GERALD P. BOYLE,
MICHAEL A.I. WHITCOMB,
JONATHAN C. SMITH,
BRIGET E. BOYLE,
BOYLE, BOYLE & SMITH, S.C.,
and WESTPORT INSURANCE CO.,
Plaintiff, the Bankruptcy Estate of Jerold J. Mackenzie
and Bonnie E. Mackenzie, by its Trustee Dennis Lee Burman, by its attorneys,
John C. Cabaniss and Christopher Hale, for its complaint against defendants
alleges as follows:
- Jerold J. Mackenzie and Bonnie E. Mackenzie are adults residing together
as husband and wife in the State of Washington; on July 27, 2001, Jerold J.
Mackenzie and Bonnie E. Mackenzie filed a Chapter 7 petition for bankruptcy
in the United States Bankruptcy Court for the Western District of Washington
at Seattle, Case No. 01-18494 SJS; as such plaintiff in this matter is the
Estate of the Debtors.
- On November 7, 2001, the bankruptcy court appointed plaintiff’s counsel
to represent the trustee, Dennis Lee Burman, of the Estate of the Debtors,
In re: Jerold J. Mackenzie and Bonnie E. Mackenzie, in the United States Bankruptcy
Court for the Western District of Washington at Seattle, Case No. 01-18494
SJS, in prosecuting this action, attached as Exhibit A is a copy of said order.
- Defendant Gerald P. Boyle is an attorney licensed to practice law in the
State of Wisconsin with his offices located at 2051 West Wisconsin Avenue,
Milwaukee, Wisconsin 53233.
- Defendant Michael A. I. Whitcomb is an attorney licensed to practice law
in the State of Wisconsin with his offices located at 633 West Wisconsin Avenue,
Suite 510, Milwaukee, Wisconsin 53203.
- Defendant Jonathan C. Smith is an attorney licensed to practice law in the
state of Wisconsin; his law offices are located at 2051 West Wisconsin Avenue,
Milwaukee, Wisconsin 53233.
- Defendant Bridget E. Boyle is an attorney licensed to practice law in the
state of Wisconsin; her law offices are located at 2051 West Wisconsin Avenue,
Milwaukee, Wisconsin 53233.
- Boyle, Boyle & Smith, S.C. is a legal service corporation incorporated
under Chapter 180 of the Wisconsin Statutes with its principal place of business
located at 2051 West Wisconsin Avenue, Milwaukee, Wisconsin 53233; defendants
Gerald P. Boyle, Jonathan C. Smith and Bridget E. Boyle are all shareholders
in Boyle, Boyle & Smith, S.C.; defendant Boyle, Boyle & Smith, S.C.
is vicariously liable for the claims alleged herein against Gerald P. Boyle,
Jonathan C. Smith and Bridget E. Boyle.
- Defendant Westport Insurance Company is a Missouri corporation with its
principal place of business located at P.O. Box 2979, Overland Park, Kansas
66201; its registered agent is Christine Nelson, 150 N. Sunnyslope Road, Suite
305, Brookfield, Wisconsin 53005; at all times relevant it had in force and
effect a policy of liability insurance whereby it insures defendants Gerald
P. Boyle, Jonathon C. Smith, Bridget E. Boyle, and Boyle Boyle & Smith,
S.C., for the claims in this matter.
- This is an action for money damages, the amount of which exceeds $75,000
exclusive of interest and cost.
- This court has jurisdiction pursuant to 28 U.S.C. § 1332 in that there exists
diversity of citizenship between plaintiff (Washington) and defendants (Wisconsin
and Missouri).
- Venue is proper in the United States District Court for the Eastern District
of Wisconsin in that defendants practice law within the district.
- In 1994, Jerold J. Mackenzie hired defendants as his attorneys to represent
him in an action against his former employer, Miller Brewing Company; the
action was captioned, Jerold J. Mackenzie v. Miller Brewing Co., et al.,
Trial Case No. 94-CV-010871, Milwaukee County Circuit Court (“Mackenzie”);
defendants intended to represent Mr. Mackenzie on a flat fee basis for a total
of Seventy-Five Thousand Dollars and 00/100 ($75,000) covering both fees and
costs if the case did not survive summary judgment; if the case went to trial
defendants intended to represent Mr. Mackenzie on a contingent fee basis;
no written fee agreement was entered and the defendants did not explain the
fee arrangement to Mr. Mackenzie; Defendant Gerald P. Boyle has testified
“I did not enter into a contingency fee agreement with Mr. McKenzie[sic]”
Frazier Depo. p. 12 [1] ;
Defendant Gerald P. Boyle also gave the following answers in sworn testimony
to questions posed:
Q: What kind of fee agreement did you enter into with Mr. McKenzie?
A: Mr. McKenzie and I with his wife had a discussion about their ability
to --- Based upon their ability to pay, we agreed to the sum of $75,000
for Mr. Whitcomb and I to proceed to take this matter into the proper form,
whatever that form was going to be and that I would take care of all matters
related to that, including payment of Mr. Whitcomb and any other expenses
that were necessary to be taken care of in order to bring some resolution
to the matter.
Q: Did you give him a maximum number initially?
A: That was it $75,000. Minimum, maximum. Nothing more, nothing less.
Q: Did you enter into a written fee agreement?
A: No.
Q: with Mr. McKenzie?
A: Sorry. No.
Frazier Depo. p. 20.
- Mackenzie paid defendants $75,000 in installments as follows: $20,000 on
February 28, 1994; $5,000 on April 7, 1994; $25,000 on October 6, 1994; and
$25,000 on October 30, 1995. Mr. Mackenzie made these payments as requested
to defendants from savings and funds obtained from early withdrawal from his
401(k) plan and by placing a second mortgage on his home; defendant Boyle
deposited these funds into his firm’s general account.
- Defendant Gerald P. Boyle has testified that he did not have any discussions
with Mr. Mackenzie or Mr. Whitcomb about creation of a contingent fee agreement,
and specifically testified with respect to a possible contingent fee agreement
that it:
Didn’t matter to me if there was a contingent fee or not . . . Because
I made a deal with Mr. McKenzie and I was satisfied with that. Obviously,
I was more interested in the case than the money. Frazier Depo.
p. 21.
