Fiduciary
Duty Case Analysis
June
28, 2006
The
court’s unquestioned adherence to stare decisis in this case is remarkable,
for this case could be the model example for when stare decisis should not be
followed.
First,
the holding is contrary to the unambiguous language of the statute; second, the
precedent to which the court adheres was adopted without any discussion or justification;
third, it is a statute of limitations case, which does not induce reliance by
parties.
Section
893.57, the statute of limitations for intentional torts, states: “An action
to recover damages for libel, slander, assault, battery, invasion of privacy,
false imprisonment or other intentional tort to the person shall be commenced
within 2 years after the cause of action accrues or be barred (emphasis added).”
“Tort
to the person,” of course, does not mean “tort to a person.” It
is a term of art, meaning the same thing as “personal tort,” defined
as “A tort involving or consisting in an injury to one’s person, reputation
or feelings, as distinguished from an injury or damage to real or personal property.”
Black’s Law Dictionary, p. 1497 (7th ed., 1999).
This
was recognized by the court of appeals in Acharya v. Carroll, 152 Wis.2d 330,
448 N.W.2d 275, 279 (Ct.App.1989): “The term ‘injuries to the person’
connotes bodily injuries, whether physical or emotional.” The court in that
case rejected the defendant’s argument that legal malpractice could constitute
an injury “to the person.”
Breach
of fiduciary duty, causing the employees in this case to miss the opportunity
for greater appreciation of their employee-owned stock, is an intentional tort,
as the court correctly held; however, like legal malpractice, it is indisputably
not an intentional tort “to the person.”
The
court of appeals at least recognized this problem, even though it concluded it
was bound by the decision in Beloit Liquidating Trust v. Grade, 2004 WI 39, 270
Wis.2d 356, 677 N.W.2d 298, to hold that sec. 893.57 applies to breaches of fiduciary
duty. Zastrow v. Journal Communications, Inc., 2005 WI App 178, 286 Wis.2d 416,
703 N.W.2d 673, 682-683.
The
Supreme Court, on the other hand, which is not so bound, but is free to reconsider
the issue, did not even acknowledge that its interpretation is contrary to the
plain language of the statute.
By
addressing only whether the breach was an intentional tort, rather than the issue
framed by the parties — what statute of limitations applies? — the lead
opinion reaches a clearly incorrect result.
Second,
as both the lead opinion, and the concurrence acknowledge, when the Supreme Court
held in Beloit Liquidating that sec. 893.57 applied to breach of fiduciary duty,
it offered no reasoning for the holding (the main point of contention being whether
Wisconsin or Delaware law applies).
Where
no reasoning is provided for a holding, the rationale for adherence to stare decisis
is weakened.
The
holding in Warmka v. Hartland Cicero Mut. Ins. Co., 136 Wis.2d 31, 400 N.W.2d
923 (1987), is not entitled to especially high deference on the issue, either.
There,
the court held, “The breach of the fiduciary duty is an intentional tort…
Section 893.57, Stats., establishes a two-year statute of limitations for an intentional
tort and is the applicable statute.” Id., 400 N.W.2d at 925.
However,
the defendant in that case was arguing in favor of a one-year statute of limitations.
Once the court found that statute inapplicable, the court’s work was done;
it did not matter whether the correct statute of limitations was two years, as
provided in sec. 893.57, or six years from some other statute of limitation.
The
decision in the case at bar is also a radical departure from Haferman v. St. Clare
Healthcare Found., 2005 WI 171, 286 Wis.2d 621, 707 N.W.2d 171. In Haferman, three
separate statutes of limitations potentially applied to medical malpractice actions
brought by developmentally disabled children. None quite fit, however, so the
court held there is no statute of limitations at all. Id., 700 N.W.2d at 866.
In
doing so, the court relied on the maxim that, “Reviewing courts must interpret
statutes of limitations so that ‘no person’s cause of action will be
barred unless clearly mandated by the legislature.’” Id., at 865 (citations
omitted).
In
contrast, in the case at bar, the court abandoned that rule, and held an action
barred, even though the statute of limitations is clearly not applicable.
Finally,
one of the reasons for stare decisis is avoiding upsetting parties’ reliance
on settled law, but that consideration does not apply to cases interpreting statutes
of limitation.
If
a court has previously held that a particular action is not a tort, or that particular
language in a contract means X, then stare decisis militates against changing
that holding; parties will have reasonably relied and acted on the prior holding.
However,
parties do not rely on decisions governing statutes of limitation; only their
lawyers do, after litigation has already commenced.
Because
of the clear erroneousness of the holding, the absence of any prior reasoning
for the holding in the precedents followed, and the absence of reliance on that
precedent by the parties, the rationale for stare decisis was at its nadir in
this case. Adhering to stare decisis in this case is the paragon of doing so for
no better reason “than that so it was laid down in the time of Henry IV.”
Holmes, The Path of the Law, 10 Harv.L.Rev. 457, 469 (1897).
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David Ziemer
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David
Ziemer can be reached by email.
