Title: Berner Cheese Corp. v. Lyle A. Krug
Citation: 2008 WI 95
Docket Number: 2005AP001527
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: July 15, 2008

2008 WI 95 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
CASE NO.: 
2005AP1527 
COMPLETE TITLE: 
 
 
Berner Cheese Corporation n/k/a Berner Foods 
Corporation, 
          Plaintiff-Appellant-Petitioner, 
     v. 
Lyle A. Krug, Plager, Hasting & Krug, Ltd. and 
ISBA Mutual Insurance Company, 
          Defendants-Respondents. 
 
 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at: 298 Wis. 2d 548, 727 N.W.2d 373 
(Ct. App. 2006-Unpublished) 
 
 
OPINION FILED: 
July 15, 2008   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
November 28, 2007   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Rock   
 
JUDGE: 
James E. Welker   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
BRADLEY, J., concurs (opinion filed). 
ABRAHAMSON, C.J., and BUTLER, JR., J., join the 
concurrence.   
 
DISSENTED: 
        
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the plaintiff-appellant-petitioner there were briefs by 
Edward R. Garvey, Christa Westerberg and Garvey McNeil & 
McGillivray, Madison, and Eugene J. Schiltz, Sean B. Crotty, and 
Robert F. Coleman & Associates, Chicago, Ill., and there was 
oral argument by Eugene J. Schiltz. 
 
For the defendants-respondents there was a brief by Michael 
B. Van Sicklen, Michael S. Heffernan, and Foley & Lardner LLP, 
Madison, and Daniel F. Konicek and Konicek & Dillion, P.C., 
Geneva, Ill., and there was oral argument by Daniel F. Konicek. 
 
 
 
 
2008 WI 95
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2005AP1527  
(L.C. No. 
2000CV961) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Berner Cheese Corporation n/k/a Berner Foods 
Corporation, 
 
          Plaintiff-Appellant-Petitioner, 
 
     v. 
 
Lyle A. Krug, Plager, Hasting & Krug, Ltd. and 
ISBA Mutual Insurance Company, 
 
          Defendants-Respondents. 
 
FILED 
 
JUL 15, 2008 
 
David R. Schanker 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed.   
 
¶1 
PATIENCE DRAKE ROGGENSACK, J.   We review a decision 
by the court of appeals that affirmed the circuit court's1 
dismissal of the petitioner's claim for breach of fiduciary duty 
and its request for a jury question on punitive damages.  The 
circuit court concluded that the evidence admitted at trial was 
insufficient 
to 
support 
both 
Berner 
Cheese 
Corporation's2 
(Berner) breach of fiduciary duty claim and the submission of a 
                                                 
1 The Honorable James E. Welker of Rock County presided. 
2 Berner Cheese Corporation is now known as Berner Foods 
Corporation. 
No. 
2005AP1527   
 
2 
 
punitive damages question to the jury.  The court of appeals 
agreed that Berner did not present credible evidence that it 
suffered damages due to conduct Berner characterized as a breach 
of Attorney Lyle Krug's fiduciary duty to it.  Berner Cheese 
Corp. v. Krug, No. 2005AP1527, unpublished slip op., ¶24 (Wis. 
Ct. App. Dec. 5, 2006).  In regard to punitive damages, the 
court of appeals concluded that due to the set-offs from damages 
awarded in Berner's legal malpractice claim, Berner collected no 
compensatory damages.  Therefore, it could not be awarded 
punitive damages.  Id., ¶29.   
¶2 
On this review, we are asked to resolve two issues:  
(1) whether Berner presented credible evidence to maintain its 
claim for breach of fiduciary duty; and (2) whether Berner 
presented credible evidence to submit a punitive damages 
question to the jury.  We answer both inquiries in the negative 
and affirm the court of appeals, albeit on different grounds.   
I.  BACKGROUND 
¶3 
This case arises from a series of separate lawsuits 
and countersuits between Berner and Dairy Source, Inc. (Dairy 
Source) that proceeded in both federal and state courts.  
Therefore, a review of two distinct phases of litigation will 
assist the reader in understanding our resolution of the case 
now before us.  Accordingly, we divide the "Background" section, 
such that part A discusses the underlying litigation between 
Berner and Dairy Source, as well as the events precipitating 
that litigation, and part B summarizes the present lawsuit. 
A. 
Underlying Litigation 
No. 
2005AP1527   
 
3 
 
¶4 
Berner is located in Illinois.  It manufactures and 
sells cheese.  The company is owned and operated by brothers, 
Steve and Ed Kneubuehl.  Berner had employed Lyle Krug as its 
corporation counsel since the Kneubuehls purchased the company 
in the early 1980s.  Dairy Source is a cheese brokerage and 
distribution company that maintained its offices in Delavan, 
Wisconsin. 
¶5 
The first lawsuit between Berner and Dairy Source 
began in Walworth County Circuit Court in April 1999, as a part 
of Berner's efforts to retrieve its recipes and customer lists 
from a former employee, Tony Steinmann.  Tony Steinmann was the 
spouse of Dairy Source's owner, Rose Steinmann.  
¶6 
Prior to his resignation from Berner, Tony worked out 
of an office in Delavan, Wisconsin leased by Dairy Source.  
Although Dairy Source was identified as the leaseholder of the 
Delavan office space, Dairy Source and Berner shared the rent 
evenly and split the cost of support staff.  
¶7 
Tony Steinmann resigned from Berner in March 1999.  
His departure from Berner was acrimonious.  At that time, Tony, 
alone, possessed Berner's full customer list, as well as 
Berner's catalogue of recipes, pricing and formulas for its 
processed cheese division.  The information was stored in his 
Delavan office.  The ill-will created by Tony's departure and 
Tony's subsequent employment by his wife's company, Dairy 
Source, led Berner's owners to fear that Tony would use Berner's 
customer and product information to Berner's detriment.  
No. 
2005AP1527   
 
4 
 
¶8 
Steve and Ed Kneubuehl, Berner's owners, expressed 
their concern to Krug about Tony's possession of Berner's 
customer lists and recipes.  They sought Krug's advice about 
retrieving their property.  Krug responded in an April 5, 1999 
letter to Steve Kneubuehl, outlining possible courses of action.   
¶9 
Krug advised the Kneubuehls of three options available 
to Berner to retrieve its property:  (1) directly communicate 
with Rose Steinman, owner of Dairy Source, to obtain her consent 
for Berner to retrieve its property located in the Delavan 
office; (2) obtain a court order directing that Berner's 
property located in Delavan be returned to it; or (3) enter the 
Delavan office without Rose Steinman's prior consent and 
retrieve Berner's property.  Krug characterized the third option 
as a "self-help" option.   
¶10 In the letter, Krug discussed certain risks attending 
the identified courses of action.  He explained that the first 
two options were of equally low risk.  However, while Krug 
indicated in the letter that "as a matter of law" Berner is 
"entitled to access [its] leased property and to inspect [that] 
property at any time of the day or night," he also explained 
that the third option "features certain legal risks and 
practical risks."  Krug identified those risks as being criminal 
liability for computer crime, for acting as a "'party to a 
crime,'" and for "theft and burglary."  Accordingly, Krug's 
letter instructed that only those electronic files belonging to 
Berner should be "removed or copied" and that "[n]o files that 
relate to Dairy Source, Inc. or any other non-Berner business 
No. 
2005AP1527   
 
