### COURT OF APPEALS DECISION DATED AND FILED July 18, 2023

Samuel A. Christensen Clerk of Court of Appeals NOTICE
This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See W IS . S TAT . § 808.10 and R ULE 809.62.

Appeal No. 2021AP1398 Cir. Ct. No. 2016CV317 STATE OF WISCONSIN IN COURT OF APPEALS DISTRICT III

C OLEMAN & H ARTMAN , S.C., L ARRY C OLEMAN AND S UE H ARTMAN ,
P LAINTIFFS - R ESPONDENTS - C ROSS - A PPELLANTS ,

V .

I AM G , LLC,

D EFENDANT - A PPELLANT - C ROSS - R ESPONDENT , S ETH P ARKER , A MANDA O ESTREICH AND M ELISSA B ARTHMAN ,
D EFENDANTS , C ARLSON SV, LLP,

C ROSS - C LAIM D EFENDANT - R ESPONDEN T .

APPEAL and CROSS

- APPEAL from order s of the circuit court for
Polk County: J. MICHAEL BITNEY , Judge. Affirmed in part; reversed in part
and cause remanded with directions

.No. 2021AP1398

2 Before Stark, P.J., Hruz and Gill, JJ.

¶ 1 GILL, J. Prior to 2014, Coleman & Hartman, S.C., Larry Coleman, and Sue Hartman (collectively, C&H) owned and operated an accounting firm. In 2014, C&H entered into two agreements to sell the accounting business to iAMg, LLC, Seth Parker, Amanda Oestreich, and Mel issa Barthman (collectively, iAMg). 1 C&H ultimately sued iAMg, asserting a number of causes of action arising out of that sale. iAMg , in turn, counterclaimed asserting various causes of action arising out of C&H’s claimed breach of the sale agreements.

¶ 2 iAMg now appeals and C&H cross

- appeals. Both parties claim that the circuit court erroneously exercised its discretion by dismissing with prejudice all of their respective claims based upon discovery violations. The parties also
argue that the court erred in denying their respective motion s for reconsideration,
and CarlsonSV

— where Har t man works as a CPA and which was impleaded by iAMg

— asserts that the court properly exercised its discretion in dismissing iAMg’s counter claims because dismissal of only C&H’s claims would unfairly prejudice CarlsonSV. 2

¶ 3 We conclude that the circuit court did not erroneously exercise its discretion in sanctioning C&H for discovery violations , pursuant to W IS

. S TAT

.

1 iAMg’s name in the record before us is at time s inconsistent. For example, documents refer t o it as iAM G and iAMG. For the sake of this opinion, we use the name given in iAMg’s notice of appeal.

2 There is some confusion as to whether CarlsonSV is properly identified as a
cross

- claim defenda nt, as opposed to a counterclaim defenda nt or a third

- party defendant. R esolutio n of this issue is not relevant to our analysis . Accordingly, and following the parties’ lead in their pleadings , we will identify iAMg’s claim against CarlsonSV as a “counte rclaim.”No. 2021AP1398

3 § 804.12(2 ) (2021

- 22) , 3 by dismissing its claims with prejudice after finding that
C&H’s violations were “ egregious, ” without excuse, and “extreme, substantial, and persistent.” Nor did the court erroneously deny C&H’s motion for
reconsideration. H owever, we furth er conclude that t he court did erroneously
exercise its discretion in sanctioning iAMg for discovery violations by dismissing
it s counterclaims with prejudice because the court did not make a finding that iAMg violated any disc overy order , or that it did so egregiously or in bad faith and
without excuse

. Section 804.12(2) only permits a court to sanction an offending party for discovery violations. Furthermore, the court erroneously found that
CarlsonSV would be prejudice d if iAMg’s counterclaims were no t dismissed.

¶ 4 We therefore affirm the circuit court’s decision dismissing C&H’s claims with prejudice. We reverse the court’s decision dismissing iAMg’s
counterclaims with prejudice, and we remand for the court to reinstate those
clai ms.

B ACKGROUND

¶ 5 In October 2016, C&H , a services corporation engaged in accounting and tax preparation and planning, filed the present lawsuit against iAMg , an invest ment and wealth management firm. C&H’s complain t alleged

seven c laims , including breach of contract, defamation, and intentional infliction
of emotional distress.

3 All references to the Wisconsin Statutes are to the 2021

- 22 version unless otherwise noted.No. 2021AP1398

4 ¶ 6 According to the complaint, in late 2014 and early 2015, C&H entered into two agreements with iAMg. The first agreement was an Asset
P urchase Agreement (APA), providing for iAMg ’s purchas e of “various assets of [C&H’s] business” from C&H

. The APA included non

- compete and

non

- solicitation provisions which prohibited C&H from “directly or indirectly” inducing or attempting to induce “any client

... to ceas e doing business with [iAMg]

... or in any way interfere with the relationship between any such
customer.”

¶ 7 The second agreement , a Management Services Agreement (MSA), involved the two parties combining their business se rvices “subject to [C&H] retaining control over [its] daily management operation.” As p art of the agreements, Coleman would serve as an employee of iAMg. C&H alleged that in August 2016 , iAMg terminated Coleman’s employment , terminated the MSA , and
declared the MSA to be no longer in effect.

