Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Sands v. Menard

Court of Appeals of Wisconsin, District III

September 20, 2016

Debra K. Sands, Plaintiff-Appellant,
v.
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,
v.
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.

         APPEALS and CROSS-APPEAL from orders of the circuit court for Eau Claire County No. 2008CV990: PAUL J. LENZ, Judge.

          Before Stark, P. J., Hruz and Seidl, JJ.

          STARK, P.J.

         ¶1 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")[1] 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.

         ¶2 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.

         BACKGROUND

         ¶3 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.

         ¶4 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.

         ¶5 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.

         Sands 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.

         ¶6 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.

         ¶7 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 expense.

         ¶8 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.

         ¶9 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 transaction.

         ¶10 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.

         ¶11 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.[2] 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.

         ¶12 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 fees.

         ¶13 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.

         ¶14 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. 2002 Trust.

         ¶15 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 duty.[3]

         ¶16 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.[4] 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 circumstances.

         ¶17 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.

         ¶18 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.

         Even 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 delicto[5]with 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 began.

         ¶19 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.

         ¶20 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."

         ¶21 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.

         ¶22 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.

         ¶23 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[6] 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.

         ¶24 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, explaining:

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 contract.

         Sands does not challenge this ruling on appeal.

         ¶25 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 limitations.

         ¶26 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.

         ¶27 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.

         DISCUSSION

         ¶28 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).[7] 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.

         I. Sands' appeal

         A. Sands' claims against the Menard Defendants

         ¶29 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 Sands' ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.