- Trial in the Mackenzie case began before the Honorable Louise Tesmer
on June 24, 1997; at that time there was no written fee agreement between
Mr. Mackenzie and defendants; the fee agreement to Mr. Boyle’s understanding
pursuant to his testimony in Frazier was that he was working on a $75,000
flat fee basis – the $75,000 was to cover case costs and defendant’s fees;
Supreme Court Rule 20:1.5 requires that contingent fee agreements be in writing
and thus if defendants intended to represent Mr. Mackenzie on such basis it
was their duty to reduce the agreement to writing.
- During the Mackenzie trial defendant Gerald P. Boyle raised the
issue of a contingent fee and asked Mr. Mackenzie if they had agreed to a
30% or 40% contingent fee; Mr. Mackenzie replied that the issue had not been
discussed; defendant Boyle did not provide Mr. Mackenzie a proposed written
free agreement nor did he explain the terms of the fee agreement he contemplated.
- On July 15, 1997, the Mackenzie jury returned a verdict in plaintiff’s favor
awarding $26.6 Million Dollars in damages; at the time the jury returned its
verdict in plaintiff’s favor there was either no valid fee agreement between
defendants and Mr. Mackenzie or the agreement was $75,000 flat fee, nothing
more, nothing less.
- After trial on or about November 18, 1997, defendant Boyle instructed Mr.
Mackenzie to write a note to him agreeing to a contingent fee. Mr. Mackenzie
wrote a note pre-dated July 14, 1997, that states as follows:
This is to confirm that we had previously agreed to a 60-40 split of any
award pursuant to Mackenzie v. Miller and do continue to confirm
this as the agreed upon arrangement.
Defendant Gerald P. Boyle testified as follows regarding Mr. Mackenzie’s
note “First of all, that’s not a contingency fee agreement. . . .” Frazier
Tr. p. 457.
- Subsequent to motions after verdict, judgment was entered on plaintiff’s
behalf in total amount of $24.7 million dollars against Miller Brewing Company;
also subsequent to the verdict in the Mackenzie case, defendants induced
Mr. Mackenzie to sign undated contingent fee agreements first providing for
40% contingent fees and then an agreement purporting to provide a 50% contingent
fee; neither purported retainer agreement was dated, nor did either specify
how the $75,000 paid to defendants by Mr. Mackenzie would be treated; Mr.
Mackenzie was induced to sign these agreements by defendants’ representation
he was legally obligated to enter a contingent fee agreement and that the
agreement was necessary to provide defendants an incentive to work harder
on the appeal. At no time prior to execution of the purported retainer agreements
did defendants advise Mr. Mackenzie (1) he should consult with independent
counsel; and (2) he could contend as a matter of contract law that defendants
were only entitled to the $75,000 already paid or that he could contend defendants
were entitled to no or partial fees pursuant to Restatement of the Law Third
§37, Partial or Complete Forfeiture of a Lawyer’s Compensation.
- In November 1997, defendant Gerald P. Boyle was in desperate financial straits.
Defendant Gerald P. Boyle told Mr. Mackenzie that he owed $200,000 to the
IRS which he needed to pay so he could concentrate on getting the Mackenzie
case settled. His financial condition was such that he could not borrow money
from a bank, credit union, or other financial institution. For that reason
on November 14, 1997, defendant Gerald P. Boyle sent a letter to “Family and
Friends” seeking investors in the Mackenzie verdict. Among other things,
Boyle stated:
[T]he trial judge recently approved $24.7 million out of our $26.5 million
award in the famous “Seinfeld” case. The trial judge’s sanctioning the
award is the singular most important thing we could ask for at this point.
Appellate courts rarely overrule judges. As reluctant as they are to overrule
juries, they are even more reluctant to do so after a judge blesses a jury
award. The $1.8 million that was set aside had to do with a technicality
and was not a reflection of the strength of the jury award. . . . It is
not my intention to settle this matter prematurely. . . .
. . . Since the date of July 15 we have now earned approximately $1,200,000
in interest and that amount increases by approximately $300,000 per month.
It is anticipated that the total amount of the judgment will be approximately
$32,000,000 if we prevail. . . . I have some people interested in putting
up the money what with the fact that I have offered to return $450,000 in
interest at any stage when this case is settled or decided. Thus
if the matter is settled within five months or fifteen months, the amount
of the return will approximate 100 percent. If we get nothing and the
prospect of that is absolutely nil, (emphasis added) I would pay back
the investors at the rate of one percent above prime over a period of five
years which would mean that I would be responsible for approximately $110,000
a year. This is an amount that I can handle without it destroying my economic
life. Therefore, the risk to the investor is hardly any at all.
After talking to some people who might be a source of funds, I decided
that it was really unfair not to at least offer part of this to some of
my friends and family. I thought it would really be ice [sic] to give those
with small children a chance to invest an amount of money, the return of
which might just pay for the child’s college education. So, I write you
this letter in the profound hope that you will keep its contents absolutely
confidential and certainly not reveal to anyone my plan as that would work
to the detriment of my client and thus to myself. . . . I must also tell
you that time is of the essence in that as soon as I have the monies together
that I need to carry off the plan, I will close this out.
You can be assured that I will settle this matter before I end up with
nothing but a half million dollar debt, and you can also be assured that
the amount of this settlement will be sufficient for me to take care of
my obligations to the investors.
- At about the same time, defendant Gerald P. Boyle approached a venture
capitalist, Joseph Sweeney, requesting that he invest a half million dollars
in the Mackenzie verdict. Defendant Gerald P. Boyle and Joe Sweeney
discussed establishing a half million-dollar line of credit to be jointly
secured by Jerold and Bonnie Mackenzie as well as Gerald P. Boyle and his
wife, Marna. When Mr. Sweeney raised an objection to the inclusion of Mr.
Mackenzie in the loan agreement, Mr. Boyle wrote to Mr. Sweeney as follows:
As to confidentiality: I thought long and hard about that matter last
evening and I think it a moot point because I will open up a checking account
under my name and since the money is a personal loan, there is no way anyone
. . . you to my use of the same. The fact that Jerry Mackenzie is involved
is my decision and his role is to provide collateral so that I can get some
funds for purposes that are personal in nature. (emphasis added).