¶ 8 iAMg filed an answer and counterclaim ed against C&H alleging that C&H breached the APA’s restrictive covenants . iAMg also sought a declaration
of the restrictive covenants’ validity. Later, the circuit court granted iAMg’s
motion s to implead CarlsonSV and to file an amended answer and counterclaims alleging , among other things, that CarlsonSV tortiously interfered with the APA by hiring Hartman. 4

4 The circuit court later granted CarlsonSV’s motion for summary judgment as to iAMg’s other c ounter claim against CarlsonSV ( tortious interference with a prospective contract )

. That counterclaim is not at issue in iAMg’s appeal

.No. 2021AP1398

5 ¶ 9 The lawsuit continued for nearly five years. In that time, iAMg and
C&H filed numerous motions to compel against each other

. iAMg continuously alleged that C&H was withholding discoverable information and, a t one point, alleged that Coleman, specifically, accessed iAMg’s servers and then destroyed
the evidence of his access to the servers ( i.e. , iAMg accused C&H of spoliation)

. ¶ 10 As relevant to this appeal, the circuit court ordered C&H to provide specific discover y to iAMg on two occasions: February 2018 and
November 2019. In the February 2018 discovery order, the court required C&H to provide iAMg with discovery “regarding when, why and how clients of [iAM g]
came to do business with Mr. Coleman or Ms. Hartman or her firm after August 26, 2016.” The November 2019 discovery order against C&H stated that C&H failed to comply with the court ’s February 2018 order , and it directed C&H to provide iAMg with specific information, including documents related to C&H’s
alle ged business with iAMg clients. The court issued only one discovery order directed specifically to iAMg. 5 That order, issued in November 2019, required iAMg to respond to C&H’s interrogatory requests and C&H’s documents requests.

¶ 11 Th roughout the litigation, t he circuit court repeatedly warned the parties that discovery sanctions were a possibility. For example, in its November
2019 discovery order s , the court warned C& H and iAMg that “[f]ailure to comply shall result in sanctions being imposed.” The court also gave oral warnings to the

5 The circuit court had previously signed a similar discovery order that was prepared by C&H. The court later vacated that order because it did not accurately reflect the court’s oral rulings. The court also signed numerous scheduling orders, some of which included discovery
co mpliance deadlines.No. 2021AP1398

6 parties. A t a November 2019 hearing regarding pending motions to compel from both C&H and iAMg , the court admonished counsel for both parties, st ating:

And instead of finalizing jury trial preparations this afternoon for the half hour that I allotted for this hearing, the [c]ourt is now bombarded with discovery motions, alleged discovery violations and a motion to amend the final scheduling order a gain, including resetting the trial, which will necessitate, at the very least, a six

- month delay in this litigation. To say that the [c]ourt is disappointed and concerned would be an understatement, gentlemen.

.... I expect the [c]ourt’s orders to be f ollowed. If they’re not, there will be the appropriate sanctions levied against the offender or the offenders. It is obvious to this [c]ourt that the parties are nowher e near ready to try this case

.... The new dates that the [c]ourt will set are expected to be complied with to the letter and without fail.

.... I can advise counsel for the record that in looking at what I have seen thus far, there have been discovery violations on both sides of the ledger . What troubles the [c]ourt is that not only have the parties failed to comply with the discovery demands that were issued, but they then failed to approach the [c]ourt for the appropriate relief, be it by way of protective orders or otherwise, until way late in the game to where we could no longer salva ge this trial date. That’s not going to happen again, gentlemen, because if it does, there will be the appropriate sanctions levied by the [c]ourt and we will try this case and bring this matter to conclusion for the parties on the next jury tria l date th at’s available to the [c] ourt and counsel’s calendar.

.... The parties are expected to comply fully with any and all outstanding interrogatories, production of documents or other discovery demands that have been made thus far. I have read them, I beli eve that they are reasonable, I believe that they were likely to lead to evidence at trial. Whether and how much of that will ultimately be admissible obviously will be determined at a later date. But the requests that are outstanding must be complied wi th in fullNo. 2021AP1398

7 under penalty of contempt and the appropriate sanctions by January 31st of 2020. Do you u nderstand that, counsel?

.... This is the last kick at the cat you’ re going to get to wra p this up to make sure that you’ re fully prepared

....
¶ 12 I n February 2021, iAMg filed a motion for discovery sanctions against C&H , stating that C&H had recently produced emails between C&H and iAMg clients

— which, according to iAMg, proved that C&H violated the APA

— “five years after they were requested,” “more than three years after the [c]ourt ordered that they be produced,” and “more than fifteen months after the [c]ourt again ordered these documents to be produced.” (Emphasis omitted.) iAMg filed a proposed order that requested, among othe r things: (1) $50,000 for reasonable costs and fees; (2) a finding that C&H intentionally breached the APA and that C&H was “dishonest in their representations to iAMg regarding the existence, nature and scope of their breaches”; and (3) an order stating that C&H was prohibited from arguing or introducing evidence regarding their breach of the
APA.

¶ 13 C&H responded to iAMg’s motion for discovery sanctions by arguing that C&H had “made a good faith effort to provide discovery” and that
C& H “produced information [on January 31, 2020,]

... that included lists of people that [C&H] had worked with after the [MSA] was wrongfully terminated.” C&H also requested that iAMg be sanction ed for attorney’s fees and expenses due to iAMg’s own failure to respond to discovery requests

. ¶ 14 CarlsonSV also opposed iAMg’s motion for discovery sanctions against C&H

. Specifically, CarlsonSV argued that if iAMg’s discovery sanctions
motion and the relief sought w ere granted, iAMg’s counterclaim against it

— thatNo. 2021AP1398

8 CarlsonSV tortiously interfered with the APA

— would not be defendable at trial. CarlsonSV stated that “[a] significant portion of [its] defense at trial w[ould] be presenting evidence and argument that [Hartman] did not breach the [APA]
th rough her employment with CarlsonSV.” A ccording to CarlsonSV, iAMg’s proposed court

- ordered finding that C&H intentionally violated the APA would directly conflict with CarlsonSV’s theory of defense. To the extent the circuit court granted iAMg’s motion for discovery sanctions and granted its relief sought, CarlsonSV argued that the court should “make arrangements to remove the prejudicial effect

... by allowing the [ counter] claim against CarlsonSV to be tried separately.”

