United States District Court, E.D. Wisconsin
NANCY DEWEY individually and as a trustee, THE NANCY DEWEY LIVING TRUST, THE NANCY DEWEY 2015 NEA GRANTOR RETAINED ANNUITY TRUST, THE NANCY DEWEY 2015 P&D GRANTOR RETAINED ANNUITY TRUST, THE IRREVOCABLE TRUST FOR THE GRANDCHILDREN OF NANCY AND DOUGLAS DEWEY, JOHN DEWEY individually and as a trustee, THE JOHN D. DEWEY LIVING TRUST, THE JOHN D. DEWEY IRREVOCABLE CHILDREN'S TRUST, THE ABIGAIL DEWEY IRREVOCABLE TRUST, THE ERIN DEWEY IRREVOCABLE TRUST, THE IAN DEWEY IRREVOCABLE TRUST, THE SHEAMUS DEWEY IRREVOCABLE TRUST, THE ABIGAIL DEWEY DESCENDANTS TRUST, THE ERIN DEWEY DESCENDANTS TRUST, THE IAN DEWEY DESCENDANTS TRUST, THE SEPARATE TRUSTS FOR IAN DEWEY, SHEAMUS DEWEY, ERIN DEWEY, ABIGAIL DEWEY, and THE SHEAMUS DEWEY DESCENDANTS TRUST, Plaintiffs,
KURT BECHTHOLD, MARK FILMANOWICZ, DAVID BECHTHOLD, PAYNE & DOLAN, INC., NORTHEAST ASPHALT, INC., CONSTRUCTION RESOURCES MANAGEMENT, INC., ZENITH TECH, INC., and TIMBERSTONE OF RICHFIELD, INC., Defendants.
STADTMUELLER U.S. DISTRICT JUDGE.
November 1, 2018, Plaintiffs in the above-captioned case
filed a motion to appoint a receiver or, alternatively, a
motion for an order to permit inspection and copying of the
Defendant Companies' accounting records. (Docket #3). In
their supporting brief, Plaintiffs explained at length their
arguments for both forms of relief. See (Docket #4
at 11-17) (arguing for order permitting inspection and
copying of records); id. at 17-31 (arguing for order
appointing a receiver). On January 14, 2019, Defendants filed
their brief in opposition to Plaintiffs' motion, in which
they failed to address Plaintiffs' arguments for an order
to permit inspection and copying of the Defendant
Companies' accounting records. (Docket #33). Following
Plaintiffs' reply, the Court issued an order denying
Plaintiffs' motion for a receiver and granting, in part,
their motion to inspect. (Docket #54). Defendants quickly
filed a notice of appeal, claiming that the Court's order
amounted to an injunction. See (Docket #55). They
also filed a motion to stay the Court's order, and an
accompanying brief, the bulk of which reads like an
unsanctioned sur-reply to Plaintiffs' motion. (Docket #57
and #59). The Court will deny the Defendants' motion to
stay for the reasons explained below.
district court has discretion to determine whether to stay an
order while an appeal is pending. See Fed. R. Civ.
P. 62(c); Glick v. Koenig, 766 F.2d 265, 269 (7th
Cir. 1985). “The factors to be considered in a request
for a stay pending appeal are (1) whether appellant has made
a showing of likelihood of success on appeal, (2) whether
appellant has demonstrated a likelihood of irreparable injury
absent a stay, (3) whether a stay would substantially harm
other parties to the litigation, and (4) where the public
interest lies.” Id. (citing Adams v.
Walker, 488 F.2d 1064, 1065 (7th Cir. 1973)).
explained below, the Defendants are unlikely to succeed on
appeal because they waived their arguments that the
inspection order should have been analyzed as a form of
injunctive relief and that the inspection order should have
been denied. Nevertheless, the Court also explains why its
decision was correct on the merits. Finally, after evaluating
the harm to the parties and determining where the public
interest lies, the Court concludes that it must deny
Defendants' motion to stay.
Likelihood of Success on Appeal
well-settled in this circuit that when a party fails to raise
an argument, that argument is deemed waived. Bonte v.
U.S. Bank, N.A., 624 F.3d 461, 466 (7th Cir. 2010)
(“Failure to respond to an argument-as the [Defendants]
have done here-results in waiver.”); Wojtas v. Cap.
Guardian Tr. Co., 477 F.3d 924, 926 (7th Cir. 2007)
(holding that a party's “failure to offer any
opposition to. . .[the] statute of limitations argument
constituted a waiver.”); Cincinnati Ins. Co. v. E.
