721 F.3d 781
7th Cir.2013Background
- Pro-Pac hired George Chapes as VP of sales in 2005; Chapes had fiduciary duties to Pro-Pac.
- WOW, landlord and logistics provider, negotiated with Pro-Pac in 2006 to retain Chapes as a consultant in exchange for rent concessions (two months free per year for five years).
- While negotiations were ongoing, Chapes secretly helped WOW secure a Vangard warehouse account; WOW paid Chapes and later hired him.
- Pro-Pac filed a bankruptcy adversary proceeding alleging Chapes breached his fiduciary duty and WOW aided and abetted that breach; bankruptcy court found liability for both.
- The bankruptcy court declined Pro-Pac’s 10% commission damage theory but treated Pro-Pac’s alternative unjust-enrichment argument as a new claim and awarded $385,000 to Pro-Pac (plus punitive damages) against WOW.
- The district court reversed as to WOW, holding the unjust-enrichment theory was not properly before the court and ordered dismissal; the Seventh Circuit reversed the district court and remanded for proper calculation of damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Pro-Pac may recover despite seeking a different damage theory at trial | Pro-Pac argued damages via unjust enrichment or lost commission; relief should be awarded once liability is established | WOW argued Pro-Pac never pleaded unjust enrichment and objected to litigating a new claim | Court held trial court may award appropriate relief under Rule 54 as incorporated by Bankruptcy Rule 7054; dismissal was error and remand required to calculate proper damages |
| Proper measure of damages for WOW’s aiding-and-abetting tort liability | Pro-Pac proposed lost brokerage commission (10%) or unjust enrichment equal to rent concessions ($385,000) | WOW disputed both measures; argued unjust-enrichment theory was not pled and bankruptcy court miscalculated damages | Court held bankruptcy court erred in awarding $385,000 without adequate factual development; remand to examine restitution (defendant’s gain), compensatory loss, or value of services and to develop profits/costs and present-value calculations |
| Availability of punitive damages following a restitution award | Pro-Pac sought punitive damages in addition to restitution/compensatory relief | WOW argued punitive damages improper if underlying damages theory was invalid or not proven | Majority: punitive damages may be available if compensatory damages (broadly defined) are awarded; concurrence: punitive damages require compensatory damages (not mere restitution based on defendant’s gain) under Wisconsin law |
| Standard for remanding remedy after liability finding | Pro-Pac urged remand to calculate appropriate remedy consistent with tort liability | WOW urged dismissal of claims because unjust-enrichment theory was not pled | Court remanded for bankruptcy court to formulate remedy, develop facts on WOW’s profits or value of services, and apply Wisconsin law on restitution/compensatory measures and punitive damages as appropriate |
Key Cases Cited
- Lindquist Ford, Inc. v. Middleton Motors, Inc., 557 F.3d 469 (7th Cir.) (elements of unjust enrichment cause of action)
- Heitmann v. City of Chicago, 560 F.3d 642 (7th Cir.) (prevailing parties get relief to which they are entitled regardless of pleadings)
- Peabody v. Davis, 636 F.3d 368 (7th Cir.) (remand to trial court to properly calculate damages when liability established)
- Zastrow v. Journal Communications, Inc., 291 Wis.2d 426 (Wis. 2006) (recognizing fiduciary-breach tort under Wisconsin law)
- Hartford Elevator, Inc. v. Lauer, 94 Wis.2d 571 (Wis. 1980) (restitution appropriate remedy for fiduciary breach)
- Dick & Reuteman Co. v. Doherty Realty Co., 16 Wis.2d 342 (Wis. 1962) (broker disgorgement of commissions for fiduciary breach)