817 N.W.2d 465
Wis. Ct. App.2012Background
- Four Lake Arrowhead Association members seek a declaratory judgment about bylaw covenants governing annual assessments for consolidated sites.
- Question whether the claim is direct or derivative under Wis. Stat. §§ 181.0740-181.0742; circuit court held derivative.
- Ewers own consolidated sites and are charged a 1.25 annual assessment under the bylaws; dispute centers on whether this is authorized for consolidated sites.
- Covenants are incorporated into the Association bylaws; bylaw provisions allegedly contractually obligate payment and confer rights to be free from excess assessments.
- Circuit court granted summary judgment, dismissed for derivative action and joinder issues, and denied class certification; this appeal challenges those rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Direct vs. derivative claim | Ewers: direct injury to individual rights; not derivative | Association: injury to the corporation; derivative | Direct claim; not derivative |
| Class certification viability | Plaintiffs seek certification of consolidated site owners | Derivative framework precludes class; no proper direct class | Class certification reversed and remanded for merits review |
| Joinder under 806.04(11) | Nonconsolidated owners may be represented; not necessary to join all individuals | All interested parties must be joined | Remand for reconsideration of representative joinder; not dismissal for nonjoinder |
Key Cases Cited
- Rose v. Schantz, 56 Wis. 2d 222 (1972) (determines inquiry for whether a right is individual or corporate_rights depending on injury source)
- Notz v. Everett Smith Grp., Ltd., 316 Wis. 2d 640 (2009) (derivative proceedings; when direct injury belongs to corporation, action is derivative)
- Jorgensen v. Water Works, Inc., 246 Wis. 2d 614 (2001) (minority shareholders' direct claim for breach of fiduciary duty; direct injury to individuals)
- Krier v. Vilione, 317 Wis. 2d 288 (2009) (examples of independent direct claims by shareholders; discusses primary vs secondary injury)
- Notz v. Everett Smith Grp., Ltd., 316 Wis. 2d 640 (2009) (reiteration of derivative requirement context and injury analysis)