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COURT OF APPEALS DECISION DATED AND RELEASED MAY 21, 1996 |
NOTICE |
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A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 95-1864-FT
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT I
INTERIOR CUSTOM
MILLWORK, INC.
and CHELSEA FAIRFAX
GROUP, INC.,
Plaintiffs,
v.
RONALD FILBRUN,
IDEAL CUSTOM MILLWORK,
DISPLAY DYNAMICS,
VEIT PARKER,
GERALD A. LASH,
SCOTT P. NORVELL,
MICHAEL MEYER,
JAMES K. ROBBE
and KEITH G. BOHN,
Defendants-Third Party
Plaintiffs-Appellants,
v.
WILLIAM STOECKER and
SALLY YULE MENGO,
Third Party Defendants-
Respondents.
APPEAL from an order of
the circuit court for Milwaukee County:
MICHAEL J. SKWIERAWSKI, Judge. Affirmed
in part and reversed in part.
Before Wedemeyer, P.J.,
Sullivan and Schudson, JJ.
PER
CURIAM. Ronald Filbrun, Ideal Custom Millwork, Display
Dynamics, Veit Parker, Gerald A. Lash, Scott P. Norvell, Michael Meyer, James
K. Robbe (together "Ideal") appeal from a circuit court order that
dismissed their third-party complaint against Sally Yule Mengo. Ideal contends that the trial court erred
when it held that Mengo, who had written letters to Ideal customers and vendors
that Ideal maintained were defamatory, was not a necessary party to the
underlying action and dismissed her from the case.[1] In addition, Ideal contends that the trial
court erroneously held that Mengo's letters were protected by absolute
privilege as a matter of law, and dismissed the third-party complaint against
Mengo on that additional basis.
Pursuant to this court's order dated August 16, 1995, this case was
submitted to the court on the expedited appeals calendar. We agree with Ideal that the trial court
should not have granted Mengo judgment on the question of whether the letters
were protected by absolute privilege.
However, we affirm the trial court's conclusion that Mengo was not a
necessary party to the underlying action, and that her dismissal on that basis
was appropriate.
The relevant facts are
largely undisputed. Interior Custom
Millwork, Inc., and Chelsea Fairfax Group, Inc., (together
"Interior"), sued Ideal alleging breach of contract and fraud, among
other things. Further information
regarding the underlying suit is irrelevant.
During the pendency of the action, Mengo, Interior's counsel, wrote
letters to various Ideal customers, prospective customers, vendors, and
prospective vendors. Because of the
nature of the contractual arrangement between Ideal and Interior, at least some
of the recipients of the letters also had a business relationship with Interior
as creditors and customers.
Ideal impleaded Mengo, alleging
that some of the statements she made in the letters were false and
defamatory. For example, Ideal noted
that Mengo stated in her letters that Ideal had attempted "to prevent
[Interior]'s customers from placing new work orders with them and to delay the
collection of [Interior]'s outstanding accounts receivable." Mengo also stated that Ideal had wrongfully
locked Interior out of its plant and corporate offices, wrongfully seized
Interior's corporate records, and wrongfully diverted Interior's corporate
business and future opportunities.
Mengo further stated that Ideal had refused to return many of Interior's
records in violation of a court order, and that Interior was therefore unable
to confirm the validity of its customers' claims. Ideal contended that as a result of Mengo's letters, the
recipients of the letters had withheld credit from Ideal, and had refused to
enter into long-term contracts and to do business with Ideal.
Mengo moved the trial
court to dismiss Ideal's third-party complaint against her. She contended that Ideal's attempt to join
her to the action was improper because Ideal's claim for damages against her
was entirely separate from Interior's action against Ideal. She contended that joinder was improper
because, under § 803.05(1), Stats.,
she was not in any way "liable to the defending party for all or part of
the plaintiff's claim against the defending party."[2] Ideal responded, arguing that Mengo was a
necessary party because, without her presence in the lawsuit, complete relief
could not be accorded among those already parties. See § 803.03(1)(a), Stats.[3] Ideal contended that Mengo's allegedly
defamatory statements were inextricably intertwined with the counterclaims it
had filed against Interior.
The trial court agreed
with Mengo. The trial court noted first
that Mengo had written her letters after Interior commenced its lawsuit against
Ideal. It reasoned that Mengo could not
be liable to Ideal for all or a part of Interior's claims against Ideal for
actions she took after the suit was filed.
The trial court reasoned that although Ideal's third-party defamation
claim was related to the underlying action, it was nonetheless a separate and
distinct tort that did not involve the conduct underlying Interior's original
suit.
Second, the trial court
rejected Ideal's contention that complete relief could not be accorded among
the parties if Mengo was not included in the suit. The trial court again noted that Interior's claims against Ideal
were separate and distinct from Ideal's claims against Mengo, and that the
basis for Ideal's action against Mengo arose after commencement of the original
lawsuit. The trial court reasoned that
if Ideal's claim against Mengo was to proceed to litigation, the litigation
could and should occur separately from Interior's action.
On the basis of the
record before us, we can only conclude that the trial court properly exercised
its discretion when it disallowed Ideal's attempt to implead Mengo.[4] In the absence of Wisconsin case law on the
precise question presented to it, the trial court turned to federal case law
interpreting Fed. R. Civ. P. 14, on which Wisconsin's third-party practice
statute, § 803.05, Stats.,
is based. The trial court noted that in
Majors v. American Nat'l Bank, 426 F.2d 566, 568 (5th Cir. 1970),
the Fifth Circuit Court of Appeals held that, even if a third-party claim
arises out of the same general set of facts as the main claim, impleader is
improper if the third-party claim is entirely separate and independent.
