Wisconsin Business Law and Litigation
A blog dedicated to Wisconsin business law and business litigation matters, authored by Chris Moander of the Moander Law Firm.

I recently covered the issue of business torts in the context of customers, but now we’re going to take a peek at torts between competitors. Most business lawsuits focus on the main legal tool of american business: contracts. However, there are torts out there designed for application to interactions between businesses, mostly in the absence of a contract.

The three primary areas of competitor-focused torts are:
Civil conspiracy,
Tortious interference with a contract, and
“unfair competition” and its various subsets

Civil Conspiracy
Civil conspiracy is a really odd tort. Most folks, including myself, think of conspiracy in terms of criminal matters (or Fox Mulder), but there is a tort under Wisconsin law (§ 134.01) that makes it illegal for two or more persons to act together to maliciously injure another person’s reputation, trade, business, or profession, with a key focus on the maliciousness of the individuals’ actions. What’s more, this tort also appears to be a crime, too! Again, rather unusual.

The elements of the tort are fairly basic after a “civil conspiracy” is defined: a combo of two ore more persons by concerted action to accomplish an unlawful purpose or to accomplish by unlawful means a purpose not in itself unlawful (in other words, not a crime). The elements are: (1) the formation and operation of a civil conspiracy; (2) the wrongful act or acts done pursuant thereto; and (3) damage resulting from such acts.

Moander Law Firm

Chris Moander is an Attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.

Phew, we’ve covered the “big” torts regarding consumers. Alas, there are a few more torts that, as a business owner, you need to know of:

The Wisconsin Deceptive Trade Practices Act - this statute is also known as the fraudulent advertising statute, which indicates the commercial wrong it addresses (although it covers an array of other issues aside from fraudulent advertising). Essentially, if a salesperson makes a misleading, false, or deceptive advertisement (including face-to-face statements) to a consumer, the salesperson’s business will be liable for damages. Luckily, silence is not covered by the statute and neither is the usual sales “puffery.”

This statute is particularly pernicious to businesses because it has what is known as a fee-shifting provision. What does this mean for you, the business owner? It means that not only does the injured consumer get to recover any economic damages s/he suffers from the allegedly bogus representation, s/he also gets to recover attorney fees from you - if you lose, you get to pay the consumer’s reasonable legal fees. A very harsh penalty, indeed. Under this law, there is great value in honesty and silence.

Invasion of privacy - most folks think of the Constitution and the government when privacy is mentioned, but businesses can be liable for privacy invasion in certain instances. By and large, health-related industries are the most likely targets for invasion of privacy suits because they deal with extremely sensitive information about individual’s health matters.

Here’s the framework: (1) the business disseminates information about the plaintiff to the public at large, which can be done in a number of ways, including acts ranging from publishing internal memoranda to press releases to the local news outlets; (2) the information disseminated is private (ex: that someone has HIV); (3) the information disseminated is the kind that a reasonable person of ordinary sensibilities would find highly offensive (again, HIV diagnoses); and (4) the business acted unreasonably or recklessly with that information, given the information’s sensitive nature (a lack of a legitimate need for the public to know about such information). Other laws often come into play in invasion cases, such as federal health laws and the First Amendment. Further, companies often have privacy elements in contracts with customers which can further exacerbate an invasion tort matter.

Negligently provided services - a/k/a “malpractice” for non-professional service providers - the basic negligence rules apply here: (1) you have a duty of care your customers to not negligently perform your services for them; (2) you breach that duty of care to the customer; (3) there is a causal connection between your alleged negligence and the injury suffered by the customer; and (4) the customer suffered an actual injury. The lesson here is that your are under an obligation to perform your services with extreme care - don’t skimp on the work or you will run the risk of paying up.

As my three “consumer tort” cases show, businesses must walk a fine line when dealing with customers. Consumers in Wisconsin have many legal options available to them when they feel wronged by a business. However, one theme rings true through all of these business torts: honesty matters. Good sales skills are essential for a profitable business, but the law lays out boundaries. As always, the assistance of an attorney can prove invaluable in avoiding consumer lawsuits.

As a general matter, misrepresentation = a consumer was told a fact (not an opinion) about a product that misled the consumer into buying the product. Put another way, if the manufacturer flat out lies about a key quality of the product to get the consumer to buy it, the manufacturer exposes itself to misrepresentation liability. Normal sales puffery such as “this machine will last for years and years” is not enough to create misrepresentation liability - facts are the key. Specifically, you will always need (a) the manufacturer to make a “representation of fact” to the consumer; (b) the representation must be false; and (3) the consumer relied, to her detriment, on the false representation.

Wisconsin recognized three specific types of misrepresentation classifications, which we’ll take a peek at: (1) intentional misrepresentation (aka fraud); (2) negligent misrepresentation; and (3) and strict liability.

