Title: Chevron Chemical Company v. Deloitte & Touche LLP

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

SUPREME COURT OF WISCONSIN 
 
                                                              
 
Case No.: 
 
94-2827 
                                                              
 
Complete Title 
of Case: 
 
 
Chevron Chemical Company,   
 
 
 
 
Plaintiff-Respondent-  
 
 
 
 
Cross Appellant-Petitioner,  
 
 
 
First Brands Corporation,   
 
 
 
 
Plaintiff,  
 
 
 
 
v.  
 
 
 
Deloitte & Touche LLP,   
 
 
 
 
Defendant-Appellant-  
 
 
 
 
Cross Respondent.  
  
 
 
_________________________________ 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
 
 
 
Reported at:  197 Wis. 2d 117, 541 N.W.2d 838 
 
 
 
 
 
 
 
(Ct. App. 1995) 
 
 
 
 
 
 
 
UNPUBLISHED 
 
 
                                                              
 
Opinion Filed:  
January 23, 1997 
Submitted on Briefs: 
November 14, 1996 
Oral Argument:  
 
                                                              
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Milwaukee 
 
JUDGE: 
 
MICHAEL P. SULLIVAN 
 
                                                              
 
JUSTICES: 
 
 
Concurred: 
 
 
Dissented: 
 
 
Not Participating: 
 
                                                              
 
ATTORNEYS:  
For 
the 
plaintiff-respondent-cross 
appellant-
petitioner there were briefs by David L. DeBruin and Kravit, Gass 
& Weber, S.C., Milwaukee. 
 
 
For the defendant-appellant-cross respondent there was a 
brief by John W. Hein, David J. Edquist and von Briesen, Purtell & 
Roper, S.C., Milwaukee and Genevieve Harris Roche and Deloitte & 
Touche, New York, NY, of counsel. 
 
 
 
No.  94-2827 
 
 
1
 
NOTICE 
This opinion is subject to further editing 
and modification.  The final version will 
appear in the bound volume of the official 
reports. 
 
 
No. 94-2827 
 
STATE OF WISCONSIN               :        
        
 
 
 
 
IN SUPREME COURT 
 
 
Chevron Chemical Company, 
 
 
Plaintiff-Respondent-Cross Appellant-
Petitioner, 
 
First Brands Corporation, 
 
 
Plaintiff, 
 
 
v. 
 
Deloitte & Touche LLP, 
 
 
Defendant-Appellant-Cross Respondent. 
 
FILED 
 
JAN 23, 1997 
 
Marilyn L. Graves 
Clerk of Supreme Court 
Madison, WI 
 
 
REVIEW of a decision of the Court of Appeals. Reversed and 
cause remanded. 
¶1 
SHIRLEY S. ABRAHAMSON, C.J.   This is a review of an 
unpublished decision of the court of appeals, Chevron Chemical 
Co. v. Deloitte & Touche, No. 94-2827, unpublished slip op. (Wis. 
Ct. App. Sept. 19, 1995), reversing a judgment and order of the 
circuit court for Milwaukee County, Michael P. Sullivan, Judge. 
The circuit court's judgment and order related to damages to be 
awarded to Chevron. This court in Chevron Chemical Co. v. 
Deloitte & Touche, 176 Wis. 2d 935, 501 N.W.2d 15 (1993) 
(hereafter Chevron I) had ordered judgment against Deloitte as a 
sanction for attorney misconduct and had remanded the cause to 
the circuit court "for a hearing on damages." Chevron I, 176 Wis. 
2d at 951. 
 
 
No.  94-2827 
 
 
2
¶2 
The circuit court declined to hold an evidentiary 
hearing and instead determined the damages on the basis of the 
trial record, with additional briefing and oral argument. The 
court of appeals reversed the judgment of the circuit court on 
damages, holding that the circuit court erred in failing to 
conduct an evidentiary hearing.
1 We hold that under the mandate 
in Chevron I, the circuit court had discretion to determine the 
nature of the hearing on remand. Accordingly, we reverse the 
decision of the court of appeals and remand the cause to the 
circuit court for further proceedings not inconsistent with this 
opinion. 
¶3 
The procedural history of the case is not in dispute 
and has been recited extensively elsewhere.
2 The court of appeals 
referred to the protracted litigation in this case as a modern-
day version of Jarndyce v. Jarndyce, a reference to Charles 
Dickens’ Bleak House.  
¶4 
To put the issue in context a brief summary of the 
proceedings follows: Chevron was an unsecured creditor of a 
distributor of its products for whom Deloitte served as 
independent auditor. Chevron brought suit against Deloitte 
seeking damages for negligence in performing the distributor's 
audit and intentional or negligent misrepresentation for failing 
to disclose the audit errors to Chevron. 
                     
