Title: Henry J. Krier v. Donald N. Vilione
Citation: 2009 WI 45
Docket Number: 2006AP001573
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: June 10, 2009

2009 WI 45 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2006AP1573 & 2006AP2290 
COMPLETE TITLE: 
 
 
Henry J. Krier and Badger Investment Realty, LLC 
f/k/a Vil-Kri Investments, LLC, 
          Plaintiffs, 
Badger Disposal of WI, Inc., 
          Plaintiff-Appellant, 
     v. 
Donald N. Vilione and Virchow Krause & Company, 
LLP, 
          Defendants-Respondents-Petitioners. 
 
Henry J. Krier, Badger Disposal of WI, Inc. and 
Badger Investment Realty, LLC, 
          Plaintiffs-Appellants, 
     v. 
Donald N. Vilione and Virchow Krause & Company, 
LLP, 
          Defendants-Respondents-Petitioners. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2007 WI App 235 
Reported at: 306 Wis. 2d 147, 742 N.W.2d 537 
(Ct. App. 2007-Published) 
 
 
OPINION FILED: 
June 10, 2009   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
November 6, 2008   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Milwaukee   
 
JUDGE: 
Jeffrey A. Kremers and Jean W. Dimotto   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
BRADLEY, J., dissents (opinion filed). 
ABRAHAMSON, C.J., joins dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For 
the 
defendants-respondents-petitioners 
there 
were 
briefs filed by Ward I. Richter, William C. Williams, Bell 
Gierhart & Moore, S.C., Madison, and Terry E. Johnson, Maria D. 
Sanders, and Peterson, Johnson & Murray, S.C., Milwaukee, and 
oral argument by Ward I. Richter. 
 
 
 
2 
For the plaintiffs-appellants there was a brief by Robert 
J. Gingras, Michael J. Luebke, Eric J. Haag, and Gingras, Cates 
& Luebke, S.C., Madison, and oral argument by Eric J. Haag. 
 
 
 
 
2009 WI 45
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2006AP1573 & 2006AP2290  
(L.C. No. 
2005CV653) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Henry J. Krier and Badger Investment Realty, 
LLC f/k/a Vil-Kri Investments, LLC, 
 
          Plaintiffs, 
 
Badger Disposal of WI, Inc., 
 
          Plaintiff-Appellant, 
 
     v. 
 
Donald N. Vilione and Virchow Krause & Company, 
LLP, 
 
          Defendants-Respondents-Petitioners. 
 
 
Henry J. Krier, Badger Disposal of WI, Inc. and 
Badger Investment Realty, LLC, 
 
          Plaintiffs-Appellants, 
 
     v. 
 
Donald N. Vilione and Virchow Krause & Company, 
LLP, 
 
          Defendants-Respondents-Petitioners. 
FILED 
 
JUN 10, 2009 
 
David R. Schanker 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed.   
 
No. 
2006AP1573 & 2006AP2290   
 
2 
 
¶1 
ANNETTE KINGSLAND ZIEGLER, J.   This is a review of a 
published court of appeals' decision1 that reversed and remanded 
the decision of the Milwaukee County Circuit Court, Jeffrey A. 
Kremers and Jean W. DiMotto, Judges.2  The circuit court granted 
the defendants'——Virchow Krause & Company, LLP, and Donald 
Vilione (collectively hereinafter "the accountants")——summary 
judgment motion thereby dismissing the claims of the plaintiffs, 
Henry J. Krier and Badger Investment Realty, LLC (f/k/a Vil-Kri 
Investments, LLC), but as to the plaintiff, Badger Disposal of 
WI, Inc. (f/k/a EOG Disposal, Inc.),3 the accountants were 
                                                 
1 Krier v. Vilione, 2007 WI App 235, 306 Wis. 2d 147, 742 
N.W.2d 537. 
2 The Honorable Jeffrey A. Kremers granted the defendant's 
motion for summary judgment with respect to claims made by Henry 
J. Krier and Badger Investment Realty, LLC, and as a result, the 
circuit court ordered that all claims asserted by Henry J. Krier 
and Badger Investment Realty, LLC be dismissed on their merits, 
with taxable costs and disbursements allowed by law.  Judgment 
was then entered; however, taxable costs and disbursements were 
only awarded to Virchow Krause & Company, LLP.  As a result, 
Donald Vilione filed a motion requesting a review of the 
decision of the judgment clerk.  Following judicial rotation, 
the Honorable Jean W. DiMotto ordered that the judgment that was 
entered be amended to reflect that Donald Vilione could also 
recover his taxable costs and disbursements. 
With respect to Badger Disposal's claims, the Honorable 
Jeffrey A. Kremers granted partial summary judgment, and as a 
result, an order was issued dismissing those claims asserted by 
Badger Disposal for any damages that it suffered by virtue of or 
related in any way to alleged thefts from EOG Environmental. 
3 Hereinafter, the plaintiffs will collectively be referred 
to as "the plaintiffs" when referring to all of them, but 
individually Henry J. Krier will be referred to as "Krier," 
Badger Investment Realty, LLC will be referred to "Vil-Kri," and 
Badger Disposal of WI, Inc. will be referred to as "EOG 
Disposal." 
No. 
2006AP1573 & 2006AP2290   
 
3 
 
granted partial summary judgment in that only EOG Disposal's 
claim against the accountants for $7,000 in damages survived 
because 
it 
arose 
out 
of 
Michael 
Vilione's 
alleged 
misappropriation from plaintiff, EOG Disposal.  The court of 
appeals 
reversed 
the 
circuit 
court's 
dismissal 
of 
the 
plaintiffs' claims,4 and as result, the accountants petitioned 
this court for review.  We accepted review and now reverse the 
court of appeals' decision. 
¶2 
This case requires us to determine whether the 
plaintiffs, who are not shareholders in EOG Environmental,5 have 
standing to make a claim against that corporation's accountants 
(who were also the plaintiffs' accountants) for damages because 
the accountants allegedly failed to disclose, failed to prevent, 
and 
assisted 
in 
the 
misappropriation 
of 
funds 
from 
EOG 
Environmental.  The complaint alleges that had the accountants 
informed the plaintiffs of the misappropriations, they would 
have ceased doing business with EOG Environmental.  The damages 
                                                 
4 The court of appeals granted EOG Disposal's petition for 
leave to appeal from Judge Kremers' nonfinal order limiting the 
damages that EOG Disposal can pursue.  Judge Kremers dismissed 
Krier and Vil-Kri's claims in their entirety and judgment was 
entered.  Because their dismissal was a final judgment, Krier 
and Vil-Kri filed a separate appeal.  The court of appeals 
ordered Krier and Vil-Kri's appeal to be consolidated with EOG 
Disposal's interlocutory appeal. 
5 Michael 
Vilione and Krier shared ownership in EOG 
Environmental, EOG Disposal, and Vil-Kri.  The plaintiffs' 
claims in this case originate from Michael Vilione's alleged 
misappropriation 
from 
EOG 
Environmental. 
 
The 
defendant 
accountants in this case served as the accountants for all three 
corporations.   
No. 
2006AP1573 & 2006AP2290   
 
4 
 
sought by the plaintiffs are not for damages due to EOG 
Environmental or for damages to the plaintiffs prior to the 
discovery of the misappropriations.  Rather, the plaintiffs' 
expert calculates damages for future, consequential loss to the 
plaintiffs despite the fact that they voluntarily and knowingly 
continued in a business relationship post-misappropriations.  
The expert calculates that the plaintiffs would have realized 
greater future profits had the accountants prevented one of EOG 
Environmental's owners from misappropriating funds or had the 
accountants warned the plaintiffs about the misappropriations.  
In other words, the plaintiffs allege that the accountants are 
liable to them even though the plaintiffs are separate and 
distinct 
entities 
with 
no 
shareholder 
interest 
in 
EOG 
Environmental, they voluntarily and knowingly continued to do 
business with that separate corporate entity, and they do not 
allege that they continued to do business based on any advice by 
the accountants. 
¶3 
We conclude that the court of appeals must be reversed 
because the summary judgment determination by the circuit court 
was correct.  Therefore, we conclude that the plaintiffs, i.e., 
Vil-Kri, Krier, and EOG Disposal, lack standing to bring such 
claims against the accountants for their alleged role in the 
misappropriation of funds from EOG Environmental because, as 
explained in section III-A, ¶¶20-52, corporate law principles 
establish that the plaintiffs have no standing in this case, 
third-party liability precedent does not provide the plaintiffs 
with standing, and the damages claimed by the plaintiffs do not 
No. 
2006AP1573 & 2006AP2290   
 
5 
 
correspond with the claims alleged.  However, as determined by 
the circuit court, EOG Disposal does have standing to assert 
claims against its own accountants, i.e., Donald Vilione and 
Virchow 
Krause 
& 
Co., 
for 
damages 
arising 
out 
of 
the 
accountants' actions when acting as EOG Disposal's accountant.  
To date, EOG Disposal has produced expert testimony to support a 
claim for $7,000 in damages. 
¶4 
Separately, as discussed in section III-B, ¶¶53-67, 
the plaintiffs' claims do not survive summary judgment because: 
(1) assuming the defendants owed the plaintiffs a duty of 
ordinary care, their negligence claims of accounting negligence, 
negligent 
training 
and 
supervision, 
and 
negligent 
misrepresentation would be barred on public policy grounds; and 
(2) their breach of fiduciary duty claim would be barred by the 
statute of limitations and the plaintiffs have not shown any 
damages that are tied to this claim.  
I. BACKGROUND 
¶5 
In 1991, Krier and Michael Vilione formed three 
different corporations: EOG Environmental, EOG Disposal, and 
Vil-Kri.  EOG Environmental, which is a sales, marketing, and 
waste collection corporation, was formed as a C-corporation.6  
EOG Disposal, which received and disposed of waste products by 
virtue of working with other waste disposal companies, was 
                                                 
6 See 2 Jay E. Grenig & Nathan A. Fishbach, Wisconsin 
Practice Series, Method of Practice § 50.12 (4th ed. 2004) 
(discussing C-corporations). 
No. 
2006AP1573 & 2006AP2290   
 
6 
 
formed as an S-corporation.7  Vil-Kri, the owner of the building 
that EOG Disposal leased for its business, was formed as a 
limited liability company (LLC).8   
¶6 
EOG Environmental, the C-corporation, was owned by 
Michael Vilione (47.17%), Krier (47.17%), Jeff Vilione (5%), and 
Kandy Schmit (0.66%).  EOG Disposal, the S-corporation, was 
owned by Michael Vilione (50%) and Krier (50%).  Vil-Kri, the 
limited liability company, was owned by Michael Vilione (50%) 
and Krier (50%). 
¶7 
Donald Vilione, i.e., the accountant, a partner in the 
accounting firm of Virchow Krause & Co., was the accountant for 
each of the three corporations and Krier's personal accountant 
until approximately January 31, 2003.  Donald Vilione and 
Michael Vilione are brothers.     
¶8 
Between December 1, 1995, and December 11, 2002, 
Michael Vilione allegedly misappropriated over $1.2 million from 
EOG 
Environmental 
and 
$7,000 
from 
EOG 
Disposal. 
 