Intentional Misrepresentation - fraud requires, in addition to the original three elements, that the manufacturer know his statements are false and that s/he intended to deceive the consumer. All of these elements sound avoidable because it simply requires a seller to not lie.

However, things are not that simple - in some cases, the producer has a duty to disclose latent defects in a product. The rub here is that there is no clear-cut rule on when this duty exists. The lesson: if there is some huge gap in bargaining power between the manufacturer and the consumer, a duty to disclose probably exists on behalf of the manufacturer. From a sales standpoint, the duty to disclose is pure torment. Generally speaking, if a product has a latent defect, either don’t sell it or disclose it.

Negligent misrepresentation - obviously, negligence is required with this flavor of misrepresentation. The required negligence must occur in the making of the representation - the key is that everyone doing sales/etc must be made fully aware of benefits and drawbacks of product, otherwise, a manufacturer may be held liable for its negligence in not notifying sales staff of those facts.

Strict Liability misrepresentation - always bad news for a business. Negligence and state of mind do not matter; if the manufacturer or seller should have had personal knowledge of the details and the product and stood to gain financially from the sale, strict liability exists.

Misrepresentation liability is, from a business standpoint, somewhat nebulous. Yet, it is also possesses some clarity. As always, it’s good to check with an attorney as to what passes muster and what does not. I mention “preventative medicine” for businesses and this is a prime area for such measures.

Moander Law Firm

Chris Moander is an Attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.

The next few posts will concern “torts” - the area of law that focuses on civil, non-contractual injuries with damages as the standard remedy. In the business context, torts fall under two categories: (1) injuries to customers (i.e. product liability) and (2) injuries to competitors (i.e. defamation and interference with contractual relations). We’ll discuss the former in this post. Bear in mind that products liability is, unsurprisingly, a heavily litigated area of the law and so my posts on this topic are very basic; any concerns you may have about products liability should be addressed by individual legal advice.

The word “injury” generally connotes ideas of bodily harm, which constitutes what is known as products liability. However, there is another area of law concerning injury to customers called misrepresentation, where the transaction between the seller and the consumer is flawed (as asserted by the consumer).

The theory behind products liability is that society has a right to be protected from catastrophic harm resulting from defective products. While such a goal is noble, it is certainly one that terrifies many manufacturers, hence the importance of getting rudimentary understanding of the area.

In a strict liability (read: the manufacturer is not favored) products liability action, there are five elements the plaintiff must prove (I won’t list them all here); the keystone element, and the most important to businesses, is whether a product is “unreasonably dangerous.” This term, translated, asks whether the average consumer would recognize that the product is dangerous and the degree of injury risked by using the product. On the other hand, a manufacturer gets a chance to be psychic and foresee all reasonable uses of the product it produces. As a bit of personal commentary, “reasonable uses” encompasses a wide array of asinine uses of any and all products - chainsaws used as can openers (ok, that’s a stretch, but my point is that a manufacturer needs to consider the creative skills of potential customers when producing goods).

Alternatively, there are negligence actions in products liability cases, which focus on the actions of the manufacturer, not the product itself (as in strict liability cases).

Products liability lawsuits can be quite harsh to a business. One avenue of prevention often taken is use of effective and attention-grabbing warning labels to get the attention of consumers. Warning labels are not a cure-all, but they do make it clear that caution must be used with a product. Another upside is that warning labels are often cheap. Another option, one that is far more costly but internalized as easily as labels, is to “childproof” your product - by that I mean you analyze the product’s safety for every possible use (not easy). Such work takes a lot of time and money on the front end of product development, but may well be worth it. Products liability suits are extremely expensive.

Bear in mind that most products liability cases focus on consumers, not businesses. Defective products in the business realm are often covered by the UCC (contract) law.

Moander Law Firm

Chris Moander is an Attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.

The Creditors’ Resource offers some advice for landlords when commercial tenants file bankruptcy.

While I’m not totally convinced that the U.S. economy has tanked, commercial bankruptcies certainly do happen and a prudent commercial landlord is smart to accept this fact - as always, preparation is key.

Moander Law Firm

Chris Moander is an Attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.

Gasp! Theft occurs in the workplace? Surely not! Oh, it’s sad but true - not all employees are honest and sticky fingers while on the clock often pick the pocket of the employer.

John Philips posted three articles on employee theft: Part I, Part II, and Part III.

I think the gist of these posts centers on two points that are always important in dealing with employees: (1) having solid policies in place and (2) enforcing them. Relationships do matter and they help make a business run well, but as John indicates, good relationships won’t stop people from boosting cash or supplies - workplace policies are king.

