COURT OF APPEALS

DECISION

DATED AND FILED

October 15, 2020

Sheila T. Reiff

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 WIS. STAT. § 808.10 

and RULE 809.62. 

Appeal No. 2019AP2268 Cir. Ct. No. 2016CV623

STATE OF WISCONSIN IN COURT OF APPEALS

DISTRICT IV

ARROWHEAD SYSTEMS, INC. AND THOMAS J. YOUNG,

 PLAINTIFFS-APPELLANTS,

 V.

GRANT THORNTON LLP AND LAWRENCE M. BOVEE,

 DEFENDANTS-RESPONDENTS.

APPEAL from a judgment of the circuit court for Dodge County: 

JOSEPH G. SCIASCIA, Judge. Affirmed. 

Before Fitzpatrick, P.J., Blanchard, and Graham, JJ. 

¶1 BLANCHARD, J. Arrowhead Systems, Inc., and its sole 

shareholder, Thomas Young, pursue claims of negligence, breach of fiduciary 
No. 2019AP2268

2

duty, and breach of contract against accounting firm Grant Thornton, LLP, and 

one of its managing directors, Lawrence Bovee.

1 All three of Arrowhead’s claims 

are based on a set of facts that the accountants do not dispute for purposes of 

summary judgment: at no point over the years that Arrowhead received tax 

services from the accountants did the accountants alert Arrowhead to a particular 

tax strategy, causing Arrowhead to miss out on tax savings. Arrowhead also 

makes an alternative claim of fraud, alleging that accountants intentionally 

deceived Arrowhead in estimating the net tax savings that Arrowhead would have 

realized if it had implemented the tax strategy beginning when Arrowhead first 

retained the accountants. 

¶2 The circuit court dismissed all of Arrowhead’s claims on summary 

judgment. It also concluded that Young individually lacks standing to pursue the 

claims. Arrowhead Systems and Young appeal dismissal. On de novo review we 

affirm summary judgment in favor of the accountants on all claims. 

BACKGROUND

¶3 The following background is derived from allegations that the 

parties submitted to the circuit court on summary judgment. Unless otherwise 

noted, there is no factual dispute between the parties, at least for purposes of 

summary judgment.

 

1

 We use “Arrowhead Systems” (or, alternatively, “the corporation”) and “Young” in 

references that distinguish between the two, but “Arrowhead” when they make collective 

arguments or where the distinction does not matter. Similarly, we use “Grant Thornton” and 

“Bovee” for individual references, but “the accountants” in referring to the collective defendants.
No. 2019AP2268

3

¶4 Young was the chief executive officer of Arrowhead Systems and its 

sole shareholder. Arrowhead Systems was a corporation that elected to be taxed at 

all pertinent times under Subchapter S of the Internal Revenue Code, 26 U.S.C.A.

§§ 1361-1379. “Subchapter S allows shareholders of qualified corporations to 

elect a ‘pass-through’ taxation system under which income is subjected to only 

one level of taxation.” Gitlitz v. Commissioner, 531 U.S. 206, 209 (2001). Thus,

all of the income and losses of the corporation passed through to sole shareholder 

Young and Young paid tax liabilities of the corporation from distributions made to 

him by the corporation. See 26 U.S.C.A. § 1366(a)(1)(A); see also Gitlitz, 531 

U.S. at 209.

¶5 From 2003 to 2014, Arrowhead Systems engaged the accountants to 

perform tasks related to taxation, with the accountants delivering completed 

federal and state returns for the last time in August 2013. As discussed below, the 

parties dispute the scope of tax services that the parties agreed that the accountants 

would provide. The parties executed annual agreements describing services to be 

performed by the accountants and the terms under which the services would be 

rendered.2 

¶6 Bovee was the accountants’ primary point of contact for Arrowhead. 

Arrowhead would contact the accountants from time to time to ask about 

particular tax issues. 

 

2

 The parties sometimes refer to these annual agreements between Arrowhead Systems 

and the accountants as “engagement letters,” but we use the phrase “annual agreements.” As we 

discuss in an additional background section below, the annual agreements were defined in the 

annual agreements as consisting of two component documents, or at the option of the parties 

possibly three component documents: (1) an engagement letter and (2) an Attachment A 

accompanying each letter, plus possibly (3) a one or more Statements of Work. As it happened, 

the parties’ annual agreements each year consisted of all three documents. 
No. 2019AP2268

4

¶7 Arrowhead Systems’ businesses included the international export of

equipment. Before 2013, the accountants did not recommend to Arrowhead, and 

Arrowhead never asked the accountants about, potential tax benefits for U.S. 

exporters such as Arrowhead that could be achieved through a particular tax 

avoidance strategy (“the tax strategy”). The tax strategy required international 

exporters to create a corporate vehicle called an Interest Charge Domestic 

International Sales Corporation. It was not until October 2013 that Arrowhead 

learned of the tax strategy, and this was from a source other than the accountants. 

¶8 The parties do not dispute any aspect of the requirements to qualify 

for benefits under the tax strategy. All that is important to our discussion are the 

following undisputed facts. First, if an exporter timely implemented the tax 

strategy, the exporter was allowed to pay lower rates on some income for the tax 

years in which it was in place. Second, as a matter of tax law, exporters cannot 

retroactively claim the benefit of the tax strategy. That is, exporters have to timely 

create specific corporate vehicles to take advantage of the strategy, which

Arrowhead had not done before 2013. 

¶9 After Arrowhead independently learned of the tax strategy, Young

asked the accountants to estimate the net tax savings that Arrowhead Systems 

would have realized if it had implemented the tax strategy over the years that it 

received tax services from the accountants. The parties dispute various aspects of 

the steps that the accountants took after receiving this request. However, they

agree that in February 2014 Bovee sent Young an email attaching a statement 
No. 2019AP2268

5

estimating that Arrowhead Systems would have realized approximately $124,500

in net savings if it had implemented the tax strategy starting in 2003.3 

¶10 Arrowhead Systems began to implement the tax strategy in 

November 2013. 

¶11 Arrowhead’s amended complaint alleges that the accountants were 

negligent, breached a fiduciary duty, and breached a series of contracts in the 

course of its relationship with Arrowhead, all based on the fact that the

accountants did not recommend the tax strategy to Arrowhead before Arrowhead 

independently discovered it in late 2013. 

¶12 Arrowhead separately alleges that the accountants committed fraud. 

The fraud allegation was that the accountants provided Arrowhead Systems with 

an estimate of unrealized net tax savings as a result of not implementing the tax 

strategy that the accountants knew was lower than the actual net savings that could 

have been achieved. The accountants minimized the actual unrealized net tax 

savings, according to Arrowhead, with the intent of dissuading Arrowhead from 

pursuing claims against the accountants in court. 

¶13 The accountants moved for summary judgment and Arrowhead 

opposed the motion. In an extensive written decision, the circuit court made a 

series of rulings that resulted in summary judgment against Arrowhead Systems 

and Young on all claims. This included the court’s conclusion that, based on a 

choice of law provision in the annual agreements, Arrowhead Systems’ claims of 

 

3

 Stated more completely, the accountants’ estimate was that there would have been tax 

savings of approximately $310,000, but that costs associated with implementing the tax strategy 

would have brought net tax savings down to approximately $124,500. 
No. 2019AP2268

6

negligence, breach of fiduciary duty, and breach of contract are barred by a twoyear Illinois statute of limitations. The court further concluded that Young lacks 

standing to bring direct claims against the accountants for providing inadequate 

tax service to Arrowhead Systems. Arrowhead Systems and Young appeal.