If for instance someone were to learn that Joe Sweeney lent Jerry Boyle
money, that would have absolutely no meaning. Anything more than that would
be an invasion of my privacy. Hopefully this puts that concern to rest
as I certainly would not want you to be embarrassed because of your helping
me. I can assure you that even members of my law office will have no idea
as to the identity of anyone connected with this transaction without your
prior approval. In any event my two partners, my daughter Bridget and Jon
Smith, would never reveal any information of this nature. . . .
Terms and Conditions: Jerry Mackenzie and I will be borrowing the sum
of $500,000 under the following terms and conditions. You will provide
such funds. Jerry Mackenzie and I, in turn, agree to pay you the sum of
$1,000,000. The payment of the sum of $1,000,000 is conditioned upon our
receiving any type of settlement in the case of Mackenzie v. Miller.
Mr. Mackenzie and I are entitled by contract to 80% of the settlement which
is anticipated to be in the neighborhood of $25,000,000. Upon the receipt
of any monies through court action or by settlement you will be entitled
to the sum of $1,000,000. If that sum is not paid within one year then
an additional sum of a $100,000 will accrue at the end of each three month
period. It is anticipated that a settlement may well be reached in the
first year. If no monies are received by the borrowers to satisfy their
obligations by virtue of court action then the borrowers will be required
to pay the sum of $100,000 per yr. at one percent above prime for a period
of five years or until the sum of $500,000 dollars plus interest is paid
to the lender. The borrowers will provide available collateral such as
life insurance, real estate and C.D.s as security for repayment of this
loan. Upon the execution of this agreement, the lender is entitled to the
amount specified herein whenever the monies in the form of settlement (or
otherwise) occur, be it a week or two years.
When the Mackenzies raised questions regarding the proposed loan agreement,
defendant Gerald P. Boyle assured them that the loan would be repaid out of
the interest paid on the judgment by Miller.
- On December 9, 1997, a line of credit (“loan agreement”) was entered into
between Gerald P. Boyle, Marna Boyle, Jerold J. Mackenzie, Bonnie Mackenzie,
jointly and severally as borrowers, and Joseph Sweeney. At all times pertinent
to the issues in this case defendant Gerald P. Boyle was aware that SCR 20:1(a)
provides as follows:
A lawyer shall not enter into a business transaction with a client or knowingly
acquire an ownership, possessory, security or other pecuniary interest adverse
to a client unless: (1) The transaction and terms on which the lawyer acquires
the interest are fair and reasonable to the client and are fully disclosed
and transmitted in writing to the client in a manner which can be reasonably
understood by the client; (2) The client is given a reasonable opportunity
to seek the advice of independent counsel in the transaction; and (3) the
client consents in writing thereto.
Defendant Gerald P. Boyle testified with respect to the Sweeney loan that
Mr. Mackenzie “was represented by one of the finest firms in the State of
Wisconsin.” That is not true. Jerold and Bonnie Mackenzie were not advised
they must have independent counsel for the loan agreement and consequently
they were not represented by counsel. Defendants also failed to advise the
Mackenzie’s of the potential adverse consequences of entering into the loan
agreement; and defendants did not obtain the Mackenzie’s written consent to
the conflicts associated with the loan.
- Pursuant to the loan agreement Joe Sweeney provided $250,000 to defendant
Gerald P. Boyle on December 9, 1997; $30,000 to defendant Gerald P. Boyle
on March 27, 1998, and $120,000 on March 30, 1998, for a total of $400,000;
as collateral for the loan Joseph Sweeney received liens on two pieces of
undeveloped property in the State of Washington worth about $100,000 owned
by the Mackenzies; the Boyles agreed to pledge Marna’s inheritance of about
$200,000; defendant Boyle promised the Mackenzies he would give them $150,000
of the monies from Sweeney; defendant Boyle did not provide the collateral
to Sweeney as promised.
- On January 7, 1998, defendant Gerald P. Boyle received a retainer of $90,000
which was in addition to $10,000 previously provided on December 13, 1997,
for costs from Thomas R. Frazier in a case defendant Gerald P. Boyle believed
to be substantially similar to the Mackenzie case in a pending action
captioned, Thomas R. Frazier v. Michael Lindbloom, Laurie Neilson a/k/a
Laurie Hrkal, Erin Johnson, and Bachman’s, Inc., PI-97-008738, District
Court 4th Judicial District, County of Hennepin, Minnesota; on
January 14, 1998, defendant Gerald P. Boyle gave Mr. Mackenzie a check for
$7,500 which he charged as a cost to Thomas Frazier in his case; defendant
Boyle represented that the $7,500 check to Mr. Mackenzie was a consulting
fee for services he expected Mr. Mackenzie to provide in the Frazier
case; defendant Boyle told Mr. Frazier he would represent him on a 40% contingent
fee plus a $100,000 cost advance; defendant Boyle did not create a written
fee agreement. When the Frazier case was dismissed prior to trial,
defendant Boyle denied he had agreed to a contingent fee and claimed they
had an unwritten $100,000 flat fee (fees and costs) agreement that would have
governed even if the case had been tried.
- Defendant Gerald P. Boyle also provided monies to the Mackenzies purportedly
from the Sweeney loans as follows: $25,000 on December 11, 1997; $10,000
on January 12, 1998; $10,000 on March 4, 1998; $10,000 on April 1, 1998; and
$50,000 on May 8, 1998 for a total of $105,000.
- As indicated in his letter to Miller’s counsel, defendant Boyle directed
Mr. Mackenzie not to make a counteroffer to Miller’s $3,000,000 offer. Defendants
enlisted the services of Attorney Brady Williamson of Lafollette Sinykin in
Madison to analyze the appeal. In a legal memorandum to defendants Gerald
P. Boyle and Michael Whitcomb dated February 20, 1998, Mr. Williamson stated
as follows:
MILLER’S APPEAL.
