Court Opinion

ID: 3002730
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:33:06.756978+00
Date Added: 2024-06-11T12:19:18.418881
License: Public Domain

In the

United States Court of Appeals
              For the Seventh Circuit

Nos. 08-1067 & 08-1689

L INDQUIST F ORD , INC., S TEVEN L INDQUIST,
and C RAIG M ILLER,
                                          Plaintiffs-Appellees,
                               v.

M IDDLETON M OTORS, INC.,
                                            Defendant-Appellant.

           Appeals from the United States District Court
              for the Western District of Wisconsin.
            No. 07 C 12—Barbara B. Crabb, Chief Judge.

  A RGUED S EPTEMBER 18, 2008—D ECIDED F EBRUARY 25, 2009

  Before E ASTERBROOK, Chief Judge, and SYKES and T INDER,
Circuit Judges.
  S YKES, Circuit Judge. Middleton Motors, Inc., a struggling
Ford dealership near Madison, Wisconsin, sought manage-
rial and financial assistance from Lindquist Ford, Inc., a
successful Ford dealership located in Bettendorf, Iowa. The
ensuing negotiations centered on Middleton’s need for
management services and a cash infusion from Lindquist.
The two dealerships generally agreed that Craig Miller,
2                                       Nos. 08-1067 & 08-1689

Lindquist’s general manager, would take over as manager
of Middleton and that Lindquist would be compensated for
these services based on Middleton’s profits after Miller
turned the dealership around. A more specific agreement,
however, was not reached.
   In the meantime, Miller assumed management responsi-
bilities over both dealerships, and the parties continued to
discuss the details of the compensation for Miller’s ser-
vices, the contemplated cash investment by Lindquist, and
other terms of a possible joint venture. The negotiations
ultimately fell apart because Lindquist did not come
forward with any cash. Middleton, still sustaining losses,
fired Miller without having paid for his services.
  Lindquist and Miller 1 sued Middleton for breach of
contract, promissory estoppel, quantum meruit, and unjust
enrichment, seeking recovery for the eleven months of
management services Miller provided Middleton. The
district court granted summary judgment for Middleton on
the first two claims, and the latter two claims proceeded to
trial. The court excluded a large amount of background
evidence, believing that the only issues for trial were
whether Middleton could overcome a “presumption” that
compensation was owed and the amount of damages. After
a bench trial, the court entered judgment for Lindquist
under both quantum meruit and unjust enrichment;
damages were awarded based on the court’s determination

1
  Steven Lindquist, one of Lindquist’s owners, is also a plaintiff.
We will refer to the plaintiffs collectively as “Lindquist” unless
the context requires otherwise.
Nos. 08-1067 & 08-1689                                       3

of the market rate of compensation for auto-dealership
general managers or consultants in the field. Middleton
appeals.
   We reverse. Quantum meruit and unjust enrichment are
both quasi-contractual theories, but the two claims have
different elements and damages measures under Wisconsin
law. The district court got off on the wrong foot by miscon-
struing these causes of action. This was understandable
given some confusing phraseology in Wisconsin caselaw,
but as a result of its misstep, the court failed to try the key
issues, erroneously excluded relevant evidence, and failed
to weigh the particular equities at stake in the commercial
circumstances of this case. Accordingly, we remand for
retrial.

                       I. Background
A. A Failed Business Relationship
  Middleton Motors, Inc., is a Ford dealership located in
Middleton, Wisconsin, and owned and operated by
brothers Robert, Dave, and Dan Hudson. In the months
leading up to the events at issue in this suit, Middleton was
experiencing heavy financial losses, and the brothers
disagreed about how to best manage the dealership. For
assistance Middleton looked to Lindquist Ford, Inc., a Ford
dealership located in Bettendorf, Iowa. In 2002 and early
2003, Dave Hudson and Craig Miller, Lindquist’s general
manager, spoke generally about the possibility of Lindquist
becoming involved in Middleton’s operations and owner-
ship. Meanwhile, Middleton’s situation worsened. In
4                                   Nos. 08-1067 & 08-1689