¶ 15 iAMg respond ed to CarlsonSV’s objection, conced ing that CarlsonSV did not engage in discovery violations. However , iAMg asserted that CarlsonSV “was repeatedly made aware that [Hartman] was the subject of restrictive covenants when they hired her

... [and] CarlsonSV wa s a beneficiary of her misconduct.” Therefore, iAMg argued , the issue could b e “ remedied with jury instructions at the time of trial[] so that CarlsonSV [would] not [be] unfairly punished for [Hartman’s] discovery failures.”

¶ 16 Followin g iAMg’s discovery sanctions motion, the circuit court held a scheduling conference on February 19, 2021 . The court informed the parties:

Having read all the pleadings filed since we were last together in October, it’s obvious that I’m going to have to
ma ke significant decisions regarding the issues of discovery despite my hope that counsel would be able to work together and in concert with their experts to resolve these. That, unfortunately, hasn’ t been done

....

.... I think counsel both know that when I make the decision on what is going to be ultimately discoverable and the mechanism for which that’ s gonna be done by, if that’ s notNo. 2021AP1398

9 complied with by a date certain in advance of trial, standard sanctions would be the exclusion of evidence or the exclusion of witnesses as may be appropriate, and that goes both ways

....
¶ 17 T he circuit court then scheduled a motion hearing for March 29, 2021, to address iAMg’s discovery sanctions motion as well as C&H’s motion to compel iAMg to prod uce specific discovery and allow C&H to forensic image
certain devices . On March 26, iAMg filed a letter with the court requesting an adjournment due to an iAMg attorney’s “serious health concern.” According to iAMg, C&H did not object to the adjournment

. ¶ 18 As the circuit court had warned, it imposed discovery sanctions on both C&H and iAMg , and it denied iAMg’s adjournment request

. In a written decision and order, the court dismissed with prejudice C&H’s claims and iAMg’s
counterclaims

. In rendering its decision, the court focused on C&H’s discov ery violations

— specifically violations of the court’s February 2018 and
November 2019 discovery orders. The court did not find in its decision that iAMg had violated the court’s N ovember 2019 discovery order against it or any other order. Despite this omission, the court dismissed iAMg’s counterclaims because , according to the court, dismissing only C&H’s claims would unfairly prejudice
CarlsonSV.

¶ 19 Following motions for clarification and reconsideration from iAMg and C&H, the circuit court affirmed its discovery sanctions decision and order. Of note, the court denied iAMg’s motion because the court “granted the relief requested by” iAMg and because all of the claims from both parties “ar e so inextricably intertwined

... that to partially reopen th[e] litigation” would create “an inability to fairly and fully prosecute or defend” the counterclaims . The court reaffirmed its reasoning that CarlsonSV woul d be unfairly prejudiced if iAMg’sNo. 2021AP1398

10 counterclaims continue d

. Again, the court did not make a finding that iAMg violated the November 2019 discovery order against it or any other order.

¶ 20 iAMg appeal s , and C&H cross

- appeal s

. Additional facts will be presented below where necessary.

D ISCUSSION

¶ 21 C&H and iAMg both argue that the circuit court erroneously exercised its discretion by sanctioning them with dismissal of their respective claims with prejudice. As relevant t o this appeal and cross

- appeal , a party “may apply for an order compelling discovery” “[i]f a deponent fails to answer a
q uestion propounded or submitted”; “ a party fails to answer an interrogatory
submitte d”; or “ if a party, in respo nse to a request for inspection

... fails to produce documents or fails to respond that inspection will be permitted as requested or fails to permit inspection as requested.” See W IS

. S TAT

. § 804.12(1)(a). An order compelling discovery may require “ an answer, or a designation, or ” an inspection

. Id.

¶ 22 Upon a party’s failure “ to obey an order to provide or permit discovery ,” a circuit court “ in which the action is pending may make such orders in regard to the failure as are just, ” including “ dismissing the a ction or proceeding or any part thereof, or rendering a judgment by defaul t against the disobedient
party .” W IS

. S TAT

. § 804.12(2)(a)3. (emphasis added) ; see also W IS

. S TAT

. § 805.03 (“[F]or failure of any party

... to obey any order of court, the court in which the action is pending may make such orders in regard to the failure as are just, including but not limited to orders au thorized under [§] 804.12 (2) (a) .”)

. Prior to issuing sanctions, due process “ requires at least a fair and adequate warning by

cour t rule or notice of the imposition of the sanctions or penalties to be invokedNo. 2021AP1398

11 for the failure to comply with a court order. ” Latham v. Casey & King Corp. , 23
Wis. 2d 311, 316, 127 N.W.2d 225 (1964).