- INTENTIONAL MISREPRESENTATION CLAIM AGAINST MILLER – failure to disclose
that Mackenzie’s position was downgraded and that he was ‘grand fathered,’
that is, allowed to retain the compensation and privileges of grade level
14 even though his position had been reclassified as grade level 13 ($6
million compensatory damages, $18 million punitives).
- Miller’s strongest argument on liability - there was no legal duty to
disclose. . . .
- Is there a duty as a matter of law? . . . There are an infinite variety
of facts that might affect that decision, and there is almost no likelihood
that the courts would adopt a general rule of law that businesses must
disclose information that is relevant to an employee’s decision to remain
with the employer. . . .
- Compensatory damages. . . .
- It will be hard to justify the compensatory damages award to the extent
that it includes income that Mackenzie lost as a result of his termination,
because there does not appear to be a causal connection between the
misrepresentation and the termination. Mackenzie’s post-verdict brief
argues that the jury could have found that Best launched her attack
on Mackenzie (which cost him his job) only because he was vulnerable
after being downgraded. But there is no claim that the downgrading
itself was improper, only that Miller should have informed Mackenzie
of it. It will be difficult to persuade the court of appeals that there
was a causal connection between the 1989 failure to disclose and the
1992 firing.
- Punitive damages.
- Should the punitive damage claim have gone to the jury, or was Miller’s
conduct not “outrageous” as a matter of law? The court of appeals
reviews this question de novo, without deference to
the trial court’s decision. Walter v. Cessna Aircraft, 121
Wis. 2d 221, 231, 358 N.W.2d 816 (Ct. App. 1984).
- The punitive damages were awarded only on the nondisclosure/misrepresentation
claim. The only conduct relevant to that question is the nondisclosure
of the downgrading and the grandfathering – not the events relating
to Mackenzie’s termination. There is a good chance that the court
of appeals would not view the nondisclosure as sufficiently outrageous
to warrant an imposition of any punitive damages.
-
Given the nature of the conduct, moreover, there is also a substantial
likelihood that even if the court of appeals approves the award of
some punitive damages, it would find the $16 million awarded here
to be grossly disproportionate to the nature of the conduct. Wisconsin’s
appellate courts have scrutinized punitive damages awards much more
closely since the Supreme Court’s decision in BMW v. Gore,
and have now begun to cut back those awards. See Management
Computers, Inc., v. Hawkins, Ash, Baptie & Co., 206 Wis. 2d
157, 557 N.W.2d 67 (1996) (reducing punitive damages award from $1.75
million to $650,000).
- On July 2, 1998, Miller Brewing Company filed a Notice of Appeal of the
judgment entered against it in Mackenzie. By that time, defendants
had advised Jerold Mackenzie that the prospect of him not recovering on his
judgment was absolutely nil. Mr. Mackenzie was advised by defendants that
he should not settle for anything less than $19,800,000. Defendants advised
Mr. Mackenzie: (1) that if Miller Brewing Company and/or its parent Phillip
Morris desired to settle the case that it would not make any difference whether
the settlement was $15,000,000 or $25,000,000; (2) that the compensatory
damage portion of his award was “unassailable;” (3) that it was highly probable
the court of appeals would uphold his judgment; (4) that “the Court of Appeals
is not going to say employers can lie to employees;” (5) that because Phillip
Morris was willing to pay “billions in cigarette litigation settlements -
$25,000,000 is nothing;” (6) “Why would or should a court of appeals upset
the jury verdict approved substantially by trial court – legally unsound,
politically without benefit;” and (7) that Miller would be more willing to
settle if he went on the TV talk show circuit; participated in an HBO movie;
and created an internet website on the case. Defendant Boyle repeatedly insisted
that the Mackenzies appear on many TV programs even though the Mackenzies
told him they did not want to do so because they believed the media coverage
was hurting their family; among other things, defendant Boyle directed TV
crews from the programs, Inside Edition and Extra, to the Mackenzie’s home
against their wishes to film packing and loading of a moving van which was
moving them from Milwaukee to the State of Washington; defendant Boyle’s actions
were without the consent of the Mackenzies and reduced Bonnie Mackenzie to
tears; at a later date the Mackenzies refused Boyle’s request to contact reporter
John Stossel, while having lunch at the Wisconsin Club; defendant Boyle threw
a temper tantrum until they relented.
- In April of 1999 Quinn Martin of Quarles & Brady, counsel for Miller
advised Gerald P. Boyle that Miller would settle the Mackenzie case
for $3,000,000. Mr. Martin also told Mr. Boyle that Miller might be willing
to pay $5,000,000 to $6,000,000 if it knew the case would settle. In response
to the filing of this lawsuit, defendant Gerald P. Boyle advised the Milwaukee
Journal Sentinel as follows, “I would have settled in a minute if an offer
was there and it was in Mackenzie’s best interest. . . . The biggest offer
Miller made was for $150,000 before the trial.” Defendant Whitcomb stated,
“there was never an offer received by me from any representative of Miller
Brewing. . . after the trial.” In a letter dated April 7, 1999, from defendant
Gerald P. Boyle to Quinn Martin, Miller’s counsel, Mr. Boyle stated as follows:
Last but not least if you are looking for a number to bring back to your
principles [sic] as an answer to the $3 Million you told me was on the
table, the obvious answer to that offer is that it is incredibly low that
I cannot in good conscience suggest a counter-offer because of the reasons
that I have stated in this letter. I believe that if your offer were
more realistic than $3 Million I would then be inclined to tell Jerry
and Mike Whitcomb that we should make a counter-offer, but under the circumstances,
with the numbers presently at $30 Million there is no way we can counter.
As indicated in his letter to Miller’s counsel, defendant Boyle directed
Mr. Mackenzie not to make a counteroffer to Miller’s $3,000,000 offer.
- Defendants did not advise Jerold Mackenzie that the court of appeals was
likely to reverse the jury verdict because there was not a sufficient causal
connection between Miller’s 1989 failure to disclose his job classification
downgrading and his 1992 firing; nor did defendants advise of the potential
impact of that holding on his judgment. Defendants also did not advise Jerold
Mackenzie there was a good chance the court of appeals would take away the
jury’s punitive damage award or that even if upheld, it was likely the punitive
damages would be substantially reduced; defendant Boyle told Mr. Mackenzie
the court of appeals would uphold the verdict because Mr. Boyle “was the important
person in the legal community and that Miller was nothing,” and the judges
on the court of appeals were his friends.