Krier 
discovered the misappropriations in 2002, and as a result, he 
                                                 
7 See 2 Grenig & Fishbach, supra, § 50.13 (discussing S-
corporations). 
8 See 2 Grenig & Fishbach, supra, § 50.14 (discussing 
limited liability companies). 
No. 
2006AP1573 & 2006AP2290   
 
7 
 
instituted litigation on January 3, 2003, against Michael 
Vilione alleging fraud and misappropriations of funds.9          
¶9 
On January 31, 2003, Krier and Michael Vilione reached 
a comprehensive settlement agreement with regard to that 
litigation.  This was also the approximate date that Krier and 
his entities ceased to employ the accountants.  In the 
settlement agreement, Michael Vilione became the sole owner of 
the C-corporation, EOG Environmental.  As a part of that 
agreement, Krier conveyed all of his common stock in EOG 
Environmental to Michael Vilione.  Also as a part of that 
agreement, Krier became the sole owner of the S-corporation, EOG 
Disposal, and he also became the sole owner of the limited 
liability company, Vil-Kri.  Similarly, Michael Vilione conveyed 
all of his common stock in EOG Disposal to Krier.  In addition, 
Michael Vilione sold his ownership interest in Vil-Kri to Krier 
for the sum of $95,000.  However, Michael Vilione and Krier also 
agreed to continue doing business together for approximately the 
next two years.  As part of the agreement, all debts Krier owed 
to EOG Environmental were eliminated and all debts Michael 
Vilione owed to EOG Disposal and Vil-Kri were eliminated.  In 
addition, under the agreement Krier, EOG Disposal, and Vil-Kri 
                                                 
9 See Krier v. EOG Envtl., Inc., 2005 WI App 256, 288 
Wis. 2d 623, 707 N.W.2d 915 (reviewing a motion to extend an 
order sealing the court record after the settlement agreement 
between Krier and Michael Vilione).  The court of appeals 
indicates that Krier made claims against Michael Vilione for 
fraud and misappropriation of funds and "seriously considered" 
filing an action against the accountants.  Id., ¶¶1-6.  
No. 
2006AP1573 & 2006AP2290   
 
8 
 
released Michael Vilione and EOG Environmental from all claims 
"from the beginning of time to the date of execution of th[e] 
Release." 
 
In 
the 
agreement, 
Michael 
Vilione 
and 
EOG 
Environmental also released Krier, EOG Disposal, and Vil-Kri of 
all claims "from the beginning of time to the date of execution 
of th[e] Release."  However, in the agreement, Krier, EOG 
Disposal, and Vil-Kri reserved the right to file an action 
against Michael Vilione's brother, i.e., Donald Vilione, who was 
the accountant.  Donald Vilione was not a party to that lawsuit 
or the settlement agreement.   
¶10 On January 20, 2005, nearly two years after Krier had 
divested himself of any interest in EOG Environmental and 
approximately two years from filing the lawsuit regarding the 
misappropriations, Krier, EOG Disposal, and Vil-Kri10 filed an 
action against the accountants.  The plaintiffs alleged that had 
the accountants informed them of the misappropriations from EOG 
Environmental or stopped the misappropriations, they would have 
ceased to do business with EOG Environmental.  They then offer 
an expert's opinion that the misappropriation of funds from EOG 
Environmental caused the plaintiffs' businesses to have a 
future, consequential reduced value.  The plaintiffs' complaint 
asserted ten causes of action: violation of Wis. Stat. § 134.01 
(2007-08),11 injury to business; civil conspiracy; accounting 
                                                 
10 Subsequent to the settlement agreement, Krier changed the 
name of EOG Disposal to Badger Disposal, Inc. and Vil-Kri to 
Badger Investments Realty, LLC.  
11 All subsequent references to the Wisconsin Statutes are 
to the 2007-08 version unless otherwise indicated. 
No. 
2006AP1573 & 2006AP2290   
 
9 
 
negligence; breach of fiduciary duty; negligent training and 
supervision; negligent misrepresentation; strict responsibility 
misrepresentation; 
misrepresentation-intentional 
deceit; 
violation of Wis. Stat. §§ 895.80 (2003-04) and 943.20, civil 
theft; and violation of the Wisconsin Organized Crime Control 
Act.  In short, the plaintiffs alleges that the defendants 
either (1) failed to discover the alleged misappropriations; (2) 
knew of the misappropriations but "fail[ed] to disclose" or 
prevent them; or (3) "acted together" "purposefully" and 
"intentionally" with Michael Vilione to allegedly misappropriate 
the funds.    
¶11 Even though the complaint is that had the accountants 
acted properly, the plaintiffs would have ceased doing business 
with EOG Environmental, the plaintiffs' expert renders an 
opinion 
about 
post-misappropriation 
damages. 
 
The 
expert 
essentially 
opines 
that 
post-settlement 
and 
after 
the 
accountants no longer worked as the plaintiffs' accountants, EOG 
Disposal and Vil-Kri would have produced greater income had 
Michael Vilione not previously misappropriated funds from EOG 
Environmental.  In fact, the plaintiffs' expert characterized 
the loss——naming it "the Krier Loss"——at approximately $11 
million.12  The plaintiffs' expert also concluded that the 
                                                 
12 The expert came to this mathematical conclusion by using 
the following methodology and stating so in the expert witness 
report number two, page five: 
In my opinion the Krier Loss is the difference between 
(i) the value as of June 30, 2005 that the EOG 
Entities would have had, absent the Vilione Stealing 
No. 
2006AP1573 & 2006AP2290   
 
10 
 
accountants caused a $7,000 loss to EOG Disposal when acting as 
EOG Disposal's accountant.  The accountants do not appeal the 
determination that the $7,000 claim survives summary judgment. 
¶12 At the circuit court, the accountants' motion for 
summary judgment was based on the premise that the plaintiffs 
were precluded as a matter of law from recovering damages 
because they lacked standing to assert a claim for relief based 
on alleged misappropriation from EOG Environmental.  As outlined 
previously, the circuit court granted the accountants' summary 
judgment motion with the exception that EOG Disposal could 
continue its claim so long as the damages were not based on the 
initial misappropriation from EOG Environmental, i.e., the 
$7,000 loss survives.  After hearing a motion to reconsider by 
the plaintiffs, the circuit court confirmed its initial summary 
judgment determination.  The circuit court reasoned that Krier 
                                                                                                                                                             
($33,445,000) 
(the 
"Projected 
Entities 
Value"), 
multiplied by [] Krier's 47.17% ownership percentage 
($15,776,007)( . . . ); 
and 
(ii) 
the 
value 
of 
[Krier's] ownership interest as of June 30, 2005 in 
Disposal and [Vil-Kri] ($4,000,000)( . . . ).  The 
difference between these two amounts, $11,776,007, is 
the Krier Loss related to the Vilione Stealing. 
We 
note, 
however, 
two 
potential 
problems 
with 
this 
calculation.  First, as discussed later, these numbers are in 
part based off a separate corporation, EOG Environmental, to 
which Krier no longer has any ownership or stock interest.  
Second, to the extent this calculation is appropriate, Krier's 
loss is likely less than approximately $11 million because that 
figure represents his interest in all three corporations had 
they grown.  However, Krier has an interest in only two of the 
three corporations.  The $4 million figure presumably represents 
Krier's current interest in the two companies and not what would 
have been his interest had no "misappropriations" taken place. 
No. 
2006AP1573 & 2006AP2290   
 
11 
 
could not assert a claim for damages done to the corporations, 
and EOG Disposal and Vil-Kri failed to show they suffered any 
"direct" damages because of the accountants' conduct except that 
EOG Disposal showed it suffered a $7,000 loss due to the actions 
of the accountant. 
¶13 The plaintiffs appealed, and the court of appeals 
reversed the circuit court's decision and remanded.  The court 
of appeals concluded that "(1) the trial court failed to follow 
the standard methodology when it determined that summary 
judgment was appropriate; (2) accountants are liable for all 
damages that flow from their misconduct; and (3) Krier has 
standing to recover damages." 
II. STANDARD OF REVIEW 
¶14 "Whether the circuit court properly granted summary 
judgment is a question of law that this court reviews de novo." 
Schmidt v. N. States Power Co., 2007 WI 136, ¶24, 305 
Wis. 2d 538, 742 N.W.2d 294.  This court applies the same 
standards as those used by the circuit court, which are set 
forth in Wis. Stat. § 802.08, id., but we benefit from the lower 
courts' analyses.  Whether a party has standing presents a 
question of law that we also review de novo.  Zellner v. 
Cedarburg Sch. Dist., 2007 WI 53, ¶14, 300 Wis. 2d 290, 731 
N.W.2d 240.    
III. ANALYSIS 
¶15 In 
this 
appeal, 
the 
plaintiffs 
argue 
that 
the 
defendant accountants are liable to them because they allegedly 
failed to discover, prevent, or because they played a role in 
No. 
2006AP1573 & 2006AP2290   
 
12 
 
the misappropriation of funds from EOG Environmental by Michael 
Vilione.  The crux of the plaintiffs' claim for damages relates 
to the fact that they would have discontinued doing business 
with EOG Environmental had they known of the misappropriations.  
The 
plaintiffs' 
expert 
renders 
an 
opinion 
regarding 
the 
diminution in value of the plaintiffs' entities, which occurred 
post-settlement and after the accountants were no longer the 
plaintiffs' accountants.  The expert opines that the plaintiffs' 
business decreased as a result of the misappropriation of assets 
from EOG Environmental.  The record reflects that the plaintiffs 
chose to continue conducting business with EOG Environmental, 
regardless of the misappropriations and it is not alleged that 
the accountants played any role in that decision.   
¶16 The accountants, on the other hand, argue that the 
plaintiffs lack standing to assert such claims for relief 
because the plaintiffs are not current shareholders of EOG 
Environmental 
and 
allowing 
such 
claims 
to 
proceed 
would 
unreasonably expand accountant liability.   
¶17 We agree with the accountants and therefore reverse 
the court of appeals' decision.   
¶18 In summary: The plaintiffs do not have standing to 
assert these claims against the defendant for at least three 
reasons.  First, the plaintiffs' claims are inconsistent with 
traditional corporate law principles and the damages sought are 
far beyond that afforded to a plaintiff in a derivative action.  
In order to initiate a derivative action, a plaintiff must be a 
current shareholder of the subject corporation.  Second, the 
No. 
2006AP1573 & 2006AP2290   
 