March 2003 Dave Hudson told Miller that he and Robert
had placed Dan on a leave of absence, that Middleton
continued to sustain losses, and that Middleton needed
Lindquist’s help. Before entering into more serious negotia-
tions, the parties signed a confidentiality agreement
drafted by Lindquist. It included the following relevant
provisions:
      In connection with the interest of [Lindquist], in
    exploring the possible acquisition (the “Transaction”)
    of all or a portion of the business (the “Business”)
    owned by you, We are requesting that you or your
    representatives furnish certain information relating to
    the Business. . . .
      ....
      6.) We acknowledge and agree that unless and until
    a written definitive agreement concerning the Transac-
    tion has been executed neither you, any of your Repre-
    sentatives, us nor any of our Representatives, will have
    any liability to the other with respect to the Transac-
    tion, whether by virtue of this agreement of [sic] any
    other written or oral expression with respect to the
    Transaction otherwise.
  On April 17, 2003, the two dealerships met to hammer
out a deal. Middleton sought Miller’s services as a general
manager and a cash infusion from Lindquist in exchange
for a profit-sharing agreement. A general understanding
was reached that Miller would take over as general man-
ager of Middleton and Lindquist would be paid for these
services on a percentage-of-net-profit basis, but the specif-
ics of an agreement were not resolved at this meeting.
Nos. 08-1067 & 08-1689                                     5

Nevertheless, the parties agreed that Miller would begin
working at Middleton on April 21, 2003, and they would
negotiate further terms and commit the agreement to
writing sometime later. On April 21 Miller started working
as general manager of Middleton while maintaining the
same position with Lindquist.
   The next attempt at a written agreement came in a
June 2 fax from Miller to Middleton. This proposal speci-
fied that “[t]he only compensation to [Lindquist] will be
the Fee, the use of one vehicle, and the reimbursement of
travel, meals and lodging costs.” The “Fee” was defined as
45% of Middleton’s profits; payment was to begin the
first month that Middleton showed a net profit. On July 1,
2003, Middleton’s accountant sent an email to Lindquist’s
accountant explaining that he (Middleton’s accountant)
had met with Miller and rejected the June 2 proposal
because it did not require Lindquist to make an up-front
cash investment in Middleton. The email also asserted
that Lindquist understood from the April 17 meeting that
its compensation for Miller’s services would come only
from Middleton’s profits once the dealership was in the
black.
  On August 28 Middleton’s accountant circulated a letter
of understanding “for the relationship among the parties
to be legally formalized at a later point.” The letter stated
that the parties “have agreed to enter into an agreement
whereby [Lindquist] would provide a cash infusion into
[Middleton] and take over management of the operations
for the fees discussed below.” Those fees included, first,
15% of profits “for recovery of expenses and time associ-
ated with the assistance provided by Lindquist” and,
6                                   Nos. 08-1067 & 08-1689

second, 22.667% of the remaining real income to be paid for
“management of the operations.” The letter of understand-
ing reiterated that payment would begin the first month
that Middleton reported a net profit. The letter also called
for Lindquist to invest $500,000 in exchange for a 25%
equity stake in Middleton.
  Over the next several months, the parties continued to
negotiate but never came to terms on the specifics of an
agreement; Lindquist never made a cash investment in
Middleton. On March 24, 2004, fed up and still sustaining
losses, Middleton fired Miller. On May 11, 2004, Miller
sent a letter to Middleton demanding payment for his
services. Despite Middleton’s persistent losses, Miller
asked for $32,627.84 as “final payment for the calendar year
2003,” “50% of adjusted profits per the ‘Letter of Under-
standing’ ” for 2004-2005, and an additional 50% of ad-
justed profits for 2006. Middleton rejected Miller’s demand,
saying it owed nothing because Miller never turned the
dealership profitable.

B. Lindquist Files Suit; Middleton Moves for Summary
Judgment
  Lindquist commenced this action in Iowa state court
seeking recovery for Miller’s services. Middleton removed
the case to federal court, and the parties agreed to transfer
venue to the Western District of Wisconsin. Lindquist filed
an amended four-count complaint asserting claims for
breach of contract, promissory estoppel, quantum meruit,
and unjust enrichment. Middleton moved for summary
judgment on all counts. The district court granted sum-
Nos. 08-1067 & 08-1689                                     7

