Case Information
*1 Before P OSNER , R OVNER , and H AMILTON , Circuit Judges . P OSNER , Circuit Judge
. This appeal in a diversity suit presents issues of Wisconsin law, both statutory law and common law. The plaintiff seeks recovery, on a theory of restitution, of a brokerage fee that he paid the defen- dants. The district court, deeming the parties in pari delicto (equally at fault), granted the defendants’ motion to dismiss the complaint for failure to state a claim. The defendants are a corporation engaged in providing in- *2 vestment banking services to the equipment rental in- dustry, and the corporation’s principal. See www. latekcapital.com/services.html (visited May 22, 2012). We’ll simplify our opinion by pretending that the only defendant is the corporation, which we’ll call Latek; but at the end of the opinion we’ll discuss briefly the plaintiff’s joinder of Mr. Latek as an additional defendant.
The plaintiff, John Schlueter, was the owner of a corpora- tion named Karl’s Rental Center. He retained Latek to help him obtain either an equity investor in, or a buyer of, Karl’s. On the advice of Latek, Schlueter entered into negotiations with a company called Horizon Partners that culminated in a sale of a majority of the plaintiff’s stock in Karl’s for some $30 million.
Latek billed the plaintiff $758,675 for its services in negotiating the deal. The plaintiff paid the fee without complaint or reservations but later brought this suit for the return of the entire fee on the ground that Latek had not had a brokerage license. Chapter 452 of the Wisconsin Statutes, entitled “Real Estate Practice,” requires that one have a license to “negotiate a sale” of “an interest or estate in real estate, a time share, or a business or its goodwill, inventory, or fixtures, whether or not the busi- ness includes real property.” Wis. Stats. §§ 452.01(2)(a), 452.03. Latek doesn’t have a broker’s license, or at least didn’t when negotiating the deal with Horizon.
Besides defending the district court’s ground of dis-
missal (the
in pari delicto
doctrine), Latek argues that under
Wisconsin law, as under federal securities law, see
Landreth Timber Co. v. Landreth
,
The only judicial decisions that we’ve found that bear on the issue are two federal district court decisions, only one recent. They agree with Latek. Bertha v. Remy Int’l, Inc ., 414 F. Supp. 2d 869, 877-81 (E.D. Wis. 2006); Schaller v. Litton Industries, Inc. , 307 F. Supp. 126, 133-35 (E.D. Wis. 1969). The opinions are well reasoned, but being fed- eral trial court opinions they are not authoritative construals of the Wisconsin statute. Even a federal court of appeals opinion would not be authoritative on a question of state law.
The statute was amended after the Bertha decision, moreover, and it is the amended statute that applies to this case. The provision on which the court focused in Bertha , see 414 F. Supp. 2d at 874, 877, was not section 452.01(2)(a), quoted above, but section 452.01(2)(d), which defines (or, rather, defined) “broker” as someone who “negotiate[s] a sale . . . of any business, its goodwill, inventory, fixtures or an interest therein.” That section has been deleted, while section 452.01(2)(a), which further defined a broker to include one who “negotiate[s] a sale . . . of an interest or estate in real estate,” now reads, as we know, “negotiate[s] a sale . . . of . . . an interest or estate in real estate, a time share, or a business or its good- will, inventory, or fixtures, whether or not the business includes real property.” The words we’ve italicized are the key to the plaintiff’s argument; one who owns stock in a corporation, he argues, owns “an interest” in a busi- *4 ness and therefore anyone who negotiates a sale of stock requires a license.
This can’t be right, because it would require every securities broker in Wisconsin to have a real estate broker’s license as well as a securities license, which securities brokers are already required to have. Wis. Stat. § 551.401(1). We don’t know whether Latek has a securities license, and it doesn’t matter; the plaintiff doesn’t argue that it matters and probably Latek is exempt from having to have one because it was brokering a deal involving the issuer of the securities that were sold (Karl’s Rental Center), and such brokering is exempt. Wis. Stat. § 551.401(2)(a).