13 
 
plaintiffs' claims are quite distinguishable from accountant 
third-party liability jurisprudence, which has traditionally 
allowed claims for the foreseeable injuries resulting from the 
accountant's negligent acts, i.e., the injuries that result when 
a third party takes action based upon reasonable reliance on 
misinformation provided by an accountant.  Third, the damages 
claimed by the plaintiffs do not correspond with the claims 
alleged. 
¶19 Separately, as discussed in section III-B, ¶¶53-67, 
the plaintiffs' claims do not survive summary judgment because: 
(1) assuming the defendants owed the plaintiffs a duty of 
ordinary care, their negligence claims, as discussed in ¶¶54-57, 
of accounting negligence, negligent training and supervision, 
and negligent misrepresentation would be barred on public policy 
grounds; and (2) as discussed in ¶¶58-67, their breach of 
fiduciary duty claim would be barred by the statute of 
limitations and the plaintiffs have not shown any damages that 
are tied to this claim.    
A. Standing   
¶20 While an accountant has a duty to his or her client 
and 
may 
have 
a 
duty 
to 
a 
third 
party 
under 
certain 
circumstances, that party must still have standing to bring an 
action.  "'Standing' is a concept that restricts access to 
judicial remedy to those who have suffered some injury because 
of something that someone else has either done or not done."  
Three T's Trucking v. Kost, 2007 WI App 158, ¶16, 303 
Wis. 2d 681, 736 N.W.2d 239.  The law of standing should be 
No. 
2006AP1573 & 2006AP2290   
 
14 
 
liberally construed, and as such, standing is satisfied when a 
party has a personal stake in the outcome.  City of Madison v. 
Town of Fitchburg, 112 Wis. 2d 224, 228-30, 332 N.W.2d 782 
(1983).  However, the plaintiffs must show that they suffered or 
were threatened with an injury to an interest that is legally 
protectable.  Chenequa Land Conservancy, Inc. v. Vill. of 
Hartland, 2004 WI App 144, ¶¶13-16, 275 Wis. 2d 533, 685 
N.W.2d 573.  Being damaged, however, without more, does not 
automatically confer standing.  The universe of entities or 
people who could be affected or damaged by a corporation that 
ceases to do business is without bounds.  
¶21 In this case, the plaintiffs assert that their claims 
are viable because they are not praying for damages to EOG 
Environmental.  Rather, they are seeking damages to their 
corporate entities and personally because the misappropriation 
from EOG Environmental caused a diminution in the value of their 
corporations——EOG Disposal and Vil-Kri——and Krier's stock in 
those corporations.  However, the complaint alleges that had 
they been properly informed, they would have ceased doing 
business with EOG Environmental.  
¶22 While 
the 
law 
of 
standing 
is 
to 
be 
liberally 
construed, this theory of liability set forth by the plaintiffs 
is not recognized in Wisconsin jurisprudence, and we will not 
pave the way for such relief with today's decision because 
corporate law principles establish that the plaintiffs have no 
standing to seek these damages in this case.  Third-party 
liability precedent does not convey standing to the plaintiffs, 
No. 
2006AP1573 & 2006AP2290   
 
15 
 
and the damages claimed by the plaintiffs do not correspond with 
the claims alleged.  While we certainly do not condone 
accountant misconduct, the plaintiffs in this case do not have 
standing to bring these claims for these damages.  
1. Corporate law principles  
¶23 The plaintiffs' argument regarding standing has never 
before 
been 
acknowledged 
in 
Wisconsin 
law, 
and 
if 
the 
plaintiffs' claims were to survive, there would be no stopping 
point to liability.  Absent additional facts that would support 
a corresponding responsibility, separate corporate entities do 
not have standing to seek the relief sought in this case.  The 
lack of any stopping point provides support for the logic behind 
these longstanding corporate principles.  If the plaintiffs' 
claims 
were 
to 
survive, 
any 
business 
could 
sue 
another 
business's advisor whenever that business advice negatively 
affects a plaintiff's business.  These plaintiffs do not have 
standing to bring an action for damages to EOG Environmental.  
The fact that the plaintiffs have been affected by the 
misappropriations is not enough to confer standing upon them to 
seek these damages.  
¶24 In this case, each of the three corporations are 
separate corporate entities.  Each corporation was specifically 
classified: a C-corporation, an S-corporation, or a limited 
liability company.  See 2 Jay E. Grenig & Nathan A. Fishbach, 
Wisconsin Practice Series, Methods of Practice §§ 50.10—50.16 
(4th ed. 2004) (discussing the difference between each type of 
corporation and when to use and not to use each entity).  The 
No. 
2006AP1573 & 2006AP2290   
 
16 
 
plaintiffs cannot pick and choose when they would like to 
operate separately and when they would like to operate as one 
corporation.  Their business's interdependence does not blur the 
entities' distinct corporate structures. 
¶25 A particular type of corporation may be the preferred 
method of doing business for any number of reasons including tax 
and liability implications, see id. at §§ 50.1, 50.20—50.36, and 
these individuals chose to operate a business by creating 
separate and distinct corporate entities.  Presumably, Krier and 
Michael Vilione made a conscious decision to create three 
different 
corporations 
with 
different 
types 
of 
corporate 
entities to carry out their operations.  While they likely 
enjoyed certain advantages from doing business as three separate 
corporate entities, they also are bound by the disadvantages of 
forming separate corporations.  See Terry v. Yancey, 344 F.2d 
789, 790 (4th Cir. 1965) (stating "where an individual creates a 
corporation as a means of carrying out his business purposes he 
may not ignore the existence of the corporation in order to 
avoid its disadvantages").   
¶26 The plaintiffs essentially assert that because the 
entities function as one overall business, corporate principles 
ought to be overlooked in the interest of justice.  However, 
when Krier and Michael Vilione were joint owners of the three 
entities, if one of their corporate entities were being sued, 
Krier and Michael Vilione would not likely suggest that the 
corporations were actually interdependent such that the assets 
of all three entities would be available for damages.  In fact, 
No. 
2006AP1573 & 2006AP2290   
 
17 
 
in a business such as waste disposal, there may be deliberate 
reasons to separate the entity that holds assets from other 
entities that might have greater exposure to liability.  One 
cannot maintain the corporate structure when it inures to one's 
benefit and then ignore the constraints of corporate law when it 
does not.  These parties formed separate entities that remain 
separate entities.   
¶27 We would abandon fundamental corporate law principles 
if we accepted the plaintiffs' theory of standing and liability.  
Fletcher Cyclopedia of the Law of Corporations provides that a 
corporation does not "have independent standing to sue for 
injuries done to a sister or subsidiary corporation, despite the 
fact that their businesses are intertwined and the success of 
one is dependent on that of the other."  1 William Meade 
Fletcher, Fletcher Cyclopedia of the Law of Corporations § 36 at 
95-96 
(perm. 
ed., 
rev. 
vol. 
2006) 
(citing 
Picture 
Lake 
Campground, Inc. v. Holiday Inns, Inc., 497 F. Supp. 858 (E.D. 
Va. 1980)). 
¶28 By 
way 
of 
example, 
in 
Picture 
Lake, 
a 
sister 
corporation of Picture Lake——First Management——alleged that the 
actions of Holiday Inns destroyed the value of First Management.  
Picture Lake, 497 F. Supp. at 860-61.  Picture Lake and Holiday 
Inns entered into a franchise agreement to develop a travel 
park.  Id.  First Management owned and leased the property to 
Picture Lake, and Picture Lake operated the travel park 
business.  Id. at 862.  When Holiday Inns allegedly breached the 
licensing 
agreement 
with 
Picture 
Lake 
and 
discontinued 
No. 
2006AP1573 & 2006AP2290   
 
18 
 
development of the travel park, First Management argued that the 
entities' operations were so intertwined that it——being a sister 
corporation of Picture Lake——should be able to make a claim 
against Holiday Inns.  Id. at 862-63.  The court concluded that 
Picture Lake did not have standing to pursue its claim.  Id.  
Relying on the fact that a choice to create separate entities 
must be honored, the court concluded:  
First Management has no independent standing to sue 
simply because the business and property interest of 
First 
Management and Picture Lake are allegedly 
intertwined and dependent upon the success of the 
Trav-L-Park system. 
To have standing to sue for damages for tortious 
injury to business or property, First Management must 
have an interest in the business or property allegedly 
injured.  In addition, just as a stockholder of a 
corporation has no standing to sue third parties for 
wrongs inflicted by those third parties upon the 
business and property interest of the corporation, it 
is evident that First Management has no standing to 
sue Holiday Inns for wrongs allegedly inflicted by 
Holiday Inns on the business or property interest of 
Picture Lake.  Moreover, the Court believes that First 
Management has no standing to sue for injuries 
inflicted 
indirectly 
or 
consequentially 
upon 
the 
business or property interest of First Management as a 
result of the alleged tortious conduct of Holiday Inns 
towards Picture Lake. The parties have not cited and 
the Court is not aware of any authority to the 
contrary. 
Id. at 863 (citation and footnote omitted). 
¶29 The damages to EOG Environmental belong to EOG 
Environmental and as a result, EOG Environmental or its 
shareholders could have made a claim against the accountants.  
However, 
Krier, as 
an individual who is not a current 
No. 
2006AP1573 & 2006AP2290   
 
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shareholder of EOG Environmental, lacks standing to file an 
action on EOG Environmental's behalf and even if he was a 
current shareholder, his standing would be in the form of a 
derivative action rather than a direct action.  
¶30 Had 
Krier, 
when 
he 
was 
a 
shareholder 
of 
EOG 
Environmental, brought a derivative action to recover the 
corporate loss, EOG Environmental would have been made whole in 
2002.  Had EOG Environmental been made whole at that time, 
plaintiffs' current claims for consequential damage would be 
nonexistent.  When Krier was still a shareholder of EOG 
Environmental, he had an opportunity to significantly limit or 
eliminate the future damages that he now seeks to recover.  
Instead he chose to enter into a new business relationship and 
now wishes to recover for that choice. 
¶31 It is logical then that when misappropriations from a 
corporation 
occur, 
the 
right 
of 
action 
belongs 
to 
the 
corporation.  See Rose v. Schantz, 56 Wis. 2d 222, 229, 201 
N.W.2d 593 (1972) (stating 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'" 
(citation omitted)).  At most, even if the accountant was 
assisting his brother with the misappropriations from EOG 
Environmental, Krier's right to recovery would have to be as a 
shareholder of EOG Environmental, not in his own stead or as 
another affected entity.  Id. (stating "[w]here the injury to 
the corporation is the primary injury, and any injury to 
stockholders secondary, it is the derivative action alone that 
No. 
2006AP1573 & 2006AP2290   
 