mary judgment for Middleton on the breach-of-contract
and promissory-estoppel claims—decisions not challenged
on this appeal.
  Proceeding to the quantum-meruit claim, the judge
framed “[t]he ultimate inquiry” as “whether the parties
came to a mutual agreement by their words, conduct or
course of dealing, as shown by [the] parties’ external
expressions of intention.” Citing Theuerkauf v. Sutton,
306 N.W.2d 651, 658 (Wis. 1981), the judge said that
Lindquist must show that “(1) defendant requested
plaintiffs to perform services; (2) plaintiffs complied with
the request; and (3) the services were valuable to defen-
dant.” If Lindquist made these showings, the court contin-
ued, it was entitled to a rebuttable presumption that the
parties had agreed to payment. The court then denied
summary judgment on this claim, reasoning that a reason-
able fact finder could conclude that all three elements
were satisfied.
  Middleton had argued that because the parties expected
compensation to be based on profits and there were no
profits, Lindquist could not recover. The judge rejected this
argument, concluding that the parties’ expectations became
irrelevant once the breach-of-contract claim was dismissed.
The court also denied summary judgment on the unjust-
enrichment claim, holding that there were material facts for
trial on the value of Miller’s services and the equities of
permitting Middleton to retain the benefit of his services
without paying for them.
8                                     Nos. 08-1067 & 08-1689

C. Trial
  Lindquist’s quantum-meruit and unjust-enrichment
claims then proceeded to a bench trial. Before opening
statements, Lindquist made two motions in limine relevant
to this appeal. First, it asked the district court to exclude as
irrelevant any evidence of the parties’ understandings and
expectations that Lindquist would be paid for Miller’s
services based on profits alone. Picking up on an aspect of
the district court’s summary-judgment ruling, Lindquist
argued that this evidence was immaterial because the
breach-of-contract claim had been dismissed. Lindquist’s
counsel maintained that “the elements of [the quantum-
meruit claim] are that the plaintiffs requested the services
and that the services were rendered,” and because those
elements were essentially undisputed, “all we need to
prove is the reasonable value of the services.” Second,
Lindquist asked the court to exclude large portions of the
proposed expert testimony of Middleton’s accountant,
including his conclusion that Lindquist’s decision not to
come through with the contemplated $500,000 investment
in Middleton had increased Middleton’s risk.
  The district court granted the motions in limine. The
judge emphasized that the scope of the trial was limited:
    [W]e’re going to try the question whether there was
    any benefit received by defendant for Mr. Miller’s
    services while he was there. There is—that is the single
    question that is at issue, was Middleton Motors en-
    riched by Mr. Miller’s services, or as it feared, if the
    agreement didn’t go through, did Mr. Miller run it into
    the ground. . . .
Nos. 08-1067 & 08-1689                                    9

      ....
      So what we’re going to be deciding today is was
    Middleton Motors enriched; did it receive a benefit
    from Mr. Miller’s services. If it didn’t, it doesn’t owe
    Lindquist for any money for those services. If it was
    enriched, it does owe for whatever benefit it received.
 The district court reiterated this understanding of the
issues for trial later in the pretrial hearing: “We’re not
looking at the terms of the contract that was never entered
into to determine what the value of the services were and
how they would be calculated.”
  The three-day bench trial that followed thus focused
narrowly on whether Miller conferred a benefit on Middle-
ton and if so, what it was worth. In an oral ruling, the
district court concluded that Miller’s services benefited
Middleton and entered judgment in Lindquist’s favor. The
court awarded damages of $160,000 based on a determina-
tion that this represented the going rate for general manag-
ers of auto dealerships in the relevant market and alterna-
tively, that Miller would have charged a similar amount
had he been hired as a consultant. The judge did not
mention the unjust-enrichment claim in her oral ruling.
  The court later amended the judgment by written order.
Recapping the pretrial and trial proceedings, the judge
said that when summary judgment on the quantum-meruit
claim was denied, the court had determined that Lindquist
had established all three elements set forth in Theuerkauf,
306 N.W.2d at 658. Thus, the judge continued, Lindquist
was entitled to a rebuttable presumption that the parties
intended fair payment. “This left the possibility that
10                                  Nos. 08-1067 & 08-1689

at trial, defendant could avoid liability . . . by coming
forward ‘with evidence sufficient to rebut and overcome
the presumption of the existence of an implied contract in
fact.’ ” (Quoting Theuerkauf, 306 N.W.2d at 658.) The judge
noted that Middleton had not rebutted the presumption at
trial, and therefore Lindquist was entitled to recover on the
quantum-meruit claim. The court then slightly adjusted its
prior damages calculation to $152,332 (down from
$160,000), plus costs.
  In the order amending the judgment, the court also held
that Middleton would be unjustly enriched if it did not pay
for Miller’s services. The court determined that the dam-
ages on this claim were identical to the damages on the
quantum-meruit claim “because that is what a general
manager’s services were worth in the marketplace and
defendant failed to prove that it received less value from
Miller than what a manager is worth in the marketplace.”
This appeal followed.