The statutory changes to which the plaintiff points do not undermine the analysis in the Bertha opinion. The question whether ownership of stock is ownership of an interest in a business was the precise question that the court addressed in Bertha (as well as in the earlier district court opinion that we cited) and the amend- ments on which the plaintiff relies merely shifted the language interpreted in Bertha (“interest . . . in . . . a business”) from subsection 2(d), which was repealed, to subsection 2(a), which was enlarged.
A considerable complication, however, is that Latek was hired to sell either the business or the plain- tiff’s stock in it. Had he done the former, as he initially tried to do, clearly he would have needed a license. He didn’t consummate a sale of the business, but a failed negotiation is still a negotiation; the stat- ute defines “negotiate” broadly, to mean “to provide to *5 a party assistance within the scope of the know- ledge, skills, and training required under this chapter in developing a proposal or agreement relating to a trans- action, including . . . participating in communications between parties related to the parties’ interests in a trans- action.” Wis. Stat. § 452.01(5m)(a). Latek negotiated on Schlueter’s behalf the letter of intent to sell the assets of his business, and this was “negotiating” for the sale of the business, albeit that sale fell through in favor of a sale of stock.
Is a license required for a failed attempt? Who knows? There’s enough uncertainty about the proper interpreta- tion of the amended statute that were it essential for our deciding this case correctly to choose between the rival interpretations, we would be inclined to certify the question to the Supreme Court of Wisconsin for an authoritative answer. But it is not essential. For there is another potentially dispositive issue, concerning the relief sought by the plaintiff for the alleged violation of the brokerage statute.
Although there is no indication that Latek was aware that it might be violating a statute in negotiating the sale of the plaintiff’s stock in Karl’s Rental Center, and no complaint about the quality of the service it ren- dered or the reasonableness of its fee, the plaintiff ar- gues that he’s entitled to restitution of the fee as punish- ment for Latek’s violation, if there was a violation as we are now assuming for the sake of argument. The assumption is the premise of an alternative ground for affirmance that the plaintiff is not entitled to the relief he is seeking even if there was a violation.
The fact that he was helped rather than hurt by the
alleged violation and so is not entitled to damages is
not dispositive. Restitution and damages are different
remedies. Damages are measured by the plaintiff’s loss,
restitution by the defendant’s gain.
Management Computer
Services, Inc. v. Hawkins, Ash, Baptie & Co.
,
Speaking of thieves, “suppose a thief takes the plaintiff’s $10 watch and sells it for $20. The thief is liable for $20, as ‘restitution.’ One possible justification for this result *7 is that we think the thief’s sale price is good evidence of the actual value of the watch, in which case $20 would represent damages for the plaintiff’s loss. But even if the plaintiff concedes that the watch was only worth $10, he can recover the $20 as restitution . . . . The defendant is liable for the $20 because the . . . $20 is perceived as [including] a gain [$20 – $10] produced by the plaintiff’s property. By identifying the $20 as a product of the plain- tiff’s property, we can think of it as a replacement or substitute for the property.” 1 Dobbs , supra , § 4.1(1), p. 554 (emphasis in original). There isn’t anything like that in this case. Latek didn’t take something that belonged to the plaintiff. It merely rendered a service and the plaintiff paid without complaint the fee for which he was billed pursuant to their service contract.
If anyone would be entitled to restitution, it would be
Latek if the contract were unenforceable because of the
absence of a license; for Latek could then argue for being
able to sue for
quantum meruit
(“what he deserves”), that
is, to sue for the value of the service rendered (provided
it was less than the agreed-upon fee), which is a form
of restitution because designed to prevent unjust enrich-
ment. See, e.g,
Scheiber v. Dolby Laboratories, Inc.
, 293 F.3d
1014, 1022-23 (7th Cir. 2002). Often
quantum meruit
is awarded even in cases in which the contract is unen-
forceable because illegal.
De La Vergne Refrigerating
Machine Co. v. German Savings Institution
, 175 U.S. 40, 58
(1899);
Scheiber v. Dolby Laboratories, Inc.
,
supra
,
But this may not be a good argument in a case
governed by Wisconsin law; for a Wisconsin case which
holds that a broker can’t recover in
quantum meruit
for the
value of his performance of a contract that fails to
comply with the statute of frauds states that “there can
be no recovery in the nature of commissions by real
estate brokers or others upon quantum meruit for
services rendered in buying or selling real estate.”