20 
 
can be brought and maintained").  While it is clear that primary 
and direct injury to a corporation may have a subsequent impact 
on the value of the stockholders' shares, that subsequent impact 
is not enough to create a right to bring a direct, rather than 
derivative, action.  Id.  When money is being misappropriated or 
stolen from a corporation, the damage is to the corporation, and 
as a result, the appropriate action is a derivative action and 
not a direct action.13  See 12B William Meade Fletcher, Fletcher 
                                                 
13 The dissent asserts that we fail to apply the test for 
determining 
whether 
the 
action 
is 
direct 
or 
derivative.  
Hogwash; when corporate funds are misappropriated, the injury to 
the corporation is the primary injury even though shareholders 
suffer from those misappropriations.  In order for a shareholder 
to have an independent claim, the injury must be "one to the 
plaintiff as a shareholder as an individual, and not to the 
corporation[;] for example, where the action is based on a 
contract to which the shareholder is a party, or on a right 
belonging severally to the shareholder, or on a fraud affecting 
the shareholder directly, or where there is a duty owed to the 
individual independent of the person's status as a shareholder, 
it is an individual action."  12B William Meade Fletcher, 
Fletcher Cyclopedia of the Law of Corporations § 5911 (perm. 
ed., rev. vol. 2009).  Therefore, a derivative action and not a 
direct action is appropriate in this case.   
No. 
2006AP1573 & 2006AP2290   
 
21 
 
Cyclopedia of the Law of Corporations §§ 5911, 5913, 5924 (perm. 
ed., rev. vol. 2009) (asserting that generally misappropriation, 
waste, and mismanagement only give rise to derivative actions); 
but see id., § 5924.10 (asserting that some courts may allow a 
direct action where plaintiff and defendant are both 50% 
shareholders). 
¶32 In this case, however, Krier can no longer even bring 
a derivative action based on the misappropriations from EOG 
Environmental because he is no longer a shareholder in EOG 
Environmental. 
 
See 
Wis. 
Stat. 
§§ 180.0103, 
180.0741.  
"'Shareholder' means the person in whose name shares are 
registered in the records of a corporation or the beneficial 
owner of shares to the extent of the rights granted by a nominee 
certificate on file with a corporation."  Wis. Stat. § 180.0103.  
Therefore, to have standing pursuant to Wis. Stat. § 180.0741, 
                                                                                                                                                             
The dissent also asserts this case is inconsistent with 
Notz v. Everett Smith Group, Ltd., 2009 WI 30, ¶27 __ Wis. 2d 
__, 764 N.W.2d 904, because, in Notz, this court concluded that 
a plaintiff could bring a direct action when a constructive 
dividend was distributed to only some shareholders and not 
others.  Our decision is not inconsistent with Notz because 
acting shareholders have a right to dividends paid on a pro rata 
basis 
equivalent 
to 
their 
ownership 
of 
corporate 
stock.  
Embezzlement, however, is distinguishable from a dividend.  An 
injury from not receiving a dividend is to the shareholder.  The 
injury from the embezzlement is to the corporation.  A 
misappropriation is not a constructive dividend.  Therefore, 
this case is unlike Notz or Jorgensen v. Water Works, Inc., 2001 
WI App 135, 246 Wis. 2d 614, 630 N.W.2d 230, where plaintiffs 
did not receive their dividends or pro rata cash flow to which 
they were entitled.  Here the injury is to the corporation.    
No. 
2006AP1573 & 2006AP2290   
 
22 
 
one must be a current shareholder to initiate a claim on behalf 
of the corporation.14     
¶33 If the plaintiffs' theory were to survive and they 
were allowed to bring a claim for damages to their entities 
because of a misappropriation to a separate entity to which they 
have no status as shareholder, they would be placed in a better 
position 
than 
a 
shareholder 
of 
the 
victim 
corporation.  
Certainly a shareholder of the victim corporation should not be 
placed in an inferior status to third-party entities that were 
affected by the misappropriation.  We know that a shareholder 
does not have the right to pursue those individual damages for 
the affect of wrongdoing to a corporation.  Rose, 56 Wis. 2d at 
229.  In fact, the shareholder would only have status of a 
derivative nature to bring action on behalf of the corporation.  
Id.  Under the theory advanced by the plaintiffs, we would 
actually be placing a shareholder who is directly affected by 
the misappropriation in a far inferior position to plaintiffs 
who are consequentially affected.  Since a shareholder lacks 
                                                 
14 See Portnoy v. Kawecki Berylco Indus., Inc., 607 F.2d 
765, 767 (7th Cir. 1979) (interpreting similar Federal Rule of 
Civil Procedure 23.1, Derivative Actions, in a like manner and 
stating that the underlying rationale is that "because a 
shareholder will receive at least an indirect benefit (in terms 
of increased shareholder equity) from any corporate recovery, he 
has an adequate interest in vigorously litigating the claim.  A 
non-shareholder or one who loses his shareholder interest during 
the course of the litigation may lose any incentive to pursue 
the litigation adequately").  This does not address, however, 
whether one who once was a shareholder and initiated a lawsuit 
while being a shareholder can continue that lawsuit when he or 
she is no longer a shareholder.  
No. 
2006AP1573 & 2006AP2290   
 
23 
 
standing to make a direct claim for such damages, id., it 
follows that a distinct entity would not have greater standing 
than the shareholder.    
¶34 Because Krier is a shareholder of EOG Disposal and 
Vil-Kri, he may be able to bring a derivative action against the 
accountant for the accountants' failures with regard to Michael 
Vilione's misappropriations from EOG Disposal or Vil-Kri.  Rose, 
56 Wis. 2d at 229; see Wis. Stat. §§ 180.0103, 180.0741.  
However, that standing is distinct from Krier's standing to 
bring an action for such injury to EOG Environmental, and Krier 
cannot now seek damages from the accountants because action with 
respect to a separate corporation has caused his business to be 
less lucrative.  In short, the assets of a corporation belong to 
that corporation.  Rose, 56 Wis. 2d at 229.  Krier relinquished 
any right to the assets of EOG Environmental or any such 
derivative claim when he relinquished his ownership in that 
corporation two years previous with knowledge that the assets of 
EOG Environmental had been depleted.  It stretches the bounds of 
imagination to conclude that one who has no right to sue on 
behalf of the corporation can then maintain a lawsuit based upon 
a 
sister 
corporation's 
diminution 
in 
value 
because 
a 
misappropriation to the separate corporation affected another 
business. 
2. Third-party liability 
¶35 The plaintiffs fail to provide the court with any 
third-party liability authority that would lead us to recognize 
that they have standing to pursue these claims for these 
No. 
2006AP1573 & 2006AP2290   
 
24 
 
damages.  The plaintiffs fail to set forth any case that goes so 
far as to let Corporation X file an action against Corporation 
Y's accountant for the accountant's failures with regard to the 
work he performed for Corporation Y solely because the financial 
problems of Corporation Y caused less growth in the value of 
Corporation X.  The plaintiffs' claims fall short of showing a 
breach of an independent duty that the accountant owed to them 
and 
how 
these damages resulted from that breach.  The 
plaintiffs' claims paint with too broad of a brush. 
¶36 The trial court aptly illustrated the flaw of applying 
third-party liability to the case at issue and how that theory 
would expand liability.  The trial court outlined that if 
someone was stealing from a car-seat maker that supplied General 
Motors and the thefts resulted in General Motors being unable to 
pay bills because it could not make cars without seats, under 
the plaintiffs' theory, General Motors could bring an action 
against the car-seat maker's accountant——who is also General 
Motors' 
accountant——for 
his 
failures. 
 
This 
hypothetical 
illustrates the absurdity of the plaintiffs' argument.  If the 
plaintiffs' theory prevailed, there would be no limit to the 
kinds of claims that other persons who have a "relationship" 
with a corporation could bring, and thus, available claims for 
relief would only be limited by one's imagination. 
¶37 The extent to which an accountant can be held liable 
to a third party has been addressed by Wisconsin law in Citizens 
State Bank v. Timm, Schmidt & Co., S.C., 113 Wis. 2d 376, 335 
N.W.2d 361 (1983) and Chevron Chemical Co. v. Deloitte & Touche, 
No. 
2006AP1573 & 2006AP2290   
 
25 
 
168 Wis. 2d 323, 483 N.W.2d 314 (Ct. App. 1992), but the facts 
before this court here are distinguishable from the facts of 
those cases.  The nexus in those cases between the accountant's 
acts and the resultant damages have a sound basis in law and 
fact, but to extend such third-party jurisprudence to the facts 
of this case would run afoul of those logical principles and 
open the floodgates to litigation.  This logic stands consistent 
with Wisconsin's adoption of the minority viewpoint of Palsgraf 
v. Long Island Railroad Co., 162 N.E. 99 (N.Y. 1928) (Andrews, 
J., dissenting) and our precedent that there can also be a limit 
to the scope of a duty and to when and where that duty may 
arise.15   
¶38 The plaintiffs, relying on Citizens and Chevron in an 
attempt to show standing, argue that their third-party liability 
                                                 
15 See Baumeister v. Automated Prods., Inc., 2004 WI 148, 
¶¶18-21, 277 Wis. 2d 21, 690 N.W.2d 1 (concluding that the 
architect did not have a duty to supervise the construction of a 
church because the architect's contract stated he had no 
responsibility for construction of the church); Hatleberg v. 
Norwest Bank Wis., 2005 WI 109, ¶¶19-25, 283 Wis. 2d 234, 700 
N.W.2d 15 (concluding that a trustee of a bank did not have a 
duty to review a trust document to ascertain whether it worked 
for the stated purpose of the trust); Hoida, Inc. v. M&I 
Midstate Bank, 2006 WI 69, ¶¶31-40, 291 Wis. 2d 283, 717 N.W.2d 
17 (concluding that the duty of ordinary care for the bank did 
not include responsibility for subcontractor's payments because 
the lender's contract said the lender had no responsibility with 
regard 
to 
paying 
the 
subcontractors 
or 
with 
obtaining 
subcontracting lien waivers); Nichols v. Progressive N. Ins. 
Co., 2008 WI 20, ¶47, 308 Wis. 2d 17, 746 N.W.2d 220 (stating 
"[w]hile liability has been limited in a negligence case based 
on the absence of a duty, liability in the vast majority of 
negligence cases in Wisconsin is guided, when determining 
whether to limit liability, by consideration of public policy 
factors").   
No. 
2006AP1573 & 2006AP2290   
 