                      II. Discussion
  Middleton challenges the district court’s handling of
almost every aspect of this case. It argues that: (1) it was
entitled to summary judgment on the quantum-meruit and
unjust-enrichment claims; (2) the district court erroneously
excluded large amounts of relevant evidence at trial; (3) the
district court erred in granting judgment for Lindquist on
both claims; and (4) the district court erred in calculating
damages. We review the denial of summary judgment de
novo. Guzman v. Sheahan, 495 F.3d 852, 856 (7th Cir. 2007).
Because the district court granted judgment following a
Nos. 08-1067 & 08-1689                                      11

bench trial, we review the district court’s legal conclusions
de novo, its factual findings for clear error, and its decision
to grant an equitable remedy for abuse of discretion. See
Marseilles Hydro Power, LLC v. Marseilles Land & Water Co.,
518 F.3d 459, 465 (7th Cir. 2008) (legal and factual conclu-
sions); EEOC v. Laborers’ Int’l Union of N. Am., AFL-CIO,
Local 100, 49 F.3d 304, 307 (7th Cir. 1995) (equitable deter-
minations).

A. Confidentiality Agreement
    We first address one of Middleton’s central, but weak,
liability arguments. Middleton claims that the confidential-
ity agreement precludes liability altogether and that the
district court erred by disregarding it. According to
Middleton, the parties drafted the confidentiality agree-
ment to be as inclusive as possible, and they explicitly
agreed that neither party would be liable to the other in the
absence of a “written definitive agreement.” Because there
was no written agreement, Middleton contends it is not
liable for Miller’s services. We review de novo the interpre-
tation of an unambiguous contract. Estate of Sustache v. Am.
Family Mut. Ins. Co., 751 N.W.2d 845, 850 (Wis. 2008).
   Like the district court, we conclude that the language of
the confidentiality agreement does not support Middle-
ton’s interpretation. The agreement is not as broad as
Middleton suggests. The no-liability provision only bars
liability “with respect to the Transaction.” (Emphasis added.)
The contract, in turn, defines “Transaction” as the
“explor[ation of] the possible acquisition . . . of all or a
portion of [Middleton].” Hiring Miller as a general man-
12                                      Nos. 08-1067 & 08-1689

ager lies outside the “Transaction” as defined in the
agreement. Furthermore, the confidentiality agreement
only bars liability based on “this agreement o[r] any other
written or oral expression with respect to the Transaction
otherwise.” (Emphasis added.) It does not preclude
liability based on the provision of services, especially those
that stem from a later agreement.

B. Quantum Meruit and Unjust Enrichment Under
Wisconsin Law
  With that preliminary question resolved, we come to the
heart of this appeal, which requires a close analysis of
quantum meruit, unjust enrichment, and the difference
between implied-in-fact and implied-in-law contracts
under Wisconsin law. We note for starters that Wisconsin
caselaw in this area can be confusing; the nomenclature
and elements of proof are sometimes mixed up, leading to
misconceptions about the nature and requirements of these
discrete causes of action.2 This has produced considerable
confusion in this case. We think it helpful, therefore, to
restate some first principles.

2
  Compare Watts v. Watts, 405 N.W.2d 303, 313 (Wis. 1987)
(“Because no express or implied in fact agreement exists
between the parties, recovery based upon unjust enrichment is
sometimes referred to as ‘quasi contract,’ or contract ‘implied in
law’ rather than ‘implied in fact.’ ”), with Ramsey v. Ellis, 484
N.W.2d 331, 333 (Wis. 1992) (“[R]ecovery in quantum meruit is
based upon an implied contract to pay reasonable compensation
for services rendered. No contract is implied in an action for
unjust enrichment.”).
Nos. 08-1067 & 08-1689                                   13

  Generally speaking, if the parties have made an enforce-
able contract and there is no ground for rescission, then
breach-of-contract principles will govern the dispute. In
the absence of an enforceable contract, however, a plaintiff
may turn to quasi-contractual theories of relief. Watts v.
Watts, 405 N.W.2d 303, 313 (Wis. 1987); Arjay Inv. Co. v.
Kohlmetz, 101 N.W.2d 700, 702 (Wis. 1960). Unjust enrich-
ment and quantum meruit are two such actions. Though
related in theory and residing in the domain of contract
law under the heading of quasi-contract, each of these
claims has its own distinct elements of proof and measure
of damages. Ramsey v. Ellis, 484 N.W.2d 331, 333 (Wis.
1992) (“[Q]uantum meruit is a distinct cause of action from
an action for unjust enrichment, with distinct elements and
a distinct measure of damages.”).

