United States District Court, W.D. Wisconsin
OPINION AND ORDER
BARBARA B. CRABB District Judge.
case arises out of a personal guaranty that plaintiff Kamlesh
Sheth gave with respect to financing provided by defendant
PremierBank for a hotel. After the borrower defaulted, a
third party stepped in to buy the property, but a deficiency
remained after the sale, so the bank sued both the borrower
and plaintiff in state court to make up the difference.
Plaintiff never made an appearance in the case, so the state
court entered judgment in the bank's favor, in the amount
of approximately $200, 000. The bank then began collection
proceedings in both Illinois and Wisconsin, eventually
recovering the money it says that plaintiff owed.
plaintiff is suing not only the bank, but also the bank's
executive vice president, Roy Budlong, and the bank's
lawyer, Mark Olm, contending that they violated his rights in
various ways. (Plaintiff identified "Olm &
Associates" as a separate defendant in his complaint,
but I have amended the caption because it is undisputed that
Olm & Associates is not a separate legal entity, but
simply a name under which Mark Olm does business. Olm PFOF
¶ 5, dkt. #93.) Plaintiff contends that the bank's
lawsuit in state court was a violation of a "settlement
agreement" that the parties had and that the bank lulled
him into believing that he did not need to participate in the
state court lawsuit because the bank had no intention of
enforcing the deficiency judgment against him. In addition,
plaintiff contends that defendant Olm violated the law by
representing the bank despite his previous representation of
plaintiff on related matters in the past.
is asserting claims for breach of contract (against the
bank), fraud (against all defendants), tortious interference
with a contract (against Budlong and Olm), breach of
fiduciary duty (against Olm), violation of Wis.Stat. §
134.01 (against all defendants), common law conspiracy
(against all defendants) and malpractice (against Olm). The
bank has asserted a counterclaim against plaintiff,
contending that it is entitled under the guaranty to receive
reimbursement for all costs and fees it incurred in this case
as well as in the state court collections cases.
plaintiff is asserting state law claims only, he must show
that jurisdiction is present under 28 U.S.C. § 1332,
which requires diversity of citizenship between plaintiff and
defendants and an amount in controversy more than $75, 000.
In an order dated August 8, 2016, I asked the parties to
provide supplemental materials showing diversity
jurisdiction. Dkt. #107. Having reviewed the parties’
supplemental materials, along with the parties’
proposed findings of fact, I am persuaded that there is
diversity of citizenship (plaintiff is a citizen of Illinois
and all defendants are citizens of Wisconsin) and the amount
in controversy is more than $75, 000 (because plaintiff is
seeking damages well over that amount).
motions are before the court: (1) a motion for summary
judgment filed by defendants PremierBank and Budlong, dkt.
#58; (2) a motion for summary judgment filed by defendant
Olm, dkt. #54; (3) plaintiff’s motion for partial
summary judgment on the bank’s counterclaim, dkt. #65;
(4) plaintiff’s motion for sanctions against the bank
and defendant Budlong, dkt. #88; (5) plaintiff’s
objection to Magistrate Judge Stephen Crocker’s May 27,
2016 order, dkt. #89; and (6) defendant Olm’s
“motion in limine” to bar plaintiff from
introducing expert testimony at trial, dkt. #45.
reasons explained below, I am (1) granting the motion for
summary judgment filed by the bank and defendant Budlong,
except as it relates to the bank’s counterclaim; (2)
granting defendant Olm’s motion for summary judgment
except as it relates to plaintiff’s claim for breach of
fiduciary duty; (3) granting plaintiff’s motion for
partial summary judgment with respect to the bank’s
counterclaim; (4) denying plaintiff’s motion for
sanctions; and (5) overruling plaintiff’s objection to
Magistrate Judge Crocker’s May 27, 2016 order. Finally,
because defendant Olm’s motion in limine relates solely
to plaintiff’s malpractice claim and I am granting
Olm’s motion for summary judgment as to that claim, I
am denying the motion in limine as moot.
respect to plaintiff’s breach of fiduciary duty claim,
I am denying defendant Olm’s summary judgment motion
because I am rejecting the two arguments he raised, that a
lawyer owes no duty of loyalty to a former client and that
the statute of limitations has expired on this claim.
However, I am directing plaintiff to show cause why that
claim should not be dismissed on the ground that plaintiff
cannot show that he suffered any damages or that Olm breached
whatever duty he had.
the parties’ proposed findings of fact and the record,
I find that the following facts are undisputed.
Plaintiff’s Interest in Whitewater Hotels
Kamlesh Sheth has owned various business since 1980. In 1989,
he acquired an ownership interest in a hotel. In 1993, he
formed Whitewater Hotels, Inc. with two partners. To date,
plaintiff has owned or managed seven different hotels and he
has executed approximately 20 guarantees related to those
hotels. Between 2002 and 2007, he was involved in seven
1990s, plaintiff began banking with defendant PremierBank.
(Because no other banks are relevant to the pending motions,
I will refer to defendant PremierBank simply as “the
bank” for the remainder of the opinion.) Over the
years, plaintiff obtained financing from the bank several
1997 to 2007, defendant Mark Olm acted as plaintiff’s
lawyer in various commercial transactions, including some
involving the bank and some involving his ownership interest
in Whitewater Hotels.