DISCUSSION

¶14 We conclude that (1) the annual agreements between Arrowhead 

Systems and the accountants govern the claims by Arrowhead Systems;

(2) Arrowhead Systems’ claims are barred by an Illinois two-year limitations 

period contained in the annual agreements, and that the limitations period was not 

tolled under the doctrines of fraudulent concealment or equitable estoppel;

4

(3) Arrowhead disavowed in the circuit court that it was making an independent 

fraud claim and therefore cannot pursue it going forward; and (4) Young lacks 

standing to pursue any of the claims, which belong to Arrowhead Systems, despite 

the fact that he was the sole shareholder and the corporation had elected to adopt 

the Subchapter S flow-through taxation feature. The following legal standards and 

standards of review are applicable to multiple issues.

¶15 We review a grant of summary judgment independently of the 

determinations of the circuit court, but we apply the same methodology. Green 

Spring Farms v. Kersten, 136 Wis. 2d 304, 315-17, 401 N.W.2d 816 (1987).

Summary judgment is appropriate when there is no genuine dispute of material 

 

4

 To clarify, the disputes on the first two issues are strictly between the only parties to 

the annual agreements—Arrowhead Systems and the accountants—and not Young, who was not 

a party to the agreements.
No. 2019AP2268

7

fact and the moving party is entitled to judgment as a matter of law. WIS. STAT.

§ 802.08(2) (2017-18).

5

¶16 Contract interpretation presents a question of law that we review de 

novo. Marx v. Morris, 2019 WI 34, ¶20, 386 Wis. 2d 122, 925 N.W.2d 112.

¶17 “[W]e interpret the plain language of a contract ‘consistent with 

what a reasonable person would understand the words to mean under the 

circumstances.’” Id., ¶63 (quoted source omitted). When contract terms “‘are 

clear and unambiguous, we construe the contract according to its literal terms.’” 

Maryland Arms Ltd. P’ship v. Connell, 2010 WI 64, ¶23, 326 Wis. 2d 300, 786 

N.W.2d 15 (quoted source omitted).

¶18 Because we conclude that the contract language here is not 

ambiguous on any issue that we address, we have no need to resort to either of two 

aids to interpretation that can be used when a court is faced with ambiguous 

language: evidence extrinsic to the contract itself, to determine the intent of the 

parties; or, the rule that ambiguous language is to be interpreted against the drafter 

(here, the accountants). See id. 

I. SCOPE OF ANNUAL AGREEMENTS 

¶19 The parties dispute whether the scope of the annual agreements is 

broad enough to govern all tax services that the accountants provided (or failed to 

provide) to Arrowhead Systems in a given year, or instead the scope of the annual 

agreements was limited to the subset of tax services that are specifically set forth 

 

5

 All references to the Wisconsin Statutes are to the 2017-18 version unless otherwise 

noted.
No. 2019AP2268

8

in Statements of Work that were part of each annual agreement. This is important 

because the annual agreements contain a choice of law provision that we conclude 

is dispositive. 

¶20 Arrowhead Systems contends that the terms in the annual 

agreements do not govern this dispute because the agreements limited the scope of 

the accountants’ obligations exclusively to preparing federal and state tax returns, 

which would not include the tax service of providing advice on potential tax 

strategies. This argument rests on the proposition that the only set of obligations

covered by the terms of the annual agreements that the accountants could have had 

to the corporation were those detailed in Statements of Work. 

¶21 In contrast, the accountants argue that the terms of the annual 

agreements govern this dispute because the agreements stated that the accountants 

would provide “tax services” to Arrowhead Systems, including “all [s]ervices 

rendered whether or not the parties execute a [s]tatement of [w]ork,” which would 

include the tax service of alerting Arrowhead Systems to the tax strategy. 

¶22 We now provide additional background facts and then explain why 

we agree with the accountants’ interpretation. 

A. Additional Background

¶23 Each annual agreement consisted of the following component 

documents: an engagement letter, an Attachment A to the letter, and a Statement 

of Work.

6

 We now describe each document.

 

6

 Arrowhead Systems acknowledges that, from year to year, there was only “minor 

variation” in the language of these documents, and that any variations do “not change the 

(continued)
No. 2019AP2268

9

¶24 Engagement letter. The two-page letter stated that Grant Thornton 

was to “provide tax services (the “Services”)” to Arrowhead Systems. It also 

stated that the agreement formed by “this letter, Attachment A, and any related 

Statement(s) of Work” would “confirm the scope and terms of our engagement.” 

¶25 The letter further provided in pertinent part:

The Services we provide to you under this 

Agreement typically will be set forth in distinct Statements 

of Work signed by you ... specifying matters including 

scope, deliverables, timing, fees and payment terms. From 

time to time we may perform in the course of our 

relationship Services without a Statement of Work. This 

Agreement will cover all Services rendered whether or not 

the parties execute a Statement of Work.

¶26 The accountants committed in the letter to perform the “Services” in 

accordance with identified professional standards. 

¶27 Attachment A. The five-page Attachment A addressed such topics 

as the required participation and responsibilities of Arrowhead Systems in the 

relationship.

7

 It included the following passage, which referred to “matters” for 

 

analysis.” For ease of reference we quote representative language from the December 2009 

annual agreement, and refer to the agreements’ component documents in the singular (e.g., “the 

engagement letter”). 

On a related note, Arrowhead takes the factual position that the parties entered into 

annual agreements only between 2007 and 2012, but neither side contends that the alleged 

absence of agreements before 2007 changes the analysis on any issue that we address. 

7

 These Attachment A topics included, favoring the accountants, a “Limitation on Period 

to File Claims” of two years and a “Limitation of Liability.” Given our dispositive rulings on 

other issues, however, we need not reach the disputes between the parties on the potential 

applicability of these provisions. 

(continued)
No. 2019AP2268

10

which Arrowhead Systems was engaging the accountants as being those “covered 

in the Agreement,” not as being those covered in any Statement of Work:

Our conclusions are limited solely to the matters for which 

we were engaged. No conclusions should be inferred as to 

any matters not specifically covered in the Agreement. 

Further, the conclusions are based upon the facts and 

information presented by you and may be inapplicable if 

the actual facts differ from those presented in any respect. 

In addition, Attachment A provided that “[a]ny capitalized terms in this 

Attachment A that are not defined shall have the meanings in the letter,” which 

would include the term “Services.”

¶28 Statement of Work. The two-page Statement of Work (including

an addendum, listing types of returns to be completed) stated that its purpose was 

“to describe the scope of services (“Services”)” that Arrowhead Systems was 

“requesting Grant Thornton to perform, and to set forth the agreed fee, timing and 

other matters related to the Services.”

¶29 The Statement of Work further provided:

The Services we will provide to you for the taxable 

year ended [specified tax year stated here] include the 

following specific deliverables, as detailed below or as set 

forth in the Addendum to this Statement of Work ....