- On June 9, 1999, Joe Sweeney advised defendant Gerald P. Boyle and the Mackenzies
the current amount due and owing on the loan agreement was $1,400,000 and
that the amount due would increase by $100,000 on September 9, 1999 and on
each quarterly date thereafter.
- By letter dated August 30, 1999, Jerold Mackenzie requested
that defendants “provide an update. . . as to the expenses [the Mackenzie’s
are legally responsible for with respect to] his case.” By letter dated
September 7, 1999, Defendant Whitcomb provided an accounting of his expenses
in total amount of $4,276.16.
- On February 22, 2000, the Court of Appeals, District I,
issued its decision reversing the jury award in its entirety thereby finding
plaintiff was not entitled to recover any monies; on March 20, 2000, Jerold
Mackenzie filed a petition for review with the Wisconsin Supreme Court.
The petition was accepted on June 13, 2000 and oral argument was held
on November 28, 2000.
- On September 29, 2000, defendant Whitcomb advised Jerold
Mackenzie “that there is a window of opportunity now wherein [Miller]
would be willing to engage in serious settlement negotiations.” Defendant
Whitcomb advised Jerold Mackenzie at that point that he should not accept
anything less than $12,000,000. Attorney Whitcomb also advised Jerold
Mackenzie that a $4,000,000 settlement would result in $2,000,000 to Jerold
Mackenzie; $1,160,000 to Mike Whitcomb; $800,000 to Gerald P. Boyle; and
$40,000 to the Crivello, Carlson law firm. However, defendant Whitcomb
further noted:
Of course, the obligation to Mr. Sweeney would also have to be considered
from your and Mr. Boyle’s perspective. Out-of-pocket costs would also
have to be resolved. . . . One note of caution. If there is any publicity
or public dissemination of information regarding possible settlement,
all bets will be off. If the case is settled at any juncture the only
comment that would be made by any party would be “the case is dismissed”
without any further elaboration or acknowledgment that it had been settled.
- In a letter dated October 3, 2000, defendant Gerald P.
Boyle wrote to defendant Whitcomb as follows:
You have indicated in your letter that in case of settlement you would
in effect get 30% and I would get 20%. You can be assured that I will
never agree to that and therefore if you are talking to the “other side”
you can be assured that there would never be “a secret” agreement because
I will sue to get my proper compensation. . . . While I recognize that
there might be a settlement, litigation will not end unless I am properly
compensated pursuant to the agreement. While I am distressed to have
to write this letter, I am very hurt that I find myself in this position,
especially what with all I have tried to do over the years to help us
through financial problems in generating business for the mutual help
of both of us. . . . Nonetheless, you cannot excise me from my proper
compensation because you have the pride of authorship of that brief.
. . . I glean from your letter to Jerry Mackenzie that there have been
more than just brief discussions.
- On October 5, 2000, defendant Gerald P. Boyle stated as
follows in a fax letter to defendant Whitcomb:
I am informing you that unless there is a global settlement (including
settlement of my and Jerry’s debt to Joe Sweeney, and my satisfaction
to my righteous compensation for bringing in the verdict and attorney
of record on the appeal) there could not be a confidential settlement
as litigation would certainly follow. Therefore, I suggest you take that
into account.
I resent the fact that I have not been made aware of the progress of
the settlement movement until I had to make a demand for the same. . .
.
. . . there shall be no loose ends that will result in compromising any
settlement agreement because of pending litigation. The “other” side
will have a right to know and if your unilateral determination as to what
my compensation is to be results in that agreement becoming impossibility,
so be it. . . .
. . . once again I best know what’s happening if there is hope that your
program has a chance of success.
- Oral argument before the Wisconsin Supreme
Court was scheduled for November 28, 2000. Jerold Mackenzie directed
that defendant Whitcomb make all arguments before the Supreme Court because
he was disappointed by defendant Boyle’s performance before the Court
of Appeals and did not want a similar performance before the Supreme Court.
- On October 19, 2000, defendant Gerald P. Boyle
faxed Jerold Mackenzie a note he proposed to send to defendant Whitcomb
that provided as follows:
I guess I missed the meeting where you were voted captain. I thought
that Jerry Mackenzie would make the decision. I’m going to tell Mr. Mackenzie
that I am demanding at least five minutes of the rebuttal just as was
done in the Court of Appeals. Should he decide differently, so be it.
- On October 25, 2000, defendant Gerald P. Boyle
in a telephone conversation with Jerold Mackenzie stated that if a settlement
offer was received from Miller, Boyle would waive legal costs; the Sweeney
debt was his on the condition that Mackenzie’s insist that attorney’s
fees be split fifty-fifty between Boyle and Whitcomb. Mr. Mackenzie refused
to intercede in the attorney’s fee dispute and declined Boyle’s offer.
- On November 2, 2000, Jerold Mackenzie, defendants
Gerald P. Boyle and Whitcomb met at Katie’s Diner at 10:00 a.m. to discuss
strategy for a meeting scheduled for November 3, 2000, between Jerold
Mackenzie and Bill Schmus, general counsel of Miller Brewing Company;
that meeting was arranged solely for the purpose of discussing settlement
possibilities; earlier that week Miller Brewing had advised Defendant
Whitcomb that those discussions would only take place if it was agreed
by all that they would be strictly confidential; defendant Gerald P. Boyle
also provided Jerold Mackenzie with an itemization of case related costs
dated October 31, 2000, he claimed to have incurred in the Mackenzie case
totaling $134,228.49. Included in the total costs which defendants told
Mr. Mackenzie he would have to pay in addition to 50% attorney’s fees
out of any settlement or recovery were $47,000 in payments made to defendant
Whitcomb; $1,500 to Attorney Robert Fenning; $5,000 to Attorney Ed Cameron;
$5,000 to Attorney Frank Crivello; $5,000 to Attorney Brady Williamson;
$5,000 to Attorney Joe Jordan; $11,205.32 to Attorney David Walther, and
included was the $7,500 payment made by Attorney Gerald P. Boyle to Jerold
Mackenzie on January 14, 1998 (Attorney Gerald P. Boyle was double billing
the $7,500 payment as a cost to Thomas Frazier in his case and to Mr.