1 The court of appeals also concluded that the circuit court 
failed to exercise its discretion to consider awarding attorney 
fees to Chevron as a further sanction.  
2 Chevron Chemical Co. v. Deloitte & Touche, No. 94-2827, 
unpublished slip op. (Wis. Ct. App. Sept. 19, 1995) at 3-5; 
Chevron I, 176 Wis. 2d at 938-41; Chevron Chemical Co. v. 
Deloitte & Touche, 168 Wis. 2d 323, 327-30, 483 N.W.2d 314 (Ct. 
App. 1992). 
 
 
No.  94-2827 
 
 
3
¶5 
The lengthy pretrial and trial proceedings were marred 
by the misconduct of Deloitte's counsel, including discovery 
abuses, misrepresentation to the court regarding the availability 
of a witness, repeated violation of a sequestration order, 
improper argument before the jury and mischaracterization of 
exhibits. The jury’s verdict favored Deloitte. On motions after 
verdict the circuit court entered judgment notwithstanding the 
verdict in favor of Chevron on the intentional and negligent 
misrepresentation claims. The circuit court inserted the figure 
$1,646,106 
on 
the 
question 
of 
damages 
arising 
from 
the 
misrepresentation. The court of appeals affirmed the circuit 
court's post-verdict judgment in Chevron’s favor on the negligent 
misrepresentation claim but concluded that the circuit court had 
erred in inserting the damage figure. Chevron Chemical Co. v. 
Deloitte & Touche, 168 Wis. 2d 323, 483 N.W.2d 314 (Ct. App. 
1992).  
¶6 
The supreme court affirmed the 1992 court of appeals 
decision. Concluding that Chevron had been prejudiced by 
Deloitte's misconduct, the court stated: "[I]t is proper to enter 
judgment as a sanction." Chevron I, 176 Wis. 2d at 949. The 
supreme court remanded the cause to the circuit court to 
determine damages with the following language which is now in 
issue: 
 
We have concluded that the matter of the amount of 
damages is to be treated as it is in typical default 
judgment cases. See generally Hedtcke v. Sentry Ins. 
Co., 109 Wis. 2d 461, 478 n.5, 326 N.W.2d 727 (1982); 
Midwest Developers v. Goma Corp., 121 Wis. 2d 632, 651-
53, 360 N.W.2d 554 (Ct. App. 1984). Because Deloitte 
has challenged the amount awarded and because there are 
genuine issues of fact remaining regarding damages, we 
remand for a hearing on damages . . . .[T]he cause is 
remanded for a determination by the circuit court of 
 
 
No.  94-2827 
 
 
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the amount of damages to be awarded as a judgment 
against Deloitte. 
 
Chevron I, 176 Wis. 2d at 950-51.  
¶7 
On remand the parties disputed the nature of the 
hearing the supreme court had mandated. Chevron argued that the 
supreme court left the form of the hearing to the discretion of 
the circuit court. Deloitte argued that the case citations and 
reference to "typical default judgment cases" in Chevron I 
evidenced an unequivocal mandate to the circuit court to conduct 
an evidentiary hearing with all the characteristics of a 
bifurcated trial on damages. These remain the positions of the 
parties on review in this court. 
¶8 
The circuit court on remand agreed with Chevron that 
the circuit court had discretion to determine the format of the 
hearing for determining damages. The circuit court concluded that 
its review of the record, illuminated by the briefs and oral 
argument of counsel, was appropriate. The circuit court reasoned 
as follows: 
 
To do otherwise (have a new trial or some other 
evidentiary hearing) would, in effect, erase the 
sanction by rewarding Deloitte & Touche with a new 
trial for their misconduct. Chevron would have obtained 
a Pyrrhic victory - nominally declared to be the winner 
yet forced to spend yet more money on a second trial as 
well as incurring the almost certain delay that another 
evidentiary hearing would entail given the conflicting 
schedules of witnesses, counsel, and the court. A 
record has been developed and the Supreme Court of this 
state has ordered judgment granted against Deloitte & 
Touche, in this judge's opinion, on all the causes of 
action. Let us examine that record and thrash out the 
entire damage issue by argument before the court; that 
is the better way to proceed. 
¶9 
Upon its review of the record and the presentations of 
counsel, the circuit court formulated extensive findings of fact 
 