 Preparation of federal and state tax returns

 Preparation of federal and state extension 

calculations and applicable forms.

 

While on this subject, we note that we need not address whether a two-year Florida 

statute of limitations could apply here based on Young’s Florida residency. Nor do we need to 

address the accountants’ alternative argument that any individual claim by Young would be timebarred under Florida’s statute of limitations because his claims would be “foreign” under 

Wisconsin’s borrowing statute, WIS. STAT. § 893.07. 
No. 2019AP2268

11

B. Analysis

¶30 We agree with the accountants that the annual agreements define the 

“Services” that the accountants would provide to Arrowhead Systems as being 

“tax services” generally, without qualification. There is no other definition of 

“Services” that applied and there were multiple references in the annual 

agreements that support this interpretation. Further, this defined term, “Services” 

was used throughout the annual agreement. We disagree with Arrowhead’s 

counter argument, which is that the “Services” were limited to the specific 

“deliverables” described in each Statement of Work. We now explain our

conclusions further, based on a plain language interpretation of the annual

agreement.

8

¶31 No doubt the expressed choice of the parties to define the “Services” 

using the broad phrase “tax services” created a wide field of potential 

responsibility for the accountants. But breadth in a contract term, even great 

breadth, does not necessarily indicate ambiguity. See Mattheis v. Heritage Mut. 

Ins. Co., 169 Wis. 2d 716, 722, 487 N.W.2d 52 (Ct. App. 1992). As we stated in 

Mattheis, a contract term “is not ambiguous merely because it is general enough to 

encompass more than one option,” because parties may elect to use “[b]road 

terms” in order “to permit flexibility in the choice of methods available without 

creating an ambiguity.” Id. Here, Arrowhead Systems fails to point to other 

language in the annual agreements that would undermine the conclusion that the 

 

8

 Arrowhead Systems alludes to expert testimony interpreting the annual agreements and 

to a particular argument made by the accountants in the circuit court, but it fails to develop an 

argument based on legal authority that either of these could be pertinent to our task of de novo 

interpretation under the contract interpretation standards we have summarized above. 
No. 2019AP2268

12

parties intended to create a wide field of potential tasks by the accountants in

defining the “Services” as “tax services” without qualification. Further, the 

intention of the parties was clear from multiple references in the annual 

agreements, including the following. 

¶32 The engagement letter provided: “This Agreement will cover all 

Services rendered whether or not the parties execute a Statement of Work.” This 

made clear that the parties contemplated that the “Services” were not exclusively 

those tasks defined in a Statement of Work, as Arrowhead Systems contends. As 

the accountants point out, Arrowhead Systems’ argument that the only set of 

obligations that the accountants could have had to the corporation were those 

detailed in Statements of Work is problematic because it would render this 

provision superfluous. See Ash Park LLC v. Alexander and Bishop Ltd., 2015 

WI 65, ¶37, 363 Wis. 2d 699, 866 N.W.2d 679 (“Interpretations that give 

reasonable meaning to each provision in the contract are preferred over 

interpretations that render a portion of the contract superfluous.”). 

¶33 The engagement letter established that use of “any” Statement of 

Work was merely an optional means of defining particular obligations. In the 

same vein, the engagement letter provided that a Statement of Work would 

“typically” be used, meaning that it did not need to be used. Consistent with that 

idea, the letter specified that, “[f]rom time to time,” the accountants “may perform 

in the course of our relationship Services without a Statement of Work.” For these 

reasons, the letter reflected an agreement that the “Services” defined in the letter 

could exceed in scope any specific tasks that might be specified in a Statement of 

Work. Arrowhead Systems apparently invites us to ignore this language in the 

annual agreements because the parties included a Statement of Work in each of the 

annual agreements, which rendered this language merely “hypothetical.” We fail 
No. 2019AP2268

13

to see any basis for this position under the standards that we apply to the 

interpretation of contracts. 

¶34 Terms in the Statement of Work itself provided further indicia that 

any Statement of Work included in any annual agreement provided a floor, and not 

a ceiling, on the potential scope of “Services.” First, the Statement of Work

provided that “The Services we will provide to you for the taxable year ended 

[specified tax year stated here] include the following specific deliverables,” which 

suggests that the Statement of Work was not an exclusive list of all “Services.” 

(Emphasis added.) Second, the Statement of Work provided that it “does not 

modify or amend” the agreement created by the engagement letter and Attachment 

A. Together, these terms limited the scope of any Statement of Work that the 

parties might decide to include in any annual agreement to addressing the 

obligation of the accountants to produce specific “deliverables” listed within the 

Statement of Work, thus leaving unqualified the broad definition of “Services” as 

tax services created by the engagement letter and used in the attachment.

¶35 It is true that the Statement of Work provided that it “does not 

include, for example, studies, ... or research or consultation with respect to 

nonrecurring items or other matters of tax significance that may arise in the course 

of tax return preparation or during the course of the year,” and then explained that 

in that event “such items arise or you request additional Services we will provide 

you a fee estimate and a new Statement of Work before we invest significant 

professional time.” Viewed strictly in isolation, this language could suggest that 

all work by the accountants had to be detailed in a Statement of Work. However, 

we interpret specific contract language in the context of the contract as a whole. 
No. 2019AP2268

14

Little Chute Area Sch. Dist. v. Wisconsin Educ. Ass’n Council, 2017 WI App 11, 

¶25, 373 Wis. 2d 668, 892 N.W.2d 312.9 Read in the context of all of the 

language that we cite above, the only reasonable interpretation of this language is 

that the accountants were agreeing that in general (“for example”) they would 

create Statements of Work to match “nonrecurring items or other matters of tax 

significance,” but that the accountants may provide “Services” not detailed in any 

Statement of Work. 

¶36 Along similar lines, given the other provisions, it does Arrowhead 

Systems no good to emphasize in support of its argument the following sentence 

from the Statement of Work: “The purpose of this Statement of Work is to 

describe the scope of services (“Services”) [Arrowhead Systems] is requesting [the 

accountants] to perform, and to set forth the agreed fee, timing and other matters 

related to the Services.” Read in the context of other provisions in the annual 

agreement that we have highlighted, this simply meant that producing the 

particular, limited set of “deliverables” listed in the Statement of Work was the 

only set of obligations required of the accountants by the Statement of Work itself. 

Thus, for example, the Statement of Work gave an estimate for fees for the 

production of the deliverables, which is a statement-of-work-specific provision.

 

9

 Elaborating on this point, we note that there are two potential sides to the equation. 

Particular contract language that is seemingly clear may be understood to be ambiguous when 

considered in the context of the contract as a whole. See Folkman v. Quamme, 2003 WI 116, 

¶19, 264 Wis. 2d 617, 665 N.W.2d 857. By the same token, however, seeming ambiguity in 

particular contract language may be shown to be clear when the contract as a whole is considered. 