Mackenzie.); and finally defendant Gerald P. Boyle sought to recover as
costs $2,045.41 which he spent for a going away part he threw for the
Mackenzies against their wishes at the Wisconsin Club.
- At the meeting at Katie’s Diner, defendants
Gerald P. Boyle and Whitcomb continued their disagreement with respect
to how any recovered monies would be shared; Attorney Boyle reiterated
that he was entitled to be reimbursed in addition to fees the entire $134,228.49
which he claimed as case related expenses; defendant Whitcomb disputed
that he had been paid $47,000 as claimed by Boyle in connection with the
case; Attorney Boyle threatened the Mackenzies and defendant Whitcomb
by stating that he would not sign any settlement agreement nor abide by
Miller’s demand for confidentiality unless his demands with respect to
fees and costs were met. In a letter dated November 3, 2000, defendant
Whitcomb stated:
The records of this office clearly indicate that the only monies received
for services provided on the Mackenzie case was $22,500....
Your statements to the Mackenzie’s at our conference yesterday that you
will not sign any settlement agreement, nor abide by its terms of confidentiality
unless your demands are met concern me greatly.
- On November 3, 2000, Jerold Mackenzie met with Bill Schmus
of Miller Brewing Company; at that meeting Mr. Mackenzie understood and
believed based on Defendants’ representations that out of any settlement
achieved he would have to pay 50% attorney’s fees plus $138,000 in costs
and out of the remainder, he would have to pay taxes and at least $700,000
on the outstanding Sweeney loan; Mr. Schmus advised Mr. Mackenzie that
in light of all that had happened including reversal of the jury verdict
by the court of appeals, that Miller Brewing Company would be willing
to pay up to $3,000,000 to settle the case prior to the Supreme Court
decision. Mr. Mackenzie advised Mr. Schmus that he could not settle for
$3,000,000 because he would not receive any monies; Mr. Schmus suggested
that if that indeed was the case perhaps his attorneys should consider
cutting their fees.
- By letter dated November 7, 2000, defendant
Gerald P. Boyle wrote to defendant Whitcomb as follows:
Let me see if I understand what is happening here. You and I worked
on a case that resulted in a $26 Million verdict. You at all times indicated
to me that we were equal partners in the endeavor. From the day of the
verdict until a month or so ago, I have never heard anything from you
that you considered me to be less than an equal partner in that endeavor.
From the day of the verdict to the present, my books reflect a good day
of commercial activity between the two of us and there was a great deal
of social activity between the two of us.
Then suddenly, 1) On September 29, 2000, you wrote Jerry Mackenzie telling
him that if the case were settled for $4,000,000 you would receive $1,160,000
and I would receive $800,000. 2) I wrote you on October 3, 2000, and told
you that that would not happen and I would not become a 20% partner while
you became a 30% partner. 3) On October 4, 2000, you wrote me back and
told me that I should be grateful for receiving even 20% and that your
secretary had expended more time on the case than all of my attorneys
and staff combined. 4) On October 6, 2000, I wrote you back and told
you that nothing had changed and that I would never agree to a confidential
resolution under the terms that you outlined. 5) I then received a fax
from you on October 19, 2000, wherein you stated you were going to handle
oral argument to the Supreme Court and I would not participate. 6) I
received your letter on November 3, 2000, this date which speaks for itself.
I wish to tell you that your attempt to indicate that you are the ‘protector’
of the Mackenzie’s is out and out fantasy. You sir, are the one who has
caused this problem, not I, and you were the one that is attempting to
color the Mackenzie’s judgment about me because of what is obviously your
private agenda.
- On November 8, 2000, Jerold Mackenzie stated the following
to defendants Gerald P. Boyle and Whitcomb in a fax:
It is astonishing to me that in my hour of greatest need and support
from my attorneys I find myself in the middle of a feud over the distribution
of settlement funds which, at this time, are exactly zero. Our greatest
hurdle at this time is to get this case settled either through negotiations
between us and Miller or through disposition by the Wisconsin Supreme
Court. If this bickering over the ‘spoils’ of my personal problems suffered
by the hand of Miller does not stop immediately, I will be faced with
seeking professional counsel even if it is at the eleventh hour.
- On November 20, 2000, defendant Gerald P. Boyle
advised Mr. Mackenzie by fax that he had finally come to the conclusion
that it would be best if defendant Whitcomb made both the argument in
chief and rebuttal before the Supreme Court. With respect to the disagreement
with defendant Whitcomb on how fees should be split, defendant Gerald
P. Boyle stated as follows:
Since Whitcomb feels he is the main man let the decision rest on his
ability to argue. If he wins all that will have to be dealt with later
what with his belief that ‘I’m lucky to be even getting 20% of the award.’
- In a fax dated November 22, 2000, defendant
Gerald P. Boyle stated to the Mackenzies as follows:
Happy Thanksgiving and many more. I hope next Thanksgiving you’ll be
a multimillionaire. Of course if you are, I will be also and that’ll
be nice. . . . Since Tuesday will be the end (unless the case gets sent
back for further proceedings) I will be finished. I will be sad to say
goodbye to you and Bonnie. I want to tell you that if we are unsuccessful,
I will waive any costs and pay the balance of Sweeney other than the obligation
you were responsible for, that being the amount of money you receive plus
appropriate interest. I will tell Joe that I am responsible for the balance
and even though I take you off the note he would not have to but you have
no fear as I will satisfy Joe so that he will look only to me. Hopefully,
we’ll be paying him a great deal of money because we will be winners.
(Emphasis added) . . . When the argument is over I will come up to you
and say good luck and farewell. I will not talk to or have anything to
do with Whitcomb. Marna asked me tonight at dinner if I would have ever
guessed that Whitcomb would have done this to me and I told her, ‘no.’
. . . I want to tell you Jerry that you must be careful with him. If
he did it to me that means he will do it to anyone. He will be able to
justify anything if he can justify what he did to me. So as my late mother
used to say, ‘never trust anyone when money is involved.’ . . .