¶ 23 Before dismissing a party’s claims based upon a party’s failure to obey a circuit court order to provide or permit discovery pursuant to W IS

. S TAT

. § 804.12(2) (a)3., a circuit court must “make a finding of ‘ egregious conduct ’ or ‘bad faith’ without a ‘ clear and justifiable excuse .’” Mohns Inc. v. BMO Harris
Bank Nat’l Ass’n , 2021 WI 8, ¶36, 395 Wis. 2d 421, 954 N.W.2d 339 (citations omitted). “W here the

... court finds that failures to respond to discovery and
follow court orders are ‘ extreme, substantial, and persistent ’ it may dismi ss the action with prejudice on the grounds that the conduct is egregious. ” Industrial Roofing Servs., Inc. v. Marquardt , 2007 WI 19, ¶43, 299 Wis. 2d 81, 726 N.W.2d
8 98 (citation omitted)

. ¶ 24 “A discovery sanction represents a discreti onary determination of [a]
circuit court and is examined under the erroneous exercise of discretion standard
of revie w.” 6 Mohns , 395 Wis. 2d 421, ¶33. A circuit court’s discretionary power

6 iAMg argues for a de novo review of the circuit court’s discovery sanction against iAMg because it is “only challenging the legal conclusion that [its] [counter] claims were properly dismissed.” We disagree that iAMg’s framing of i ts argument on appeal alters the standard of review we apply to a court’s discovery sanctions decision. Regardless of whether the party challenging a discovery sanction takes issue with a court’s factual findings or legal conclusions, the court still must “examine[] the relevant facts, appl[y] a proper standard of law [and] us[e] a demonstrated rational process [to] reach[] a conclusion that a reasonable judge could reach.” See Mohns Inc. v. BMO Harris Bank Nat’l Ass’n , 2021 WI 8, ¶33, 395 Wis. 2d 421, 95 4 N.W.2d 339. Therefore, we apply the erroneous exercise of discretion standard to the court’s decisions to issue discovery sanctions, including the dismissal of claims. iAMg and CarlsonSV both discuss the circuit court “abus[ing]” its discretion in iss uing the discovery sanctions. Our supreme court, however, long ago abandoned the practice of using the language “abuse of discretion” in place of “erroneous exercise of discretion” because the former “carries unjustified negative connotations.” City of B rookfield v. Milwaukee Metro. Sewerage Dist. , 171 Wis. 2d 400, 423, 491 N.W.2d 484 (1992). While the two phrases refer to the same standard of review, id. , we urge counsel to use the correct terminology going forward.No. 2021AP1398

12 to issue discovery sanctions “ is ab solutely essential to the court’ s ability to efficiently and effectively administer its calendar.” Sentry Ins. v. Davis , 2001
WI App 203, ¶19, 247 Wis. 2d 501, 634 N.W.2d 553. We will uphold a court’s discretionary decision if the court “ examined the relevant facts, applied a pro per standard of law, and, using a demonstrated rational process, reached a conclusion
that a reasonable judge could reach.” Mohns , 395 Wis. 2d 421, ¶33 (citation omitted). “We affirm a circuit court’ s factual findings unless they are clearly

erroneous. ” Id. (citing W IS

. S TAT

. § 805.1 7(2) ). “ Additionally, this case involves questions of statutory interpretation and application ,” whi ch present questions of
law that we review de novo. Townsend v. ChartSwap, LLC , 2021 WI 86, ¶11, 399 Wis. 2d 599, 967 N.W.2 d 21.

I
. Discovery violation sanction against C&H
¶ 25 T he circuit court did not erroneously exercise its discretion when it
dismiss ed C&H’s claims with prejudice pursuant to W IS

. S TAT

. § 804.12(2) (a)3

. as a sanction for C&H’s failure to comply with the court’s discovery orders , which
failure the court described as “extreme, substantial, and persistent.” Specifically, the court found that iAMg served “multiple discovery demands , ” including interrogatories, requests for the production of d ocuments, and depositions, on C&H beginning in December 2016. These demands sought “all communications relating to when, why and how clients of [iAMg] came to do business with Mr. Coleman or Ms. Hartman or her firm [CarlsonSV], despite their agreed

- upon

r estrictive covenants.”

¶ 26 The circuit cou rt further found that : Despite the plaintiffs’ and their attorney’s claim that no such communication exi sted, [iAMg] discovered from documents subpoenaed from former clients that both of the plain tiffs had used a variety of email accounts toNo. 2021AP1398

13 communicate with and provide tax and accounting services to [iAMg’s] clients beginning in the fall of 2016 through early 2017. The plaintiffs , however, produced none of these emails themselves, and even denied their existence, de spite these disclosures and [iAMg’s] repeated demands therefor and [c]ourt [o]rders compelling the production thereof.

.... It was not until late February[] 2021 that the plaintiffs finally produced at least some of the emails that [iAMg] ha[d] sought over the last five years and which this [c]ourt ordered b e produced by two separate [o]rders. Furthermore, many of the emails that the plaintiffs finally turned over to [iAMg] appeared to have been altered to delete information regard ing the date and time that the emails were originally sent and to what email addresses they were sent to, leading this [c]ourt to suspect a possible effort to cover up the plaintiffs’ violations of the restrictive covenants, which again are material to [iA Mg’s] defense and counterclaims.

The court then discussed both its February 2018 and November 2019 orders , with
which the court found that C&H had refused to comply. The court’s first discovery o rder required C&H to provide discovery relating to “ when, why and how clients of [iAMg] came to do business with Mr. Coleman or Ms. Hartman or her firm [CarlsonSV] after August 23, 2016.” The court’s second discovery order required C&H to “provide responses to” specific iAMg requests for the production
of documents and an interrogatory concerning “when, why and how clients of [iAMg] came to do business with Mr. Coleman or Ms. Hartman or her firm [CarlsonSV] after August 23, 2016.”

