Zastrow v. Journal Communications

• Decision Date: 20 June 2006
• Citation: 2006 WI 72,718 N.W.2d 51
• Parties: David ZASTROW, the Employee Stockholders of Perry Printing, Larry J. Gocker, Neal C. Kopplin, Catherine Thompson and Eunice Weihert, Plaintiffs-Appellants-Cross-Respondents-Petitioners, 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 Supreme Court

718 N.W.2d 51

2006 WI 72

David ZASTROW, the Employee Stockholders of Perry Printing, Larry J. Gocker, Neal C. Kopplin, Catherine Thompson and Eunice Weihert, Plaintiffs-Appellants-Cross-Respondents-Petitioners, v.JOURNAL COMMUNICATIONS, INC., Journal Employees Stock Trust (JESTA) and Trustees of Journal Employees Stock, Defendants-Respondents-Cross-AppellantsPerry 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.

Supreme Court of Wisconsin.

Argued February 23, 2006.

Decided June 20, 2006.

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For the plaintiffs-appellants-cross-respondents-petitioners there were briefs by Kevin Demet, Donal Demet, and Demet & Demet SC, Milwaukee, and oral argument by Kevin Demet.

For the defendants-respondents-cross-appellants there was a brief by Thomas L. Shriner, Jr., David W. Simon, and Foley & Lardner L.L.P., Milwaukee, and oral argument by Thomas L. Shriner, Jr.

An amicus curiae brief was filed by Jennifer L. Peterson and LaFollette Godfrey & Kahn, Madison, on behalf of Wisconsin Manufacturers and Commerce.

¶ 1PATIENCE DRAKE ROGGENSACK, J

In this review of a court of appeals decision that reversed and remanded to the circuit court¹ to dismiss plaintiffs' claims for breach of fiduciary duty based on a statute of limitations defense, we are asked to determine whether a claim for breach of fiduciary duty of loyalty must be intentional, or whether it can also be based on negligence.We conclude that the circuit court found that the Trustees of Journal Employees Stock (Trustees) created circumstances that adversely affected the plaintiffs' interests by giving plaintiffs incomplete information relative to plaintiffs' holdings, which we conclude is a breach of the fiduciary duty of loyalty, an intentional tort.As a result, the two-year statute of limitations found in Wis.Stat. § 893.57(2003-04),² which is applicable to intentional torts, requires dismissal of the lawsuit.Accordingly, we affirm the decision of the court of appeals.

I.BACKGROUND

¶ 2Plaintiffs are former employees of Perry Printing (Perry), which was a wholly owned subsidiary of Journal Communications, Inc.(Journal Communications).Since 1937, 90 percent of Journal Communications' stock has been held in the Journal Employees Stock Trust (Trust).Administration of that Trust is governed by the Journal Employees' Stock Trust Agreement (JESTA) and managed by the Trustees of the Trust.

¶ 3 As a part of their employee benefits, employees of Perry could, under certain circumstances, purchase units of the Trust (Trust-units) at a price that was formulaically determined.The JESTA required employees who owned Trust-units and whose employment terminated for any reason other than retirement to immediately offer for sale to persons who were eligible purchasers under the JESTA all Trust-units at the then-current formula price.The JESTA also provided that when an employee retired, the employee was permitted to offer his or her Trust-units for sale over a period of ten years, with not less than ten percent of the Trust-units offered for sale in each year.Having an extended sell-back opportunity is claimed to be beneficial because the Trust-units have always appreciated in value.

¶ 4 In 1995 as part of its corporate restructuring, Journal Communications sold Perry's assets.The sale agreement required the buyer to continue to operate the business and to offer similar positions with comparable compensation and benefits to all Perry employees.When the sale closed, all employees were terminated by Perry and rehired by the buyer of Perry's assets.

¶ 5 Because their employment with a Journal Communications company terminated when Perry was sold, under the JESTA, the former employees had to offer to sell back their Trust-units immediately, unless they retired.In that case, the JESTA accorded them ten years to accomplish the sell-back.None of the employees actually retired, and the Trustees did not treat any of the Perry employees as retirees, even though some who accepted new employment with the buyer were eligible to retire.Instead, the Trustees told the former employees of Perry they had one to five years, depending on how long each person had owned the Trust-units, during which they had to re-sell them.

¶ 6 In April of 2000, former Perry employees who had been employed on the date of the Perry asset sale and who had sold their Trust-units at the time of the corporate restructuring, filed a class action against Journal Communications, the Trust, and its Trustees(collectively, the defendants).The complaint alleged that the plaintiffs were entitled under the JESTA to be treated as retirees with the right to sell their Trust-units over a ten-year period, but that the Trustees denied them this right.Plaintiffs' claims included breach of fiduciary duty, breach of contractual rights and denial of a statutory right to wages under ch. 109.