26 
 
claims are firmly rooted in Wisconsin law.  However, while 
third-party liability is recognized in Wisconsin, the cases 
cited by the plaintiffs are distinguishable from the allegations 
and the proof of damages in the case at issue.  In this case, 
the plaintiffs do not allege or show any damages based upon 
detrimental reliance on information provided by the accountants 
like in Citizens and Chevron.  
¶39 In 
Citizens, 
the 
Timm 
accounting 
firm 
prepared 
financial statements and an opinion letter for Clintonville Fire 
Apparatus, Inc., to use in obtaining a loan.  Timm represented 
that "the financial statements fairly presented the financial 
condition 
of 
[Clintonville 
Fire 
Apparatus] 
and 
that 
the 
statements were prepared in accordance with generally accepted 
accounting principles."  Citizens, 113 Wis. 2d at 378.  Based on 
those 
documents, 
Citizens 
Bank 
loaned 
Clintonville 
Fire 
Apparatus approximately $380,000 between 1975 and 1976.  Id. at 
378-81.  In 1976, Timm discovered that the 1974 and 1975 
financial statements contained a number of material errors 
totaling over $400,000.  Id. at 378.  Once the errors were 
corrected, Citizens Bank called its loans due, and as a result, 
Clintonville Fire Apparatus went into receivership and was 
liquidated and dissolved.  Id. at 378-79.  Because Citizens Bank 
had loaned those amounts in reliance on the accountant's work, 
Citizens Bank filed an action against Timm for malpractice.  Id. 
at 379-81.  Citizens Bank sought damages for the unpaid amounts 
due on its loans to Clintonville Fire Apparatus.  Id. at 379. 
No. 
2006AP1573 & 2006AP2290   
 
27 
 
¶40 This court determined that privity of contract was not 
required in order for the accountant to be liable to a third 
party 
and 
instead 
concluded 
that 
accepted 
principles 
of 
Wisconsin negligence law should govern.  Id. at 386.  In 
Citizens, the accountant prepared the documents with client 
approval as to disclosure and knowing that the bank would rely 
on the documents in order to make loan decisions.  Therefore, it 
stands to reason that the accountant could reasonably anticipate 
liability for that malpractice.  Id. at 388. 
¶41 Similarly, in Chevron the court of appeals applied 
this same logic when assessing third-party liability of an 
accountant.  In Chevron, the American Fuel & Supply Co., Inc. 
hired Deloitte to independently audit American Fuel.  Chevron, 
168 Wis. 2d at 327-28.  As a part of that audit, Deloitte 
prepared a report of American Fuel's financial statements.  
American 
Fuel 
distributed 
copies 
of 
the 
reports 
to 
its 
creditors, one of which was Chevron.  Id. at 328.  In early 
1986, Deloitte discovered that the audit was in error due to 
American Fuel's "rebilling" practice.  Id.  Because of the 
error, American Fuel's financial statements reflected it making 
a profit when in reality it was operating at a deficit.  Id.  
However, before that error was discovered, Chevron relied upon 
the 1985 financial statements in its decisions to extend credit 
to American Fuel for certain purchases.  Id.  When Deloitte 
discovered the incorrect audit report, it urged American Fuel to 
recall the report, but American Fuel refused.  Id.  When 
Deloitte indicated its intent to withdraw the audit and advise 
No. 
2006AP1573 & 2006AP2290   
 
28 
 
any entity relying upon it, American Fuel threatened legal 
action against Deloitte because such disclosure would breach 
Deloitte's duty to American Fuel.  Id. at 328-29.  American Fuel 
filed for bankruptcy on April 23, 1987, and in 1989, Chevron 
filed an action against Deloitte alleging both negligence in the 
audit and misrepresentation based upon Deloitte's failure to 
notify Chevron of the withdrawn report.  Id. at 329.  Chevron 
sought to recover from Deloitte the amounts due from American 
Fuel and interest as a result of Chevron relying on the 
accountant's work to extend credit to American Fuel.  Id. at 
341-42.   
¶42 Because the accountant prepared the statements in 
Chevron, knowing that a third party would rely upon them, and 
the third party took action based on those financial statements 
to their specific detriment, the accountant could be held 
responsible on the basis of third-party liability.  Id. at 334-
35. 
¶43 Citizens and Chevron provide significant guidance 
regarding third-party liability of an accountant.  While privity 
of contract is not required for an accountant to be liable to a 
third party, these cases demonstrate the kind of foreseeable 
reliance to one's detriment that can reasonably create a third-
party cause of action against an accountant.  In both Citizens 
and 
Chevron, 
the 
accountant, 
the 
third 
party, 
and 
the 
accountant's client formed a "triangular-relationship."  The 
client relied on the third party to receive a loan, and the 
third 
party 
relied 
on 
the 
accountant's 
documentation 
to 
No. 
2006AP1573 & 2006AP2290   
 
29 
 
determine whether to loan the money.  In Citizens and Chevron, 
the accountant, the client, and the bank or creditor were all 
aware of the fact that the statements were prepared for the bank 
or creditor to review and that based upon that information, the 
bank or creditor would decide whether to loan money or extend 
credit.  As a result, the accountant could reasonably be held 
liable to that third party for his or her malpractice.    
¶44 In order for an accountant to bear responsibility to a 
third party, the third party must have done something to its 
detriment based upon the accountant's information.  Here, there 
is no such claim that the plaintiffs took action in reliance on 
information provided by the accountants.  The plaintiffs do not 
claim that they relied on the accountants' inaccurate work 
product and as a result, loaned money to the other corporations 
or took action to their detriment.   
¶45 Unlike Citizens or Chevron, the plaintiffs do not make 
claim for a specific loss that was caused by their relying on 
the accountants' misinformation.  At most, the plaintiffs assert 
that the accountants, Michael Vilione, and Krier attended a 
meeting in January of 1999 where Krier inquired about the state 
of the "enterprise," but that the accountants did not inform 
Krier at that time about the misappropriations and instead told 
Krier that the corporations were not worth anything.  The 
plaintiffs' claims and damages here, however, do not relate to 
any loss caused to them by the accountants' statements at this 
meeting.  They do not allege damages based on action that they 
took because of the accountants' statements.  The accountants' 
No. 
2006AP1573 & 2006AP2290   
 
30 
 
statements in this meeting do not tether to quantifiable damages 
alleged here by the plaintiffs.   
¶46 The case before the court is distinguishable from 
Citizens and Chevron, and it does not remedy the plaintiffs' 
problem that the damages are to EOG Environmental.  At most, the 
plaintiffs' proof shows that the value of EOG Disposal and Vil-
Kri was diminished because of the misappropriations from EOG 
Environmental, and as a result, EOG Disposal was not able to 
expand its facilities.  As stated previously, however, the 
plaintiffs' claims against the accountants for diminished value 
are not viable under the facts of this case.  The plaintiffs' 
claims and the future consequential damages they seek are far 
removed from the facts of Chevron or Citizens.   
3. Damages 
¶47 The parties spend a significant amount of time arguing 
over the damages calculation made by the plaintiffs' expert.  
While the calculation is certainly questionable, we have other 
concerns regarding the damages sought by the plaintiffs. 
¶48 First, the expert's calculation of damages is based 
upon 
future, 
consequential damages post-settlement of the 
misappropriation 
claim. 
 
The 
origination 
of 
the 
damage 
calculation is remotely based upon the alleged misappropriation 
of funds from EOG Environmental.  The plaintiffs' complaint 
alleges that they would have ceased to do business with EOG 
Environmental had they known of the misappropriations.  However, 
the expert's calculations do not support that allegation.   
No. 
2006AP1573 & 2006AP2290   
 
31 
 
¶49 Second, the plaintiffs assert that had they known 
about the misappropriations they would have ceased doing 
business with EOG Environmental and thus limited their potential 
damages.  However, this assertion is disingenuous because the 
plaintiffs voluntarily continued to do business with EOG 
Environmental even though the plaintiffs claim that they would 
have ended the business relationship.  After learning of the 
misappropriations and filing suit against Michael Vilione, Krier 
settled his claims with Michael Vilione.  As part of that 
settlement agreement, Krier chose to relinquish all status as a 
shareholder, not file an action while he was a shareholder, and 
instead agreed to continue a business relationship with Michael 
Vilione's corporation——a separate corporate entity——for two 
years.  It is not alleged that the accountants had any role in 
that decision to continue doing business together.   
¶50 Additionally, despite knowing of the misappropriations 
and even contemplating making claims against the accountants 
around the time of the settlement agreement, Krier did not bring 
any claims against the accountant at that time.  Rather, two 
years after relinquishing all status as a shareholder, he filed 
this lawsuit against the accountants for unrealized business 
growth to his separate corporate entities.   
¶51 In summary, the plaintiffs knew of the alleged 
misappropriations in 2002; they filed a lawsuit for that alleged 
wrongdoing, but only against the other shareholder.  Krier did 
not seek relief for EOG Environmental by derivative claim; the 
record indicates that the plaintiffs contemplated making a claim 
No. 
2006AP1573 & 2006AP2290   
 
32 
 
against the accountants in the 2002 lawsuit but did not.  The 
plaintiffs continued to do business with the alleged wrongdoer 
for another two years post-settlement and now claim that they 
would have ceased to do business with that corporation had the 
accountants told them of the misappropriations; and, the damages 
the plaintiffs seek relate to the two-year time period when they 
continued to do business post-settlement.   
¶52 Simply stated, the plaintiffs' claims for future 
consequential damages fail considering the allegations of the 
complaint.  The plaintiffs claim that they would have ceased 
doing business with EOG Environmental had they known of the 
misappropriations 
and 
that 
the 
accountants 
shirked 
their 
responsibility in not warning them of the misappropriations.  
However, the plaintiffs contracted to do business with EOG 
Environmental 
for 
two 
years 
after 
knowing 
about 
the 
misappropriations.  Now they wish to recover from another for 
that knowing and voluntary choice. 
B. Plaintiffs' claims are not otherwise viable 
¶53 Separately, the plaintiffs' claims would not survive 
summary 
judgment 
for 
the 
following 
reasons: 
First, 
the 
negligence claims in this case could also be precluded on public 
policy grounds.  Second, the plaintiffs' breach of fiduciary 
duty claim is barred by the statute of limitations and the 
plaintiffs' damages are not tied to this claim.   
1. Negligence claims  
¶54 Aside from the reasons set forth thus far, the 
plaintiffs' claims could also be precluded on public policy 
No. 
2006AP1573 & 2006AP2290   
 
