Debra K. Sands, Plaintiff-Appellant,
John R. Menard, Jr., Menard, Inc., Menard Thoroughbreds, Inc., Webster Hart as Trustee of the John R. Menard, Jr. 2002 Trust and Related Trusts, Angela L. Bowe as Trustee of the John R. Menard, Jr. 2002 Trust and Related Trusts and Alphons Pitterle as Trustee of the John R. Menard, Jr. 2002 Trust and Related Trusts, Defendants-Respondents, Midwest Manufacturing Co., Wood Ecology Inc., Countertops Inc., Team Menard Inc., Menard Engine Group, Menard Competition Technologies LTD, MC Technologies Inc., Menard Engineering LTD, UltraMotive LTD and Merchant Capital LLC, Defendants. Debra K. Sands, Plaintiff-Appellant-Cross-Respondent,
John R. Menard, Jr., Menard, Inc., and Menard Thoroughbreds, Inc., Defendants-Respondents-Cross-Appellants, Webster Hart as Trustee of the John R. Menard, Jr. 2002 Trust and Related Trusts, Angela L. Bowe as Trustee of the John R. Menard, Jr. 2002 Trust and Related Trusts, Alphons Pitterle as Trustee of the John R. Menard, Jr. 2002 Trust and Related Trusts, Midwest Manufacturing Co., Wood Ecology Inc., Countertops Inc., Team Menard Inc., Menard Engine Group, Menard Competition Technologies LTD, MC Technologies Inc., Menard Engineering LTD, UltraMotive LTD and Merchant Capital LLC, Defendants.
and CROSS-APPEAL from orders of the circuit court for Eau
Claire County No. 2008CV990: PAUL J. LENZ, Judge.
Stark, P. J., Hruz and Seidl, JJ.
This case involves, in part, the extent to which an attorney
can assert a claim under Watts v. Watts, 137 Wis.2d
506, 405 N.W.2d 303');">405 N.W.2d 303 (1987), arising out of legal services
allegedly provided to a cohabiting partner and his
businesses. Debra Sands appeals orders dismissing her claims
against John Menard, Jr., Menard, Inc., and Menard
Thoroughbreds, Inc., ("the Menard
Defendants") and against the trustees of the John R.
Menard, Jr. 2002 Trust and related trusts ("the
Trustees"). Sands claims she cohabitated with Menard
from 1998 until 2006, and during that time she performed work
for Menard and his companies that increased their value and
for which she was not fully compensated. Sands further claims
Menard repeatedly represented to her during their
relationship that he would give her ownership interests in
his companies as compensation for her services, but he has
since failed to do so.
For the reasons explained below, we conclude the circuit
court properly granted summary judgment dismissing Sands'
claims against the Menard Defendants and the Trustees. We
also conclude the court properly granted summary judgment to
Sands on Menard, Inc.'s counterclaim for breach of
fiduciary duty. We therefore affirm.
Menard is the founder of Menards, a highly successful,
privately held chain of home improvement stores, and is
president and chief executive officer (CEO) of Menard, Inc.
In November 1997, nearly forty years after starting his
business, Menard began dating Sands. Sands had graduated from
William Mitchell Law College of Law in 1993 and was licensed
to practice law in Minnesota.
Sands contends she moved into Menard's home in August
1998, and they became engaged in December 1998. She claims
they lived together until their relationship ended in April
2006. Menard concedes he and Sands were engaged; however, he
denies they ever lived together.
It is undisputed that, during Sands' relationship with
Menard, she performed work on behalf of Menard and his
companies. Sands asserts:
Among the many contributions Sands made, in addition to being
Menard's life's partner, social companion, and
manager and hostess of his households, were acting as a
"gate-keeper" to screen Menard from unwanted
approaches; supervising his health care and medical needs;
managing the remodeling of three residences; advising on the
acquisition of airplanes and their design and decor; finding
and suggesting ideas for new products and product lines for
the Menard stores, such as garden centers; scouting and
proposing new store locations; proposing redesign of store
layout and product displays; representing Menard, Inc., as a
product buyer; reviewing and suggesting changes and additions
to Menard, Inc., marketing plans; assisting with government
and public relations; participating in the redesign of store
signs and logo; helping find new business and investment
opportunities; and assisting in the management of
newly-acquired businesses, including two engine design
companies in England, a thoroughbred racing business, and a
$400 million private equity fund.
contends Menard repeatedly promised to compensate her for her
services by giving her "an ownership interest in the
various Menard business ventures for which she provided
assistance." Menard denies making any such promises.