5 
 
should be removed."  Krug also counseled Berner to "take all 
practical steps possible to advise the local law enforcement 
authorities" that Berner was on the premises to remove its 
property, because doing so would render it "less likely that a 
prosecution will be brought."  Krug's letter concluded by 
stating that he has "not authorized or directed your entry onto 
[the Delavan offices'] premises."   
¶11 Ed Kneubuehl testified that Krug recommended that 
Berner pursue the "self-help" option and enter the Delavan 
offices without Dairy Source's prior consent.  However, he also 
testified 
that 
he, 
Steve 
and 
Cheryl 
Kneubuehl,3 
decided 
collectively to take the "self-help" course of action and enter 
the Delavan office without Dairy Source's consent.  Ed testified 
that, although Krug informed the Kneubuehls that "anybody can 
file a lawsuit at any time," Krug assured them that they "were 
doing everything correctly and that since [they] were following 
[Krug's] orders" Berner encountered no appreciable risk of being 
sued by Dairy Source.  Krug assured Ed and Steve that, "as long 
as [Berner employees] go [into the Delavan offices] during the 
day4 and present ourselves to the people up front there shouldn't 
be any problem with going in and demanding [Berner's] property 
                                                 
3 Cheryl and Steve were spouses at the time. 
4 The Kneubuehls had originally planned to enter the Delavan 
offices at night, but reconsidered after one of Krug's law 
partner's, Duane Hastings, dissuaded them from doing so.  He 
pointed out that a night-time entry without consent "sound[ed] 
like breaking and entering" to him. 
No. 
2005AP1527   
 
6 
 
back," because Berner "paid for the rent" and "paid for the 
people" at the Delavan offices. 
¶12 Krug accounted for certain contingencies associated 
with Berner's plan to enter the Delavan offices.  For instance, 
he enlisted the services of a private detective, Michael 
Boomgarden, who participated in the entry.  Krug sent Boomgarden 
a letter four days before the entry occurred, with instructions 
related to the entry.  Krug instructed that those participating 
in the entry deliver to Michael Matthias, an employee of Dairy 
Source who was anticipated to be the most senior of the Dairy 
Source personnel present at the Delavan offices, letters 
documenting Berner's purpose for entering.  In the letter, Krug 
admonished Boomgarden to "be prepared to testify after service 
[of the letters] whether or not [Matthias] agreed to the removal 
of the property or objected to the removal of the property."   
¶13 Krug also advised them to steer clear of computer 
equipment, not to remove anything that was not Berner property, 
and, as Ed Kneubuehl testified, if the police arrived at any 
point, to "get the . . . trucks with the documents out of there 
and back to [the Berner headquarters in] Illinois so that they 
wouldn't be tied up."  Krug explained that the individuals from 
Berner "should talk to the police and explain to them what 
[they] were doing." 
¶14 In addition, because Krug anticipated that Berner 
would not recover all of the documents related to its customers 
and products that Berner sought, he advised Berner to retain the 
law firm of Brennan, Steil, Bastings and MacDougall, S.C. 
No. 
2005AP1527   
 
7 
 
(Brennan) to file a replevin action against Dairy Source in 
Walworth County Circuit Court the day after the entry.   
¶15 Ed Kneubuehl, Boomgarden and other Berner employees 
entered the Delavan offices the morning of April 12, 1999, when 
the Kneubuehls knew that Rose and Tony Steinmann5 would be in Las 
Vegas.  Ed testified that he was prepared to follow Krug's 
advice not to enter the offices unless Matthias was present and 
gave them consent to enter.  The group arrived at the offices at 
approximately 7:30 a.m. and, as expected, Matthias was present.  
Ed greeted Matthias by saying he had an "order" from his brother 
Steve in the form of a letter explaining the group was there to 
perform an "audit," then handed Matthias the letter and informed 
him that they were there to retrieve Berner's property.  
Matthias permitted the group to enter, and they began to collect 
boxes of material.   
¶16 While Ed and Matthias talked, the others removed 33 
boxes of documents from the Delavan offices.  At some point 
during the removal of documents, a Dairy Source employee reached 
Rose Steinmann in Las Vegas to inform her that Berner employees 
were removing boxes of documents from the premises.  She 
instructed the employee to call the police.  After Dairy Source 
contacted the police, Ed instructed the Berner employees to take 
the boxes they had removed back to Berner's offices in Illinois.  
                                                 
5 On April 12, 1999, Tony Steinmann was employed by Dairy 
Source, his wife's company. 
No. 
2005AP1527   
 
8 
 
However, pursuant to Krug's instructions, Ed and Boomgarden 
stayed behind to explain their purpose to the police.   
¶17 As Krug had anticipated, Berner determined that it had 
not retrieved all of its property from the Delavan offices.  
Consequently, Brennan filed a replevin action in Walworth County 
Circuit Court on Berner's behalf the following day.  In 
response, Dairy Source filed multiple counterclaims against 
Berner, including conversion, fraud, interference of contract 
and misappropriation of trade secrets.  Berner dismissed the 
replevin suit and filed a new action against Dairy Source in 
federal court.  Dairy Source then filed a motion in the replevin 
action that requested attorney's fees and costs, claiming that 
Berner's replevin action was frivolous.   
¶18 In the federal suit, Berner sought to retrieve both 
the remainder of its property and unauthorized commissions it 
alleged that Tony Steinmann paid himself while employed by 
Berner.  Dairy Source again counterclaimed against Berner and 
the Kneubuehls.6   
¶19 Although Brennan was independent litigation counsel 
for Berner in all of these court actions, Krug maintained his 
                                                 
6 In the federal lawsuit, Berner asserted nine claims 
against Dairy Source: Federal Racketeer Influenced and Corrupt 
Organizations Act violation, 18 U.S.C. 1962(c) & (d); fraud; 
conversion; 
misappropriation 
of 
trade 
secrets; 
replevin; 
infringement of trademark; defamation; civil conspiracy; and 
breach of fiduciary duty.  Dairy Source's counterclaim alleged: 
breach of contract; tortious interference with contract; injury 
to business, contrary to Wis. Stat. § 134.01 (1997-98); and 
misappropriation of trade secrets, contrary to Wis. Stat. 
§ 134.90 (1997-98).  
No. 
2005AP1527   
 
9 
 
role as corporation counsel.  Krug's view of the litigation at 
that time led him to believe Berner would prevail in its claims 
against 
Dairy 
Source. 
 
Accordingly, 
when 
the 
Kneubuehls 
approached Krug and suggested that they would accept a $300,000 
payment from Dairy Source to settle the lawsuits, he advised 
them against suggesting settlement to Dairy Source.  Krug 
explained that he believed Berner would receive more than 
$300,000 as a result of the litigation and that Berner's making 
an offer to settle would show weakness.  
¶20  Because Brennan defended against the claims by Dairy 
Source in part by contending that Berner had acted in accordance 
with Krug's advice, Dairy Source deposed Krug on two occasions.  
Dairy Source subpoenaed many of Krug's records for those 
depositions.  Krug's law partner, Duane Hastings, represented 
Krug at both depositions and Brennan represented Berner.   
¶21 Following the depositions, both Krug and Hastings 
concluded that it was likely that Dairy Source would add Krug as 
a defendant to its claims against Berner.  Krug and Hastings 
realized that Krug possessed potentially damaging meeting notes 
about Berner's entry into the Delavan offices that would not be 
protected by the attorney-client privilege because a third party 
had been present for those meetings.  They feared that documents 
in Krug's file could expose him to legal malpractice; they also 
feared that the notation that one of Berner's goals, to 
No. 
2005AP1527   
 
10 
 
"[e]liminate Steinmann as competitor,"7 would expose Berner to 
punitive damages.  Consequently, Hastings averred that he 
"wanted 
to 
get 
[the 
suit] 
settled 
before 
. . . 
Krug's 
undisclosed notes got turned over to the Steinmanns."   
¶22 Krug expressed concern to his law partners and to 
Berner's attorneys at Brennan that he might not be insured for 
the claims of Dairy Source.  Dairy Source moved to add Krug as a 
defendant shortly after his second deposition was taken.   
¶23 Subsequent to Dairy Source's motion, Brennan attorneys 
met with Steve, Ed, and Cheryl Kneubuehl to discuss the case.  
They explained that the litigation was not going well, that a 
trial would be expensive, and that Berner faced the possibility 
of losing.  They advised Berner to settle.  The Brennan 
attorneys also explained that Krug could be named as a defendant 
in the suit.  Ed Kneubuehl testified that Brennan's advice 
represented a "180 degree[]" reverse in litigation strategy.   
¶24 Ed and Steve then met separately with Krug.  Krug 
echoed the words of the Brennan attorneys; he informed them that 
Berner faced exposure to punitive damages and the case could 
cost Berner millions of dollars.  He further informed them that 
Brennan attorneys and he could be named as defendants.  Krug 
requested that Berner indemnify him.  Krug did not suggest to Ed 
                                                 