 
No.  94-2827 
 
 
5
and conclusions of law relating to damages and awarded damages in 
the amount of $2,364,043. 
¶10 The court of appeals reversed the judgment of the 
circuit court. The court of appeals interpreted the comment in 
Chevron I about treating damages in this case as damages are 
treated in “typical default judgment cases” and the references in 
Chevron I to Hedtcke v. Sentry Insurance Company, 109 Wis. 2d 
461, 478 n.5, 326 N.W.2d 727 (1982), and Midwest Developers v. 
Goma Corp., 121 Wis. 2d 632, 651-53, 360 N.W.2d 554 (Ct. App. 
1984), as directing a procedure under Wis. Stat. § 806.02(2), the 
default judgment statute. The court of appeals concluded that 
Chevron I mandated an evidentiary hearing on the question of 
damages.  
¶11 The issue before this court is whether the circuit 
court properly carried out the mandate of the supreme court in 
Chevron I. 
¶12 Nowhere in the mandate is there a requirement that the 
circuit court conduct an evidentiary hearing. Nevertheless 
Deloitte argues that the supreme court’s direction that "the 
matter of the amount of damages is to be treated as it is in 
typical default judgment cases," Chevron I, 176 Wis. 2d at 950, 
and the supreme court’s reliance on Hedtcke and Midwest 
Developers direct an evidentiary hearing.  
¶13 Although Chevron I refers to typical default judgment 
cases, this case is not a typical default judgment case. It 
involved a month-long trial, a jury verdict, judgment on the 
merits after verdict and a judgment entered on appellate review 
as a sanction.  
 
 
No.  94-2827 
 
 
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¶14 Default judgment cases are governed by Wis. Stat. 
§ 806.02. Sections (1) through (4) of Wis. Stat. § 806.02 apply 
to default judgments rendered "if no issue of law or fact has 
been joined." Wis. Stat. § 806.02(1). Subsection 806.02(5) 
applies to defendants who fail to appear at trial. In the present 
case, issues of fact and law were joined and the defendant 
appeared at trial. The present case is not governed by § 806.02.  
¶15 To determine whether the supreme court intended default 
judgment procedures to apply by analogy we examine the cases to 
which Chevron I referred. Neither cited case stands for the 
proposition that an evidentiary hearing is mandatory in every 
contested default judgment case. 
¶16 Chevron I referred to Hedtcke, 109 Wis. 2d at 478 n.5, 
which reversed a circuit court's grant of additional time for the 
filing of a defendant's answer. The Hedtcke court offered the 
following guidance to the trial court in the event that upon 
remand it would enter a default judgment: "[U]pon entry of a 
default judgment, the circuit court may hold a hearing or inquiry 
to determine damages." Id. (emphasis added). This language in 
Hedtcke to which Chevron I referred does not support Deloitte's 
position that Chevron I directed the circuit court to hold an 
evidentiary hearing.  
¶17 In the other opinion referenced in Chevron I, Midwest 
Developers, 121 Wis. 2d at 651-53, the court of appeals reviewed 
a default judgment entered under § 806.02 as a sanction. The 
court of appeals held that where a default judgment was entered 
as a sanction and the amount of damages was not contested "[n]o 
proof was necessary for the trial court to determine the issue of 
 
 
No.  94-2827 
 
 
7
damages." Midwest Developers, 121 Wis. 2d at 653. Midwest 
Developers cannot be read to state that an evidentiary hearing is 
required when damages are contested. The court did not address 
the issue of contested damages. The Chevron I court likely cited 
Midwest Developers to demonstrate that the circuit court had a 
range of options available to it on remand. 
¶18 Hedtcke and Midwest Developers do not suggest that the 
Chevron I court intended to require an evidentiary hearing on the 
remand for damages. The language and authorities in Chevron I 
suggest the court's intention to leave to the circuit court's 
discretion the proper form of the damages hearing. The circuit 
court properly exercised the discretion granted it by the supreme 
court's Chevron I mandate. We agree with the circuit court that 
the grant of a new evidentiary hearing on damages would leave 
Chevron in the position of Pyrrhus, whose victories over the 
Roman army were achieved at excessive cost. Like Pyrrhus, Chevron 
would have cause to complain: "One more such victory and I am 
lost."
3 
¶19 In sum, we agree with the circuit court that the 
mandate in Chevron I left the nature of the hearing on damages to 
the circuit court's discretion. The circuit court exercised that 
discretion consistent with the mandate of Chevron I. Accordingly, 
we reverse the decision of the court of appeals and remand the 
cause to the circuit court for proceedings not inconsistent with 
this opinion. 
 
 
                     
3 The Concise Columbia Encyclopedia 721 (3d ed. 1994). 
 
 
No.  94-2827 
 
 
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By the Court.The decision of the court of appeals is 
reversed and the cause is remanded to the circuit court. 
 
 
No.  94-2827 
 
 
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