Moander Law Firm

Chris Moander is an Attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.

My title is for you Pulp Fiction fans and another attempt at humor on my part. Where do you draw the line with your in-house collections and hand over the burden to a collections attorney? That’s not an easy question to answer, but there are a few markers that may help.

1. The account is 90 days overdue - if you’ve not heard from the debtor in three months, especially RE payments, the time has come to look at alternative methods of collecting.
2. You cannot reach the debtor by phone, mail, email, or any other method - yup, he/she/it is hiding from you. However, hiding does as well when you have the power of the judicial system behind you (although using lawsuits may not always be the best option)
3. All of a sudden, the debtor alleges some dispute over the debt, yet refuses to divulge the relevant details (date, nature of disputed charge, etc) of the dispute to you, or anyone for that matter.
4. The debtor breaks promise after promise after promise to pay - you want to believe the debtor will pay, but this tactic just buys time for the debtor.
5. You learn that other creditors are facing the same behavior by debtor as you are - i.e. not getting paid.

As always, this list is by no means exhaustive - there are a whole array of other signals indicating that you should consider outside collections help. Essentially, it is your company’s call whether to send debts out to an independent collector - consider how your internal collection team’s time is better spent working with willing or forgetful customers, versus investing resources chasing people who will not work with you until pressure is applied.

Moander Law Firm

Chris Moander is an Attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.

As more food for thought, I’ve guest posted on my friend Jon Groth’s blog. You can read my post here on the primary collections laws that apply to Wisconsin.

Moander Law Firm

Chris Moander is an Attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.

No, that’s not really a joke - it’s the point of the following post, that properly organizing your accounts receivable files and other debt-oriented materials is a really good idea!

So, the time has come to face a debtor that has vexed collection efforts at every turn. Your collector is lined up and has begun preparations for what may lie ahead. When you turn over the debtor’s file, what will the collector find?

Organization is key in a collection matter, but is secondary to timing. As you have likely encountered, debtors (feeling desperate) often resort to running, hiding, liquidating assets/collateral, and any number of other evasion tactics. To reduce losses caused by debtor avoidance maneuvers, your business might consider confirming that certain documents are preserved, properly organized, and easily accessible. It is likely you have an existing need to maintain these records, including:

• The name, address, telephone number, Social Security number, a copy of the debtor’s driver license, and other information used to identify the debtor.
• If the debtor is a business, the contact person at the company
• Credit applications
• Debtor-signed contract or agreement
• Financial statements
• Ledger’s reflecting the debt, including the life cycle to date of your company’s relationship with the debtor
• Correspondence to debtor from your company (i.e. in-house collection documentation): emails, letters, and any other kind of documentation
• UCC financing statements
• Copies of debtor’s checks, including those that cleared and any declared NSF.
• Tax returns (for both individuals and companies)
• Records of prior relationship(s) between debtor and creditor to establish a course-of-dealing
• Any other relevant or applicable information

The list above isn’t exhaustive, but it conveys the idea of what information your business will need to organize and secure. When your collector examines these files, he or she will be able to: (1) get a sense of the debtor’s legal composition (otherwise extra research may be required); (2) potential alternatives to litigation (i.e. arbitration); and (3) whether interim relief is available (pre-suit garnishments). Because time is of the essence, you collector can move faster with organized files and thus increase the likelihood of collection and reduce costs across the board - the key value in proper document organization!

Moander Law Firm

Chris Moander is an Attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.

Well, it depends. Often, when collections is mentioned, people think of credit cards and the like…some feel like collections is dirty word reflecting hardball collectors calling you at 2 am.

Let’s look at the other side of this coin. Your company worked hard to seal a lucrative contract, only to have the other side simply stop performing or never ship the goods. They won’t accept your phone calls, nor your mailings. You dedicated considerable time and money to winning the agreement, in some cases rejecting offers from others willing to work with - all to your detriment! You sue and win - now what?

Perhaps a competitor has been using your trademark for some time, causing you to sue her and you win. She’s not paying up and she’s made that clear as crystal.

Or maybe your business offers financing to consumers so they can buy new washers and dryers. The payments begin to come in late and then, not at all. You come to find that some consumers have vanished, along with your collateral.

Litigation makes businesses shudder. However, collecting what is owed to you does matter, for a number of reasons: (1) the cost of collecting is less than the debt owed (in some cases); (2) you want to make it clear that you do mean business when debts are owed to you, so people and entities that contract with you are serious in their commitments; (3) if you don’t collect, a major part of your business may die (think banks), to name a few.

My point is simple: sometimes, many times, it is imperative that your company collect (or at least try) - your bottom line may be at stake if you don’t.

www.moanderlawfirm.com

Chris Moander is an Attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.