7 Prior to the entry into the Delavan offices, Krug and the 
Kneubuehls listed goals they wanted to attain from the entry.  
Ed 
Kneubuehl 
testified 
that 
"[e]liminate 
Steinmann 
as 
competitor" was never a goal of Berner's; that Krug had inserted 
that statement into the list of goals on his own accord.   
No. 
2005AP1527   
 
11 
 
and Steve that Berner and Krug might have a conflict of interest 
if Krug became a party.   
¶25 Following the meeting with Krug, Ed and Steve decided 
to begin settlement discussions with Dairy Source.  Steve 
averred that one of the reasons Berner chose to settle was 
because it was "tired of fighting and . . . wanted to end the 
litigation."  Cheryl also stated that Berner was "legal weary."  
¶26 Krug sent Steve a letter that Krug characterized as a 
summary of their previous meeting.  In the letter, Krug stated 
that "[y]ou will be receiving legal advice from the Brennan 
. . . law firm on this matter."  Krug also stated that it was 
likely that he would be added as a party and would therefore "be 
seeking indemnification" for damages and for attorney's fees.  
The record is silent in regard to Berner's response to Krug's 
request that Berner indemnify him.  However, Berner, through a 
Brennan attorney, requested that Krug contribute $200,000 toward 
a settlement with Dairy Source.  Krug declined. 
¶27 Berner 
authorized 
Brennan 
attorneys 
to 
offer 
a 
settlement to Dairy Source.  Brennan relayed Berner's offer to 
settle to Dairy Source, but when Dairy Source balked, Steve and 
Ed Kneubuehl decided to meet directly with Rose and Tony 
Steinmann, without either side's attorneys being present, to 
negotiate a settlement.  During that meeting between the owners 
of both companies, Berner and Dairy Source agreed that Berner 
would pay Dairy Source $1.35 million.  Dairy Source agreed not 
to use, distribute, or copy Berner's proprietary information, 
including its formulas, recipes and pricing information.  In 
No. 
2005AP1527   
 
12 
 
addition, both Berner and Dairy Source agreed to dismiss all 
claims against each other in all court actions and not to sue 
each other based on the events that gave rise to their then 
ongoing litigation.  Ed averred that Krug had no input on the 
settlement amount reached.  Cheryl also testified that, to her 
recollection, Krug did not have any input into the settlement.   
¶28 Multiple witnesses testified that Krug played no role 
in the settlement that was reached.  Ed averred that Krug had no 
input on the settlement amount reached.  Cheryl testified 
further, stating that to her recollection, Krug did not have any 
input into the settlement.  Krug did, however, review a draft of 
the settlement document and relayed one suggestion to a Brennan 
attorney:  that the confidentiality provisions be relaxed to 
allow the settlement to be discussed with tax authorities and 
with Berner's insurers.  The settlement document included a 
release of all claims against Krug.  A Brennan attorney 
testified that neither Krug nor Krug's law firm, who represented 
Krug, pressured Berner to include a release for Krug in the 
settlement document.  The attorney testified that Krug was 
released because "[w]e wanted to make sure that everybody in the 
civil action that was a party defendant or a possible party 
defendant" would be insulated from further legal liability.  
Steve Kneubuehl testified that it was not Berner's idea to add 
Krug to the releases the settlement document provided; he did 
not know how Krug came to be listed among those who were 
released from claims.  
No. 
2005AP1527   
 
13 
 
 
B. 
Present Litigation 
¶29 Following the settlement and the dismissal of all the 
underlying litigation, Brennan commenced this action in Rock 
County Circuit Court.  Brennan sued Berner to collect its fees 
for legal services that Brennan provided to Berner in the 
underlying litigation.  Berner counterclaimed, alleging legal 
malpractice.  It also filed a third-party action against Krug, 
his law firm and their insurers, alleging legal malpractice and 
breach of fiduciary duty.8  Berner asserted that:  (1) Krug's 
limited advice about the risks attending Berner's decision to 
enter the Delavan offices of Dairy Source to retrieve its 
property constituted legal malpractice; and (2) the settlement 
agreement between Berner and Dairy Source that resolved all 
claims relating to Berner's entry into Dairy Source's offices to 
retrieve its property constituted a business transaction between 
Berner and Krug in which Krug had breached his fiduciary duty to 
Berner.   
¶30 Berner hired Marquette Law School Professor and 
Associate Dean Peter Rofes as an expert witness.  Professor 
Rofes testified at a deposition that Krug's conduct fell below 
the standard of care attorneys must exercise in representing 
clients and that Krug's interests conflicted with Berner's 
during the litigation.  However, Professor Rofes expressed no 
                                                 
8 Berner filed additional claims, but they are not at issue 
in this review. 
No. 
2005AP1527   
 
14 
 
opinion about whether the case settled for an appropriate sum or 
whether Krug's conduct was a cause of Berner's alleged damages.   
¶31 The parties both filed motions for summary judgment.  
The circuit court denied Berner's motion and granted Krug's 
motion, ruling that Berner's claim for malpractice constituted a 
legal duplication of its claim for breach of fiduciary duty.  
Berner appealed. 
¶32 The 
court 
of 
appeals 
reversed, 
holding 
that 
malpractice and breach of fiduciary duty are legally distinct 
claims and that Berner's evidence supporting its malpractice 
claim was sufficient to withstand summary judgment.  See 
Brennan, Steil, Basting & MacDougall, S.C. v. Berner Cheese 
Corp., No. 2003AP919, unpublished slip op., ¶1 (Wis. Ct. App. 
May 25, 2004).  Accordingly, the court of appeals remanded the 
matter to the circuit court.  Id.   
¶33 On remand, Berner tried its claims to a jury.  At the 
conclusion of the presentation of the evidence, the circuit 
court submitted Berner's claim for legal malpractice to the 
jury, but dismissed Berner's claim for breach of fiduciary duty 
and it refused to submit a jury question on punitive damages.  
The court reasoned that the breach of fiduciary duty claim 
failed because Berner produced no evidence to show that Krug or 
his law firm received a benefit at Berner's expense as a result 
of Berner's settlement with Dairy Source.  The court refused to 
submit a question on punitive damages because Berner presented 
no evidence to show that Krug knew that his advice "was 
substantially likely to cause harm to Berner."  
No. 
2005AP1527   
 
15 
 
¶34 On the legal malpractice claim, the jury found Krug 
causally negligent, but it also found Berner 40% contributorily 
negligent.  The jury awarded Berner $850,000 in damages for 
Krug's malpractice, but that amount was reduced by 40% for 
Berner's own negligence.  However, due to set-offs resulting 
from $990,000 in payments to Berner by other parties in other 
lawsuits, Berner collected none of the jury's damage award.9 
¶35 Berner appealed, and the court of appeals affirmed.  
Berner petitioned for review, which we granted. 
II.  DISCUSSION 
A. 
Standard of Review 
¶36 A motion to dismiss a claim based on insufficiency of 
the evidence adduced at trial may be granted when a court "is 
satisfied that, considering all credible evidence in the light 
most favorable to the party against whom the motion is made, 
there is no credible evidence to sustain a finding in favor of 
such a party."  Weiss v. United Fire & Cas. Co., 197 Wis. 2d 
365, 
388, 
541 N.W.2d 753 (1995); see also, Wis. Stat. 
§ 805.14(1).  We have explained that we will "not overturn a 
circuit court's decision to dismiss for insufficient evidence 
unless the record reveals that the circuit court was 'clearly 
wrong.'"  Id. at 389 (citing Helmbrecht v. St. Paul Ins. Co., 
122 Wis. 2d 94, 110, 362 N.W.2d 118 (1985)).  We read the 
"clearly wrong" standard and the "no credible evidence" standard 
                                                 