¶ 27 After outlining the factual basis for its decision, the circuit court
found that C&H “repeated[ly] and persistent[ly] refus[ed] to comply with” both iAMg’s discovery demands and the court’s discovery orders. The court characterized C&H’s refusals as “egregious in every sense of the word

... leavingNo. 2021AP1398

14 the [c]ourt with no option[] but to dismiss this action under” W IS

. S TAT

. §§ 804.12(2)(a)3. and 805.03.

¶ 28 The circuit court’s findings that C&H “repeated[ly] and persistent[ly] refus[ed] to comply with” both iAMg’s discovery demands and the
court’s discovery orders, and that the refusals were “extreme, substantial, and
p ersistent ” and “egregious,” are not clearly erroneous and support the court’s discovery sanction against C&H. It is undisputed that the court required C&H to comply with iAMg’s disc overy requests regarding communication between C&H and iAMg clients. After the court’s November 2019 order, C&H did provide iAMg with some documents. However, iAMg then sent C&H responses it had
received , pursuant to multiple subpoenas to former clients , showing that both Coleman and Hartman used a variety of email accounts to communicate and provide tax and accounting services to iAMg clients in the fall of 2016 and early 2017. Almost none of these emails were provided through discovery by C&H up to tha t point

. Almost immediately thereafter, C&H produced the documents requested by iAMg and required by the court’s earlier orders. In total, C&H delayed in responding to the court’s February 2018 order by over 1,100 days, and
it delayed in responding to th e court’s November 2019 order b y over 450 days.

¶ 29 Despite the record before the circuit court, C&H contends that an evidentiary hearing was required prior to the dismissal of its claims because ,

a ccording to C&H, “all the facts relied upon by the circuit court [in its decision and order] were disputed.” Citing the affidavits of its forensic expert, who was
hired to address “technical issues

... related to the discovery of electronically
stored infor mation (ESI),” C&H argue s that there were “technical issues underlying the parties’ discovery dispute” and that it denies failing to produce
emails that were available to it.No. 2021AP1398

15 ¶ 30 Regardless of whether there were technical discovery issues, C&H’s reliance on its forensic expert’s affidavits and discovery issues to argue that an evidentiary hearing was required prior to the circuit court’s issuance of its
dismissal order i s misplaced. A circuit court is required to hold an evidentiary hearing on a discovery sanctions motion “if the [court] relies upon disputed facts or inferences from those facts in its decision” and if the motion is for dismissal with prejudice

. Industrial Roofing , 299 Wis. 2d 81 , ¶66 n.13 . Howev er, an evidentiary hearing is not required if the court relies on undisputed facts that are

reas onably supported by the record

. I d.

¶ 31 First, the forensic expert did not opine that the purported “ technical
issues ” caused C&H to not comply with the circuit court’s discovery orders; specifically, the expert did not explain how C&H was able to produce the emails in February 2021, but not previously. Second , t he court did not find that technical
issues had any impact on C&H’s ability to produce the ordered discovery , and the
court did not consider any f actual disputes surrounding technical issues when sanctioning C&H. This reasoning is supported by the record given that there was
no evidence before the court to the co ntrary

. Furthermore, C&H’s motion to compel at the February 2021 hearing dealt with “forensic imaging” of certain iAMg devices , and did not deal with C&H’s ability to produce documents related to communications with iAMg’s clients. 7 Therefore, the court’s findings that C&H “repeated[ly] and persistent[ly] refus[ed] to comply with” both iAMg’s discovery demands and the court’s discovery orders, and that the refusals were

7 At the February 19, 2021 hearing , C&H admitted as much when it argued to the circuit court that its “motion to compel has to do with the production of devices that our experts are prepared to look at and conduct a forensic imaging of those devices. [iAMg’s] motion for sanctions is not r eally interrelated to that.”No. 2021AP1398

16 “extreme, substantial, and persistent,” are not clearly erroneous and support the court’s discovery sanction against C&H.

¶ 32 C&H also argues that the circuit court made erroneous factual findings in its written decision and order demonstrating “a fundamental misunderstanding concerning the nature of t he discovery demands ” and “ the nature of the parties’ claims

. ” For example , C&H points to the court’s
misstatement that the MSA was terminated because C&H violated the restrictive

covenants. However, C&H fails to explain how the court’s misstatement of t hese particular background facts a ffect ed the court’s ultimate decision regarding discovery violations. We conclude that these findings, although erroneous, were not material to the court’s decision and therefore provide no grounds for reversal.

¶ 33 Next, C&H argues that the circuit court failed to “g ive warning to either party that its claims were subject to dismissal.” Instead, C&H cites the court’s statements at the February 2021 hearing, at which it stated that “ standard
sanctions wo uld be the exclusion of evidence or the exclusion of witnesses as may be appropriate .” Furthermore, C&H argues that because the court s cheduled a hearing for March 29, 2021, to address the sanctions motion, the court was barred from issuing a decision pri or to holding that hearing. In support of this latter argument , C& H cites the court’s statement that C&H should have “a full opportunity to respond” prior to the court’s sanctions decision.