See id., ¶21; Blum v. 1st Auto & Cas. Ins. Co., 2010 WI 78, ¶¶20, 32, 326 Wis. 2d 729, 786 

N.W.2d 78. In this instance, Arrowhead Systems makes an argument focused on particular 

language that ignores context provided by other language in the contract.
No. 2019AP2268

15

¶37 Arrowhead Systems argues that if the “tax services” interpretation of 

the annual agreement were correct “there would be no reason to enter into multiple 

engagement letters.” Assuming without deciding that this argument could assist in 

interpreting the annual agreement, it ignores the obvious value to the parties of 

being able to specify particular deliverables to be produced in any given year and 

to review and discuss the agreements in general on a periodic basis. Further, 

stepping back, we review the agreements that the parties in fact entered into; it is 

irrelevant whether the parties could have structured their relationship in different 

ways, including ways that Arrowhead Systems might now suggest would have 

been more optimal with the benefit of hindsight.

¶38 Arrowhead Systems misinterprets the sentence in the engagement 

letter which provided that the annual agreement formed by “this letter, Attachment 

A, and any related Statement(s) of Work” would “confirm the scope and terms of 

our engagement.” Arrowhead Systems may intend to interpret this sentence to 

mean that the “scope” of “engagement” could not go beyond the deliverables 

listed in any Statement of Work in a way that limits the otherwise broad definition 

of “Services” as “tax services.” But that is not a reasonable interpretation in light 

of the other provisions we have highlighted. Instead, the only reasonable 

interpretation is that the scope of “Services” would be defined by the engagement 

letter, with the entire annual agreement providing context for how the parties 

would address particular deliverables listed in any Statement of Work.

¶39 Arrowhead Systems states, 

[j]ust because Grant Thornton may provide other services 

that come within the definition of Services without a 

separate statement of work does not mean that everything 

Grant Thornton could have been asked to do at any point 

falls within the definition of Services and is covered by the 

Engagement Letters. 
No. 2019AP2268

16

We interpret this as an argument that the annual agreement could not encompass 

all “tax services” that the accountants could provide, but that it had to be more

specific. This argument merely returns us to our original point that parties are 

permitted to enter into contracts that create broad obligations.

¶40 On a related point, we note that Arrowhead Systems fails to develop 

an argument contrary to the accountants’ contention on appeal that, if the annual 

agreements applied to all tax services, then that would have included providing 

advice about the tax strategy in particular. As the accountants argued the point to 

the circuit court: “What the [p]laintiffs are complaining here is [that] the people 

who provided tax services didn’t recommend a tax service.” Arrowhead Systems 

concedes the issue by failing to reply to the accountants’ argument. See United 

Coop. v. Frontier FS Coop., 2007 WI App 197, ¶39, 304 Wis. 2d 750, 738 

N.W.2d 578 (failure to refute proposition asserted in response brief may be taken 

as concession).10

¶41 Finally regarding the scope of the annual agreements, we note two 

phrases in the choice of laws provision in the engagement letter, a provision that 

we discuss in more detail in the following section of this opinion. We now 

italicize the two pertinent phrases here:

This Agreement, including its formation and the 

parties’ respective rights and duties and all disputes that 

might arise from or in connection with this Agreement or 

its subject matter, shall be governed by and construed in 

 

10

 On a related note, given other decisions we explain in this opinion, we need not 

address an alternative legal theory that the accountants offer to affirm the circuit court, namely, 

that if giving unsolicited tax advice about the tax strategy was beyond the scope of the annual 

agreement, then Arrowhead Systems could not prevail because there was no evidence of a 

separate agreement to provide this type of advice. 
No. 2019AP2268

17

accordance with the laws of Illinois, without giving effect 

to conflicts of laws rules. 

(Emphasis added.) It supports our interpretation of the annual agreement that the 

parties included this very broad language in the choice of laws provision. They

reached out to include “all disputes” arising from the “subject matter” of the 

agreement and did not, for example, limit this provision to the resolution of 

disputes involving deliverables listed on any Statement of Work.

¶42 For these reasons, we conclude that all tax services provided by the 

accountants fall within the scope of the annual agreements, and accordingly the 

accountants’ failure to provide advice regarding the tax strategy is governed by the 

terms of those agreements. 

II. STATUTE OF LIMITATIONS

¶43 We turn to the accountants’ contentions that a choice of law 

provision in the annual agreement dictates the application of Illinois law to 

disputes between the parties, and that, applying Illinois law, the claims of 

Arrowhead Systems are time-barred under a two-year statute of limitations.11 In

this context, Arrowhead Systems renews arguments that we have already rejected 

above related to the scope of the annual agreement. Putting those arguments to the 

side, we do not discern any new argument by Arrowhead Systems either that 

Illinois law does not govern under the choice of law provision or that the correct 

statute under Illinois law is not the one cited by the accountants. 

 

11

 As with the first issue addressed above, the dispute on the second issue is strictly 

between the only parties to the annual agreements—Arrowhead Systems and the accountants—

and not Young.
No. 2019AP2268

18

¶44 What remains is Arrowhead Systems’ argument that the statute of 

limitations was tolled due to fraudulent concealment by the accountants under 735 

ILL. COMP. STAT. 5/13-215 or due to the closely related common law doctrine of 

equitable estoppel.

12

 More specifically, Arrowhead Systems contends that the 

accountants cannot assert the two-year Illinois limitations defense because 

Arrowhead Systems reasonably relied on false representations made by the 

accountants that prevented Arrowhead Systems from understanding the full scope 

of its net tax losses. In response, the accountants argue that fraudulent 

concealment/equitable estoppel does not apply on these facts. We agree with the 

accountants on this issue. 

¶45 We now provide additional background and then explain why we 

agree with the accountants on this disputed issue of Illinois law. 

A. Additional Background

¶46 As to the choice of laws issue, as partially quoted above, the 

engagement letter provided in pertinent part:

This Agreement, including its formation and the 

parties’ respective rights and duties and all disputes that 

might arise from or in connection with this Agreement or 

its subject matter, shall be governed by and construed in 

 

12

 The arguments of the parties sometimes merge the two doctrines and we sometimes 

refer to them collectively, which is consistent with Illinois law. “Although case law developed 

the doctrine of equitable estoppel and the legislature promulgated fraudulent concealment, the 

principles behind the two are substantively the same.” Turner v. Nama, 689 N.E.2d 303, 308

(Ill. App. Ct. 1997). But in our discussion we attempt to preserve any reliance by a party on one 

doctrine. 

Separately, given our determination that Illinois law applies, we do not address 

Arrowhead Systems’ several references in its appellate briefing to non-Illinois law on the 

fraudulent concealment/equitable estoppel issue, such as case law from Wisconsin, California, or 

Florida. 
No. 2019AP2268

19

accordance with the laws of Illinois, without giving effect 

to conflicts of laws rules. The parties consent to the 

personal jurisdiction of the courts of the state where the 

Grant Thornton office performing the Services is located 

..., and the parties waive objection to venue .... 

¶47 Arrowhead Systems does not dispute that the Illinois statute of 

limitations cited by the accountants, a two-year statute of limitations for all claims 

against accountants and their firms, would apply here, absent fraudulent 

concealment/equitable estoppel.

13

 The statute of limitations provides:

Actions based upon tort, contract or otherwise 

against any person, partnership or corporation registered 

pursuant to the Illinois Public Accounting Act, as amended, 

or any of its employees, partners, members, officers or 

shareholders, for an act or omission in the performance of 

professional services shall be commenced within 2 years 

from the time the person bringing an action knew or should 

reasonably have known of such act or omission.