9 Berner does not contend that the set-offs were not 
properly made. 
No. 
2005AP1527   
 
16 
 
together, such that when a circuit court dismisses a claim that 
is supported by any credible evidence, its decision is "clearly 
wrong."  Id.   
¶37 We independently review whether there is sufficient 
evidence to submit a question on punitive damages to the jury.  
Strenke v. Hogner, 2005 WI 25, ¶13, 279 Wis. 2d 52, 694 N.W.2d 
296.   
B. 
Sufficiency of the Evidence 
1. 
Breach of fiduciary duty 
¶38 Berner claims that Krug had a fiduciary relationship 
with it because he was Berner's corporation counsel.  Krug 
agrees with this contention.  Berner also contends that Krug's 
conduct prior to Berner's settlement with Dairy Source, together 
with the amount it paid to Dairy Source for that settlement, is 
sufficient to establish that Krug breached his fiduciary duty to 
Berner resulting in damage to Berner.   
¶39 Berner 
further 
contends 
that 
the 
settlement 
constitutes a business transaction between Krug and Berner and, 
as such, the transaction is presumed to be unlawfully tainted by 
Krug's undue influence.  Moreover, Berner argues that because 
Krug engaged in a transaction with his client, Berner, it is 
Krug's burden to prove that the settlement was not the product 
of undue influence, rather than Berner's burden to prove that 
the settlement was the product of Krug's undue influence.  
Finally, Berner asserts that, because its settlement with Dairy 
Source was reached as a result of Krug's undue influence, it was 
harmed by the entire amount of the settlement, $1.35 million.   
No. 
2005AP1527   
 
17 
 
a. 
Attorney-client "transaction" 
¶40 The elements of a claim for breach of fiduciary duty 
are:  (1) the defendant owed the plaintiff a fiduciary duty; (2) 
the defendant breached that duty; and (3) the breach of duty 
caused the plaintiff's damage.  Reget v. Paige, 2001 WI App 73, 
¶12, 242 Wis. 2d 278, 626 N.W.2d 302. 
¶41 Wisconsin law has long recognized that attorneys owe a 
fiduciary duty of loyalty to their clients, e.g., In re Law 
Examination of 1926, 191 Wis. 359, 362, 210 N.W. 710 (1926).  An 
attorney may breach that duty when he enters into a transaction 
with his client without fully informing the client of the risks 
that the transaction will potentially benefit the attorney and 
will potentially disadvantage the client.  See Zastrow v. 
Journal Commc'ns, Inc., 2006 WI 72, ¶30, 291 Wis. 2d 426, 718 
N.W.2d 51.  Indeed, we have promulgated a Supreme Court Rule 
forbidding lawyers licensed in Wisconsin from entering into 
business transactions with clients, unless they ensure the 
presence of certain safeguards.10  SCR 20:1.8(a).   
                                                 
10 SCR 20:1.8(a) identifies the following three safeguards: 
(1) the transaction and terms on which the lawyer 
acquires the interest are fair and reasonable to the 
client and are fully disclosed and transmitted in 
writing in a manner that can be reasonably understood 
by the client;  
(2) the client is advised in writing of the 
desirability of seeking and is given a reasonable 
opportunity to seek the advice of independent legal 
counsel on the transaction; and  
(3) the client gives informed consent, in a 
writing signed by the client, to the essential terms 
No. 
2005AP1527   
 
18 
 
¶42 Berner is correct in asserting that the Restatement 
(Third) of the Law Governing Lawyers § 126 (2000) (Restatement 
§ 126) presumes that transactions between attorneys and clients 
are tainted by undue influence.  Berner is also correct in 
asserting that Restatement § 126 places the burden on an 
attorney who enters into a transaction with a client to show 
that he did not impose undue influence on the client.11  However, 
we have not yet adopted Restatement § 126 as Wisconsin law.  
Furthermore, we do not need to decide whether to do so here 
because Berner has failed to prove that the settlement between 
Berner and Dairy Source constitutes a "transaction" between Krug 
and Berner.   
¶43 The 
undisputed 
testimony 
is 
that 
Ed 
and 
Steve 
Kneubuehl personally met with Rose and Tony Steinmann and 
negotiated for the dismissal of all of Dairy Source's claims 
against Berner.  The payment of $1.35 million to Dairy Source by 
Berner was agreed to at that meeting.  The testimony shows that 
the Kneubuehls did not know how Krug's name came to be listed 
among those "released from claims" in the settlement document; 
                                                                                                                                                             
of the transaction and the lawyer's role in the 
transaction, 
including 
whether 
the 
lawyer 
is 
representing the client in the transaction. 
11 Restatement (Third) of the Law Governing Lawyers § 126 
(Restatement § 126) embodies a standard for legal malpractice.  
We need not consider here whether Restatement § 126 might also 
establish a standard for breach of fiduciary duty because, as 
explained more fully below, Berner failed to show that the 
settlement agreement constitutes a "transaction" between Berner 
and Krug.    
No. 
2005AP1527   
 
19 
 
they did not request it.  Therefore, Berner did not bargain to 
pay Dairy Source $1.35 million for a release that included Krug.  
In sum, there is nothing in the record to demonstrate that 
Berner's settlement with Dairy Source for the payment of $1.35 
million was a transaction between Berner and Krug.  The 
settlement was a transaction between Berner and Dairy Source. 
¶44 That 
the 
settlement 
was 
not 
an 
attorney-client 
transaction is even more apparent upon review of those occasions 
when we have evaluated actual transactions between attorneys and 
clients.  For instance, in In re Disciplinary Proceedings 
Against Peckham, 2000 WI 17, 233 Wis. 2d 28, 606 N.W.2d 170, in 
the context of a disciplinary proceeding, we evaluated the 
conduct of Peckham, who accepted a loan from a client.  Id. ¶¶7, 
10.  Peckham had appeared at a July 1997 pretrial conference 
short on cash and asked a client to loan him $500.  Id., ¶7.  
Peckham scribbled out a promissory note indicating he would 
return payment with 12 percent interest by September 5, 1997.  
Id., ¶7.  The client agreed to the terms.  Id.  Peckham received 
the money and his client provided that money.  We affirmed that 
the loan constituted a business transaction between an attorney 
and a client.  Id., ¶10. 
¶45 Armstrong v. Morrow, 166 Wis. 1, 163 N.W. 179 (1917), 
provides 
another 
example 
of 
an 
attorney 
engaging 
in 
a 
transaction with his client.  There, an attorney, Morrow, 
represented a client, Phillips, in a matter in which Phillips 
had agreed to loan Oconto Brewing Company $10,900.  Id. at 3.  
However, Phillips was $1,250 short of the full amount needed to 
No. 
2005AP1527   
 
