Fiduciary Duty Case Analysis

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The court’s unquestioned adherence to stare decisis in this case is remarkable, for this case could be the model example for when stare decisis should not be followed.

First, the holding is contrary to the unambiguous language of the statute; second, the precedent to which the court adheres was adopted without any discussion or justification; third, it is a statute of limitations case, which does not induce reliance by parties.

Section 893.57, the statute of limitations for intentional torts, states: “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 (emphasis added).”

“Tort to the person,” of course, does not mean “tort to a person.” It is a term of art, meaning the same thing as “personal tort,” defined as “A tort involving or consisting in an injury to one’s person, reputation or feelings, as distinguished from an injury or damage to real or personal property.” Black’s Law Dictionary, p. 1497 (7th ed., 1999).

This was recognized by the court of appeals in Acharya v. Carroll, 152 Wis.2d 330, 448 N.W.2d 275, 279 (Ct.App.1989): “The term ‘injuries to the person’ connotes bodily injuries, whether physical or emotional.” The court in that case rejected the defendant’s argument that legal malpractice could constitute an injury “to the person.”

Breach of fiduciary duty, causing the employees in this case to miss the opportunity for greater appreciation of their employee-owned stock, is an intentional tort, as the court correctly held; however, like legal malpractice, it is indisputably not an intentional tort “to the person.”

The court of appeals at least recognized this problem, even though it concluded it was bound by the decision in Beloit Liquidating Trust v. Grade, 2004 WI 39, 270 Wis.2d 356, 677 N.W.2d 298, to hold that sec. 893.57 applies to breaches of fiduciary duty. Zastrow v. Journal Communications, Inc., 2005 WI App 178, 286 Wis.2d 416, 703 N.W.2d 673, 682-683.

The Supreme Court, on the other hand, which is not so bound, but is free to reconsider the issue, did not even acknowledge that its interpretation is contrary to the plain language of the statute.

By addressing only whether the breach was an intentional tort, rather than the issue framed by the parties — what statute of limitations applies? — the lead opinion reaches a clearly incorrect result.

Second, as both the lead opinion, and the concurrence acknowledge, when the Supreme Court held in Beloit Liquidating that sec. 893.57 applied to breach of fiduciary duty, it offered no reasoning for the holding (the main point of contention being whether Wisconsin or Delaware law applies).

Where no reasoning is provided for a holding, the rationale for adherence to stare decisis is weakened.

The holding in Warmka v. Hartland Cicero Mut. Ins. Co., 136 Wis.2d 31, 400 N.W.2d 923 (1987), is not entitled to especially high deference on the issue, either.

There, the court held, “The breach of the fiduciary duty is an intentional tort… Section 893.57, Stats., establishes a two-year statute of limitations for an intentional tort and is the applicable statute.” Id., 400 N.W.2d at 925.

However, the defendant in that case was arguing in favor of a one-year statute of limitations. Once the court found that statute inapplicable, the court’s work was done; it did not matter whether the correct statute of limitations was two years, as provided in sec. 893.57, or six years from some other statute of limitation.

The decision in the case at bar is also a radical departure from Haferman v. St. Clare Healthcare Found., 2005 WI 171, 286 Wis.2d 621, 707 N.W.2d 171. In Haferman, three separate statutes of limitations potentially applied to medical malpractice actions brought by developmentally disabled children. None quite fit, however, so the court held there is no statute of limitations at all. Id., 700 N.W.2d at 866.

In doing so, the court relied on the maxim that, “Reviewing courts must interpret statutes of limitations so that ‘no person’s cause of action will be barred unless clearly mandated by the legislature.’” Id., at 865 (citations omitted).

In contrast, in the case at bar, the court abandoned that rule, and held an action barred, even though the statute of limitations is clearly not applicable.

	Related Links Wisconsin Court System Related Article Breach of fiduciary duty is intentional tort

Finally, one of the reasons for stare decisis is avoiding upsetting parties’ reliance on settled law, but that consideration does not apply to cases interpreting statutes of limitation.

If a court has previously held that a particular action is not a tort, or that particular language in a contract means X, then stare decisis militates against changing that holding; parties will have reasonably relied and acted on the prior holding.

However, parties do not rely on decisi
ons governing statutes of limitation; only their lawyers do, after litigation has already commenced.

Because of the clear erroneousness of the holding, the absence of any prior reasoning for the holding in the precedents followed, and the absence of reliance on that precedent by the parties, the rationale for stare decisis was at its nadir in this case. Adhering to stare decisis in this case is the paragon of doing so for no better reason “than that so it was laid down in the time of Henry IV.” Holmes, The Path of the Law, 10 Harv.L.Rev. 457, 469 (1897).

– David Ziemer

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David Ziemer can be reached by email.