¶ 34 C&H’s arguments fail for several reasons. First, C&H
mischaracterizes the circuit court’s statement regarding it giving C&H an opportunity to respond to iAMg’s motion for sanctions. T he court state d that it was giving C&H an opportunity to “support

... their position that they are entitled
to the d iscovery that they are demanding” iAMg to produce

. In other words, theNo. 2021AP1398

17 court was offering C&H an opportunity to reply to iAMg’s response to C&H’s motion to compel discovery related to forensic imaging . Regarding iAMg’s motion for sanctions, the court ask ed C&H “how long is a fair and reasonable opportunity for you to respond to” iAMg’s motion, indicating that it wanted C&H to file a written response. And, following the February 19, 2021 hearing, C&H indeed filed a response to iAMg’s motion for sanctions. The court, therefore, was fully apprised of C&H’s position as to iAMg’s motion for sanctions prior to issuing its order. E ven assuming dismissal of C&H’s claims with prejudice was not “the self

- evident remedy for an overt violation of a court order or r ule,” the court gave C&H an opportunity to respond to iAMg’s sanctions motion. See B & B Invs. v. Mirro Corp. , 147 Wis. 2d 675, 683

- 84, 434 N.W.2d 104 (Ct. App. 1988)

. ¶ 35 Second, as noted above, the circuit court warned the parties on a
number of occasions that if a party violated its discovery orders, it could impose
serious sanctions. At the November 2019 hearing, the court warned of sanctions
on three occasions. Initially , the court stated that it expected its “orders to be
followed . If they’re not, there will be the appropriate sanctions levied against the offender or the offenders.” Later, the court again warned that “ the [discovery] requests that are outstanding must be complied with in full under penalty of contempt and the app ropriate sanctions .” And again, at the end of the hearing, the court informed the parties that if the parties “ aren’t willing to comply, be fair and be fully disclosing what’ s being ordered, there will be the appropriate sanctions by way of either admissi ons or exclusions of evidence or testimony, as well as any
othe r necessary sanctions that the [c] ourt finds reasonable and appropriate. Counsel, do you understand?” Similarly, t he court’s November 2019 order identified that C&H failed to comply with its previous February 2018 discoveryNo. 2021AP1398

18 order and required C&H to provide iAMg with specific discovery. The order
further stated that “[f]ailure to comply shall result in sanctions being imposed.” 8 These warnings were more than adequate to give “a fair and adeq uate warning by

... notice of the imposition of the sanctions or penalties to be invoked for the failure to comply with” the court’s discovery order. See Latham , 23 Wis. 2d at
316.

¶ 36 Additionally, W IS

. S TAT

. § 804.12(2)(a)3. expressly provides circuit courts the authority to dismiss an action for a party’s failure to comply with a discovery order. Therefore, the court’s warnings to C&H that “appropriate sanctions” could be imposed for a party’s failure to follow the court’s discovery
orders

— in addition to the circumstances of this particular case, including the numerous warnings and length of litigation

— clearly put C&H on notice that dismissal with prejudice was a possibility. See Latham , 23 Wis. 2d at 316 (holding that the absence of a court rule allowing sanctions meant an attorney was not on notice of sanctions for failure to “obey an order to appear at a pretrial conference”).

¶ 37 C&H relies on Industrial Roofing to argue that statutory notice is
insuffi cient to give notice of sanctions. In Industrial Roofing , our supreme court stated that “before a client is subjected to dismissal with prejudice, the client should have notice that [a circuit] court is considering such a harsh sanction.”

8 At a September 21, 2020 hearing, the circuit court warned the parties that “one of the

... requests on the table

... is the ultimate dynamite sanction, which is a dismissal of this case.” The court’s statement was in response to iAMg’s motion for dismissal relating to the spoliation issue. While the court’s warning at this particular hearing was not expressly in relation to alleged discovery violations, it further supports the fact that the court warned the parties that they could be sanctioned for their improper actions, including sanction with dismissal of claims.No. 2021AP1398

19 Industrial Roof

ing , 299 Wis. 2d 81, ¶71. This holding was made in the context of an argument made on appeal by a sanctioned party. Specifically, the sanctioned party argued “that it was an erroneous exercise of discretion for the circuit court to impute the conduct of the attorney to the client where the client is blameless.” Id. , ¶57.

¶ 38 Ultimately, our supreme court determined “that it is an erroneous
exercise of discretion for a circuit court to enter a sanction of dismissal with prejudice, imputi ng the attorney’s conduct to the client, where the client is blameless.” Id. , ¶61. In this context, the court held that the attorney’s conduct in that case could be imputed upon the client because the client “knew that the court was considering the dismi ssal with prejudice sanction and was given an opportunity by the court to avoid those consequences.” Id. , ¶71.

¶ 39 Here, C&H does not argue that Coleman and Hartman were blameless or that they, specifically, did not receive proper notice . Even so, the circuit court found that the attorneys, as well Coleman and Hartman, were also to blame. For example, the circuit court found in its order dismissing C&H’s claims with prejudice, that “[d]espite the plaintiffs’ and their attorney’s claim t hat no such communication” between Coleman and Hartman and iAMg clients “existed, [iAMg] discovered from documents subpoenaed from former clients that both of the plaintiffs had used a variety of email accounts to communicate with and provide tax and accou nting services” to iAMg’s clients. Yet, Coleman and Hartman “denied” that the emails existed “despite these disclosures and the defendant’s repeated demands therefor and [c]ourt [o]rders compelling the production thereof.” This finding is not clearly err oneous. Therefore, we do not find persuasive C&H’s reliance on Industrial Roofing ’s notice standard. In any event, we conclude that C&H did receive notice of the impending sanction.No. 2021AP1398

20 ¶ 40 We therefore conclude that the circuit court’s discovery sanction decision against C&H was not without warning. Additionally, t he fact that the
court did not wait to issue its discovery sanction decision until after another motion hearing

— when the case had already languished for nearly five ye ars , after the court expressed its irritation with the parties’ discovery tactics , and after the court gave C&H an opportunity to respond to iAMg’s motion for sanctions

— does not constitute an erroneous exercise of the court’s discretion.