2002, plaintiff executed a stock purchase agreement under
which 98% of the stock for Whitewater Hotels was transferred
to Munish Singh and Sonya Singh. Plaintiff did not own any
portion of the company after the sale.
Plaintiff Signs a Guaranty for the Hotels
2006, Whitewater Hotels obtained $1, 050, 000 in financing
from the bank. As a condition for the loan, plaintiff signed
the following personal guaranty:
For value received, and to induce PremierBank ("Lender
"), to extend credit or to grant or continue other
credit accommodations to Whitewater Hotels, Inc.
("Debtor"), the undersigned ("Guarantor,
" whether one or more) jointly and severally guarantees
payment of the Obligations defined below when due or, to the
extent not prohibited by law, at the time any Debtor becomes
the subject of bankruptcy or other insolvency proceedings.
'Obligations' means all loans, drafts, overdrafts,
checks, notes, and all other debts, obligations and
liabilities of every kind and description, whether of the
same or a different nature, arising out of credit previously
granted, credit contemporaneously granted or credit granted
in the future by Lender to any Debtor, to any Debtor and
another, or to another guaranteed or endorsed by any Debtor.
Obligations include interest and charges and the amount of
payments made to Lender or another by or on behalf of any
Debtor which are recovered from Lender by a trustee,
receiver, creditor or other party pursuant to applicable
federal or state law, and to the extent not prohibited by
law, all costs, expenses and attorneys' fees at any time
paid or Incurred before and after judgment in endeavoring to
collect all or part of any of the above, or to realize upon
this Guaranty, or any collateral securing any of the above,
including those Incurred in successful defense or settlement
of any counterclaim brought by Debtor or Guarantor or
incident to any action or proceeding involving Debtor or
Guarantor brought pursuant to the United States Bankruptcy
* * *
ENTIRE AGREEMENT. This Guaranty is intended by Guarantor and
Lender as a final expression of this Guaranty and as a
complete and exclusive statement of its terms, there being no
conditions to the full effectiveness of this Guaranty. This
Guaranty may not be supplemented or modified except in
writing. This Guaranty includes additional provisions on the
(Plaintiff does not say why he chose to guarantee a loan when
he had no ownership interest in the property.) Plaintiff did
not seek advice from defendant Olm regarding whether to sign
this guaranty and Olm did not represent plaintiff in this
2006, the bank hired defendant Olm to perform work on its
collections and foreclosures. In 2007, Olm informed plaintiff
that he would no longer be representing plaintiff or his
2007, pursuant to the guaranty, the bank required plaintiff
to assign his interest in his life insurance policies to the
bank. During the time that Olm represented him, plaintiff did
not give Olm any confidential information about his life
Whitewater Hotels Defaults
December 2009, the bank notified plaintiff that Whitewater
Hotels had defaulted on its loan. In response, plaintiff met
with defendant Roy Budlong, an executive vice president for
the bank who was in charge of the Whitewater Hotels account.
After the meeting, plaintiff agreed either to assume the loan
or otherwise make the bank whole in the event of a
January 4, 2010, the bank initiated foreclosure proceedings
against Whitewater Hotels. Defendant Olm was the bank's
lawyer in those proceedings. On January 12, 2010, plaintiff
asked the bank to release him from his guaranty, but the bank
refused. On February 15, 2010, defendant Budlong gave
plaintiff an estimate of $961, 437 to pay off the loan.
Around the same time, plaintiff asked again to be released
from his guaranty, but the bank refused again.
February 19, 2010, Whitewater Hotels, plaintiff and the bank
agreed to modify the loan. (Oddly, none of the parties
identify what the modifications were, but neither side
suggests that there were any changes to plaintiff’s
guaranty. Rather, plaintiff admits that the bank still would
be looking to him to cover a deficiency in the event of a
default. Plt.’s Resp. to Dft.’s PFOF ¶ 33,
dkt. #96.) As a result of the modified agreement, the bank
suspended its prosecution of the foreclosure action. In
August 2010, the bank dismissed the case.
The Parties Negotiate after Whitewater Hotels Defaults
2010, the bank informed plaintiff that Whitewater Hotels had
defaulted on the modified loan. In February 2011, plaintiff
and the bank began negotiating a resolution. The bank
retained defendant Olm to prepare a draft of a settlement
agreement. Between February 2011 and May 2011, plaintiff and
the bank continued to exchange drafts of an agreement, all of
which Olm prepared. Olm had no communication with plaintiff
during that time.
March 2011, plaintiff and the bank discussed the possibility
of Whitewater Hotels’ agreeing to a receiver and
plaintiff’s taking responsibility for operating the
hotel and covering any deficiency that remained after a
sheriff’s sale. However, Whitewater Hotels rejected
March 25, 2011, in an email, defendant Budlong stated that
the “current pay off of the loan was $926, 649.37 with
a per diem of $132.18.” In addition, Budlong stated
that the bank had legal fees of less than $2000 and that
“the lien releases will take another $2100.” Dkt.
