In the

United States Court of Appeals

For the Seventh Circuit

No. 11-3679

JOHN SCHLUETER,

Plaintiff-Appellant,

v.

EDWARD C. LATEK and LATEK CAPITAL CORP.,

Defendants-Appellees.

Appeal from the United States District Court

for the Eastern District of Wisconsin.

No. 2:11-cv-00127-LA—Lynn S. Adelman, Judge.

ARGUED APRIL 10, 2012—DECIDED JUNE 6, 2012

Before POSNER, ROVNER, and HAMILTON, Circuit Judges.

POSNER, 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 defendants. 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 No. 11-3679

vestment banking services to the equipment rental industry, 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 corporation 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 business 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 dismissal (the in pari delicto doctrine), Latek argues that under

Wisconsin law, as under federal securities law, see

Landreth Timber Co. v. Landreth, 471 U.S. 681, 689-91 (1985);
No. 11-3679 3

SEC v. National Presto Industries, Inc., 486 F.3d 305, 309-10

(7th Cir. 2007), the sale of stock in a business is not the

sale of a business, and so Latek was not required to have

a license to negotiate the sale of a majority stake in Karl’s.

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 federal 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 goodwill, 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 No. 11-3679

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 amendments 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 plaintiff’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 statute defines “negotiate” broadly, to mean “to provide to
No. 11-3679 5

a party assistance within the scope of the knowledge, skills, and training required under this chapter in

developing a proposal or agreement relating to a transaction, including . . . participating in communications

between parties related to the parties’ interests in a transaction.” 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 interpretation 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 rendered or the reasonableness of its fee, the plaintiff argues that he’s entitled to restitution of the fee as punishment 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.
6 No. 11-3679

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., 557 N.W.2d 67,

79-80 (Wis. 1996); Ryerson Inc. v. Federal Ins. Co., No. 10-

3522, 2012 WL 1216282, at *2 (7th Cir. Apr. 12, 2012); 1 Dan

B. Dobbs, Law of Remedies § 4.1(1), p. 555 (2d ed. 1993).

Often they’re equivalent, as when the plaintiff had overpaid the defendant by mistake and seeks to recover

the overpayment. But not always. A defendant who

takes something (and not because of an innocent

mistake, either) that belongs to the plaintiff must give

it back together with any profit from the unlawful appropriation even if that profit exceeded what the

plaintiff would have earned had his property not been

taken. City of Milwaukee v. Knox, 266 N.W. 911, 914

(Wis. 1936); Warren v. Century Bankcorporation, Inc., 741

P.2d 846, 851-52 (Okla. 1987); Restatement (Third) of Restitution & Unjust Enrichment §§ 51(4), (5)(a), and comment f;

and § 53 (2011); 1 Dobbs, supra, § 4.1(1), p. 554; Douglas

Laycock, “The Scope and Significance of Restitution,”

67 Tex. L. Rev. 1277, 1288-89 (1989). If someone steals

your pregnant cow, you are entitled to get the cow back

but also the calf even if the thief incurred expenses

in assisting the birth of the calf and his assistance was

essential to its survival.

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
No. 11-3679 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 plaintiff’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 enrichment. 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 unenforceable because illegal. De La Vergne Refrigerating

Machine Co. v. German Savings Institution, 175 U.S. 40, 58

(1899); Scheiber v. Dolby Laboratories, Inc., supra, 293 F.3d at

1022-23; United States v. Amdahl Corp., 786 F.2d 387, 393

(Fed. Cir. 1986); Zbichorski v. Thomas, 103 N.W.2d 536,

537 (Wis. 1960).
8 No. 11-3679

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, 210 N.W. 704, 704 (Wis. 1926),

holds regarding an unlicensed architect that “the failure

to procure a license bars recovery where the license is

exacted as a police measure for the protection of the

public,” and adds that this rule “applies with equal force

whether the requirement is sought upon contract or upon

quantum meruit.” An unlicensed architect sounds a

good deal more dangerous than an unlicensed real

estate broker, but if requiring a broker to be licensed is

intended for the protection of the public—albeit not

from the fall of a poorly designed building—rather than

just for protecting brokers from competition, maybe

Hickey bears on our case.

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
No. 11-3679 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, 775 F.2d 859, 868 (7th Cir. 1985).

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, 293 F.3d at 1022.

The point is only that a court will not adjudicate a case if

a judgment for the plaintiff would encourage or reward

criminal or other unlawful activity—and by the same

token it will not enforce a defense of in pari delicto if the
10 No. 11-3679

effect would be to encourage or reward a greater wrong.

The second ground is the one on which the defense was

rejected in Bateman Eichler, Hill Richards, Inc. v. Berner, 472

U.S. 299, 312-14 (1985), and Perma Life Mufflers, Inc. v.

International Parts Corp., 392 U.S. 134, 137-39 (1968) (plurality), the latter a case in which the plaintiff challenged, as

a violation of antitrust law, restrictions on its competitive

freedom, to which it had agreed in contracts with

the defendant. The defendant pleaded in pari delicto as

a defense to the plaintiff’s suit for damages. The Court

rejected the defense, holding that antitrust law, which

would be disserved by enforcing the contracts, trumps

contract law.

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 plaintiff, 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 someone 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
No. 11-3679 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 compensation 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 records); 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 No. 11-3679

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 consequence 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,
No. 11-3679 13

without need to add the sanction that the plaintiff advocates. 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 argument 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.,

290 S.W.3d 721, 726 (Mo. 2009); King v. First Capital Financial Services Corp., 828 N.E.2d 1155, 1171 (Ill. 2005). The

reason is to reduce uncertainty in commercial transac-
14 No. 11-3679

tions; the recipient of the voluntary payment doesn’t

have to create a reserve against the possibility of having

to return the payment. The plaintiff argues that he

didn’t know that Latek had no license. If instead he

were arguing that he didn’t know that Latek needed to

have a license, that would be a mistake of law; and

mistake of law is not a defense to the voluntarypayment rule, Putnam v. Time Warner Cable, supra, 649

N.W.2d at 632; Butcher v. Ameritech Corp., supra, 727 N.W.2d

at 555; Stone v. Mellon Mortgage Co., 771 So.2d 451, 458

(Ala. 2000), because the law is equally accessible to

both parties to the transaction. A mistake of fact is different; its absence is a precondition to the application of

the doctrine, as the statements of the doctrine in the

cases we’ve cited make clear.

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 become 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

AFFIRMED.

6-6-12