Atl. Ins. Co., 260 F.3d 742, 747 (7th Cir. 2001)
(holding that where a party fails to address a non-frivolous
or dispositive argument, it is appropriate to infer
acquiescence, and “acquiescence operates as a
waiver.”); United States v. Furr, 2015 WL
1034056, at *2 (E.D. Wis. Mar. 10, 2015) (“It should go
without saying that the Seventh Circuit adheres to the
longstanding rule that a litigant waives an argument by
failing to make it.”) (quoting Burton v. City of
Franklin, 2011 WL 2938029 at *2 (S.D. Ind. July 18,
Plaintiffs point out, “Defendants did not once describe
Plaintiffs' request to review Defendants' records as
a request for an injunction or even suggest that [the] Court
should review the request under an injunctive-relief
standard.” (Docket #64 at 10). In fact, Defendants
never even opposed Plaintiffs' request for an order to
inspect. Civil Local Rule 7(f) states that “the
principal memorandum. . .in opposition to any motion must
not exceed 30 pages.” The Defendant's opposition
brief to Plaintiffs' motion was a mere fourteen pages,
and only addressed Plaintiffs' motion to appoint
a receiver. (Docket #33). Defendants requested an evidentiary
hearing only for the purpose of evaluating whether a
receiver was necessary. Id. at 3. Throughout the
entire brief-despite having ample page length and
incentive to do so-they made no arguments against
Plaintiffs' request for an order to inspect. When
Defendants spoke of Plaintiffs' request to inspect, this
is all they had to say:
• “Among other claims, [Plaintiffs] allege that
the Companies have violated Wis.Stat. § 180.1602 by
refusing to allow inspection of certain corporate records.
Id. ¶¶ 70-79. The plaintiffs take the
position that they are entitled to examine all the records
underlying the Companies' annual financial statements,
for purposes of valuing their shares. Id. ¶
48.” (Docket #33 at 5).
• “On the same day that they filed their
complaint, the plaintiffs also filed the current motion for
appointment of a receiver. Dkt. 3, Mot. to Appoint Receiver.
In support of their motion, they provided a list of
categories of records that they seek to inspect; the list
spans 28 pages and encompasses virtually every document
relating to the Companies' business. Dkt. 5, Nettesheim
Decl. Ex. D-E.” (Docket #33 at 5).
• “The right to inspect corporate records is a
statutory right available to qualifying shareholders. See
Wis.Stat. §§ 180.1601-.1604. The Companies'
refusal to provide the requested mass of records is, at most,
the breach of a statutory duty, rather than a fraudulent act,
and again does not merit appointment of a receiver.”
(Docket #33 at 8).
• “Here, if the plaintiffs prevail on their
records claims, they are entitled to (1) get records and (2)
(maybe) collect statutory expenses/fees. See Compl.
¶ 75 (citing Wis.Stat. § 180.1604). They seek
damages if they win on their ‘shareholder
oppression' claim. See Id. ¶ 107. It
appears that they may not be satisfied with their remedy
under the inspection statute, see Pl. Br. 11, and
they incredibly suggest that the Companies would flout an
order to allow inspection of records, id. at
But a court cannot, by appointing a receiver, add to the
substantive relief that a party is entitled to at law.”
(Docket #33 at 9).
• [In arguing that a receiver is inappropriate because
the Plaintiffs' claims would fail on the merits]:
“The list of categories of records that John and Nancy
claim they are entitled to inspect spans 28 pages and
includes documents relating to virtually every aspect of the
Companies' business. See Nettesheim Decl. Ex.
D-E.) [sic]. As the defendants' motion to dismiss brief
shows, see Mot. to Dismiss Br. 27-29, the plaintiffs
will not succeed on their records claim, either under the
statute or ‘common law.'” (Docket #33 at 10).
last point is the closest Defendants ever come to arguing
against Plaintiffs' motion for an order to inspect, and
even here they give short shrift to the issue and include it
purely as an element of their argument against the
appointment of a receiver. It is not the Court's role to
make arguments on litigants' behalf, especially when
Defendants' lawyers are more than capable of making those
arguments themselves. See Vaughn v. King, 167 F.3d
347, 354 (7th Cir. 1999). At no point in their opposition
brief did Defendants directly address Plaintiffs' motion
for an order to inspect, which might have been expected in
light of the lengthy section in the moving brief that
detailed Plaintiffs' eligibility for an order to inspect
under Wis.Stat. § 180.1602. See (Docket #4 at
11). At no point in their opposition brief did Defendants
frame Plaintiffs' request for an order as a request for
an injunction. In light of Defendants' failure to address
Plaintiffs' request for an order, the Court properly
inferred acquiescence and waiver. Cincinnati Ins.
Co., 260 F.3d at 747.
Defendants took issue with the scope of the Court's
inspection order in light of the Plaintiffs' prior
demands, or the fact that there was no evidentiary hearing on
the subject of the propriety of Plaintiffs' request, then
their recourse would have been a motion for reconsideration
on both of those issues, on the basis of their own
excusable neglect. Fed.R.Civ.P. 60(b)(1). Instead, they
attempt to circumvent the litigation process by framing the
Court's inspection order as an injunction and appealing
to the Seventh Circuit. For these reasons stated above, it is
unlikely that Defendants will succeed on their appeal.
Nevertheless, the Court will also address the merits of
Plaintiffs' claims below.
The Court's Order was Correct on the Merits
Defendants' brazen evisceration of the Court's order,
they criticized the Court's “failure to analyze the
applicable statute and case law” and lack of
“close consideration to the documents requested.”
(Docket #59 at 21). The Court takes this opportunity to
provide Defendants with the legal analysis for which they now
clamor, despite the fact that they did not address any of
these issues in their opposition to Plaintiffs' motion,
where some form of legal analysis would have been most
appropriate. It is worth remembering that at the time the
Court drafted its order partially granting Plaintiffs'
motion, Defendants had not contested a single
argument associated with Plaintiffs' motion for the
order to inspect. The Court did not need an evidentiary