Hale
v. Kreisel
, 215 N.W. 227, 228 (Wis. 1927). The case is old,
and deals with a sale of real estate rather than a sale of
stock or of a business, but its language is broad and it
has never been overruled. Another old case, also never
overruled,
Hickey v. Sutton
,
In response Latek needlessly complicates matters by arguing that the relief sought by the plaintiff the return of his fee is barred because he is in pari delicto with Latek. The plaintiff responds that he cannot be in pari delicto because he has committed no “delict”; the statute does *9 not forbid the hiring of an unlicensed broker, but only the broker’s failure to have obtained a license.
The common law teaches that if the opposing
parties in a lawsuit are equally in the wrong and as a
result neither has a colorable claim against the
other — more precisely, if awarding relief to the plaintiff
would reward wrongdoing courts will not adjudicate
their dispute. The classic illustration is
Everet v. Williams
(Ex. 1725), better known as
The Highwayman’s Case
and
reported (long afterward) in a note by that name in 9
L.Q.
Rev
. 197 (1893). A highwayman sued his partner in
crime for an accounting of the illegal profits of their
criminal activity. The court refused to adjudicate the
case, and both parties were hanged. A modern example
would be a suit by the owner of a misleading trademark
for infringement of the mark. The suit would be
dismissed, although the parties would not be hanged.
Both examples and another are discussed in
Shondel v.
McDermott
,
When as in such cases the plaintiff is asking for
equitable relief, the
in pari delicto
defense is referred to as
the unclean-hands defense. But the label doesn’t matter,
and the defenses were equated in
McKennon v. Nashville
Banner Publishing Co
., 513 U.S. 352, 360-61 (1995); see
also
Byron v. Clay
, 867 F.2d 1049, 1052 (7th Cir. 1989);
Scheiber v. Dolby Laboratories, Inc
.,
supra
,
The law could easily do without an unclean-hands doctrine and an in pari delicto doctrine, since they reduce to the principle that a court will not entertain a claim or defense that would create a greater legal wrong than vindicating the claim or defense would avert. The principle cannot help Latek. The plaintiff can hardly be thought to have been equally at fault with Latek, if Latek violated (as we’re assuming, though only for the sake of argument) the brokerage statute, while the plain- tiff, so far as anyone is suggesting, violated nothing by contracting with Latek. The statute did not require the plaintiff the broker’s client to get a license, or forbid it to deal with an unlicensed broker. And it’s not as if by contracting with Latek the plaintiff harmed some- one else. To punish the plaintiff would be the equivalent of deeming the victim of a theft an accomplice of the thief on the theory that without a victim there would have been no theft, and thus of barring the victim from *11 suing to recover what had been stolen from him. Cf. Badger Coal & Coke Co. v. Sterling Midland Coal Co. , 192 N.W. 461-62 (Wis. 1923).
But to bar relief for this plaintiff can hardly be thought a punishment for a victim of a violation. The plaintiff alleges no harm from the violation. He is seeking com- pensation for having spotted a violation of the statute and incurred legal expenses to punish the violator a bounty-hunter or “private attorney general” theory of liability. There is no common law principle that someone who discovers a violation of law that caused him no harm can nevertheless sue the violator for the latter’s profit from the violation. There are plenty of bounty-hunter statutes, see, e.g., 25 U.S.C. § 201 (violation of Indian protection laws); 31 U.S.C. § 3730(d) (False Claims Act); 47 U.S.C. § 80103 (removing wrecked property from Florida coast to foreign nations), and plenty of statutes that provide bounty-like relief in the form of statutory damages to which a plaintiff is entitled without proof of injury. See, e.g., 15 U.S.C. § 1640(a)(2)(A) (Truth in Lending Act); 15 U.S.C. § 1681n(a)(1)(A), (3) (Fair and Accurate Credit Transactions Act); 17 U.S.C. § 504(c) (copyright infringement); 18 U.S.C. § 2710(c)(2)(A) (wrongful disclosure of video tape rental or sale re- cords); 29 U.S.C. § 1854(c)(1) (Migrant and Seasonal Agricultural Worker Protection Act); 47 U.S.C. § 227(b)(3) (Telephone Consumer Protection Act) (unsolicited text messages or fax advertisements). But no Wisconsin statute authorizes the bounty that the plaintiff is seeking.