If Miller wants to talk after the argument about settlement I will demand
that I am present during any conversation. . . . You have the right
to make that decision but I’ll be damned if the guy who won $26.5 Million
for you is suddenly discarded because Whitcomb thinks he is the only smart
guy on the face of the earth. You have chosen to have Whitcomb make the
argument and that is all right with me. As a matter of fact, because
there was some question of my ability at the Court of Appeals, I wouldn’t
want to take the chance that could happen again.
- Oral argument before the Wisconsin Supreme
Court was heard on November 28, 2000.
- Prior to the Supreme Court argument, defendant Whitcomb
told Jerold Mackenzie there was almost no chance the Supreme Court would
ignore Wedemeyer’s court of appeal’s dissent and the unanimous jury verdict;
defendant Whitcomb also stated he could not imagine the Supreme Court
leaving Mr. Mackenzie with nothing – the Supreme Court “knows you were
wronged and that you need to be made whole.”
- Based on the representations of defendants,
Jerold Mackenzie understood there was a high probability he would succeed
before the Wisconsin Supreme Court and very little likelihood he would
lose and receive no monies.
- At no time did defendants advise and explain
to Mr. Mackenzie it was probable the court of appeals’ decision would
be affirmed; that it was highly unlikely punitive damages would be reinstated
or that it was not likely compensatory damages would be recovered because
there was no causal connection proven at trial between Mr. Mackenzie’s
1989 job reclassification and his 1992 firing.
- On March 20, 2001, the Wisconsin Supreme Court
issued its decision affirming the decision of the Court of Appeals thereby
definitively determining that Jerold Mackenzie would receive no monies
on his verdict.
- On March 28, 2001, defendant Gerald P. Boyle, his wife
Marna, and the Mackenzies jointly owed Joe Sweeney $438,932 pursuant to
the loan agreement.
COUNT I – LEGAL MALPRACTICE – PROFESSIONAL NEGLIGENCE
- Plaintiff hereby realleges and incorporates herein paragraphs
1 through 51.
- At all times pertinent to the issues in this case, defendants
served as legal counsel to Jerold Mackenzie in connection with his action
against Miller Brewing Company as referenced in paragraph no. 12; in providing
legal services to Mr. Mackenzie, it was defendants’ duty to use the degree
of care, skill and judgment which reasonably prudent lawyers practicing
in Wisconsin would exercise under like or similar circumstances. As stated
by the Wisconsin Supreme Court, legal malpractice may give rise to either
a tort or contract claim. This is a tort claim because it arises from
defendants’ breach of their common law duties whereas a contract claim
arises from breach of duty created by contractual agreement between the
attorney and client. See Milwaukee County v. Schmidt, Gardner,
and Erickson, 43 Wis.2d 445, 168 N.W.2d 559 (1969); Klingbeil v.
Saucerman, 165 Wis. 60, 160 N.W. 1051 (1917).
- Defendants’ violated their duty to use the degree of care,
skill and judgment which reasonably prudent lawyers practicing in Wisconsin
would exercise by failing to fully and truthfully explain the following
to Mr. Mackenzie so he could make informed decisions regarding his case:
(a) the basis of his fee agreement with defendants;
(b) that a contingent fee agreement must be in writing;
(c) that if a contingent fee is entered, it must specify
whether a different rate applies for settlement, trial or appeal;
(d) that because there was no written fee agreement between
Mr. Mackenzie and defendants on the verdict date, there was no valid fee
agreement and the $75,000 tendered by Mr. Mackenzie was presumed to be
a deposit against future services which was required to be maintained
in trust;
(e) that a change from flat fee to contingent fee required
defendants to explain how the flat fee payment - $75,0000 would be treated
in connection with any such change;
(f) that defendant Gerald P. Boyle intended from the beginning
of his representation to represent Mr. Mackenzie on a flat fee basis if
the case did not go to trial and on a contingent fee basis if it proceeded
to trial;
(g) that it was not in Mr. Mackenzie’s interest to date his
note purportedly confirming a contingent fee arrangement July 14, 1997,
upon creation in November 1997; and in not fully explaining to Mr. Mackenzie
all conflicts between Mr. Mackenzie and defendants related to fees and
costs;
(h) of all potential ramifications created by conflicts on
settlement that existed as a result of the fee situation and loan agreement;
(i) that it was illegal and unethical for defendant Gerald
P. Boyle to enter the loan agreement with Mr. Mackenzie unless Mr. Mackenzie
had independent counsel;
(j) to fully explain that the terms of the loan agreement
were not fair to Mr. Mackenzie and the loan was being procured for defendant
Boyle’s personal benefit and that Mr. Mackenzie was only included in the
deal for purposes of providing collateral;
(k) that out of any settlement monies Mr. Mackenzie would
not have to repay the Sweeney loan, and that defendants were not entitled
to recover either the fees or costs they claimed;
(l) that the issue of the attorney’s fees and costs should
be resolved promptly so Mr. Mackenzie could make an informed decision
on settlement opportunities;
(m) that it was reasonable and prudent to settle for substantially
less than $19,800,000; that it probably made a big difference to Phillip
Morris whether it settled for $15,000,000 or $25,000,000; that the compensatory
damages were assailable on appeal; that it was not highly probable the
court of appeals would uphold the judgment; and to explain all bases for
a potential court of appeals reversal.
- At all times before the court of appeals issued its decision
reversing the Mackenzie jury verdict; the defendants breached their duties
to Mr. Mackenzie by failing to do the following:
(a) create a valid written attorney’s fee agreement;
(b) instruct Mr. Mackenzie in writing to consult with independent
counsel regarding the status of his fee agreement and the loan agreement;
(c) instruct Mr. Mackenzie that he had a right to assert that
he was entitled to partial or complete forfeiture of defendants’ attorney’s
fees pursuant to Section 37 of the Restatement of the Law Third;
(d) to instruct Mr. Mackenzie he could assert based on defendant
Boyle’s understanding, defendants were only entitled to $75,000 for fees
and costs, nothing more, nothing less;
(e) to instruct Mr. Mackenzie that the loan agreement was
void and unlawful because of the violation by defendant Gerald P. Boyle
of his duties to Mr. Mackenzie including but not limited to the fact Mr.
