2003AP1391 Menard, Inc. v. Liteway Lighting Products (63006)

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“Because it is undisputed that all of the allegedly defective goods for which Menard seeks credit in its suit against Liteway were returned prior to Liteway’s original action for unpaid invoices, the issue of returned products formed the basis of the dispute between the parties from the beginning, and allowing Menard to recover in the present case would undermine Liteway’s original judgment, we conclude that Menard’s suit is barred under the doctrine of claim preclusion and the common-law compulsory counterclaim rule….

“The issue presented is whether a buyer’s claims based on credit for returned goods are barred under the doctrine of claim preclusion and the common-law compulsory counterclaim rule when the seller had previously sued the buyer for breach of contract based on unpaid invoices, a default judgment was entered due to the buyer’s failure to timely file an answer, the parties had terminated their business relationship prior to the instigation of the first suit, the defective goods were returned prior to the time the first lawsuit was filed, and the issue of credit for the defective goods was the basis of the entire dispute between the parties that led to the filing of the initial lawsuit. We hold that under these facts, the doctrine of claim preclusion and the common-law compulsory counterclaim rule bar any subsequent suit by the buyer for credit for the returned goods.

“We conclude that for purposes of claim preclusion, Menard’s claims in its second suit are part of the same transaction as the claims in Liteway’s original suit because both suits arise from the same common nucleus of operative facts. It is uncontested that the dispute over the amount of money Menard owed Liteway on unpaid invoices was based on Menard’s practice of taking a “credit” for defective products. Further, Menard’s claims in its second suit could have been raised in Liteway’s original action, as the parties had terminated their business relationship almost a year before Liteway filed its original complaint and all of the allegedly defective goods were returned prior to Liteway’s action.

“Moreover, we conclude that Menard’s claims fall under the common-law compulsory counterclaim rule because allowing Menard to proceed with its present suit would impair Liteway’s rights as determined in the original action and would undermine the validity of the judgment Liteway obtained.”

DISSENTING OPINION: Crooks, J., with whom Butler, J., joins. “ I strongly disagree with the majority that Menard’s lawsuit against Liteway is barred by the doctrine of claim preclusion. The majority concludes that all three elements for claim preclusion are present and, additionally, that Menard was required to raise its claims in the action brought by Liteway pursuant to the common-law compulsory counterclaim exception to Wisconsin’s permissive counterclaim statute, Wis. Stat. § (Rule) 802.07(1) (1999-2000).

“I respectfully dissent because there is no identity of claims or causes of action between the first and second suits involving these parties, and Menard’s claim here does not come within the narrow exception to Wisconsin’s permissive counterclaim statute.”

Court of Appeals, Wilcox, J.

Attorneys:

For Appellant: Carol S. Dittmar, Teresa E. O’Halloran, Eau Claire

For Respondent: Stephanie L. Finn, Webster A. Hart, Eau Claire