Sands contends she did not perform any legal work for Menard
until 2003, over five years after their relationship began.
Conversely, the Menard Defendants assert that Sands began
providing legal services for Menard in October 1997, about
one month before she and Menard began dating. Specifically,
the Menard Defendants claim Sands was retained to provide
legal services in connection with an investigation by the
Wisconsin Department of Natural Resources (DNR) regarding
Menard's disposal of wood ash.
The record reflects that, on or about May 28, 1998, the Prima
Group, a company owned by Sands and her sister, sent Menard,
Inc., an invoice for a "Client Matter" entitled
"Wisconsin Dept. of Natural Resources v. Menard,
Inc." The invoice stated it was for
"Governmental relations & Legal services rendered
Oct. 15, 1997 - May 15, 1998." The total amount of the
invoice was $49, 635.84, which was comprised of a $35, 000
retainer, $35.84 in "Disbursements, " and $14, 600
for "Gov't Relations & Legal Services."
Menard, Inc., paid this invoice in full on May 29, 1998, and
recorded the payment in its financial records as a legal
Sands disputes that the May 29, 1998 payment was compensation
for legal services. Instead, Sands contends that, in May
1998, Menard offered to give her money so that she could pay
off an outstanding student loan in the amount of $49, 635.84.
According to Sands, Menard directed her to bill Menard, Inc.,
for the exact amount of the loan and to state the invoice was
for government relations and legal services. Sands contends
this was done so that the payment would be tax deductible by
Menard, Inc., as a business expense.
In addition to the DNR/wood ash matter, the Menard Defendants
contend Sands provided legal services to both Menard and
Menard, Inc., beginning in September 1998 in a transaction
involving race car driver Robby Gordon. Gordon's
affidavit supports the Menard Defendants' claim. In
addition, the record reflects that Menard, Inc., paid Sands
$3, 000 on September 21, 1999, and the Menard Defendants
contend that payment was for her work on the Gordon
Sands concedes she performed "a small amount of work ...
in assisting with negotiation" of the Gordon
transaction. However, she asserts her role in the transaction
was "as [Menard's] business advisor, and not as his
lawyer." Sands further claims she was never paid for her
work on the Gordon transaction, and the $3, 000 payment she
received from Menard, Inc., was actually a reimbursement for
wedding planning expenses.
The parties do agree, however, that by the year 2003 Sands
had begun doing legal work for Menard and Menard, Inc. From
May 2003 to June 2004, Sands sent Menard, Inc., seven
invoices for a total of 1, 049 hours of "legal
services" provided between April 9, 2003 and June 7,
2004. Sands billed at an hourly rate of $145,
which she testified at deposition was "suggested,
demanded, ... approved" and "agreed" upon by
Menard. Menard, Inc., paid Sands a total of $152, 105 for the
legal work reflected in the seven invoices.
Sands continued providing legal services for Menard and
Menard, Inc., until her relationship with Menard ended in
2006. At that point, Menard instructed Sands to submit a bill
for all legal services for which she had not been paid dating
back to 2003. Sands then submitted 190 separate invoices to
Menard, Inc., for work performed between February 2003 and
April 2006. According to those invoices, Sands performed 7,
487.10 hours of legal work during that time period, which, at
a rate of $145 per hour, amounted to $1, 085, 629.50 in legal
Sands met with Menard and Peter Liupakka, Menard, Inc.'s
chief financial officer (CFO), in October 2006. During the
meeting, Liupakka advised Sands he believed the number of
hours reflected in her invoices was excessive. Menard, Inc.,
nevertheless offered to pay Sands $961, 518-the amount
claimed in the invoices, less payments Menard, Inc., believed
Sands had already received. However, payment of that amount
was conditioned on Sands signing a one-page "Release of
All Claims, " which expressly included a waiver of any
"quasi-marital claims." Sands refused to sign the
release. According to Sands, Menard then "said that he
would add an additional $100, 000 to the total of these
invoices and [Liupakka] would go prepare the check as [she]
sat there if [she] would sign the [r]elease." Sands
again refused to sign. Because of Sands' refusal, Menard,
Inc., declined to pay her any portion of the fees reflected
in the 190 invoices she had submitted.
On November 3, 2008, Sands filed the instant lawsuit against
the Menard Defendants and various other parties. Two weeks
later, Sands filed an amended complaint dropping all of the
additional defendants except MH Private Equity Fund, LLC. A
second amended complaint was filed on May 10, 2011, adding
the Trustees as defendants. Among other things, the second
amended complaint alleged that, in 2002, unbeknownst to
Sands, Menard had transferred the vast majority of his
non-voting stock in Menard, Inc., to the John R. Menard, Jr.