#83-3 at 30.
March 31, 2011, the bank initiated a new foreclosure action
against Whitewater Hotels. Defendant Olm again represented
the bank. The complaint included a statement that the bank
was waiving its right to a deficiency judgment. On April 5,
2011, in an email, Budlong told plaintiff that Olm
“can’t move any further until he receives the
signed settlement agreement.” On April 13, 2011, the
bank amended its complaint to add plaintiff as a defendant.
In the amended complaint, the bank removed the waiver and
asserted its right to a deficiency judgment. (The parties do
not identify the reason for the change.)
18, 2011, plaintiff met with Jim Schafer, a trust officer for
the bank with whom plaintiff had a long relationship. Schafer
provided plaintiff a copy of the amended complaint and asked
plaintiff to sign an admission of service form. (Plaintiff
signed the form on June 1, 2011.) Also on May 18, 2011, in an
email to defendant Budlong, Schafer reported that he had
asked plaintiff to sign the settlement agreement.
19, 2011, plaintiff signed the latest version of the
settlement agreement (called “Agreement by
Guarantor”), which he had reviewed with a lawyer. Under
that agreement, the bank would dismiss plaintiff from the
foreclosure action, waive its right to a deficiency judgment
and release plaintiff from his guaranty if he “bid
$1.00 higher than [the bank’s] opening bid [at the
sheriff’s sale] in order to buy the property from [the
bank], which will bid its principal, interest, late charges,
receivership costs, other related costs, real estate taxes
and costs and attorney’s fees.” However,
“if [plaintiff] fail[ed] to bid at the Sheriff’s
Sale, or if the balance of the Sheriff’s Sale purchase
[was] not paid to the Clerk of Court within 10 days . . .,
then [the bank had] the right to sue [plaintiff] for the
difference” between the bank’s total costs and
the price it received at the sale. In addition, the agreement
included the following provision:
SHETH understands and acknowledges that ATTORNEY MARK T. OLM
drafted this Agreement for PREMIER even though he has
represented SHETH in past transactions. By signing this
Agreement SHETH consents to MARK T. OLM representing PREMIER
in this matter and acknowledges and agrees that MARK T. OLM
is not representing SHETH’S interests in this matter.
the agreement included a provision that “[n]o
amendments or additions to this Agreement will be binding
upon the parties unless reduced to writing and signed by
signing the agreement, plaintiff returned it to the bank
through a fax machine, using the number that Schafer had
provided. (It is disputed whether plaintiff called Schafer to
confirm that Schafer had received it.) Neither Budlong nor
anyone else at the bank signed the agreement. (Defendants say
this was because they were not aware that plaintiff had
returned the agreement to them.) Plaintiff never asked
defendants for a signed copy of the agreement and he did not
ask them whether they had signed the agreement. For their
part, defendants did not ask plaintiff whether he had
returned the agreement and they never made another request
for him to sign it.
21, 2011, the bank filed a motion in the foreclosure action
for a default judgment against both plaintiff and Whitewater
Hotels. On June 28, 2011, the state circuit court entered a
default judgment against all defendants. (The parties did not
submit any proposed findings of fact addressing the question
whether plaintiff received a copy of the motion or judgment.)
August 1, 2011, in an email to plaintiff, defendant Budlong
suggested that they meet to discuss the procedure for the
sheriff’s sale and an appropriate price.
August 18, 2011, plaintiff met with defendant Budlong and
Schafer to discuss pending offers on the hotel property. On
August 25, 2011, in an email to plaintiff, Budlong wrote the
We discussed the offer of $950, 000 for the purchase of the
Whitewater Hotel and it was agreed by you and the bank to
decline the offer. I contacted Munish Singh by email the next
day and informed him of the decision to decline the offer. I
restated to him that the bank is seeking a price of $1, 100,
It is your position that your group is at the $1, 050, 000.00
mark for the purchase of the motel. If a price higher than
that amount comes in, we are in agreement to accept it. We
will continue discussions regarding any deficiency at that
time. . . .
The sheriff sale is scheduled for October 6. It was agreed
that, prior to the sheriff sale if no other buyer is
accepted, we will finalize in writing the offer from your
group so we know what amount to bid at the sheriff sale.
August 2011, plaintiff met with Ronak Patel for the purpose
of marketing the hotel property.
September 2, 2011, in an email to plaintiff regarding the
$950, 000 offer, Budlong wrote, “Since you are
guarantor on the loan, I need your confirmation regarding the
agreement to decline the offer made on the motel.”
September 2011, the bank reached an agreement with
Patel’s company, SAI Hospitality, to sell the hotel for
$1.1 million. They also agreed that the bank would bid that
amount at the sheriff’s sale and then the bank would
transfer the title to SAI for the same amount. (The parties
do not explain why they chose that procedure.)
September 20, 2011, in an email, defendant Budlong informed
plaintiff of the offer and asked for his consent to it.
Plaintiff agreed to accept the offer, but neither Budlong nor
plaintiff raised the issue of a potential deficiency.
The Sheriff’s Sale and Request for a ...