Culpability required for dismissal

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A court may not dismiss a case as a sanction for discovery abuses if the plaintiff was blameless for the misconduct of its attorney, the Wisconsin Supreme Court held on Feb. 8.

In so holding, the court overruled its prior holding to the contrary in Johnson v. Allis-Chalmers Corp., 162 Wis.2d 261, 470 N.W.2d 859 (1991).

Keith Dippel owns Industrial Roofing Services, Inc., which provides consulting services for roofing applications. Between July 2002 and January 2003, several employees resigned and established a competitor; others joined existing roofing companies. Randy Marquardt was one of those employees and the court in its decision referred to them collectively as “Marquardt.”

Industrial brought suit against 12 defendants, asserting various causes of action, including breach of contract, misappropriation of trade secrets, and intentional interference with Industrial’s business relationships.

Counsel for the defendants sought discovery for the next year to no avail, when Industrial obtained new counsel. Ultimately, the circuit court dismissed the complaint without prejudice as a sanction, allowing re-filing within 60 days if Industrial paid about $4,000 in attorney fees to Marquardt.

The court also stated that, if the case were re-filed, Industrial would have to demonstrate “the viability of the allegations against the Marquardt Defendants in the complaint from both a factual and legal basis.”

Industrial never re-filed or paid the attorney fees, and the circuit court dismissed the complaint with prejudice. The court of appeals affirmed in an unpublished decision, and the Supreme Court granted review.

The case generated three opinions: in the lead opinion, written by Justice Ann Walsh Bradley, and joined by Justices Jon P. Wilcox and N. Patrick Crooks, the court overruled Johnson, and held that the plaintiff was not blameless for the discovery abuse; Justice Louis B. Butler wrote a concurrence, disagreeing with overruling Johnson, and disagreeing with the holding that the plaintiff was culpable; Chief Justice Shirley S. Abrahamson wrote a dissent, joined by Justices Patience Drake Roggensack and David Prosser, agreeing with the overruling of Johnson, but concluding the plaintiff was not culpable.

Lead Opinion

After initially holding that the conduct of Industrial’s counsel was egregious enough to warrant dismissal, the lead opinion concluded that dismissal was an inappropriate sanction if the plaintiff itself was blameless for the attorney’s conduct, overruling Johnson to the extent it holds to the contrary.

In Johnson, Chief Justice Abrahamson wrote a concurrence to that effect, which the lead opinion concluded was persuasive.

Abrahamson gave five reasons for such an interpretation in Johnson, which the lead opinion in the case at bar adopted:

One, as a practical matter, a layperson ordinarily cannot be expected to supervise his or her attorney through every pretrial phase of litigation.

Two, the consequence for the blameless litigant whose case is dismissed is extraordinarily severe. The litigant never gets the opportunity for a trial on the merits.

Three, the harm to the opposing party is ordinarily limited, and the opposing party can be compensated.

Four, the circuit court has other sanctions available to it short of dismissal of the litigant’s case with prejudice, the most severe sanction possible. Sanctions could be imposed on the lawyer personally.

Five, while a circuit court’s efforts to move the docket expeditiously are important, dismissing actions for counsel’s failure to comply with court orders does not necessarily foster sound, speedy administration of justice. Johnson, 162 Wis.2d, at 290-291 (Abrahamson, J., concurring).

The court then concluded that the circuit court did not err in imputing the attorney’s conduct to Industrial, concluding, “Even if the record supports the view that the client, Industrial, was not itself directly to blame for those failures, it does not follow that Industrial is without fault. Industrial’s fault lies in its failure to act in a reasonable and prudent manner when it knew or had reason to know that its attorney was failing to properly manage the case.”

The court noted that Dippel was present at a hearing during which the parties could conduct no business because Industrial’s attorney failed to provide a response to a motion to dismiss.

In addition, an affidavit of Dippel demonstrated that contacts with his attorney should have raised suspicion about his ability to handle the case.

Finally, the circuit court gave Industrial an opportunity to cure, by re-filing and paying the defendants’ attorney fees, but Industrial did not do so, a failure the court called neither reasonable nor prudent.

Accordingly, the court affirmed.

Concurrence

Justice Butler disagreed with the lead opinion to the extent it overruled Johnson, concluding, “While this conclusion is well intentioned, in the absence of any change implemented as part of our rule-making procedure, I cannot join the majority opinion.”

Butler noted that sec. 804.12(2)(a)3 provides that if a party fails to obey an order to provide or permit discovery, the court may make such orders in regard to the failure as are just, “and among others the following: … An order … dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party.

Butler concluded that the plain language clearly includes the sanction of dismissal as a remedy.

In addition, sec. 805.03 provides that, “for failure of any party to comply with the statutes governing procedure in civil actions or to obey any order of court, the court … may make such orders in regard to the failure as are just, including but not limited to orders authorized under s. 804.12(2)(a).”

Accordingly, Butler concluded that dismissal is a permissible sanction, even without imputing blame to the plaintiff.

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Butler also disagreed with the lead opinion’s conclusion that blame could be imputed to the party in this case, but given the egregiousness of Industrial’s counsel, he concluded that dismissal was appropriate.

The Dissent

The dissent by Abrahamson agreed with the lead opinion to the extent it overruled Johnson, and required that a plaintiff be blameworthy before the case can be dismissed as a sanction for discovery abuses.

However, the dissent concluded that Industrial was blameless in this case, opining, “The majority opinion cobbles together miscellaneous statements in the record and fashions them into a story of noncompliance in the discovery process amounting to the circuit court’s finding egregious attorney conduct. But do not be fooled. This is the majority opinion’s story, not the facts and reasoning of the circuit court.”

Abrahamson wrote, “As a result of the majority opinion, clients are now obligated to monitor due dates for discovery and examine whether the materials provided by counsel are responsive. The client can no longer just generally keep abreast of the case. The client must make detailed inquiries and check with court records, not take the lawyer’s word. Unless the client so acts, the client risks being deemed blameworthy, having its case dismissed with prejudice, and being ordered to pay legal fees to opposing counsel.”

The dissent also took issue with the circuit court’s holding that it would allow the case to proceed if Industrial could show the case was viable, after paying attorney fees and re-filing suit, stating, “This creative sanction cannot be satisfied because no one knows what it means.”

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David Ziemer can be reached by email.