Dec. 2, 2009 – In a decision affirming the $203.8 million verdict calculated under the Wisconsin Organized Crime Control Act (WOCCA), the Wisconsin Court of Appeals clarified today when a party may withdraw an earlier invocation of the Fifth Amendment during civil litigation.

Before a party is permitted to testify after initially refusing, the trial court must consider whether the change of heart is intended to gain a tactical advantage. For example, a party who withheld information during discovery on account of privilege and then seeks to testify in the middle of trial may have hoped to preview the opponent’s theory of the case before divulging information that the opponent has little opportunity to rebut.

In S.C. Johnson & Son, Inc. v. Morris, 2008AP1647, the court also refused to impose a duty on the victim of an intentional tort to mitigate the damages stemming from misconduct he or she “should have known of.”

Conspiracy

For about a decade, certain S.C. Johnson employees invited bribes and kick backs from transportation companies. In exchange, these employees submitted inflated invoices to S.C. Johnson on behalf of those transportation companies.

Upon discovery of the scheme, S.C. Johnson sued Thomas H. Buske and his companies, Buske Lines, Inc., and Buske Intermodal, as well as Tom Russell and his companies, Transportation Associates Inc., and JMP Intermodal, Inc. S.C. Johnson alleged fraudulent misrepresentation, conspiracy to violate Wis. Stat. sec. 134.05, fraud, and violations of the WOCCA. S.C. Johnson also named two of its employees, Milton E. Morris, and Katherine M. Scheller, for breach of fiduciary care.

Following approximately three years of discovery and a four-week trial, Russell and Buske appealed the jury’s finding that they had engaged in a civil conspiracy to overcharge S.C. Johnson for transportation services.

Fifth Amendment withdrawal

In an opinion authored by Chief Judge Richard S. Brown, the court of appeals directed trial courts to study the facts of each case and tailor the most appropriate means to balance a party’s Fifth Amendment rights and the harm that a belated decision to testify might cause the opponent.

Timing of a request to withdraw a previously asserted Fifth Amendment right is one of the most important factors in the balancing test, the court said. A party who invokes the privilege during discovery may conceal its version of events and, if permitted to testify later at trial, forecloses the opponent’s ability to scrutinize, investigate, or otherwise prepare for the new information, the court observed.

The court cautioned that a late withdrawal of the privilege “does not automatically lead to a finding of abuse requiring a complete bar of submitting evidence.” If the adversary is not actually prejudiced and there is no suggestion of an effort to gain an unfair tactical advantage, the trial court should be especially inclined to permit withdrawal, the court of appeals said.

An appellate court should give deference to the trial court’s determination, the court of appeals added.

In this case, the court noted that during lengthy discovery Russell testified as a corporate representative, but he refused to answer questions he believed related to his individual liability. Shortly before trial, Russell was listed as a “may call” witness, drawing an objection from S.C. Johnson. A hearing in this dispute was scheduled days before trial, but then postponed when Russell became uncertain whether he would testify after all. On the Friday of the third week of trial, Russell decided he wanted to testify. The trial court refused to let Russell take the stand.

The trial court found Russell’s failure to answer questions during discovery caused actual prejudice to S.C. Johnson. The trial court determined that much of the case depended on Russell’s bank account, which Russell allegedly used to distribute money for the conspiracy. The court of appeals concluded that the record demonstrated S.C. Johnson – despite substantial efforts during discovery – could still not answer “why the money was there, how it got there, and who was involved.” “[T]hose missing pieces were what Russell withheld until he unilaterally decided, more than halfway through trial, that the information should be used in his defense, in his own way,” the court of appeals remarked, upholding the trial court’s decision.

Duty to mitigate an intentional tort

The court of appeals rejected Russell and Buske’s argument that the victim of an intentional tort has a duty to mitigate the damages when he or she “should have known” that misconduct was occurring. A duty to mitigate exists in breach of contract and negligence cases.

A duty to mitigate is intended to discourage the needless accumulation of damages that can reasonably be avoided, the court of appeals noted. But expansion of the duty to include intentional torts would only allow a tortfeasor “to assert the very weakness he or she exploited as a ground for limiting the victim’s damages claim,” the court said.

“So unless the victim, with actual knowledge of the danger, intentionally fails to act in the protection of his or her own interests or is heedlessly indifferent to them, there is no duty to mitigate an intentional tort,” the court of appeals, adopting the holding of Morgan, Olmstead, Kennedy & Gardner, Inc. v. Schipa, 585 F. Supp. 245 (S.D.N.Y. 1984), and Restatement (Second) of Torts sec. 918(2) (1979).

Doubled WOCCA damages

Russell and Buske questioned whether the entire damage award of $101.9 million should be doubled under WOCCA or just that portion of damages attributable to a WOCCA violation. They argued that because it was not possible to say which part of the verdict concerned WOCCA, none of the verdict should be doubled.

But the court of appeals held that none of the jury’s award fell outside of WOCCA and so it should all be doubled. Reaching this conclusion, the court explained that WOCCA – like the federal Racketeer Influenced and Corrupt Organizations Act – serves to both sanction “subversion of the economy by organized criminal elements” and to compensate victims of that criminal activity.

When a statute is both penal and remedial, the court of appeals explained, courts are to strictly construe the penal feature and liberally interpret the remainder, including the civil cause of action component, the court said.