20 
 
complete his loan to Oconto Brewing.  Id.  Attorney Morrow 
contributed the $1,250 balance.  Id.  Oconto Brewing issued 
Phillips a mortgage to secure its debt.  Id.  Morrow and 
Phillips had a tacit understanding that Phillips would repay 
Morrow at Phillips' convenience.  Id.  However, they also agreed 
that Morrow would retain possession of the Oconto Brewing 
mortgage and promissory note until Phillips repaid the $1,250, 
with interest.  Id.  
¶46 Approximately a year and a half later, Morrow drafted 
an assignment of the Oconto Brewing mortgage to him.  Id.  
Phillips signed the assignment, which Morrow recorded.  Id.  
Morrow provided Phillips no additional consideration in return 
for the additional benefit he received from the assignment of 
the mortgage.  Id.   
¶47 We held that the assignment prepared by Morrow was 
presumptively invalid.  Id. at 8.  As we stated, it is 
"incumbent upon the attorney in a case like the one at bar to 
show affirmatively either that he paid an adequate consideration 
for the property, or that a gratuity was intended and that no 
advantage was taken of the confidential relations existing 
between the attorney and his client to obtain it."  Id. at 7.  
Armstrong shows a giving up of an asset by the client and a 
taking of the asset by the attorney as evidence of their 
transaction. 
¶48 Other cases from outside Wisconsin provide additional 
examples of attorney-client transactions.  For example, In re 
Smith, 572 N.E.2d 1280, 1286 (Ind. 1991), the Indiana Supreme 
No. 
2005AP1527   
 
21 
 
Court held that Smith had engaged in a transaction with a 
client, Mary Maxon, when the attorney made gifts to himself, his 
family, and employees of his law firm from the entrusted assets 
of an elderly, mentally incompetent client.12  Once again, the 
attorney-client transaction involved a giving up of an asset by 
the client and a taking of the asset by the attorney. 
¶49 In Duggan v. Gonsalves, 838 N.E.2d 614 (Mass. App. Ct. 
2005), the Appeals Court of Massachusetts held that Duggan 
engaged in a transaction with his client, when he purchased his 
client's house at foreclosure for substantially less than the 
appraised value, then rented the property back to the client for 
the equivalent of the mortgage payment.  The attorney-client 
transaction was evidenced by the attorney benefiting himself at 
the expense of the client.  
¶50 The cases reviewed above demonstrate that the Berner-
Dairy Source settlement is patently different from transactions 
between attorneys and clients that courts have reviewed under 
claims that they were improper.  In all the cases we have 
                                                 
12 Smith had used nearly $17,000 of his client's assets to 
purchase office equipment, and he arranged for his law firm to 
repay the debt interest-free.  In re Smith, 572 N.E.2d 1280, 
1283 (Ind. 1991).  Although he claimed that he informed the 
client, he acknowledged that he did not advise her to seek 
outside counsel regarding the matter because "she would not have 
followed that advice."  Id.  Smith also doled out large bonuses 
to employees of his law firm and large gifts to Mary Maxon's 
relatives from funds in her estate.  Id. at 1283-84.  The client 
was elderly, unable to care for herself and lived in a "confused 
state."  Id. at 1285.  Accordingly, the court concluded that if 
Smith in fact had consulted her regarding these transactions, 
she was incompetent to consent.  Id.  
No. 
2005AP1527   
 
22 
 
located where attorney-client transactions were involved, there 
was a communication or activity that reciprocally affected the 
client and the attorney.  That is, one party gave up something 
and the other party received something at the expense of the one 
who relinquished it.  Our understanding of a transaction is 
consistent with that set out in Black's Law Dictionary, which 
defines transaction as, "An agreement that is intended by the 
parties to prevent or end a dispute and in which they make 
reciprocal concessions."  Black's Law Dictionary 1535 (8th ed. 
2004). 
¶51 In contrast, there is no evidence that the Berner-
Dairy Source settlement embodies reciprocal activity affecting 
Berner and Krug.  Krug was not involved in Berner's decision to 
pay Dairy Source in a settlement.  That determination was made 
in a meeting between Berner and Dairy Source.  Accordingly, 
Dairy Source, not Krug, is the party with whom Berner engaged in 
reciprocal activity.  Berner paid Dairy Source $1.35 million 
dollars and in return received from Dairy Source its commitment 
not 
to 
"use, 
distribute 
or 
copy" 
Berner's 
proprietary 
information, including its recipes, pricing information, and 
formulas.  In addition, the parties agreed to drop all claims 
against each other and to refrain from filing new suits against 
each other.  Therefore, Berner gave up nothing to Krug when it 
agreed to pay Dairy Source $1.35 million as settlement.  The 
settlement negotiation that resulted in the settlement was a 
transaction between Berner and Dairy Source, not between Berner 
and Krug. 
No. 
2005AP1527   
 
23 
 
¶52 Furthermore, Brennan, not Krug, represented Berner in 
the litigation with Dairy Source.  Berner does not dispute that 
its attorneys at Brennan were engaged with Dairy Source 
representatives in drafting the settlement document.  Moreover, 
the admissions by Ed and Cheryl Kneubuehl belie Berner's claim 
that, because the settlement document releases Krug from all 
claims, the settlement was the product of undue influence.  When 
asked whether Krug had any input into the settlement amount, Ed 
Kneubuehl testified that Krug had not.  Cheryl Kneubuehl also 
testified that she did not recall Krug having any input in the 
settlement. 
¶53 Therefore, although the settlement document may have 
conferred a benefit on Krug, there is no evidence that releasing 
Krug came at a cost to Berner, and thereby affected the parties 
reciprocally.  Furthermore, although it is possible that some 
finite value could be attributed to the release of Krug, Berner 
has not presented any evidence to show what that value may be.  
For example, Berner has not presented any evidence that the cost 
of its settlement was increased due to Krug's release.  Berner 
instead alleges that the full cost of the settlement agreement, 
$1.35 million, constitutes its damages for releasing Krug.  No 
credible evidence supports Berner's claim in this regard.  
¶54 Berner also has contended that it is entitled to a 
presumption that the settlement was the product of undue 
influence.  The party seeking the benefit of a presumption 
carries the burden of establishing that presumption.  See 
Patterson v. Jensen, 246 Wis. 319, 345-46, 17 N.W.2d 423 (1945).  
No. 
2005AP1527   
 
24 
 
Because the settlement was not a transaction between Berner and 
Krug, Berner has failed in its proof that it is entitled to the 
presumption it seeks.13  See Restatement § 126.  Therefore, the 
burden remained with Berner to show that Krug's inclusion in the 
settlement was a breach of Krug's fiduciary duty that caused 
Berner damages.  
b. 
Damages 
¶55 In the absence of a breach of the fiduciary duty that 
an attorney owes to his client, there are, of course, no damages 
that can be caused by a breach of that duty.  However, we 
discuss Berner's arguments with respect to damages to further 
explain how the evidence presented at trial falls short of what 
the law requires to maintain a claim for breach of fiduciary 
duty.   
¶56 Berner argues that it is entitled to a presumption 
that it was damaged by the entire settlement amount of $1.35 
million.  Berner supports this argument by asserting that Krug 
assured Berner that it would recover money from Dairy Source and 
that Krug advised Berner not to offer to settle if Dairy Source 
were to pay Berner $300,000.  However, Dairy Source never 
offered to pay Berner one dollar to settle.  It was Berner who 
was required to pay Dairy Source in order to settle the multiple 
                                                 
13 We do not decide that, had Krug and Berner in fact 
engaged in a transaction, Berner would, in accordance with 
Restatement § 126, be entitled to the presumption that the 
transaction was the product of undue influence.  We reserve the 
decision to adopt or not to adopt Restatement § 126 for another 
day. 
No. 
2005AP1527   
 
25 
 
suits between them.  Therefore, this contention has no support 
in the facts, as well as none under the law.  See ¶27, above. 
¶57 Berner also argues that it incurred $1.35 million in 
damages because Krug "planned and oversaw" the entry into the 
Delavan offices.  Berner's arguments are misplaced in regard to 
a breach of fiduciary duty claim, although those arguments were 
before the jury in regard to Berner's legal malpractice claim.14  
A breach of fiduciary duty does not arise simply because a 
lawyer gives poor, but well-meaning, legal advice.  Zastrow, 291 
Wis. 2d 426, ¶30; see also Cmty. Nat'l Bank v. Med. Benefit 
Adm'rs, 2001 WI App 98, ¶8, 242 Wis. 2d 626, 626 N.W.2d 340.  It 
requires something more:  the breach of the attorney's duty of 
loyalty to the client.  Zastrow, 291 Wis. 2d 426, ¶30. 
¶58 Furthermore, the law requires Berner to establish the 
magnitude of the damages it sustained as a result of Krug's 
alleged breach of fiduciary duty.  See, e.g., Reget, 242 Wis. 2d 
278, ¶12.  Berner has proved neither that it incurred damages 
nor the magnitude of its damages in regard to its breach of 
fiduciary duty claim. 
¶59 Berner retained an expert, Professor Rofes, who 
testified that Krug's conduct in representing Berner fell below 
                                                 