735 ILL. COMP. STAT. 5/13-214.2.(a) (1991). We pause to note that this

incorporates a “discovery rule,” which delays the commencement of the two-year 

statutory period until the potential plaintiff “knew or should reasonably have 

known of such act or omission.” See Brummel v. Grossman, 2018 IL App (1st) 

162540, ¶26, 103 N.E.3d 398 (using phrase “‘discovery rule’”) (quoting Romano 

v. Morrisroe, 759 N.E.2d 611, 613 (Ill. App. Ct. 2001)).

¶48 The following are additional undisputed facts regarding 

Arrowhead’s discovery of the alleged omission by the accountants. Arrowhead 

asked the accountants in December 2013 to tell Arrowhead what net savings the 

 

13

 Arrowhead Systems also does not dispute that under Illinois law, while the issue of 

when a limitations period begins is generally one of fact, it becomes an issue of law for the court 

to decide if the relevant facts are undisputed. See Witherell v. Weimer, 421 N.E.2d 869, 874 (Ill. 

1981).
No. 2019AP2268

20

corporation would have achieved if it had implemented the tax strategy. Young

acknowledged in deposition testimony that he made this request “[b]ecause I 

wanted to see what the damage was by the negligence of Grant Thornton.” 

Similarly, Young averred in this litigation that, after he learned in the fall of 2013 

that the accountants had failed to recommend the tax strategy, “I was 

understandably upset and frustrated with Mr. Bovee and his incompetence.” On 

February 24, 2014, the accountants provided its analysis estimating lost tax 

savings. 

¶49 Well over two years after the accountants provided this analysis, on 

December 14, 2016, Arrowhead commenced this action. However, the 

accountants do not dispute that they do not have a defense based on the Illinois 

statute of limitations if the Illinois fraudulent concealment statute or the doctrine 

of equitable estoppel applies to toll operation of the statute of limitations for a 

significant fraction of the period from February 2014 to December 2016. 

¶50 The fraudulent concealment statute provides:

If a person liable to an action fraudulently conceals the 

cause of such action from the knowledge of the person 

entitled thereto, the action may be commenced at any time 

within 5 years after the person entitled to bring the same 

discovers that he or she has such cause of action, and not 

afterwards. 

735 ILL. COMP. STAT. 5/13-215 (1982). 

¶51 As to equitable estoppel,

A defendant is estopped from asserting the 

limitations bar if the plaintiff’s failure to act within the 

statutory period results from reasonable reliance on the 

defendant’s conduct or representations. “To establish 

equitable estoppel, the party claiming estoppel must 

demonstrate that: (1) the other party misrepresented or 
No. 2019AP2268

21

concealed material facts; (2) the other party knew at the 

time the representations were made that the representations 

were untrue; (3) the party claiming estoppel did not know 

that the representations were untrue when they were made 

and when they were acted upon; (4) the other party 

intended or reasonably expected the representations to be 

acted upon by the party claiming estoppel or by the public 

generally; (5) the party claiming estoppel reasonably relied 

upon the representations in good faith to his or her 

detriment; and (6) the party claiming estoppel has been 

prejudiced by his or her reliance on the representations.”

Brummel, 103 N.E.3d 398, ¶36 (citations omitted). 

B. Analysis

¶52 With that additional background, Arrowhead Systems makes the 

following fraudulent concealment/equitable estoppel argument. It does not dispute

that the applicable Illinois statute of limitations would have otherwise been 

triggered under the discovery rule no later than February 2014, which is when the 

accountants provided their estimate of tax losses. But it contends that its

complaint was timely filed nearly three years later because the statute of 

limitations should be deemed tolled as of February 2014, when the accountants 

provided Arrowhead with a “fraudulently altered analysis” of tax losses. The 

corporation argues that it could prove that the accountants intentionally gave it a 

phony estimate, strategically aiming for a number somewhere below “a reasonable 

estimate of the cost of litigation against a large accounting firm.” According to 

Arrowhead Systems, it was only after the corporation began using the tax strategy,

and realized “two years of successively larger tax savings” generated by the 

strategy, that it had “a basis to believe [that the accountants’] representation had 

been false.” 

¶53 We put to one side the accountants’ arguments that there is no proof 

of a scheme to provide an artificially low estimate. Even assuming the truth of the 
No. 2019AP2268

22

concealment allegations, the accountants contend in part that neither fraudulent 

concealment nor equitable estoppel could apply. They argue that this is because,

on the undisputed facts, no later than February 2014 Arrowhead Systems knew or 

should reasonably have known that it had a legally cognizable injury, with 

potential damages. We agree with the accountants that this is the legal standard in 

Illinois and that it applies here on the undisputed facts to defeat the exception to 

the statute of limitations sought by Arrowhead Systems.

¶54 In Illinois, a plaintiff may potentially avoid the effect of a statute of 

limitations when the plaintiff is uncertain regarding “‘the fact of damage’ but not 

where uncertainty exists only as to the amount of damage.” See Brummel, 103 

N.E.3d 398, ¶31 (quoting Belden v. Emmerman, 560 N.E.2d 1180, 1183 (Ill. App. 

Ct. 1990) (in turn quoting Jackson Jordan, Inc. v. Leydig, Voit & Mayer, 557 

N.E.2d 525, 528 (Ill. App. Ct. 1990), rev’d on other grounds, 633 N.E.2d 627 

(1994)). The accountants note that the Illinois Supreme Court has stated the same 

point in the following way:

This court has never suggested that plaintiffs must know 

the full extent of their injuries before the statute of 

limitations is triggered. Rather, our cases adhere to the 

general rule that the limitations period commences when 

the plaintiff is injured, rather than when the plaintiff 

realizes the consequences of the injury or the full extent of 

her injuries. See Hyon Waste Management Services, Inc. 

v. City of Chicago (1991), 214 Ill.App.3d 757, 762-63, 158 

Ill. Dec. 335, 574 N.E.2d 129 (“the mere fact that the extent 

of its damages is not immediately ascertainable does not 

postpone the accrual of a plaintiff’s claim”); Swider v. Holy 

Cross Hospital (1986), 146 Ill.App.3d 740, 742, 100 Ill.

Dec. 496, 497 N.E.2d 474.

Golla v. General Motors Corp., 657 N.E.2d 894, 899-00 (Ill. 1995); see also

McDaniel v. La Salle Ambulance Serv., Inc., 440 N.E.2d 158, 160 (Ill. App. Ct. 

1982) (stating that a “mere misrepresentation of a fact does not constitute 
No. 2019AP2268

23

fraudulent concealment in absence of a showing that it tended to conceal the cause 

of action,” so that, for example, “[a] contention that defendant concealed the 

identity of a wrongdoer rather than the cause of action does not constitute 

fraudulent concealment”).

14

¶55 Here, the only uncertainty alleged by Arrowhead Systems was the 

extent of damage. The existence of damage is, of course, an element of a cause of 

action. But Arrowhead Systems does not argue that the accountants denied the 

existence of damage. Indeed, it is undisputed that the accountants gave 

Arrowhead Systems an analysis estimating the tax savings loss to be

approximately $124,500, which is not a mere de minimis sum.