33 
 
grounds.  Despite that "a plaintiff adequately establishes all 
four elements of a common-law negligence claim, Wisconsin courts 
have 'reserved the right to deny the existence of a negligence 
claim based on public policy reasons . . . .'"  Nichols v. 
Progressive N. Ins. Co., 2008 WI 20, ¶19, 308 Wis. 2d 17, 746 
N.W.2d 220 (citing Hoida, Inc. v. M&I Midstate Bank, 2006 WI 69, 
¶24, 291 Wis. 2d 283, 717 N.W.2d 17).  The relevant factors to 
be considered are as follows: "(1) the injury is too remote from 
the negligence; (2) the recovery is wholly out of proportion to 
the culpability of the negligent tort-feasor; (3) the harm 
caused is highly extraordinary given the negligent act; (4) 
recovery would place too unreasonable a burden on the negligent 
tort-feasor; (5) recovery would be too likely to open the way to 
fraudulent claims; and (6) recovery would enter into a field 
that has no sensible or just stopping point."  Hoida, 291 
Wis. 2d 283, ¶41, (citations and internal quotations omitted).   
¶55 Public 
policy 
is 
therefore 
another 
basis 
for 
precluding the plaintiffs' claims.  First, as we discussed above 
with regard to this case, there would be no sensible or just 
stopping point if the plaintiffs' claims prevailed.  If the 
plaintiffs' claims were to survive, any business could sue 
another 
business's 
advisor 
whenever 
that 
business 
advice 
negatively affects the plaintiffs' business, even if the 
plaintiff chooses to remain in business with the wrongdoer.  In 
other words, the plaintiffs' claims assume that they have a 
right to require a separate entity to continue to do business in 
a manner that benefits them and that a business advisor of that 
No. 
2006AP1573 & 2006AP2290   
 
34 
 
entity has a duty to keep them abreast of that other entities' 
wellbeing.  The plaintiffs' theory would open the floodgates to 
litigation.   
¶56 Second, the damages sought by the plaintiffs would 
have no sensible stopping point.  Had the parties decided to do 
business for four years instead of two, would they be entitled 
to twice as much in damages?  Moreover, if the plaintiffs' 
theory survived, an accountant could be subjected to paying 
endless damages to multiple claimants for the same alleged 
wrongful act.  For example, if EOG Disposal was to recover from 
the accountants, nothing would preclude any other affected 
entity from also filing an action against the accountants.  
Absent some special relationship between that accountant and the 
entities, corporate law principles do not provide support for 
the alleged avenue of relief.  In this case, a new party claims 
to be affected by another entities' reduced value.  Could a 
third party then sue these plaintiffs and recover for the fact 
that the third party was not warned of EOG Environmental's 
corporate shortcomings despite the fact that the plaintiffs here 
knew of the misappropriation at EOG Environmental?  Where would 
it stop?  
¶57 Third, fraudulent claims could flourish under the 
plaintiffs' theory because corporations could assert that they 
would have done business differently and thus been more 
profitable had they known the full financial status of the other 
corporation; 
yet 
how 
does 
one 
necessarily 
know 
what 
a 
corporation would have done had they known about another's 
No. 
2006AP1573 & 2006AP2290   
 
35 
 
financial troubles?  These questions also bear out the lack of a 
sensible stopping point. 
2. Breach of fiduciary duty claim 
¶58 While we do not approve of or encourage accountants to 
breach any fiduciary duty owed to a client, the breach of 
fiduciary duty claim in this case is not viable because the 
statute of limitations bars that claim.  Any misappropriation by 
Michael Vilione, which the accountants allegedly assisted in, 
occurred between 1998 and 2002 pursuant to the plaintiffs' 
complaint.  Yet, the plaintiffs did not bring any claims against 
the accountants until January 20, 2005.  Wisconsin Stat. 
§ 893.57 bars such claims two years after the cause of action 
accrues.16  In this case, the plaintiffs knew of the accountants' 
potential role before January 20, 2003, given Krier was 
concerned about Michael Vilione's expenditures in the fall of 
2002, believed he could not discuss his financial concerns with 
the accountants, commenced a lawsuit against Michael Vilione on 
January 3, 2003, and "seriously considered filing suit against 
the accountant" at that time.  The plaintiffs ceased to employ 
the accountants on or about that same date as the January 31, 
2003 settlement agreement.  Thus, the statute of limitations 
bars the plaintiffs' January 20, 2005, claim for breach of 
fiduciary duty. 
¶59 However, even if the breach of fiduciary duty claim 
was not barred by the statute of limitations, the breach of 
                                                 
16 The discovery rule could otherwise impact this analysis. 
No. 
2006AP1573 & 2006AP2290   
 
36 
 
fiduciary duty claim would not survive summary judgment in this 
case for three reasons.   
¶60 First, the plaintiffs have not shown any damages that 
are tied to this claim.  The damages here do not relate to 
misappropriations that occurred prior to 2002, which is when the 
alleged breach of duty would have occurred.  Rather, any damages 
here are for a time period after the lawsuit was brought against 
Michael Vilione, and as a result, the damages do not support a 
breach of fiduciary duty claim. 
¶61 Second, the plaintiffs, in part, base their breach of 
fiduciary duty claim on the allegation that the accountants 
allegedly concealed and conspired with Michael Vilione to 
misappropriate funds from EOG Environmental and that they 
fraudulently 
represented 
the 
financial 
status 
of 
the 
corporations in January of 1999.  However, the summary judgment 
record 
is 
devoid 
of 
anything 
that 
would 
support 
such 
allegations. 
¶62 Third, the plaintiffs, in part, seem to assert that 
the defendants should have informed the plaintiffs of the 
misappropriations from EOG Environmental and by failing to make 
such disclosures, the defendants breached a duty to the 
plaintiffs.  We disagree. 
¶63 The plaintiffs seek to impose a much broader duty on 
an accountant to inform any other person or entity when that 
accountant's client is in financial trouble and that trouble 
could impact the other's business in the future.  
No. 
2006AP1573 & 2006AP2290   
 
37 
 
¶64 The plaintiffs do not allege that the accountants in 
this case, like in Citizens and Chevron, had a duty to Krier 
personally or his entities that were breached and resulted in 
corresponding damages.  Instead, the plaintiffs allege that had 
the accountants done their job properly, the plaintiffs would 
have ceased doing business with EOG Environmental.  The 
plaintiffs do not allege the accountants breached a duty that 
corresponds with the expert testimony of damages.   
¶65 Moreover, an accountant who discloses information 
about another client could breach the accountant's duty of 
confidentiality.  See Wis. Admin. Code § Accy 1.301 (May 2004) 
and American Institute of Certified Public Accountants (AICPA) 
Code of Conduct, §§ 301 and 391 (providing rules governing 
confidentiality and examples).17  Even though Krier and the other 
corporations did business with EOG Environmental, this does not 
automatically eliminate the accountants' duty of confidentiality 
to EOG Environmental.  While Krier, as an owner of EOG 
Environmental, would have learned of the misappropriations if 
the accountants would have informed EOG Environmental of Michael 
Vilione's actions, this does not automatically transform the 
                                                 
17 An accountant's duty of confidentiality is governed by 
Wis. Admin. Code § Accy 1.301 (May 2004).  It provides: "(1) No 
person licensed to practice as a certified public accountant 
shall disclose any confidential information obtained in the 
course of a professional engagement except with the consent of 
the client or through the due process of law."  While an 
accountant's duty of confidentiality is not without exception, 
see § Accy 1.301(2), an accountant's duty to his or her client 
is difficult to circumvent.   
No. 
2006AP1573 & 2006AP2290   
 
38 
 
misappropriation from EOG Environmental into a viable claim for 
future damages to Krier or his entities personally because they 
chose to continue to do business with the entity after knowing 
of the misappropriations. 
¶66 While it has some appeal to ignore the separate 
corporate status in the case at hand because two individuals 
jointly own the three corporations, the accountants' duty of 
confidentiality is not complicated in a more traditional 
setting.  When entities have a separate and distinct corporate 
status, if and when an accountant discovers a problem with one 
corporation, the accountant does not have an automatic duty to 
inform all clients who may have an interest in doing business 
with the corporation of that corporation's shortcomings.  Here, 
assuming that the accountants discovered the misappropriations 
at EOG Environmental, the accountants' duty to inform may extend 
to EOG Environmental or Michael Vilione and Krier in their 
capacities as shareholders, but that duty does not automatically 
extend to separate entities such as Krier, EOG Disposal, or Vil-
Kri.  In this case, the allegations in the complaint and the 
plaintiff expert's opinion regarding damages do not correspond 
to an alleged breach of duty by the accountant.    
¶67 If the plaintiffs had any viable claim against the 
defendants with regard to breaching a duty that an accountant 
owes a client, it would likely be in regard to a conflict of 
No. 
2006AP1573 & 2006AP2290   
 
39 
 
interest violation.18  Instead, at most, the plaintiffs claim 
that 
they 
would 
have 
ceased 
to 
do 
business 
with 
EOG 
Environmental earlier had they discovered the misappropriations.  
The 
facts 
bear 
out 
that 
even 
after 
they 
knew 
of 
the 
misappropriations, they continued to do business together.  
IV. CONCLUSION 
¶68 We conclude that the court of appeals' decision must 
be reversed because the summary judgment determination by the 
circuit court was correct.  Therefore, we conclude that the 
plaintiffs, i.e., Vil-Kri, Krier, and EOG Disposal, lack 
standing to bring such claims against the accountants for their 
alleged 
role 
in 
the 
misappropriation 
of 
funds 
from 
EOG 
Environmental because, as explained in section III-A, ¶¶20-52,  
                                                 
18 The American Institute of Certified Public Accountants 
(AICPA) 
Code 
of 
Conduct, 
which 
has 
been 
specifically 
incorporated by reference in this state instructs as follows: 
Section 101.02, in relevant part, entitled "Application of the 
Independence Rules to Close Relatives." 
Independence would be considered to be impaired if— 
1. 
An 
individual 
participating 
on 
the 
attest 
engagement team has a close relative who had 
a.  A key position with the client, or 
b.  A financial interest in the client that 
(i) Was material to the close relative and of which 
the individual has knowledge[.] 
(Emphasis added.)  See Wis. Admin. Code § Accy 1.101; see also 
AICPA Code of Conduct, § 101.02.  The code of conduct defines 
"close relative" as a "parent, sibling, or nondependent child."  
See AICPA Code of Conduct, § 92.04.   
No. 
2006AP1573 & 2006AP2290   
 