14 It also appears that Berner is seeking double recovery 
for the consequences of using a "self-help" remedy to recover 
its property from Dairy Source's offices.  Double recovery for a 
single wrong generally is not permitted under the common law.  
Wickenhauser v. Lehtinen, 2007 WI 82, ¶20, 302 Wis. 2d 41, 734 
N.W.2d 855; Olstad v. Microsoft Corp., 2005 WI 121, ¶82, 284 
Wis. 2d 224, 700 N.W.2d 139.       
No. 
2005AP1527   
 
26 
 
the standard of care that Wisconsin law requires attorneys to 
exercise.  But Professor Rofes expressed no opinion about 
whether the settlement amount was appropriate or whether Krug 
had caused Berner any damages.  Furthermore, Berner presented no 
evidence to show that the settlement amount was greater than it 
otherwise would have been absent Krug's alleged breach of 
fiduciary duty.  Accordingly, Berner has not satisfied its 
burden of proving it incurred damages as a result of any alleged 
breach of fiduciary duty by Krug. 
¶60 In sum, as we have recounted and as two previous 
courts have concluded, the record is devoid of "credible 
evidence to sustain a finding" in favor of Berner on its claim 
for 
breach 
of 
fiduciary 
duty. 
 
Wis. 
Stat. 
§ 805.14(1).  
Accordingly, the circuit court did not err when it dismissed 
this claim.  
2. 
Punitive damages 
¶61 Berner next contends that the circuit court erred by 
refusing to submit a punitive damages question to the jury.15  
Before discussing why the credible evidence is insufficient to 
support a jury question on punitive damages, the parties ask us 
to resolve one preliminary issue:  Which state law applies with 
respect to Berner's punitive damages claim?  Krug contends that 
                                                 
15 The court of appeals did not reach the question of 
whether Krug's conduct gave rise to punitive damages; instead, 
it concluded that because Berner did not collect compensatory 
damages as a result of its set-off, Berner could not collect 
punitive damages.  Berner Cheese Corp. v. Krug, No. 2005AP1527, 
unpublished slip op., ¶29 (Wis. Ct. App. Dec. 5, 2006).  
No. 
2005AP1527   
 
27 
 
Illinois law should apply in this case.  Illinois law precludes 
punitive damages in legal malpractice cases,16 while Wisconsin 
law does not.  We conclude that there is no need to answer this 
question because, even if we assume that Wisconsin law applies, 
the evidence adduced at trial is insufficient to support a claim 
for punitive damages. 
¶62 Wisconsin 
Stat. 
§ 895.043(3) 
regulates 
the 
availability of punitive damages.  It provides:  "The plaintiff 
may receive punitive damages if evidence is submitted showing 
that the defendant acted maliciously toward the plaintiff or in 
an intentional disregard of the rights of the plaintiff."  
Berner does not argue that Krug acted maliciously; it argues 
only that Krug acted in intentional disregard for its rights. 
¶63 The legislature enacted Wis. Stat. § 895.043(3) in 
1995, thereby altering Wisconsin's common law standard for 
punitive damages.  Strenke, 279 Wis. 2d 52, ¶19.  In doing so, 
it heightened the state of mind required of a defendant from a 
"wanton, willful and reckless" disregard for rights of another 
to an "intentional disregard" for rights of another.  Id.   
¶64 A defendant acts with intentional disregard if he or 
she:  (1) "acts with a purpose to cause the result or 
consequence," or (2) "is aware that the result or consequence is 
substantially certain to occur from the person's conduct."  Id., 
¶36. 
 Accordingly, 
in order to fall within Wis. Stat. 
§ 895.043(3), a defendant's conduct must be (1) deliberate, (2) 
                                                 
16 735 Ill. Comp. Stat. 5/2-1115. 
No. 
2005AP1527   
 
28 
 
in 
actual 
disregard of the rights of another, and (3) 
"sufficiently aggravated to warrant punishment by punitive 
damages."  Id., ¶38.  We explained in Strenke that under this 
heightened threshold for punitive damages, we "expect circuit 
courts to serve as gatekeepers before sending a question on 
punitive damages to the jury."  Id., ¶40. 
¶65 Since the legislative change, we have decided two 
cases that considered whether a defendant's conduct warranted 
submitting a jury question on punitive damages under the 
heightened standard of Wis. Stat. § 895.043(3):  Strenke, 279 
Wis. 2d 52 and Wischer v. Mitsubishi Heavy Industries America, 
Inc., 2005 WI 26, 279 Wis. 2d 4, 694 N.W.2d 320.  We review the 
factual background of both cases, before we consider whether 
Krug's conduct warranted submitting a jury question on punitive 
damages under § 895.043(3). 
¶66 In Strenke, we concluded that the plaintiff presented 
sufficient evidence to submit to a jury question in regard to 
punitive damages.  Strenke, 279 Wis. 2d 52, ¶58.  Strenke arose 
in the context of a personal injury action, where the injury was 
caused by a drunk driver.  Id., ¶6.  Hogner got behind the wheel 
of his vehicle and proceeded southbound down Highway 48, after 
consuming 16-18 beers in five hours.  Id., ¶8.  Strenke was 
driving northbound on the same highway.  Id., ¶5.  As Strenke 
approached an intersection, Hogner veered left into Strenke's 
path and the two collided, causing injury to Strenke.  Id., ¶5.  
During trial, Hogner admitted that he had four prior convictions 
for driving while intoxicated.  Id., ¶8. 
No. 
2005AP1527   
 
29 
 
¶67 We concluded that there was sufficient evidence from 
which a reasonable jury could find that Hogner's conduct was (1) 
deliberate, (2) in actual disregard for the plaintiff's rights 
and (3) sufficiently aggravated to warrant punishment by 
punitive damages.  Id., ¶¶55-57.  First, Hogner's consumption of 
16-18 beers in five hours and then driving while intoxicated was 
deliberate. 
 
Id., 
¶55. 
 
Second, 
Hogner's 
drunk 
driving 
disregarded Strenke's right to safely use the highway with other 
sober motorists.  Id., ¶56.  Finally, Hogner's four previous 
convictions for driving while intoxicated and his consumption of 
16-18 beers in five hours the evening of the collision with 
Strenke constituted sufficiently aggravated conduct to warrant 
punishment by punitive damages.  Id., ¶57. 
¶68 Similarly, 
in 
Wischer, 
we 
concluded 
that 
the 
defendant's conduct was sufficiently aggravated that a jury 
could consider whether to award punitive damages.  Wischer, 279 
Wis. 2d 4, ¶8.  Wischer also arose from personal injuries.  Id.  
On a windy afternoon, three ironworkers, standing in a basket 
atop a crane, prepared to bolt into place a 913,000-pound, 120 
by 76-foot panel of Miller Park's retractable roof.  Id., ¶14.  
The crane collapsed and the workers fell to their deaths.  Id., 
¶12. 
¶69 In concluding that a question on punitive damages 
could be submitted to the jury, the following facts were noted:  
(1) Users of the crane were issued a load chart that set out the 
crane's limitations in wind.  See id., ¶38.  (2) The load chart 
stated that the crane could not be used safely in winds 
No. 
2005AP1527   
 
30 
 
exceeding 20 mph, regardless of the load.  Id., ¶39.  (3) 
Mitsubshi was aware that the maximum safe wind speed for the 
crane to conduct a lift was 20 mph and that a "tragedy could 
occur" if a lift was conducted during winds in excess of 20 mph.  
Id., ¶¶40, 42.  (4) Various witnesses placed the wind speed 
during the afternoon of the accident as being between 20-32 mph.  
Id., ¶48.  (5) At the time of the lift, Mitsubishi was aware of 
winds that exceeded the 20 mph maximum wind velocity for a safe 
lift. 
 