¶56 We note that the Illinois rule reflected in Brummel, Golla, and 

McDaniel is consistent with the statutory language in 735 ILL. COMP. STAT. 5/13-

215 (“fraudulently conceals the cause of such action” (emphasis added)). Further, 

Arrowhead Systems does not identify, and we do not discern, in Illinois law an 

exception to the Illinois rule for the situation in which the plaintiff alleges, as 

Arrowhead Systems does here, that the defendant concealed damages with the 

specific purpose of falsely making the value of potential litigation appear cost 

prohibitive. 

¶57 Arrowhead Systems also quotes the following passage in Brummel, 

which we have also quoted above and which does nothing to undermine our 

 

14

 Arrowhead Systems quotes, clearly out of context, one passage from Smith v. Cook 

County Hospital, 518 N.E.2d 336, 340 (Ill. App. Ct. 1987). Arrowhead Systems leaves out the 

following statement, which followed the passage it quotes: “Moreover, fraudulent 

misrepresentations which constitute the basis of the claim do not amount to fraudulent 

concealment unless these actions tended to conceal the cause of action.” See id.
No. 2019AP2268

24

interpretation of Illinois law: “A defendant is estopped from asserting the 

limitations bar if the plaintiff’s failure to act within the statutory period results 

from reasonable reliance on the defendant’s conduct or representations.” Under 

the logic of Brummel’s rule that the mere “amount of damage” does not count in 

this context, it could not have been reasonable for Arrowhead Systems to rely on 

the estimate of loss provided by the accountants in deciding whether it had a cause 

of action against the accountants.

¶58 In its reply brief, Arrowhead Systems relies on an Illinois court

decision that recognizes a special situation in which a defendant may be equitably 

estopped from asserting a limitations defense even when the plaintiff has sufficient 

information regarding a potential cause of action against the defendant. The 

special situation occurs when a defendant engages in fraudulent settlement 

negotiations for the purpose of lulling the plaintiff into believing that there is no 

need to pursue a legal cause of action until it is too late to do so. See Mitchell v. 

State Farm Fire & Cas. Co., 796 N.E.2d 617, 621 (Ill. App. Ct. 2003) (insurance 

company equitably estopped from asserting statute of limitations defense because, 

just before limitations period ran, it intentionally lulled insured into failing to 

commence suit by expressing a willingness to reconsider denial of coverage,

accompanied by a request for more information). Mitchell addresses the use of a

devious settlement tactic that is different in kind from what is alleged here. Id. 

Again, here the only argument is that the accountants misled Arrowhead Systems 

in estimating the extent of potential damages.
No. 2019AP2268

25

¶59 In sum, fraudulent concealment/equitable estoppel do not provide a 

basis here to toll the Illinois statute of limitations.15 Therefore Arrowhead 

Systems’ claims of negligence against the accountants are time barred under 

Illinois law. 

III. INDEPENDENT FRAUD CLAIM

¶60 Arrowhead argues that, if the two-year Illinois statute of limitations 

applies despite its allegation of fraudulent concealment, this means that 

Arrowhead must have a viable, independent common law fraud claim under 

Wisconsin law by operation of Article I, § 9 of the Wisconsin Constitution.16 The 

argument is apparently that the same allegations that would support an exception 

to the statute of limitations would support an independent claim of fraud, and 

under Article I, § 9 this court is obligated to remand to allow Arrowhead to pursue 

the fraud claim.

 

15

 Further, as a general matter, fraudulent concealment cannot provide Arrowhead with a 

separate cause of action. See Wisniewski v. Diocese of Belleville, 943 N.E.2d 43, 72-73 (Ill. App. 

Ct. 2011) (fraudulent concealment is not a separate cause of action but rather an exception to a 

statute of limitations that would otherwise bar some other, underlying cause of action).

Separately, we note that we have no need to address the accountants’ alternative 

argument that Arrowhead Systems failed to adduce evidence that it exercised ordinary diligence 

to discover the amount of its damage. 

16

 Article I, § 9 of the Wisconsin Constitution provides:

Every person is entitled to a certain remedy in the laws 

for all injuries, or wrongs which he may receive in his person, 

property, or character; he ought to obtain justice freely, and 

without being obligated to purchase it, completely and without 

denial, promptly and without delay, conformably to the laws.

This constitutional provision guarantees a litigant’s access to the courts to attempt to enforce an 

existing legal right, but it does not create any new legal rights. See Aicher v. Wisconsin Patients 

Comp. Fund, 2000 WI 98, ¶43, 237 Wis. 2d 99, 613 N.W.2d 849.
No. 2019AP2268

26

¶61 We reject this argument because, after the accountants argue on 

appeal that Arrowhead stated in the circuit court that it was not making an 

independent fraud claim, Arrowhead concedes the point by failing to reply to the 

argument. See United Coop., 304 Wis. 2d 750, ¶39 (failure to refute proposition 

asserted in response brief may be taken as concession). Arrowhead must be held 

to the litigation choices that it made in the circuit court, including any waivers or

forfeitures. 

IV. YOUNG’S STANDING

¶62 As a general rule, a corporation’s shareholders do not have standing 

to bring a direct claim seeking redress for an injury to the corporation, but instead 

the claim for an injury to a corporation belongs to the corporation itself. See Rose 

v. Schantz, 56 Wis. 2d 222, 228-29, 201 N.W.2d 593 (1972). The circuit court 

invoked this principle, which we refer to as the shareholder-standing rule, and 

dismissed Young’s claims against the accountants for lack of standing. 

¶63 Young argues that, as the sole shareholder of the Subchapter S 

corporation who claims harm from the accountants’ failure to recommend the tax 

strategy, he has standing to pursue the same claims as Arrowhead Systems against 

the accountants. The accountants argue that Young does not have standing 

because all claims based on failure to recommend the tax strategy belong solely to 

Arrowhead Systems, the injured party, and not to Young, who claims mere 

indirect injury. We agree with the accountants. The direct injury is to the

corporation; Young’s only individual injury, while predictable as a result of the 

corporation’s injury, results from the corporation’s injury. See id. at 229 (“So the 

question to be asked is, Whose right is sought to be enforced by the ... cause of 

action?”); Park Bank v. Westburg, 2013 WI 57, ¶43, 348 Wis. 2d 409, 832 
No. 2019AP2268

27

N.W.2d 539 (claim is derivative when individual plaintiff’s injury results from the 

corporation’s injury).

¶64 We rely on Wisconsin law to resolve this issue, as influenced by

persuasive authority, because Young was not a party to the annual agreements that 

required application of Illinois law.

17

¶65 Standing disputes present issues of law that we review independently 

of the determinations of the circuit court. Park Bank, 348 Wis. 2d 409, ¶37.

¶66 The parties agree that the issue here is whether, on the undisputed 

relevant facts, the shareholder-standing rule involving “direct injury” applies. To 

repeat, “[i]f the only direct injury is to the corporation, then the right to bring the 

action belongs solely to the corporation.” Ewer v. Lake Arrowhead Ass’n, 2012 

WI App 64, ¶17, 342 Wis. 2d 194, 817 N.W.2d 465 (citing Rose, 56 Wis. 2d at

229). “This is true even though the direct injury to the corporation ‘may have a 

subsequent impact on the stockholders’ shares.’” Id., ¶17 (quoting Rose 56 

Wis. 2d at 229). Such a stockholder injury “is secondary to the injury to the 

corporation, which is the primary injury.” Id. (citing Rose 56 Wis. 2d at 229). 