Sands' second amended complaint asserted claims for
unjust enrichment, breach of contract, and promissory
estoppel against Menard. As damages for those claims, Sands
sought "a fair and reasonable share of the property,
wealth, and increased net worth acquired by Menard through
[Sands'] efforts" during their relationship, or
damages equal to the fair value of the ownership interest
Menard had allegedly promised her. The second amended
complaint also asserted unjust enrichment claims against the
other Menard Defendants and the Trustees, claiming in each
case that Sands was entitled to "judgment in an amount
equal to the fair and reasonable value of the substantial ...
benefits" she had provided. In response to Sands'
second amended complaint, Menard, Inc., asserted a
counterclaim against Sands for breach of fiduciary
In April 2012, the Menard Defendants moved for partial
summary judgment, seeking dismissal of "all of
[Sands'] claims by which she [sought] a portion of
[Menard's] net worth or assets, ownership interests in
the Menard companies, or any part of the increase in value of
the Menard companies." (Some capitalization omitted.)
The Menard Defendants argued, among other things, that Sands
was barred from recovering a portion of Menard's assets
or an ownership interest in his companies because she had
failed to comply with the requirements of SCR 20:1.8(a)
(hereinafter, Rule 1.8(a)), which regulates business
transactions between attorneys and clients. The Trustees also
moved for summary judgment. They contended Sands' unjust
enrichment claim against them failed as a matter of law
because: (1) Sands did not allege she had provided any
services to the Trustees; (2) Sands could not establish the
value of her alleged contributions; and (3) the Trustees did
not retain any benefit provided by Sands under inequitable
Following a hearing, the circuit court granted both summary
judgment motions. With respect to the Menard Defendants'
motion, the court declined to adopt a bright-line rule that
an attorney's claims against his or her client stemming
from a business transaction with the client are necessarily
barred if the attorney violated Rule 1.8(a). Instead, the
court held that Rule 1.8(a) does not bar the attorney's
claim if: (1) the attorney and client had a romantic
relationship that predated their attorney-client
relationship; and (2) the legal services rendered by the
attorney were "merely ancillary or incidental" to
the parties' larger joint enterprise.
Applying the first prong of this test, the circuit court
focused on whether the May 28, 1998 invoice from the Prima
Group to Menard, Inc., for "legal services"
rendered between October 15, 1997, and May 15, 1998,
established that Sands' attorney-client relationship with
Menard preceded their romantic relationship. The court noted
that, for purposes of summary judgment, it was required to
accept as true Sands' claim-which the court referred to
as "quite a tale"-that the invoice was
a fraudulent document she submitted to Menard, Inc., so that
a personal gift from John R. Menard, Jr., to Debra Sands to
pay her student loans could be run through his company and,
with the magic of fraud, transforms a taxable event under the
gift tax to a tax deductible event as a business expense,
albeit a tax shifting event to Sands as income.
accepting Sands' claim regarding the invoice as true,
however, the court stated it would deny Sands relief in
equity because her admitted fraud regarding the invoice was
evidence of unclean hands and showed she was in pari
delictowith Menard. The court therefore
refused to "ignor[e]" the invoice, which, according
to the court, showed that Sands had an attorney-client
relationship with Menard before their romantic relationship
Applying the second prong of the test stated above, the
circuit court noted the record contained "invoices ...
approaching one million dollars covering eight years'
period, which is, on average, ... over a hundred thousand
dollars a year." The court stated that amount of legal
services was "certainly not ... ancillary, much less
incidental." Because the court concluded neither prong
of the test it had formulated was met, it ruled Sands'
violation of Rule 1.8(a) barred her claims against the Menard
Defendants for an ownership interest in Menard's
businesses or for a portion of the increase in their value.
The circuit court then held that, "since there [was] no
avenue to recover against the Menard principal, " Sands
could not recover from the Trustees. Accordingly, the court
granted the Trustees' motion for summary judgment. The
court stated that, following these rulings, Sands' only
remaining claim was her claim "against [the Menard
Defendants] for compensation for services rendered."
The circuit court subsequently entered written orders
granting summary judgment to the Trustees and partial summary
judgment to the Menard Defendants. Sands appealed as of right
from the order regarding the Trustees and petitioned for
leave to appeal from the order regarding the Menard
Defendants. On December 27, 2012, we denied Sands' motion
for leave to appeal the order regarding the Menard
Defendants; however, we stayed Sands' appeal of the order
regarding the Trustees pending the disposition of her
remaining claims in the circuit court.