Id., 
¶¶74-75 
(Roggensack, 
J., 
concurring). 
 
(6) 
Notwithstanding Mitsubishi's awareness of the conditions then 
present, the lift proceeded, even though Mitsubishi was aware 
that performing the lift could imperil the ironworkers' right to 
personal safety.  Id., ¶8.   
¶70 The basis for Berner's contention that it provided 
sufficient evidence to submit a punitive damages question to a 
jury is distinguishable from Strenke and Wischer.  For example, 
unlike Mitsubishi's awareness that "tragedy could occur" through 
a crane lift when the wind speeds exceeded 20 mph and that the 
winds were then in excess of 20 mph, no credible evidence was 
presented to show that Krug was aware that Berner's rights would 
be disregarded as a result of his legal advice.  To the 
contrary, the evidence demonstrates that Krug believed that 
Berner's entry into the Delavan offices was lawful.   
¶71 In addition, the evidence shows that, by attempting to 
mitigate the risks attending the entry into the Delavan offices, 
Krug took steps to ensure that he preserved Berner's property 
rights:  he advised Berner (1) not to enter at night; (2) not to 
No. 
2005AP1527   
 
31 
 
remove anything that was Dairy Source's property; (3) to stay 
away from Dairy Source's computers; (4) to apprise local law 
enforcement in advance that it planned to enter the Delavan 
offices; and (5) to hire Brennan to seek any of Berner's 
property that remained in Delavan in a replevin action.   
¶72 Berner contends that Krug's inclusion among those 
released by the settlement document warrants submission of a 
punitive damages question to the jury.  To be sure, by March 
2000, Krug had become concerned that Berner could come out the 
loser in its many lawsuits against Dairy Source.  He did ask 
Berner to indemnify him and the settlement document lists Krug 
among those who are released by Dairy Source.  However, Berner 
has not presented any evidence to prove that its rights were 
disregarded 
by 
Dairy 
Source's 
release 
of 
Krug. 
 
Stated 
otherwise, Berner elicited no evidence providing a causal link 
between Krug's release and Berner's payment of $1.35 million to 
settle with Dairy Source.  Accordingly, no credible evidence 
indicates that Krug was aware that his conduct was substantially 
certain to result in Berner's rights being disregarded.  See 
Strenke, 279 Wis. 2d 52, ¶36; Wischer, 279 Wis. 2d 4, ¶8.  The 
circuit court correctly concluded that the evidence adduced at 
trial was insufficient to submit a question on punitive damages 
to the jury. 
III.  CONCLUSION 
¶73 In sum, we were asked to resolve two issues:  (1) 
whether Berner presented credible evidence to maintain its claim 
for breach of fiduciary duty; and (2) whether Berner presented 
No. 
2005AP1527   
 
32 
 
credible evidence to submit a punitive damages question to the 
jury.  We answer both inquiries in the negative and affirm the 
court of appeals, albeit on different grounds. 
By the Court.—The decision of the court of appeals is 
affirmed. 
 
 
No.  2005AP1527.awb 
 
1 
 
¶74 ANN WALSH BRADLEY, J.   (concurring).  I agree with 
the majority that there was insufficient evidence to present a 
punitive damages question to the jury. I also agree that the 
circuit court did not err in dismissing Berner's breach of 
fiduciary duty claim. Unlike the majority, however, the circuit 
court based its determination on an insufficiency of evidence 
and not on the majority's erroneous interpretation of what 
constitutes a transaction.  
¶75 I write separately because the majority narrows the 
attorney discipline rule that serves as a basis for its opinion. 
In interpreting SCR 20:1.8(a) (Conflict of interest: prohibited 
transactions), the majority (1) sub silencio alters the text of 
SCR 20:1.8(a); (2) adds a requirement that transactions involve 
reciprocal activity; and (3) ignores other language set forth in 
the rule. I am particularly concerned because the majority's 
narrowing of the rule here has implications for future lawyer 
discipline cases.  
I 
¶76 The majority determines that Krug did not breach his 
fiduciary duty to Berner. It reaches that conclusion by 
reasoning that the transaction (the settlement agreement) was 
between Berner and Dairy Source and not between Berner and Krug.  
It next concludes that there is no evidence that the settlement 
"embodies reciprocal activity affecting Berner and Krug." Id., 
¶51.  
¶77 The analysis of the majority goes off track in its 
discussion of the transaction when it alters the text of SCR 
No.  2005AP1527.awb 
 
2 
 
20:1.8(a) that serves as a foundation for its opinion. It fails 
to quote the actual text of the rule, which provides as follows: 
"A lawyer shall not enter into a business transaction with a 
client or knowingly acquire an ownership, possessory, security 
or other pecuniary interest adverse to a client . . . ." SCR 
20:1:8(a) (emphasis added).  
¶78 Failing to quote the actual text allows the majority 
to alter the language of the rule. Although it initially states 
that there may be a breach of fiduciary duty when an attorney 
"enters into a transaction with his client," majority op., ¶41 
(emphasis added), its analysis and conclusions regarding the 
rule concern only whether the settlement agreement was a 
"transaction between Berner and Krug." Id., ¶43 (emphasis 
added).1 
• ¶42: "Berner has failed to prove that the settlement 
between 
Berner 
and 
Dairy 
Source 
constitutes 
a 
'transaction' between Krug and Berner."  
• ¶43: "In sum, there is nothing in the record to 
demonstrate 
that 
Berner's 
settlement 
with 
Dairy 
Source . . . was a transaction between Berner and Krug." 
• ¶44: "That the settlement was not an attorney-client 
transaction is even more apparent upon review of those 
                                                 
1 The majority also uses four cases to support its use of 
"between": In re Disciplinary Proceedings Against Peckham, 2000 
WI 17, 233 Wis. 2d 28, 606 N.W.2d 170; Armstrong v. Morrow, 166 
Wis. 1, 163 N.W. 179 (1917); In re Smith, 572 N.E.2d 1280 (Ind. 
1991); and Duggan v. Gonsalves, 838 N.E.2d 614 (Mass. App. Ct. 
2005). However, not one of the cases uses "between." Consistent 
with the text of SCR 20:1.8(a), they all use the word "with." 
No.  2005AP1527.awb 
 
3 
 
occasions when we have evaluated actual transactions 
between attorneys and clients." 
• ¶50: "[T]he Berner-Dairy Source settlement is patently 
different 
from 
transactions 
between 
attorneys 
and 
clients . . . ." 
• ¶51: "The settlement negotiation that resulted in the 
settlement was a transaction between Berner and Dairy 
Source, not between Berner and Krug." 
• ¶54: "[T]he settlement was not a transaction between 
Berner and Krug . . . ." 
(Emphasis added.) 
¶79 Krug appears to have entered a transaction, which was 
also entered by Berner. Both Krug and Berner signed the 
settlement agreement. Although the settlement agreement was not 
between Krug and Berner, Krug entered the transaction with 
Berner. In effect, the majority sub silencio alters the text of 
this 
attorney 
discipline 
rule 
and 
appears 
to 
limit 
the 
prohibition to only those situations where the transaction is 
between the attorney and client. 
¶80 The significance of the majority's misstep is that it 
narrows the application of SCR 20:1.8(a). The word "between" 
means that two parties are involved whereas the word "with" 
encompasses an unlimited number of parties. 
¶81 By altering the text of the rule, the majority appears 
to apply this conflicts of interest prohibition only to 
situations where there is a transaction between a lawyer and a 
client. The result of such a narrow application is that it may 
No.  2005AP1527.awb 
 