40 
 
corporate law principles establish that the plaintiffs have no 
standing in this case; third-party liability precedent does not 
provide the plaintiffs with standing, and the damages claimed by 
the plaintiffs are not based upon viable claims.  However, as 
determined by the circuit court, EOG Disposal does have standing 
to assert claims against its own accountants, i.e., Donald 
Vilione and Virchow Krause & Co., for damages arising out of the 
accountants' action when acting as EOG Disposal's accountant.  
To date, EOG Disposal has produced expert testimony to support a 
claim for $7,000 in damages. 
¶69 Separately, as discussed in section III-B, ¶¶53-67, 
the plaintiffs' claims do not survive summary judgment because: 
(1) assuming the defendants owed the plaintiffs a duty of 
ordinary care, their negligence claims of accounting negligence, 
negligent 
training 
and 
supervision, 
and 
negligent 
misrepresentation would be barred on public policy grounds; and 
(2) their breach of fiduciary duty claim would be barred by the 
statute of limitations and the plaintiffs have not shown any 
damages that are tied to this claim. 
By the Court.—The decision of the court of appeals is 
reversed. 
No.  2006AP1573 & 2006AP2290.awb 
 
1 
 
¶70 ANN WALSH BRADLEY, J.   (dissenting).  I agree with 
the analysis and conclusion of a unanimous court of appeals that 
the plaintiffs "have asserted their own claims for damages, 
which are separate from those that could allegedly be claimed by 
EOG Environmental."  See Krier v. Vilione, 2007 WI App 235, ¶24, 
306 Wis. 2d 147, 742 N.W.2d 537.  "[A]s parties claiming to have 
been injured by [the accountants'] malpractice, they seek to 
recover damages that they incurred."  Id., ¶26.  Therefore, the 
plaintiffs' "interests are more than sufficient to confer 
standing."  Id., ¶25.   
¶71 The majority, however, disagrees with the court of 
appeals and concludes that Henry Krier has no standing to assert 
a claim.  It determines that Krier's claims are not his own, but 
rather are claims that could only be made by shareholders of EOG 
Environmental.  See majority op., ¶31.   
¶72 Even if we would assume that the majority was correct 
and that standing to bring these claims could be conferred 
solely on shareholders of EOG Environmental, the majority 
erroneously concludes that Krier, as a shareholder, would be 
entitled to bring only a derivative claim.  See id.  Instead, 
the conclusion should be that Krier can maintain a direct claim 
for an injury primarily to himself as a shareholder of EOG 
Environmental.   
¶73 I write separately to highlight the majority's cursory 
and erroneous analysis of the issue actually presented and to 
emphasize that its conclusion directly contradicts this court's 
No.  2006AP1573 & 2006AP2290.awb 
 
2 
 
recent 
decision 
in 
Notz 
v. 
Everett 
Smith 
Group, 
Ltd.1  
Additionally, 
I 
take 
issue 
with 
the 
majority's 
mischaracterization of the plaintiffs' allegations and its 
unbridled tendency to reach out and decide issues not briefed in 
this case.  Accordingly, I respectfully dissent. 
I 
¶74 Henry Krier was a 47 percent shareholder in EOG 
Environmental until 2003.  He has produced evidence that, over a 
period 
of 
four 
years, 
EOG 
Environmental's 
director 
and 
shareholder Michael Vilione routinely took money from the 
corporation for his personal use.  A partial list of Michael's 
personal "withdrawals" from corporate accounts includes: checks 
payable directly to Michael or his wife totaling $469,640; 
$98,502 for household expenses for Michael's family; $85,583 for 
Michael's automobile expenses; another $182,608 for what appear 
to be more personal and household expenses, and an $11,000 
payment on the purchase of a vacation home in Palm Springs, 
California.   
¶75 Krier alleges that EOG Environmental's accountant, 
Donald Vilione, "knowingly falsified the accounting records for 
the enterprise to cover up and conceal the misappropriation of 
enterprise funds[.]"  A report submitted by Krier's expert 
accountant lists various accounting tricks used in furtherance 
of this purpose.  The complaint alleges a number of interrelated 
claims 
including 
accounting 
negligence, 
negligent 
misrepresentation, breach of fiduciary duty, conspiracy, injury 
                                                 
1 2009 WI 30, __ Wis. 2d __, __ N.W.2d __.   
No.  2006AP1573 & 2006AP2290.awb 
 
3 
 
to business, and violation of the Wisconsin Organized Crime 
Control Act.2   
¶76 The issue is whether Krier has standing to maintain a 
direct action against the accountants.  The answer depends on 
whether their actions resulted in an injury primarily to Krier, 
or an injury primarily to the corporation.  See majority op., 
¶31 (citing Rose v. Schantz, 56 Wis. 2d 222, 229, 201 N.W.2d 593 
(1972)).  As we have previously explained, when an injury is 
primarily to a shareholder, that shareholder can bring a direct 
cause of action.  Rose, 56 Wis. 2d at 228-29.  When the injury 
is primarily to the corporation, a shareholder derivative action 
is appropriate.  Id. at 229.  
¶77 On the question of whether the injury was primarily to 
the corporation or to Krier, the majority's analysis is brief 
and conclusory: "It is logical . . . that when misappropriations 
                                                 
2 The 
majority 
specifically 
discusses 
the 
breach 
of 
fiduciary duty claims and the negligence claims, see majority 
op., ¶¶53-67, but it fails to specifically address others.  It 
is not clear what happens to the remainder of these interrelated 
claims.  For instance, it is difficult to see how the majority's 
analysis provides a legal basis for dismissing the plaintiffs' 
claim that the defendants violated the Wisconsin Organized Crime 
Control Act.  
No.  2006AP1573 & 2006AP2290.awb 
 
4 
 
from a corporation occur, the right of action belongs to the 
corporation."  Majority op., ¶31.  Thus ends the analysis.3 
¶78 Wisconsin case law provides no explicit test for 
determining when an injury is "primarily to the corporation."  
Notz, __ Wis. 2d __, ¶23.  The only articulated test is for 
whether an injury is "primarily to an individual shareholder."  
Id.  That test is found in Jorgensen v. Water Works, Inc. 
(Jorgensen II), 2001 WI App 135, ¶16, 246 Wis. 2d 614, 630 
N.W.2d 230. 
¶79 In Jorgensen II, three couples were the sole directors 
of a close corporation and they owned equal shares.  Id., ¶¶2-3.  
Following a dispute, the Jorgensens were removed as directors, 
and the corporation stopped paying the Jorgensens weekly 
director's fees.  Id., ¶4.    
¶80 The circuit court determined that "it was obvious" 
that these director's fees were "related to profits of the 
corporation" rather than salaries paid "as compensation for work 
                                                 
3 The 
majority 
correctly 
quotes 
from 
Fletcher 
that 
"generally," misappropriation gives rise to derivative actions 
only.  See majority op., ¶31 (citing 12B William Meade Fletcher, 
Fletcher Cyclopedia of the Law of Corporations §§ 5911, 5913, 
5924 (perm. ed., rev. vol. 2009)).  However, it fails to set 
forth additional quotes from Fletcher that undermine its 
conclusion: "A shareholder may sue to redress direct injuries to 
him or herself regardless of whether the same violation injured 
the corporation."  12B Fletcher, supra, § 5911.  "While the 
misappropriation . . . of 
corporate 
property 
or 
assets 
ordinarily generates a claim in the corporation or derivatively 
in 
its 
shareholders, 
minority 
shareholders 
may 
have 
an 
individual cause of action in an appropriate case for damages 
that they alone have sustained, as where majority shareholders 
have profited but plaintiff minority shareholders have been 
wronged by a fraudulent sale of corporate assets."  Id. § 5924. 
No.  2006AP1573 & 2006AP2290.awb 
 
5 
 
done."  Id., ¶6.  That is, the court concluded that the fees 
were in reality distributions of the corporation's profits.  
¶81 The court of appeals concluded that an injury is 
"primarily an injury to an individual shareholder" when it 
"affects a shareholder's rights in a manner distinct from the 
effect upon other 
shareholders."  Id., ¶16.  When the 
shareholder's rights are violated in a manner that "inflict[s] a 
harm on [the shareholder] that other shareholders did not 
suffer," the shareholder has a direct cause of action.  Id., 
¶18.  Because the corporation stopped paying the Jorgensens 
distributions 
that 
other shareholders received, the court 
concluded that the Jorgensens' rights were affected in a manner 
distinct from the effect upon other shareholders, and were thus 
entitled to bring a direct claim.  Id. 
¶82 In this case, however, the majority fails to apply the 
Jorgensen II test.4  Without analysis, the majority states that 
"when misappropriations from a corporation occur, the right of 
action belongs to the corporation."  See majority op., ¶31.  The 
                                                 
4 The majority takes issue with this statement, labeling it 
"hogwash."  See majority op., ¶31, n.13.  Such a response lends 
credence to the old adage, "When you have the law on your side, 
argue the law; when you have facts on your side, argue the 
facts; and when you have neither, holler."  The majority's 
hollering, however, is no substitute for analysis. 
The majority never examines whether the injury inflicted 
harm on Krier that Michael Vilione did not suffer or whether it 
affected Krier's rights "in a manner distinct from the effect 
upon" Michael Vilione.  Instead, in a conclusory fashion, the 
majority ultimately determines that "[h]ere the injury is to the 
corporation" because "injury from the embezzlement is to the 
corporation."  See majority op., ¶¶31, 31 n.10.     
No.  2006AP1573 & 2006AP2290.awb 
 
6 
 
majority never examines whether Krier's rights were affected in 
a manner distinct from the effect upon another shareholder, 
Michael Vilione.         
¶83 When the Jorgensen II test is faithfully applied, 
however, one must conclude that Krier's rights were affected in 
a manner distinct from the effect upon Michael Vilione.  
According to the allegations, Michael was paying himself a 
direct distribution of EOG Environmental's profits, unrelated to 
any work that Michael did for the corporation.  Due to the 
misappropriation 
and 
the 
coverup, 
the 
value 
of 
Krier's 
investment was driven into the ground.  At the same time, 
Michael Vilione directly profited.  This is not a case where all 
shareholders were affected equally by misappropriation from the 
corporation.  Instead, the injury was primarily to Krier, and he 
can assert a direct claim against Donald Vilione. 
II 
¶84 In addition to its failure to apply the primary injury 
test, the majority's conclusion directly contradicts our recent 
holding in Notz v. Everett Smith Group Ltd.  See __ Wis. 2d __.  
The inevitable result is confusion in the law.   
¶85 In Notz, this court held that when a "constructive 
dividend" is distributed to some shareholders but not to others, 
the shareholders who did not receive the dividend can bring a 
direct claim.  __ Wis. 2d __, ¶¶4, 27.  In that case, the 
corporation had the opportunity to acquire another business.  
Id., 
¶9. 
 