Mackenzie did not have independent counsel and the loan agreement was
entered for defendant Boyle’s personal purposes;
(f) instruct Mr. Mackenzie that it was probable the punitive
damages award would be thrown out or substantially reduced on appeal;
(g) advise Mr. Mackenzie that defendants failed to produce
proof at the Mackenzie trial establishing a causal connection between
Mr. Mackenzie’s 1989 job reclassification and his 1992 termination and
that thus Mr. Mackenzie’s compensatory damage award would likely be taken
away on appeal;
(h) advise Mr. Mackenzie that it was likely the court on appeals
would find employers have no general duty to disclose;
(i) to accurately explain to Mr. Mackenzie the amount of monies
he would receive out of a $3 million dollar settlement;
(j) to advise Mr. Mackenzie it was probable the case could
be settled for $5 to $6 million dollars; to correctly explain what share
of those monies he would be entitled to receive; and
(k) to recommend to Mr. Mackenzie that he settle the case
for $3 to $6 million dollars.
Following the court of appeals’ decision reversing the
jury verdict in its entirety, defendants had a duty to fully and truthfully
explain to Mr. Mackenzie all factors pertinent to his opportunity to settle
so he could make an informed decision; defendants Gerald P. Boyle and
Whitcomb also had a duty to cooperate with each other fully and ensure
that their disagreements regarding the splitting of fees did not in any
way interfere with settlement.
-
Defendants violated their duties to Mr. Mackenzie
by failing to fully and truthfully explain to him the following in advance
of and following his meeting with Bill Schmus:
(a) that there was no valid fee agreement and
that defendants’ entitlement to any fees was in dispute and that the dispute
should be resolved before the Schmus meeting;
(b) that because of the fee dispute, Mr. Mackenzie
needed to obtain independent counsel;
(c) that the loan agreement was void and unlawful
and therefore Mr. Mackenzie would not have to pay Sweeney as specified in
the agreement out of any settlement monies;
(d) that it was probable the court of appeals’ decision
would be affirmed; that it was reasonable to settle for $3,000,000;
(e) that even if reversed, the likelihood of recovering
more than $3 million dollars was very small;
(f) that Mr. Mackenzie was not required to reimburse
as costs fees paid to attorneys, or the Wisconsin Club going away party
cost; and
(g) that the $7,500 which was being charged to him
as a cost by Attorney Gerald P. Boyle had previously been charged to Mr.
Frazier as a cost in his case.
- That defendants’ violation of their duties
was a proximate cause of damages sustained by Mr. Mackenzie; had Mr. Mackenzie
been fully and truthfully advised regarding all issues associated with
his opportunity to settle with Miller Brewing Company before the court
of appeals’ decision, the case would have settled for $5 to $6 million
dollars; and in the alternative, if Mr. Mackenzie had been fully and truthfully
advised regarding all factors pertinent to his opportunity to settle with
Miller Brewing Company for $3 million dollars following the court of appeals’
decision, the case would have settled for that amount.
COUNT II – BREACH OF FIDUCIARY DUTIES
- Plaintiffs hereby reallege and incorporate herein paragraphs 1 through 58.
- Defendants, as lawyers for Jerold Mackenzie owed him a
fiduciary duty of loyalty. This means that in matters within the scope
of their representation of Jerold Mackenzie, they were required to comply
with obligations concerning his property, avoid impermissible conflicting
interests, deal honestly with Jerold Mackenzie, and not employ advantages
arising from the client-lawyer relationship in a manner adverse to Jerold
Mackenzie. As lawyers for Mr. Mackenzie, defendants occupied positions
of trust and confidence with Jerold Mackenzie and therefore were obligated
to discharge their duties with absolute fidelity and loyalty to the interest
of Jerold Mackenzie; keep Mr. Mackenzie informed with respect to, and
to make full disclosure to him of all material facts that affected the
client-lawyer relationship; and discharge faithfully their duties so as
to protect and serve his best interests. As lawyers defendants could
not represent Mr. Mackenzie if there was a substantial risk that their
representation of him would be materially and adversely affected by defendants’
own interests or by the interests of another current or former client
or a third person.
- Defendants breached their fiduciary duties to Jerold Mackenzie.
- As a result of defendants’ breach of fiduciary duties,
Jerold Mackenzie sustained damages of $3 to $6 million dollars.
COUNT III – DISGORGEMENT-RESTITUTION
- Plaintiffs hereby reallege and incorporate
herein paragraphs 1 through 62.
- Jerold Mackenzie is entitled to restitution
of the $75,000 he paid defendants as fees or costs and those monies which
constitute the economic benefit derived by defendant Gerald P. Boyle as
a result of the loan agreement pursuant to generally applicable principles
governing restitution by a fiduciary; Restatement Second, Agency §§388,
403-404A and 407.
COUNT IV – PUNITIVE DAMAGES
Plaintiffs hereby reallege and incorporate herein paragraphs 1 through
64.
- The actions of defendants were in deliberate disregard
of the rights of Jerold Mackenzie thereby entitling plaintiff to punitive
damages in an amount to be determined at trial.
WHEREFORE,
plaintiff demands judgment against the defendants in accordance with the
demands of this complaint, together with actual attorney’s fees, interest,
costs and disbursements, and such other relief, as the court may deem
just and equitable.
Dated
this ___ day of May, 2001.
LAW OFFICE OF JOHN C. CABANISS
Attorney for Plaintiff
____________________________________
JOHN C. CABANISS
State Bar No. 1002857
P.O. ADDRESS:
205 East Wisconsin Avenue
Suite 300
Milwaukee, Wisconsin 53202
Phone: (414) 278-6066
Fax: (414) 278-1229
HALE & WAGNER, S.C.
Attorney for Plaintiff
____________________________________
CHRISTOPHER HALE
State Bar No. 1016363
P.O. ADDRESS:
205 East Wisconsin Avenue
Suite 300
Milwaukee, WI 53202
Phone: (414) 278-7000
Fax: (414) 278-7590
PLAINTIFF HEREBY DEMANDS TRIAL BY JURY