¶ 7The defendants moved for partial summary judgment, asking the circuit court to reject these theories because many plaintiffs were not eligible to retire and of those who were eligible, none had retired.Eventually, after reaching a decision on that initial motion and several other motions that followed, the circuit court granted the defendants' request to dismiss the complaint and amended complaint, in part.³It denied all claims relative to those former employees who were not eligible to retire when Perry's assets were sold, and it dismissed all other claims for relief, except those for breach of fiduciary duty.

¶ 8 As part of the defendants' motions, they asserted that the two-year statute of limitations for intentional torts, Wis. Stat. § 893.57, barred the plaintiffs' breach of fiduciary duty claim.The circuit court did not agree.Instead, it concluded that not all breaches of fiduciary duty are intentional torts, reasoning that there is a distinction between claims based on negligent conduct and claims that are based on intentional conduct or conduct that evinces a reckless disregard of another's rights.For breaches of duty based on negligent conduct, the circuit court reasoned that the six-year statute of limitations in either Wis. Stat. §§ 893.52 or 893.53 applied.The circuit court determined that the applicable moment at which to toll the statute of limitations was the date of each plaintiff's sale of his or her last Trust-unit, and that any time-bar would depend upon that date for each individual plaintiff.

¶ 9 The breach of fiduciary duty claims of the plaintiffs who were eligible to retire when Perry's assets were sold were tried to the court.Subsequent to the trial, the court made the following findings and conclusions: (1) none of the plaintiffs had intended to retire; (2)the Trustees told the plaintiffsthey had to sell back their Trust-units over a one to five year period after leaving their employment with Perry; (3)the defendants had a fiduciary obligation to tell the plaintiffs that they could retire from Perry before the sale closed, which would have made them eligible for a ten-year sell-back period; (4) retirement would mean those who made that choice would not be entitled to automatic employment by the buyer, but would have to apply for such employment; (5) three of the plaintiffs would have retired, if the Trustees had told them they could do so; (6) the same three plaintiffs did not know about the ten-year sell-back opportunity; (7)the Trustees had a conflict of interest with respect to advising the plaintiffs about a choice of either retirement or immediate employment with the buyer because the Trustees, as employees of Journal Communications, had the right to purchase some of the Trust-units sold by the plaintiffs; (8)the Trustees negligently failed to fulfill their duty to advise plaintiffs; and (9) the six-year statute of limitations applies.⁴

¶ 10The defendants appealed, challenging the circuit court's application of a six-year statute of limitations and raising Clause 33 of the JESTA⁵ as a bar to all negligence claims.The defendants asserted that the conduct found by the circuit court as proof of plaintiffs' claims was a violation of the Trustees' duty of loyalty to the plaintiffs.As such, it is an intentional tort and barred by the two-year statute of limitations.

¶ 11The court of appeals reasoned that Beloit Liquidating Trust v. Grade,2004 WI 39, 270 Wis.2d 356, 677 N.W.2d 298, which we decided after the circuit court's decision, controlled because Beloit Liquidating concluded that the two-year statute of limitations for intentional torts applies to breach of fiduciary duty claims.Zastrow v. Journal Communications, Inc.,2005 WI App 178, ¶ 2, 286 Wis.2d 416, 703 N.W.2d 673.The plaintiffs on appeal did not dispute that if the two-year statute of limitations applies, their claims were not timely brought.Id.Accordingly, the court of appeals reversed the circuit court and remanded with directions to dismiss the complaint.Id.

II.DISCUSSION

A.Standard of Review

¶ 12 Our review requires us to choose and apply the appropriate Wisconsin statute to the plaintiffs' claims to determine if they are time-barred.Choosing the correct statute of limitations involves a question of law that we independently review.Estate of Hegarty v. Beauchaine,2001 WI App 300, ¶ 14, 249 Wis.2d 142, 638 N.W.2d 355.Whether one breached a fiduciary duty is also a question of law that we review independently.Jorgensen v. Water Works, Inc.,2001 WI App 135, ¶ 8, 246 Wis.2d 614, 630 N.W.2d 230.

B.Wisconsin Stat. §§ 893.57and893.43

¶ 13 A question in our review of the court of appeals decision is which statute of limitations applies to the plaintiffs' claims: the two-year statute of limitations in Wis. Stat. § 893.57, or the six-year limit found in either Wis. Stat. §§...