So his only hope is to show that the brokerage statute creates an implied right to seek such a bounty. Under *12 Wisconsin law as under federal law, implied rights of action to enforce statutes that do not specify a monetary remedy are occasionally recognized. Green v. Jones , 128 N.W.2d 1, 5 (Wis. 1964). But again as in federal law, e.g., Mallett v. Wisconsin Division of Vocational Rehabilitation , 130 F.3d 1245, 1249 (7th Cir. 1997), the presumption is against them. See McNeill v. Jacobson , 198 N.W.2d 611, 614 (Wis. 1972); Miller Aviation v. Milwaukee County Board of Supervisors , 273 F.3d 722, 728-29 (7th Cir. 2001) (Wisconsin law). We’ve never heard of an implied right to restitution of a violator’s profit that was not a conse- quence of an injury of some sort to the plaintiff. If a state creates a right of action, restitution the conditions for which, we emphasize, are not satisfied in this case is a permissible remedy. But what the plaintiff is seeking in this case is not restitution.
All other objections to one side, so novel an implied right of action as the plaintiff asserts cannot be defended as necessary to promote compliance with the brokerage statute. The “Real Estate Practice” act, as it is still called despite its having been broadened beyond real estate, provides misdemeanor criminal remedies for violating the statute, § 452.17, and, more important, forbids a violator to sue (perhaps including for quantum meruit ) to collect any compensation for his brokerage services. § 452.20. So had the plaintiff not paid Latek’s fee, Latek could not have sued him for it (always assuming that the statute was violated). The fact that an unlicensed broker cannot sue for his fee is a significant deterrent to violating the brokerage law, and combined with the criminal sanctions should provide adequate deterrence, *13 without need to add the sanction that the plaintiff advo- cates. In a case decided after the oral argument in the present appeal, Wisconsin’s intermediate appellate court held, consistent with this point, that “the only consequences for violating Wis. Stat. § 452.03 by acting as a real-estate broker in Wisconsin without a license are: (1) the violator may not sue in a Wisconsin court for a brokerage commission; and (2) the violator may be subject to criminal penalties . . . . Protection of Wisconsin residents from unlicensed real-estate brokers is, as the legislature determined, sufficiently enforced by denying those brokers the right to sue for their commissions in Wisconsin courts and by subjecting them to potential criminal penalties.” Hernandez v. BNG Management Limited Partnership , No. 2011AP362, 2012 WL 1499826 (Wis. App. May 1, 2012).
For the sake of completeness, we address Latek’s ar-
gument that the suit fails for still another reason: the
“voluntary payment” doctrine, recognized in Wisconsin
as in other states. If you pay a bill voluntarily that is,
on demand, rather than after being sued or threatened
with suit you can’t later sue to recover what you paid,
on the basis of facts known to you (or that you should
have known) when you paid.
Putnam v. Time Warner Cable
,
649 N.W.2d 626, 631-37 (Wis. 2002);
Butcher v. Ameritech
Corp.
, 727 N.W.2d 546, 552-56 (Wis. App. 2006);
Anthony
v. American General Financial Services, Inc.
, 697 S.E.2d
166, 175 (Ga. 2010);
Huch v. Charter Communications, Inc.
,
So the voluntary-payment doctrine is inapplicable, and the in pari delicto doctrine unhelpful, but nevertheless Latek wins.
It remains to say just a word about the joinder of Mr. Latek as a defendant. He should not have been joined, for when, as in this case, “an agent merely contracts on behalf of a disclosed principal, the agent does not be- come personally liable to the other contracting party.” Benjamin Plumbing, Inc. v. Barnes , 470 N.W.2d 888, 893 (Wis. 1991).
The judgment of dismissal is
A FFIRMED . 6-6-12