  1. Unjust Enrichment
  In Wisconsin unjust enrichment is a legal cause of action
governed by equitable principles. The action is “grounded
on the moral principle that one who has received a benefit
has a duty to make restitution where retaining such a
benefit would be unjust.” Watts, 405 N.W.2d at 313. To
prevail on an unjust-enrichment claim, a plaintiff must
prove three elements: “(1) a benefit conferred upon the
defendant by the plaintiff, (2) appreciation by the defen-
dant of the fact of such benefit, and (3) acceptance and
retention by the defendant of the benefit, under circum-
stances such that it would be inequitable to retain the
14                                       Nos. 08-1067 & 08-1689

benefit without payment of the value thereof.” 3 Seegers v.
Sprague, 236 N.W.2d 227, 230 (Wis. 1975) (internal quota-
tion marks omitted); accord Ramsey, 484 N.W.2d at 333.
  The measure of damages under unjust enrichment is
limited to the value of the benefit conferred on the defen-
dant; any costs the plaintiff may have incurred are gener-
ally irrelevant. Mgmt. Computer Servs., Inc. v. Hawkins, 557
N.W.2d 67, 79-80 (Wis. 1996). The value of the benefit may
be calculated based on the prevailing price of plaintiff’s
services as long as those services benefited the defendant.
See, e.g., Shulse v. City of Mayville, 271 N.W. 643, 647 (Wis.

3
  We note an apparent anomaly in Wisconsin law. As phrased,
the third element of unjust enrichment appears to require an
equitable determination by the court. In the famous case of
Hoffman v. Red Owl Stores, Inc., 133 N.W.2d 267 (Wis. 1965),
which recognized a cause of action for promissory estoppel, the
Wisconsin Supreme Court described a similar equitable element
in that quasi-contractual claim: “[T]he third requirement, that
the remedy can only be invoked where necessary to avoid
injustice, is one that involves a policy decision by the court. Such
a policy decision necessarily embraces an element of discretion.”
Id. at 275. In practice, however, Wisconsin courts give all three
elements of the unjust enrichment claim to the jury. See W IS .
JURY I NSTRUCTION -C IVIL 3028 (“Contracts implied in law (Unjust
Enrichment)”) (instructing the jury that “it must be established
that as between the parties it would be unjust and unconsciona-
ble for the recipient to retain the benefit without paying the
reasonable value thereof”). Here, the court was the fact finder.
In any event, the standard of review on this element of the
claim is either abuse of discretion or clear error, and both are
deferential standards. We reach the same result under either.
Nos. 08-1067 & 08-1689                                      15

1937) (“In ordinary [unjust-enrichment] cases, particularly
those involving money and service, the amount of the
plaintiff’s recovery is the amount of money advanced or
the reasonable value of the services rendered but, if the
service is rendered upon some project which is of no value
or benefit to the city or the city only partially benefits, the
city is liable only to the extent of the benefits received.”).

  2. Quantum Meruit
  Like unjust enrichment, quantum meruit is a legal cause
of action grounded in equitable principles. Tri-State Home
Improvement Co. v. Mansavage, 253 N.W.2d 474, 479 (Wis.
1977). Unlike under unjust enrichment, however, a plaintiff
can recover under quantum meruit even if he confers no
benefit on the defendant. See, e.g., Barnes v. Lozoff, 123
N.W.2d 543 (Wis. 1963) (allowing recovery for architect
who created blueprints that were valueless to the defen-
dant because defendant did not own some of the land at
issue in the blueprints). Under quantum meruit, damages
are “measured by the reasonable value of the plaintiff’s
services,” Ramsey, 484 N.W.2d at 334, and calculated at
“the customary rate of pay for such work in the community
at the time the work was performed.” Mead v. Ringling, 64
N.W.2d 222, 225 (Wis. 1954).
  To take advantage of the more liberal recovery rule of
quantum meruit, a plaintiff must prove two elements, both
relating to the parties’ course of conduct. As explained by
the Wisconsin Supreme Court in Ramsey, to recover under
quantum meruit, the plaintiff must prove that “the defen-
dant requested the [plaintiff’s] services” and “the plaintiff
16                                   Nos. 08-1067 & 08-1689