The 
corporation 
conducted 
due 
diligence, 
but 
ultimately, the directors and controlling shareholder caused the 
No.  2006AP1573 & 2006AP2290.awb 
 
7 
 
corporation to pass on acquiring the business.  Id.  Instead, 
the directors and controlling shareholder purchased the business 
themselves.  Id.  A minority shareholder brought suit, alleging 
that the directors and controlling shareholder had breached a 
fiduciary duty and that he sustained an injury primarily to 
himself as a result.  See id., ¶10. 
¶86 To be clear, there were no actual "dividends" paid in 
Notz.  See id., ¶24.  Nonetheless, this court focused on the 
fact that the due diligence expenditure financially benefitted 
the 
controlling shareholder, but the minority shareholder 
received no corresponding financial benefit.  Id., ¶27.  The 
court determined that the money paid for due diligence could be 
considered 
a 
"constructive 
dividend" 
or 
a 
"dividend-like 
payment."  Id., ¶¶4, 27.  Because the minority shareholder did 
not receive any benefit from this "constructive dividend," his 
"rights as a shareholder were affected 'in a manner distinct 
from the effect upon other shareholders,'" and he could bring a 
direct action for breach of fiduciary duty.5  Id., ¶27 (citing 
Jorgensen II, 246 Wis. 2d 614, ¶16).      
¶87 The giving of the "constructive dividend" in Notz 
differed little from putting a check for that amount directly in 
the pocket of the controlling shareholder.  The court in Notz 
concluded that this same type of disparate treatment "was at 
                                                 
5 I did not join the Notz majority, in part because I was 
unsure of what the court meant by the term "constructive 
dividend," as it was not defined in Notz or in any of our case 
law.  However, if the term "constructive dividend" applied to 
the facts alleged in Notz, it is also applicable here.   
No.  2006AP1573 & 2006AP2290.awb 
 
8 
 
issue in Jorgensen II because the defendants had 'stopped paying 
plaintiffs the pro rata distribution from the corporation's cash 
flow 
while 
they 
continued 
to 
pay 
themselves 
regular 
distributions'" 
and 
therefore 
"'they 
treated 
plaintiffs 
differently, and inequitably, when compared with the treatment 
accorded all other shareholders.'"  Id., ¶27 (citing 
Jorgensen 
II, 246 Wis. 2d 614, ¶18).      
¶88 In 
this 
case, 
Michael 
Vilione 
was 
the 
sole 
"beneficiary" of the embezzled funds and "there was never any 
intention for [Krier] to benefit in any way" from the money that 
was taken out of the corporation.  See id.  The funds that 
Michael Vilione took from EOG Environmental were not paid as 
compensation for his services to the corporation.  Instead, it 
is alleged that they were misappropriated corporate profits.  
With Donald Vilione's assistance, Michael in essence put a check 
for over $1.2 million of the corporation's profits directly into 
his own pocket.  Krier did not, and it was never intended that 
he would receive a corresponding share.   
¶89 This case and Notz are in direct conflict.  In Notz, 
one shareholder got a disproportionate financial benefit.  It 
was as though one shareholder was able to put money in its 
pocket while another was not.  The court concluded that because 
one shareholder did not receive the same financial benefit as 
the other, a direct claim could be maintained.  In this case, 
Michael Vilione actually did put corporate money in his pocket, 
yet the majority concludes that Krier, who did not receive the 
benefit, has no direct claim.  Ultimately, due to this conflict 
No.  2006AP1573 & 2006AP2290.awb 
 
9 
 
with 
Notz, 
the 
majority 
here 
confuses 
the 
law, 
giving 
practitioners and judges no real guidance.  
III 
¶90 The majority's analysis is further undermined when it 
repeatedly misstates the central allegations of the plaintiffs' 
complaint.  Time and time again throughout the opinion, the 
majority states: "The complaint alleges that had the accountants 
informed the plaintiffs of the misappropriations, they would 
have ceased doing business with EOG Environmental."  Majority 
op., ¶2; see also id. ¶¶10, 11, 15, 21, 48, 49, 51, 52, 67.   
¶91 Nowhere in the complaint can you find the allegation 
as misstated by the majority.  Instead the allegation the 
majority apparently relies upon provides that he would have 
discontinued his partnership with Michael Vilione:  
Had Henry Krier been aware of the fact that defendant 
Vilione was assisting and conspiring with his brother 
Michael Vilione to misappropriate and convert money 
and fraudulently conceal the true financial state of 
the companies, then Mr. Krier would not have continued 
to employ defendants Vilione and Virchow Krause as 
accountants, nor would he have continued to associate 
with Michael Vilione as a business partner, nor would 
he have allowed the misappropriation and conversion of 
company monies. 
Complaint ¶39 (emphasis added). 
¶92 Indeed, that is exactly what Krier did in 2002 after 
he found out about the misappropriations.  He discontinued 
associating "with Michael Vilione as a business partner."  As 
set forth in the allegations of the complaint, he concluded that 
Michael Vilione was engaging in an illegal activity, embezzling 
money from the corporation as well as cheating on taxes. 
No.  2006AP1573 & 2006AP2290.awb 
 
10 
 
¶93 The complaint alleges that Michael Vilione cheated the 
IRS by charging the corporation for a variety of personal 
expenses that were not deductible business expenses, including 
$98,502 for household expenses, $85,583 for family automobile 
expenses, another $182,608 for what appear to be more personal 
and household expenses, and an $11,000 partial payment on the 
purchase of a vacation home in Palm Springs, California.  See 
complaint, ¶¶28, 30.  If these allegations are true, it is no 
wonder that Krier no longer wanted "to associate with Michael 
Vilione as a business partner." 
¶94 Krier, however, never alleged that he wanted to 
discontinue doing business with EOG Environmental.  Quite to the 
contrary.  At least for a period of time, his financial success 
was in part tied to having a continuing relationship with EOG 
Environmental. 
¶95 In certain circumstances, the majority's misstatement 
may be nothing more than a minor error.  Here, however, the 
majority misstates the allegation and then characterizes this 
misstated allegation as the "crux" of the plaintiffs' claim for 
damages: "The crux of the plaintiffs' claim for damages relates 
to the fact that they would have discontinued doing business 
with EOG Environmental had they known of the misappropriations."  
Majority op., ¶15.   
¶96 Having denominated this misstated allegation as the 
"crux" of the plaintiffs' claim for damages, the majority then 
proceeds 
to 
build 
its 
entire 
damage 
analysis 
on 
this 
misstatement.  The majority's analysis of damages is set forth 
No.  2006AP1573 & 2006AP2290.awb 
 
11 
 
in paragraphs 47-52.  The misstated allegation appears in 
paragraph 48, twice in paragraph 49, and again in paragraphs 51 
and 52. 
¶97 The majority's analysis is but a house of cards that 
must 
fall 
because 
it 
misunderstands 
the 
"crux" 
of 
the 
plaintiffs' argument and builds its analysis on a foundation of 
repeated misstatement.   
IV 
¶98 Finally, the majority's lengthy discussion obfuscates 
what is really at issue in this case.  Instead of focusing its 
discussion on the issue presented, the majority reaches out and 
raises all manner of issues not found in the parties' briefs——
resolving them all in favor of the defendants.   
¶99 As Chief Justice John Roberts has stated, a judge's 
job is like an umpire's——"to call balls and strikes, and not to 
pitch or bat."6  The majority should focus on calling the pitch 
that the defendants have thrown and keep off the playing field. 
¶100 The 
majority 
has 
determined 
that 
because 
the 
plaintiffs are not current shareholders of EOG Environmental, 
they cannot assert a derivative claim.  Thus, the issue 
presented is whether they have standing to bring a direct claim 
against the accountants.  This was the issue that the defendants 
                                                 
6 Confirmation Hearing on the Nomination of John G. Roberts, 
Jr., to be Chief Justice of the United States: Hearing Before 
the S. Comm. on the Judiciary, 109th Cong. 56 (2005) (statement 
of 
John 
G. 
Roberts), 
available 
at 
http://www.cnn.com/ 
2005/POLITICS/09/12/roberts.statement/index.html. 
No.  2006AP1573 & 2006AP2290.awb 
 
12 
 
argued in their motions for partial summary judgment and the 
issue that defendants raise in their briefs to this court.  
¶101 Nevertheless, the majority reaches out and decides the 
following issues:  
1. A fiduciary duty can be limited in scope by public 
policy considerations, majority op., ¶37——not briefed.  
2. The negligence claims must be precluded on public 
policy grounds, id., ¶¶54-57——not briefed.  
3. The breach of fiduciary duty claim is barred under the 
statute of limitations for intentional torts, id. ¶58—
—not briefed.   
Curiously, the majority adds a footnote indicating 
that it is applying the bar and dismissing the claim 
without any consideration of an essential part of the 
analysis——the discovery rule.  See id., ¶58, n.16. 
4. "[T]he summary judgment record is devoid of anything 
that 
would 
support" 
the 
allegations 
that 
the 
defendants 
"concealed 
and 
conspired 
with 
Michael 
Vilione to misappropriate funds from EOG Environmental 
and that they fraudulently represented the financial 
status of the corporations," id., ¶61——not briefed.  
5. Defendants did not breach a fiduciary duty to disclose 
information 
to 
the 
plaintiffs, 
id., 
¶¶62-67——not 
briefed.   
¶102 I do not weigh in on the unbriefed issues that occupy 
so much of the majority's attention.  Opinions of this court 
should not "reach out and decide issues that were not presented 
No.  2006AP1573 & 2006AP2290.awb 
 
13 
 
to the court by the parties."  Dairyland Greyhound Park, Inc. v. 
Doyle, 2006 WI 107, ¶335, 295 Wis. 2d 1, 719 N.W.2d 408 
(Roggensack, J., concurring in part and dissenting in part). 
¶103 For the reasons set forth above, I respectfully 
dissent.    
¶104 I am authorized to state that CHIEF JUSTICE SHIRLEY S. 
ABRAHAMSON joins this dissent. 
 
No.  2006AP1573 & 2006AP2290.awb 
 
1