A trial court's
discretionary determination will be upheld by this court if the record shows
that the trial court examined the relevant facts, applied a proper standard of law,
and, using a demonstrated rational process, reached a conclusion that a
reasonable judge could reach. State
v. Gudenschwager, 191 Wis.2d 431, 440, 529 N.W.2d 225, 229 (1995). Ideal's claim against Mengo arose after the
original complaint was filed. Thus,
Ideal's claim against Mengo depended upon proof of a separate, but related set
of facts. Those facts, although related
to Interior's lawsuit, are not so inextricably intertwined that complete relief
cannot be afforded to Ideal without Mengo's joinder to Interior's action. In addition, neither relief for Ideal in its
action against Mengo nor for Interior in its original suit depends upon the
outcome of the other. Because complete
relief for Interior against Ideal and for Ideal against Mengo can be obtained
in separate actions, Mengo is not a necessary party to the litigation between
Interior and Ideal. We therefore affirm
the trial court's order in this regard.
After rendering its
ruling on joinder, however, the trial court went on to hold that Mengo's
letters were protected by absolute privilege as a matter of law. The trial court held that, even assuming
Mengo's letters contained false and defamatory information about Ideal, she was
protected by absolute privilege because the letters had been written when she
was Interior's counsel and in the context of Interior's action against
Ideal. We reverse on this point
because, given the information before the trial court at the time of the
hearing, unresolved issues of material fact regarding the purpose of those
letters remained. Consequently, it was
not clear whether Mengo's letters had been made in a procedural context that
afforded absolute privilege.
Judicial proceedings are
protected by an absolute privilege, and "[a]n absolutely privileged statement
is subject to only two restrictions: It
must be made in a procedural context that is recognized as affording absolute
privilege, and it must be relevant to the matter under consideration." Rady v. Lutz, 150 Wis.2d 643,
647-48, 444 N.W.2d 58, 59 (Ct. App. 1989).
The determination of whether an attorney's statements are absolutely
privileged is one of law and this court therefore owes no deference to the
trial court's decision. Id.
at 647, 444 N.W.2d at 59. However, that
determination cannot be made until all factual disputes have been
resolved. Id. (Summary judgment not appropriate if
material factual dispute exists or conflicting inferences might be drawn from
undisputed facts). In cases involving
the absolute privilege, the allegedly defamatory statement must generally have
been made as part of the judicial proceeding.
Converters Equip. Corp. v. Condes Corp., 80 Wis.2d 257,
266-67, 258 N.W.2d 712, 716-17 (1977).
Thus, "a nexus between the publication and the proceeding must
exist" to meet the "procedural context" requirement of the
absolute-privilege rule. Id.
at 267, 258 N.W.2d at 717.
Here, there is no
dispute but that Mengo's statements regarding the actions Ideal had taken were
relevant to the underlying suit.
Mengo's communications, made to Ideal customers and creditors, discussed
the very claims that Interior was making against Ideal.
We conclude, however,
that conflicting inferences regarding the purpose of Mengo's letters could be
drawn such that the absolute privilege rule might not protect her
statements. "[L]etters sent to
persons having collateral interests in the litigation are privileged to the
extent that the alleged defamatory statements have some relation to the subject
matter of the proposed litigation and are made in furtherance of the
litigation." Rady,
150 Wis.2d at 649, 444 N.W.2d at 60. On
the basis of the record before the trial court, it was unclear whether the
statements Mengo made to entities not directly involved in the litigation were
made in furtherance of the litigation and to apprise Interior's and Ideal's
customers and creditors of the status of the litigation, or whether they were
made to disrupt Ideal's business. If
Mengo's statements were made for the latter reason, there was no "nexus
between the publication and the proceeding" that would permit application
of the privilege. Because the purpose
of Mengo's letters was not clear, it follows that their connection to the
judicial proceedings was unclear. The
trial court's holding that Mengo's allegedly defamatory statements were
absolutely privileged as a matter of law was therefore unwarranted. However, since we affirm the dismissal of
Mengo from the underlying lawsuit, the question of Mengo's liability to Ideal,
if any, must be litigated in another context.
The trial court's dismissal of Mengo is therefore affirmed in part, but
reversed as to the portion of the order that dismisses Ideal's claim against
Mengo on the basis of absolute privilege.
By the Court.—Order
affirmed in part and reversed in part.
This opinion will not be
published. See Rule 809.23(1)(b)5, Stats.
[1] Ideal impleaded William Stoecker, the sole shareholder in Interior, along with Mengo. Ideal claimed that Stoecker had also defamed it. The trial court held that Stoecker was not a necessary party. Although Ideal contends that the trial court erred in dismissing the "defendants," -- Mengo and Stoecker -- it appeals only from the portion of the order dismissing Mengo. Consequently, we will not discuss further the trial court's ruling as to Stoecker.
[2]
In pertinent part, § 803.05(1), Stats.,
provides:
At any time after commencement of the action, a defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to the defending party for all or part of the plaintiff's claim against the defending party, or who is a necessary party under [§] 808.03[, Stats.]