II
. Discovery v iolation sanction against iAMg
¶ 41 We conclude that the circuit court erroneously exercised its discretion when it dismissed iAMg’s counterclaims because W IS

. S TAT

. § 804.12(2), by its plain language, allows a circuit court to impose sancti ons only on a party that it finds violated a discovery order. 9 See Rao v. WMA Sec., Inc. , 2008 WI 73, ¶36, 310 Wis. 2d 623, 752 N.W.2d 220.

¶ 42 W ISCONSIN S TAT

. § 804.12(2)(a) begins by stating that sanctions are permissible “[i]f a party

... fails to obey an order.” Id. Section 804.12(2)(a) limits a court’s discovery sanctions “in regard to the failure .” Id. (emphasis added).
Dismissal of the action is one such sanction listed under § 804.12(2)(a) , but the

9 In its written decision and order regarding discovery sanctions, the circuit court cited three cases to support dismissal of iAMg’s counter claims: (1) Industrial Roofing Services ., Inc. v. Marquardt , 2007 WI 19, 299 Wis. 2d 81, 726 N.W.2d 898 ; (2) Lister v. Sure

- Dry Basement Systems, Inc. , 2008 WI App 124, 313 Wis. 2d 151, 758 N.W.2d 126; and (3) Garfoot v. Fireman’s Fund Insurance Co. , 228 Wis. 2d 707, 599 N.W.2d 411 (Ct. App. 1999). Although it is not clear from the decision whether the court was relying on these three cases to support dismissal against iAMg

— as opposed to dismissal against C&H only

— we conclude that the cases do not support dismissal ag ainst a non

- violating party under W IS

. S TAT

. § 804.12(2)( a). See Industrial Roofing , 299 Wis. 2d 81, ¶¶20

- 38 (disobedient party appealing); Lister , 313 Wis. 2d 151, ¶8 (same); Garfoot , 228 Wis. 2d at 711 (same).No. 2021AP1398

21 sanction is limited to “the di sobedient party.” Sec. 804.12(2)(a)3. The statute is devoid of any language allowing a court to sanction a non

- violating party.

¶ 43 This interpretation of W IS

. S TAT

. § 804.12(2) produces the most logical outcome, particularly where a no n

- violating party has claims pending. The
statute allows the non

- violating party harmed by the discovery abuses to continue its claims instead of further harming that party by also dismissing its claims. Conversely, dismissing the non

- violating party’s c laims would benefit the “disobedient” party by dismissing claims against it.

¶ 44 The circuit court’s decision and order did not make any finding regarding iAMg’s purported discovery violations. The court issued only one discovery order t o iAMg

— the November 2019 order. That order required iAMg to respond to interrogatories and produce documents, but the court never found that iAMg violated the order. 10

¶ 45 C&H concedes that “the circuit court did not make any specific
fin dings of egregiousness against iAMg” in its written decision and order. Despite this concession, C&H urges this court to “imply such a finding given the record in this case.” In making this argument, C&H cites the court’s statements throughout the nearly five

- year litigation, in which the court placed blame on both C&H and iAMg for discovery issues.

¶ 46 Be that as it may, the circuit court did not make a single finding that iAMg violated a discovery order. As outlined above, a circuit c ourt is authorized

10 Nor did the circuit court find that iA Mg failed to comply with any of the court’s scheduling orders that included discovery compliance deadlines.No. 2021AP1398

22 to issue the discovery sanctions at issue here only “against the disobedient party.”
See W IS

. S TAT

. § 804.12(2)(a)3. The court cannot be said to have made an implicit finding of egregiousness warranting the dismissal of iAMg’s

counter c laims when there was no underlying finding of a discovery order violation. Even then, the court never made a finding that iAMg violated such an order through “‘egregious conduct’ or ‘bad faith’ without a ‘clear and justifiable
excuse.’” See id. ; Mohns , 3 95 Wis. 2d 421, ¶36 (citations omitted). Furthermore, to dismiss iAMg’s counter claims with prejudice, the court was required to find, but failed to on the record before us, that iAMg ignored discovery requests and orders in an “ extreme, substantial, and p ersistent ” manner. See Industrial Roofing , 299 Wis. 2d 81, ¶43 (citation omitted) . The only comment the court made regarding iAMg’s discovery violations came at the November 2019 hearing, where it stated that the court observed “discovery violations on both sides of the ledger.” This statement

— made prior to a discovery order specifically directed at iAMg

— does not meet the standard required to dismiss a party’s claims with prejudice under § 804.12(2)(a)3.

