be treated as retirees with the right to sell their units over a ten-year period, but they were denied this right. They were damaged as a result, the amended complaint alleged, because the earlier sales deprived them of the benefit of later price increases. The amended complaint asserted claims of breach of fiduciary duty, breach of employment contract, and a violation of WIS. STAT. ch. 109 (wage claims) against Journal Communications, the trustees, and the trust (collectively, the defendants).

¶ 6. In a series of decisions on motions to dismiss, motions for summary judgment, and motions for reconsideration, the circuit court dismissed the breach of contract and wage claims and concluded the breach of fiduciary duty claim could proceed to trial with one subclass of plaintiffs and on only one theory. The subclass consisted of those eligible to retire at the time Perry was sold. Because of the court's conclusion that the procedure for Perry employees to exercise a decision to retire was unclear, the court decided that it would consider a member of the subclass to be retired within the meaning of the trust agreement if that person could show he or she intended to retire when Perry was sold. The single theory that remained, the court ruled, was that the trustees breached their fiduciary duties of loyalty and impartiality by requiring those employees to sell their units within five years instead of ten. ¶ 7. The defendants moved for dismissal of this remaining claim for breach of fiduciary duty on the ground that it was barred by the two-year statute of limitations in WIS. STAT. § 893.57:

Intentional torts. An action to recover damages for libel, slander, assault, battery, invasion of privacy, false imprisonment or other intentional tort to the person shall be commenced within 2 years after the cause of action accrues or be barred.

The plaintiffs responded that the six-year statutes of limitations in WIS. STAT. §§ 893.52 or 893.43 applied. These statutes provide:

893.52 Action for damages for injury to property. An action, not arising on contract, to recover damages for an injury to real or personal property shall be commenced within 6 years after the cause of action accrues or be barred, except in the case where a different period is expressly prescribed.

893.43 Action on contract. An action upon any contract, obligation or liability, express or implied, including an action to recover fees for professional services, except those mentioned in s. 893.40, shall be commenced within 6 years after the cause of action accrues or be barred.

¶ 8. In its written decision, the circuit court considered Warmka v. Hartland Cicero Mutual Insurance Co., 136 Wis. 2d 31, 34-35, 400 N.W.2d 923 (1987), on which the defendants primarily relied. There the supreme court held that the two-year statute of limitations in WIS. STAT. § 893.57 applied to an insured's claim against his insurer for bad faith because, the supreme court stated, the insurer's duty is analogous to a fiduciary duty and the breach of a fiduciary duty is an intentional tort.⁴Warmka, 136 Wis. 2d at 35-36. The circuit court here reasoned that there was a distinction between claims of breach of fiduciary duty that are based on negligent conduct, such as a failure to act, and claims that are based on conduct that is in bad faith, is deceitful, or with knowledge of the lack of a reasonable basis for the conduct or a reckless disregard of a reasonable basis. For the former category, the circuit court concluded, the two-year statute of limitations for intentional torts did not apply and the six-year statute of limitations in either WIS. STAT. §§ 893.52 or 893.53⁵ did apply. Because the breach of fiduciary duty claim that remained for trial involved a failure to reasonably interpret the agreement or a failure to treat the subclass impartially as compared to other retirement eligible employees, the court concluded that a six-year statute of limitations applied to the claim. Applying a six-year statute of limitations, the court concluded the claim was timely filed.

¶ 9. The breach of fiduciary duty claims of sixteen subclass members went to trial before the court. In its written decision, the court found that, in order to have the right to a ten-year sell-back under the trust agreement, the subclass members would have had to first retire from Perry and then apply for employment with the new company; they could not both retire and have immediate employment with the new company. However, the court concluded, they could have retired from Perry the day before the sale, obtained the ten-year sell-back right, and then applied for employment with the new company the next day. The court concluded that the trustees had a conflict of interest with respect to the subclass members' choice of either retirement or immediate employment with the new company: the trustees, as employees of Journal Communications, had the right to purchase some of the units sold back by the subclass after Perry was sold, and the trustees were executives of Journal Communications, which had contracted with the new company for immediate employment of all Perry employees. That conflict of interest, the court concluded, imposed on the trustees a duty to disclose the availability of the ten-year sell-back period as an advantage to choosing retirement over immediate employment with the new company. The court determined that the trustees negligently failed...