4 
 
leave clients unprotected and lawyers unregulated in situations 
where multiple parties are involved and actual conflicts of 
interest exist.  
II 
¶82 Additionally, the majority narrows SCR 20:1.8(a) by 
adding a new requirement. It maintains that for an attorney to 
enter a transaction with a client, there must be "reciprocal 
activity," majority op., ¶51, and some "giving up of an asset by 
the client and a taking of the asset by the attorney." Id., ¶48. 
Certainly such cases constitute transactions. However, as the 
majority notes, this court in Armstrong v. Morrow stated that it 
is "incumbent upon the attorney . . . to show affirmatively 
either that he paid an adequate consideration for the property, 
or that a gratuity was intended and that no advantage was taken 
of the confidential relations existing between the attorney and 
his client to obtain it." 166 Wis. 1, 163 N.W. 179 (1917) 
(emphasis added); majority op., ¶47. A gratuity may involve 
giving without getting something in return.  
¶83 The majority recognizes that the settlement agreement 
was a transaction. Majority op., ¶47.  However, it fails to 
acknowledge that it is also a transaction from which Krug 
received a substantial benefit: indemnification. The benefit is 
one that Krug pursued. He indicated to the Kneubuehls that he 
would seek indemnification, even going so far as to prepare a 
legal memorandum arguing that Berner should indemnify him.  
¶84 The majority maintains that "Berner gave up nothing to 
Krug when it agreed to pay Dairy Source $1.35 million as 
No.  2005AP1527.awb 
 
5 
 
settlement." Majority op., ¶51. Even if that is true, it is not 
dispositive.  
¶85 What matters is that Berner lost an opportunity to pay 
less to Dairy Source because Krug's indemnification was in the 
settlement agreement. Krug benefited, but did not give anything 
in exchange——it was in essence a gratuity from Berner to Krug. 
Because Berner did not know how Krug's indemnification came to 
be included in the agreement, id., ¶28, there is no reason to 
think the gratuity was intended.  
III 
¶86 Another way in which the majority narrows the rule is 
by failing to address all of the language in SCR 20:1.8(a). The 
rule does not refer only to transactions. Rather, it also 
requires 
precautions when attorneys "knowingly acquire an 
ownership, possessory, security or other pecuniary interest 
adverse to a client." By seeking and receiving indemnification, 
Krug knowingly acquired a pecuniary interest in the settlement 
agreement. That interest is adverse to Berner.  
¶87 Berner requested that Krug pay $200,000 toward the 
settlement, although Krug refused to do so. More importantly, 
the agreement to indemnify Krug must have been worth something 
to Dairy Source, such that Berner had to pay more for the 
settlement by including Krug. Otherwise, Dairy Source agreed to 
the indemnification gratuitously——a "free lunch" for Berner and 
Krug. No such thing.  
IV 
No.  2005AP1527.awb 
 
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¶88 I am particularly concerned about the repercussions of 
the majority's narrowing of the rule. The supreme court rule 
used by the majority is not confined to cases involving breach 
of fiduciary duty. Rather the rule applied by the majority today 
is part of the Code of Professional Responsibility. The Code 
serves as the guidepost of our lawyer disciplinary system. By 
narrowing the scope of the rule, the majority concurrently 
limits the responsibility of lawyers and narrows the protection 
afforded to clients. 
¶89 The rule also serves as a guide for lawyer self-
regulation. Does the majority opinion signal that it is proper 
for lawyers to enter transactions with clients, so long as the 
transaction is not between the lawyer and client? Does the 
majority opinion indicate that gratuity given by clients to 
lawyers are beyond the scope of lawyer regulation because there 
is no "reciprocal activity"? Is it now the case that lawyers may 
knowingly acquire pecuniary interests adverse to their clients 
so long as there is no transaction?  
V 
¶90 I 
believe 
that 
the 
settlement 
agreement 
was 
a 
transaction that Krug entered with Berner, even though it was 
not a transaction between Krug and Berner. The indemnification 
was a gratuity that was apparently unintended, and the fact that 
there was no reciprocal activity is irrelevant. By receiving 
indemnification, Krug received a pecuniary interest adverse to 
Berner, his client. Thus, because Krug took none of the 
No.  2005AP1527.awb 
 
7 
 
precautions outlined in SCR 20:1.8(a),2 Berner's breach of 
fiduciary duty claim should not have been dismissed on the 
ground that there was no breach.3 
¶91 Although 
I disagree with the majority regarding 
whether there was a breach of fiduciary duty in this case, I 
agree that the circuit court did not err in dismissing the 
breach of fiduciary duty claim. The circuit court dismissed the 
claim on the ground that Berner failed to produce sufficient 
evidence that it had paid more for the settlement because of the 
                                                 
2 Those safeguards are: 
(1) the transaction and terms on which the lawyer 
acquires the interest are fair and reasonable to the 
client and are fully disclosed and transmitted in 
writing in a manner that can be reasonably understood 
by the client; 
(2) 
the 
client 
is 
advised 
in 
writing 
of 
the 
desirability of seeking and is given a reasonable 
opportunity to seek the advice of independent legal 
counsel on the transaction; and 
(3) the client gives informed consent, in a writing 
signed by the client, to the essential terms of the 
transaction and the lawyer’s role in the transaction, 
including whether the lawyer is representing the 
client in the transaction. 
SCR 20:1.8(a). 
3 Berner argues that Krug's transaction with Berner gives 
rise to a presumption of undue influence in the transaction, and 
that Krug has failed to prove that the transaction was not the 
product of undue influence. Even if Berner is correct about this 
presumption, it does not demonstrate that the attorney has the 
burden of showing that the client suffered no damages as a 
result of the breach of fiduciary duty and undue influence. 
Thus, while I agree that there was a breach, Berner has not 
proven that it can proceed before providing evidence that the 
breach caused damages.  
No.  2005AP1527.awb 
 
8 
 
breach. The court of appeals affirmed the dismissal on the 
ground that Berner presented no credible evidence that it was 
harmed. Berner Cheese Corp. v. Krug, No. 2005AP1527, unpublished 
slip op., ¶23 (Wis. Ct. App. Dec. 5, 2006).  
¶92 The majority purports to follow the same course, 
setting forth a standard of review based on sufficiency of 
evidence. Majority op., ¶36. However, it does not stick with 
that standard. Instead it reviews the legal question of what 
constitutes a transaction in a breach of fiduciary duty cause of 
action. Id., ¶¶40-50.  
¶93 I would stick to a review of the question presented by 
the decisions of the circuit court and court of appeals in this 
regard. The circuit court determined that Berner has not 
provided evidence that it paid more for the settlement to 
include indemnification for Krug. Applying the correct standard 
of review I conclude that the circuit court's determination of 
insufficient evidence of damages is not clearly erroneous. See 
Weiss v. United Fire and Cas. Co., 197 Wis. 2d 365, 388, 541 
N.W.2d 753 (1995). 4 I therefore respectfully concur. 
¶94 I am authorized to state that Chief Justice SHIRLEY S. 
ABRAHAMSON 
and 
Justice 
LOUIS 
B. 
BUTLER, 
JR. 
join 
this 
concurrence. 
                                                 
4 The elements for a claim of breach of fiduciary duty are: 
(1) the defendant had a fiduciary duty; (2) the defendant 
breached that duty; and (3) the breach of duty caused injury to 
the plaintiff. Reget v. Paige, 2001 WI App 73, ¶12, 242 
Wis. 2d 278, 626 N.W.2d 302. Rather than addressing the second 
element, as the majority does, I would decide the case based on 
the third element alone. 
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