¶ 47 C&H cites a number of cases in support of its assertion that even if a circuit court does not make an express finding that a party acted egregiously, we can look for implicit findings in the record. We disagree that these cases support C&H’s proposition as applied to this case. Fo r example, in Teff v. Unity Health Plans Insurance Corp. , 2003 WI App 115, ¶14, 265 Wis. 2d 703, 666 N.W.2d 38, the circuit court ordered a default judgment against the plaintiff for discovery violations. While the court did not specifically use the words “‘egregious’ or ‘bad faith’ to describe [the plaintiff’s] conduct,” we concluded that there was “an implicit finding” of such conduct. Id. Notably, the court found at a motion hearing that the plaintiff violated numerous discovery orders and did not “ta ke theNo. 2021AP1398

23 lawsuit seriously and give it the attention it deserved.” Id. , ¶¶9, 14; see also Englewood Cmty. Apts. Ltd. P’ship v. Alexander Grant & Co. , 119 Wis. 2d 34, 39 n.3, 349 N.W.2d 716 (Ct. App. 1984) (circuit court’s failure to use precise “magic words ” did not preclude this court from relying on the circuit court’s factual findings regarding the disobedient party’s discovery violations)

. ¶ 48 Again, here , unlike in Teff , the circuit court never found that iAMg violated a discovery orde r. We cannot search the record for implicit findings supporting a court’s discovery sanction for egregious or bad faith conduct in violation of court orders if the court never found that iAMg violated the court’s discovery orders to begin with. Further, unlike in Teff , here, the court never made a finding

— implicitly or expressly

— that iAMg engaged in egregious conduct

. ¶ 49 Following iAMg’s motion for clarification and reconsideration, the circuit court defended its dismissal of iAMg’s cou nterclaims on two different grounds. We conclude that the court erroneously exercised its discretion in dismissing iAMg’s counterclaims under both grounds.

¶ 50 First, the circuit court stated that it “granted the relief requested by [iAMg], that this matter be dismissed with prejudice because of [C&H’s] egregious discovery abuses.” However, as iAMg argues on appeal, its motion for discovery sanctions did not request dismissal of t he entire case. Instead, as it related to the discovery sanctions, iAMg only requested: (1) $50,000 for reasonable costs and fees; (2) a finding that C&H intentionally breached the APA and that C&H was “dishonest in their representations to iAMg regardin g the existence, nature and scope of their breaches”; (3) an order stating that C&H was prohibited from arguing or introducing evidence regarding their breach of theNo. 2021AP1398

24 APA ; and (4) the requested discovery

. We therefore conclude the court erroneously exercis ed its discretion in this sense.

¶ 51 Second, the circuit court justified dismissing the entire case because the parties

— specifically , CarlsonSV

— would be unfairly prejudiced if the entire case was not dismissed. In particular, the court found in its order denying iAMg’s
motion for reconsideration that all of the parties’ claims were “so inextricably
intertwined with [C&H’s] alleged violations of the restrictive covenants

... and the
discover y abuses surrounding them

... that to partially reopen this litigation would put the parties right back in the same quagmire that existed at the time of the”
court’s original sanctions decision and order, “namely, an inability to fairly and fully prosecute o r defend all of the claims and counterclaims.” ( Formatting
altered

. )

¶ 52 Assuming without deciding that the circuit court’s decision to analyze the potential prejudice to CarlsonSV when applying W IS

. S TAT

. § 804.12(2) was not in error , w e disagree with the court’s finding that CarlsonSV would be unfairly prejudiced if iAMg’s c ounterclaim a ga inst CarlsonSV were not dismissed

. T he court dismissed C&H’s claims against iAMg for violating the
court’s discovery orders

. Notably, t he court did not grant iAMg’s request to make a finding that C&H intentionally breached the APA , which would have some bearing on CarlsonSV’s ability to defend itself against the tortious interference
claim

. See Briesemeister v. Lehner , 2006 WI App 140, ¶48, 295 Wis. 2d 429, 720 N.W.2d 531 ( listing the elements for tortious interference with contract). Nor did
the court order a default judgment in favor of iAMg ’s claims against C&H.
See § 804.12(2) (a) 3. (a circuit court is authorized to dismiss the action or proceeding, or render a default judgment against the disobedient party). In other words, there has been no ruling on the merits of any parties’ claims in this case.No. 2021AP1398

25 We t herefore conclude that the court erroneously exercised its discretion by finding that CarlsonSV would be unfairly prejudiced by allowing iAMg’s

counter claim s to continue.

¶ 53 Lastly, CarlsonSV argues in the alternative that even if this court
reverses and remands on iAMg’s counterclaims, we should “order the [ cou nt er] claim a gainst [CarlsonSV] be tried separately to insulate [it] from the prejudicial taint of the sanction s imposed against C&H.” Again, in granting iAMg’s motion for discovery sanctions against C&H, t he c ircuit c ourt did not adopt iAMg’s request ed relief. Instead, the court dismissed C&H’s claims with prejudice. CarlsonSV’s request on appeal would require this court to issue an advisory opinion, which we refuse to do in this case. See State v. Armst ead , 220
Wis. 2d 626, 631, 583 N.W.2d 444 (Ct. App. 1998) (“ If the resolution of a claim depends on hypothetical or future facts, the claim is not ripe for adjudication and will not be addressed by this court. ”). Regardless, the court on remand is in the best position to determine the manner and mode of th e remaining litigation.

¶ 54 In all, the circuit court did not erroneously exercise its discretion in dismissing C&H’s claims with prejudice under W IS

. S TAT

. § 804.12(2)

. Nor did the court erroneously deny C&H’s motion for reconsideration. The court did, however, erroneously sanction iAMg without finding that it had violated a discovery order or engaged in egregious conduct

. We therefore reverse the court’s
decision dismi ssing iAMg’s counterclaims with prejudi ce and we remand for the
court to reinstate th ose claims. We affirm the court’s order dismissing C&H’s claims with prejudice.

¶ 55 No costs are awarded to any party

.No. 2021AP1398

26 By the Court.

— Order s affirmed in part; reversed in part and cause
remanded with directions.

Not recommended for publication in the official reports.