 

17

 We reject a tardy forfeiture argument made by Young on the standing issue. In his 

principal brief, Young criticizes the accountants for their timing in raising the standing argument 

in circuit court, but he does not raise a forfeiture issue. For the first time in his reply brief, Young 

argues that the accountants “waived and now impermissibly challenge” Young’s standing. We 

reject this argument because Young raises it for the first time in the reply brief. See A.O. Smith 

Corp. v. Allstate Ins. Cos., 222 Wis. 2d 475, 492, 588 N.W.2d 285 (Ct. App. 1998) (we generally 

decline to consider arguments raised for the first time in a reply brief because the alternative 

would typically be “inherently unfair”). We also observe that—putting aside Young’s misuse of 

the word “waiver” for the correct term in this context, “forfeiture”—the forfeiture argument is 

meritless. The record reflects that the circuit court patiently gave both sides full opportunities to 

explore the standing issue in a thoughtful colloquy at a hearing on June 26, 2019, which they took 

advantage of, and that there is no suggestion that the court prevented Young from a full 

opportunity to submit any pleadings on the standing issue at any time. Further, the court made 

clear that it believed that the issue had been squarely raised and the court explained its reasoning. 
No. 2019AP2268

28

The rationale behind the shareholder-standing rule is that “‘[r]ights of action 

accruing to a corporation belong to the corporation, and an action at law or in 

equity, cannot be maintained by the members as individuals.’” Rose, 56 Wis. 2d 

at 229 (quoting Marshfield Clinic v. Doege, 269 Wis. 519, 526, 69 N.W.2d 558, 

(1955), relying in part on Button v. Hoffman, 61 Wis. 20, 20 N.W. 667 (1884)). 

¶67 The focus of the direct injury issue is whether the claim is to protect 

corporate assets. “Generally, a derivative claim is one that ‘a corporation could 

bring because the corporation’s assets are affected.’” Park Bank, 348 Wis. 2d 

409, ¶41 (quoting Borne v. Gonstead Advanced Techs., Inc., 2003 WI App 135, 

¶15, 266 Wis. 2d 253, 667 N.W.2d 709). “In contrast, a direct action [by a 

shareholder-plaintiff] is an action seeking a judgment awarding damages to the 

plaintiff individually due to injuries that the plaintiff individually suffered,” and 

“the complaining plaintiff individually recovers damages.” Id., ¶40 n.6. Under 

this approach, when “an individual’s injury results from the corporation’s injury, 

the resulting claim is derivative and the individual lacks standing to raise it in a 

direct action.” Id., ¶43.

¶68 Applying the law as we have summarized to this point, it is evident

that Young lacks standing to bring a direct claim for any injury to Arrowhead 

Systems. There can be no dispute that the injury at issue was to the corporation

when it failed to receive advice about a tax strategy that can be implemented only 

by international exporters. Young, as an individual, was not an international 

exporter. That is, the “right [that Young seeks] to be enforced,” in the words of 

the case law, belongs to Arrowhead Systems, because the tax strategy would have 

been implemented by the exporting corporation, not by Young individually. 

Young has not grounded any claims on any contract to which he, and not the 

corporation, was a party, nor has he alleged that the accountants owed him a 
No. 2019AP2268

29

pertinent duty independent of his status as a shareholder. See Krier v. Vilione, 

2009 WI 45, ¶31 n.13, 317 Wis. 2d 288, 766 N.W.2d 517 (an individual 

shareholder claim might be based on the shareholder being party to a contract or 

on a duty owed to the shareholder individually, independent of his or her status as 

a shareholder). Thus, Young’s alleged personal lost benefit, while easily predicted

as flowing from the lost benefit to the corporation, would be derivative of the lost 

benefit to the corporation. Young confuses predictability of harm to him with 

direct injury to him, as described in the case law that we have summarized.

¶69 However, Young suggests that the shareholder-standing rule should 

not apply here because he is the sole shareholder of a Subchapter S corporation. 

We first address the sole shareholder aspect of the argument and then the 

Subchapter S aspect. 

¶70 There are two problems with the sole shareholder aspect of Young’s 

argument. First, the shareholder-standing rule, as described in case law, does not 

provide for an exception based solely on the fact that the number of shareholders 

of corporation is small, even down to one. The case that Rose cites for the 

shareholder-standing rule, Marshfield, relies for the rule on an older case, Button,

which stated that simply because a single individual owns all shares of a 

corporation does not entitle the individual to disregard the fact that the corporation 

is a separate entity and to sue individually for damages to the individual’s

investment. See Rose, 56 Wis. 2d at 229 & n.7 (quoting Marshfield, 269 Wis. 

519, relying on Button, 61 Wis. 20). 

¶71 In Button, a replevin action, the plaintiff was the sole owner of all 

stock in a corporation. Button, 61 Wis. at 20-21. The circuit court directed the 

jury to find that the plaintiff had title to the property at issue in the replevin 
No. 2019AP2268

30

because the corporation owned the property. Id. at 21. Our supreme court 

reversed on the ground that “the plaintiff, as the sole stockholder of the 

corporation, is not the legal owner of the property. He may have an equitable 

interest in it, but in this action he must show a legal title to the property in himself 

in order to recover, and he has shown that such title is in another person,” namely, 

in the corporation. Id. at 24-25.

¶72 We cannot ignore the fact that the court in Marshfield relied on 

Button in articulating the shareholder-standing rule and that Rose relied on 

Marshfield. This signals firm adherence by our supreme court to the shareholderstanding rule even when the corporation has but one shareholder.

¶73 The second reason we reject Young’s sole-shareholder argument is 

that we consider persuasive the reasoning by a federal court of appeals that the 

shareholder-standing rule applies even when the corporation has only few or one 

shareholder. See Kush v. American States Ins. Co., 853 F.2d 1380, 1383 (7th Cir.

1988).18 While denial of standing to a sole shareholder to sue for harms to the 

corporation may seem “harsh, or, at least, counter-intuitive,” it is justified because 

the sole shareholder has elected to use the corporate form. Id. at 1384. “That 

form [provides] several advantages over operations as an unincorporated sole 

proprietorship, not the least of which [is] limitation of liability. In return, [the 

shareholder gives] up several prerogatives, including that of direct legal action to 

redress an injury to him [or her] as primary stockholder in the business.” Id.; see 

also Krier, 317 Wis. 2d 288, ¶25 (“‘where an individual creates a corporation as a 

 

18

 Kush, relies on Illinois law related to standing, but the Illinois law cited by the federal 

court appears to closely track the Wisconsin law that we have summarized in the text. Kush v. 

American States Ins. Co., 853 F.2d 1380, 1383 (7th Cir. 1988).
No. 2019AP2268

31

means of carrying out his [or her] business purposes he [or she] may not ignore the 

existence of the corporation in order to avoid its disadvantages’”) (quoting Terry 

v. Yancey, 344 F.2d 789, 790 (4th Cir. 1965)).