Thereafter, in the circuit court, Sands submitted a
thirty-seven page list of "nonlegal" services for
which she alleged she was entitled to be compensated. Among
other things, Sands sought compensation for selecting and
purchasing furniture for Menard's residences, planning
and preparing meals, managing and coordinating Menard's
medical care, assisting with gardening and lawn mowing,
providing "personal ... and family advice, " and
advising Menard regarding various aspects of his businesses.
The Menard Defendants moved to strike Sands' claim for
nonlegal services on several grounds, including that Sands
had previously averred in an affidavit that she never
expected to be compensated for her nonlegal services. The
circuit court granted the Menard Defendants' motion to
strike, finding Sands had previously admitted she had no
expectation of compensation for her nonlegal services. Sands
does not challenge that ruling on appeal.
After the circuit court struck Sands' claim for nonlegal
services, the Menard Defendants sought an admission from
Sands that her only remaining claim was "for the legal
services that she rendered to the Menard Defendants at $145
per hour." However, Sands refused to admit that fact,
instead asserting, apparently for the first time, that she
was entitled to the quantum meruit value of her
legal services, which she claimed was between $355 and $640
per hour. After multiplying those hourly rates by 6, 779.25
hours-the number of hours for which Sands claimed she had not
yet been paid-Sands asserted she was entitled to damages of
between $2, 406, 633.75 and $4, 338, 720.
The Menard Defendants moved to strike Sands' quantum
meruit claim, arguing she could not recover on a
quasi-contract theory when she had an express contract with
Menard to be paid $145 per hour for her legal services. The
circuit court agreed with the Menard Defendants and granted
their motion to strike the quantum meruit claim,
All the invoices in this case generated by [Sands] show the
rate of $145 per hour. Even if this sum was dictated by the
client, Mr. Menard, this was clearly the agreed rate. [Sands]
claims that Mr. Menard repudiated the contract and thus the
contract amount when he refused to pay the amount without
there being the signature of a general release. Refusal to
pay when the services have been fully performed is not a
repudiation of the contract, it is rather a breach of the
does not challenge this ruling on appeal.
In the meantime, Sands moved for summary judgment on Menard
Inc.'s counterclaim for breach of fiduciary duty. The
circuit court ultimately granted that motion, concluding the
counterclaim was barred by the applicable statute of
Thus, the only remaining claim before the circuit court was
Sands' claim that Menard had breached an express contract
to pay her $145 per hour for legal services. On March 27,
2015, Sands moved the circuit court to dismiss that claim
with prejudice and enter a final judgment so that she could
pursue an appeal of the court's previous order granting
the Menard Defendants partial summary judgment. The court
granted Sands' motion, and a final order was entered on
April 8, 2015, disposing of the entire matter in litigation
with respect to all the parties.
On April 24, 2015, Sands filed a notice of appeal from the
circuit court's April 8, 2015 final order. Menard, Inc.,
cross-appealed from the order dismissing its counterclaim for
breach of fiduciary duty. Sands moved to consolidate her
appeal from the April 8 order with her previous appeal from
the order granting summary judgment to the Trustees. We
granted that motion on June 15, 2015. Additional facts are
included in the discussion section as necessary.
We review a grant of summary judgment independently, using
the same methodology as the circuit court. Hardy v.
Hoefferle, 2007 WI.App. 264, ¶6, 306 Wis.2d 513,
743 N.W.2d 843. Summary judgment is appropriate where there
are no genuine issues of material fact and the moving party
is entitled to judgment as a matter of law. WIS. STAT. §
802.08(2). The burden is on the party seeking summary
judgment to demonstrate "the absence of any genuine
factual disputes and entitlement to judgment as a matter of
law under the legal standards applicable to the claim."
Steven V. v. Kelley H., 2004 WI 47, ¶35, 271
Wis.2d 1, 678 N.W.2d 856. We review summary judgment
materials in the light most favorable to the nonmoving party.
Thomas v. Mallett, 2005 WI 129, ¶4, 285 Wis.2d
236, 701 N.W.2d523.
Sands' claims against the Menard Defendants
In her second amended complaint, Sands asserted claims for
unjust enrichment against all three of the Menard Defendants.
In addition, she asserted breach of contract and promissory
estoppel claims against Menard only. The Menard Defendants
contend the circuit court properly granted summary judgment
on all of these claims, to the extent they were premised on
legal services Sands provided during her relationship with
Menard, because the undisputed facts show that Sands violated
Rule 1.8(a), which governs business transactions between
attorneys and clients. The Menard Defendants contend