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Dewey v. Bechthold

United States District Court, E.D. Wisconsin

May 21, 2019

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,
v.
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.

          ORDER

          J.P. STADTMUELLER U.S. DISTRICT JUDGE.

         On 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.

         1. LEGAL STANDARD

         A 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)).

         2. ANALYSIS

         As 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.

         2.1 Likelihood of Success on Appeal

         It is 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, 2011)).

         As 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 17.[1] 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).

         This 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.

         If 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).[2] Instead, they attempt to circumvent the litigation process by framing the Court's inspection order as an injunction and appealing to the Seventh Circuit.[3] 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.

         2.1.1 The Court's Order was Correct on the Merits

         In 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 ...


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