¶74 We now turn to the Subchapter S corporation aspect of Young’s 

argument. To repeat, there is no dispute that the income and losses of Arrowhead 

Systems flowed through to Young individually, and accordingly he was obligated 

to pay any corporate tax liability out of corporate income distributed to him for 

that purpose. Young asserts that, as a pass-through corporation, Arrowhead 

Systems paid “no income tax” and as a result Young himself “uniquely suffered” 

from the accountants’ omission. We are not persuaded, however, that there is a 

basis in Wisconsin law to depart from the shareholder-standing rule for that 

reason, and the weight of persuasive authority appears to be against it. 

¶75 Arrowhead Systems was a corporation, not a limited liability 

company.19 Rights that accrued to Arrowhead Systems belong to the corporation, 

not to Young. See Krier, 317 Wis. 2d 288, ¶¶31-34 (shareholder of Subchapter S 

 

19

 Our supreme court has explained that a limited liability company is “‘an 

unincorporated association of investors, members in LLC parlance, whose personal liability for 

obligations of the venture is limited to the amount the member has invested,’” and therefore

claims involving LLC’s fall outside the shareholder-standing rule. See Marx v. Morris, 2019 WI 

34, ¶22, 386 Wis. 2d 122, 925 N.W.2d 112 (quoted source omitted). For the first time in his 

reply brief, Young effectively asks this court to extend some reasoning in Marx from the LLC 

context to the Subchapter S corporation context. There is reasoning in Marx that could point in 

this direction. See id., ¶¶38, 44 n.24. But there are two problems with this argument. First, 

Young did not make a Marx-based argument until the reply brief, depriving the accountants of an 

opportunity to respond to this particular argument. Second, the court in Marx did not indicate 

that the shareholder-standing rule should not apply to shareholders in Subchapter S corporations. 

See id. Given the tardy argument by Young, the limited discussion on this specific topic in Marx, 

and the other case law that we reference, we decline to consider taking what would be a new 

direction in Wisconsin law.
No. 2019AP2268

32

corporation could sue accountants only in a derivative capacity; “[i]n short, the 

assets of a corporation belong to that corporation”).

¶76 We consider persuasive federal court of appeals decisions applying 

the shareholder-standing rule in related contexts. See AFY v. Badami, 734 F.3d 

810, 820 (8th Cir. 2013); Smith Setzer & Sons, Inc. v. South Carolina 

Procurement Rev. Panel, 20 F.3d 1311, 1318 (4th Cir. 1994). AFY involved the 

sole shareholders of a Subchapter S corporation seeking to appeal a bankruptcy 

court decision based on their interests as shareholders. AFY, 734 F.3d at 820. 

“‘While an S corporation is treated differently for taxation purposes, it remains a 

corporation in all other ways, and it and its shareholders are separate entities’” 

who generally do not have standing to sue on the corporation’s behalf.” Id.

(quoting Smith Setzer, 20 F.3d at 1318). The court in AFY continued, “Any 

impact on the [plaintiffs’] personal tax liability is an indirect, rather than a direct, 

consequence.” Id.

¶77 The individual plaintiff in Smith Setzer was the shareholder of an S 

corporation and sought to bring a constitutional challenge to a contractor 

preference provision. See Smith Setzer, 20 F.3d at 1316-17. The shareholder

claimed an economic injury based on the corporation’s loss of revenue, namely, 

the economic injury being loss of income to himself. See id. The court held that 

any injuries to the individual plaintiff were derived through the corporation, and it 

was “of no matter” that the corporation was an S corporation. See id. at 1318. As 

the court explained, “While an S corporation is treated differently for taxation 

purposes, it remains a corporation in all other ways, and it and its shareholders are 

separate entities. This being the case, [the shareholder] lacks standing to assert 

this claim.” Id.
No. 2019AP2268

33

¶78 As one federal district court has noted in this context, one practical 

problem with a proposed exception for the “pass through” corporation is that 

allowing the sole shareholder of an S corporation to recover as a shareholder 

“would permit both the corporation and its shareholder to recover for the same 

loss, requiring complex allocation of damages.” See Economic Enter., Inc. v. 

T.D. Bank N.A., No. 3:10-cv-157 (VLB), 2011 WL 446891, at *4–5 (D. Conn. 

Feb. 3, 2011).

20

 Here, without clear rebuttal from Young, the accountants 

effectively made this argument to the circuit court. The accountants contended

that, under Young’s approach, it would not be possible for the circuit court to 

construct a set of jury instructions that would accurately and fairly “divvy up the 

dollars they are awarding” between the corporation and Young. 

¶79 Young points to evidence supporting the inference that he “was 

himself a client” of the accountants, in addition to Arrowhead Systems being a 

client. But a separate relationship between Young and the accountants is not the 

basis of the claims here. The entire thrust of the complaint is that the accountants 

failed to provide adequate tax services to exporter Arrowhead Systems regarding a

tax strategy relating to its international exports, not that these tax services were not 

provided to Young as an individual client.21 It is alleged that Bovee prepared 

Young’s personal returns, but that does not change the analysis. Young’s claims 

 

20

 The standing analysis in Economic Enterprises is based on the substantive law of 

Connecticut, but the rationale of the opinion appears consistent with Wisconsin law cited above. 

Economic Enter., Inc. v. T.D. Bank N.A., No. 3:10-cv-157 (VLB), 2011 WL 446891, at *4–5 

(D. Conn. Feb. 3, 2011).

21

 The accountants distinguish a California federal district court opinion on which Young 

relies on the ground that it involved a claim that an accounting firm provided negligent tax advice 

concerning personal tax returns, and not concerning a tax strategy for a corporation. See Miller 

v. Taryle, No. CV 13-02390 GAF (JCx), 2013 WL 12205851 (C.D. Cal., Sept. 10, 2013). Young 

has no reply on this point, conceding it. See United Coop., 304 Wis. 2d 750, ¶39. 
No. 2019AP2268

34

allege exclusive injury to the corporation, with Young individually allegedly 

suffering predictable but derivative injury.

¶80 Young cites two cases in which a proper direct action by a 

shareholder has been found, but in each of those cases the basis to allow a direct 

action was an allegation that minority shareholders’ rights were affected in a 

manner distinct from the effect on other shareholders, and therefore the injury to 

the plaintiff minority shareholder was an injury primarily to the minority 

shareholders as individuals. See Notz v. Everett Smith Grp., Ltd., 2009 WI 30, 

¶20, 316 Wis. 2d 640, 764 N.W.2d 904; Jorgensen v. Water Works, Inc., 2001 

WI App 135, 246 Wis. 2d 614, 630 N.W.2d 230. These were both shareholder 

oppression cases. See Notz, 316 Wis. 2d 640, ¶¶4, 26-28; Jorgensen, 246 Wis. 2d 

614, ¶¶16-18. That is, they were based on the proposition that individual minority 

shareholders must be allowed to challenge unfair treatment by directors who 

control a corporation. Young fails to develop an argument from these cases 

involving alleged shareholder oppression that could apply to the starkly different 

facts here. Young cannot argue that he was subject to oppression by himself.

CONCLUSION

¶81 For all these reasons, we affirm summary judgment in favor of the 

accountants on all claims.

By the Court.—Judgment affirmed.

Not recommended for publication in the official reports.