expected reasonable compensation” for the services. 484
N.W.2d at 333.
  Ramsey’s second element is potentially problematic as
phrased. We have not found any Wisconsin case denying
recovery under quantum meruit because the plaintiff
expected unreasonable compensation. This makes sense.
Suppose a defendant asks a plaintiff to paint his house and
the plaintiff complies, expecting compensation. Suppose
further that the plaintiff expected an unreasonable rate of
compensation—say, $100,000, when the house is small and
the painting services are worth far less. That the plaintiff
subjectively expected “unreasonable compensation” rather
than “reasonable compensation” should not necessarily
defeat recovery under quantum meruit, properly under-
stood. Rather, the outcome in this hypothetical case should
be an award of damages for the plaintiff, albeit it at a lower
rate based on the community standard. We suspect what
the Ramsey court meant was that the plaintiff must reason-
ably expect compensation, not that he must expect reason-
able compensation. See 26 R ICHARD A. L ORD , W ILLISTON ON
C ONTRACTS § 68:1, at 24 (4th ed. 2007) [hereinafter
W ILLISTON] (“The courts have generally allowed quasi-
contractual recovery for services rendered when a party
confers a benefit with a reasonable expectation of pay-
ment.”).
 Furthermore, we must not lose sight of the fact that
quantum meruit is rooted in equity. If equity does not lie
with the plaintiff, he will not recover under quantum
meruit. As the leading contracts treatise puts it:
     Although the remedy of quantum meruit was devel-
     oped as part of the common law of contracts to avoid
Nos. 08-1067 & 08-1689                                     17

    unjust enrichment under a contract implied by law,
    equitable considerations influence the determination of
    whether recovery is warranted in a given case. The
    duty to pay arises not from the intent of the parties but
    from the law of natural justice and equity.
26 W ILLISTON § 68:1, at 25 (footnote omitted); see also
Seegers, 236 N.W.2d at 230-31 (“Respondent’s desire to call
their action quantum meruit . . . does not avoid the clear
decisional law that regards unjust enrichment as an
element necessary for recovery in these circumstances.”).
There are at least two ways to conceptualize the equity
underpinnings of quantum meruit. One is to treat equity as
another element of liability, as some states have. See, e.g.,
Amend v. 485 Props., 627 S.E.2d 565, 567 (Ga. 2006) (“[T]he
essential elements [of quantum meruit] are: (1) the perfor-
mance of valuable services; (2) accepted by the recipient or
at his request; (3) the failure to compensate the provider
would be unjust; and (4) the provider expected compensa-
tion at the time services were rendered.”). Another is to
treat equity as absorbed under Ramsey’s (slightly tweaked)
requirement that a plaintiff must reasonably expect compen-
sation; if equity does not lie on the plaintiff’s side under
the circumstances, his expectation of compensation is
necessarily unreasonable. Under either approach, the result
is the same.
  Several of Wisconsin’s quantum-meruit cases involve
women who provided household services to unrelated
decedents and then sued their estates after the decedents’
deaths. E.g., Brooks v. Steffes (In re Estate of Steffes), 290
N.W.2d 697 (Wis. 1980); Gename v. Benson, 153 N.W.2d 571
18                                        Nos. 08-1067 & 08-1689

(Wis. 1967); Schroeder v. Estate of Voss (In re Estate of Voss),
121 N.W.2d 744 (Wis. 1963). In these cases, the guiding
equitable principle is apparent: If the plaintiff expected to
provide these services gratuitously, she should not recover;
if she expected to provide them for a fee, she should
recover.4
  Based on this line of cases, Lindquist suggests that there
is recovery in quantum meruit under Wisconsin law
whenever a plaintiff does not render the services

4
   Because it is sometimes difficult to establish whether a
plaintiff expected payment, Wisconsin cases have allowed for a
rebuttable presumption of payment in some instances. In the
cited cases, for example, the court would presume that a plaintiff
expected to be paid when she performed household services to
an unrelated man. E.g., Gename, 153 N.W.2d at 574 (“The
circumstances and the relationship of the parties are such that
these services were not rendered gratuitously. Therefore, the
general rule of a presumption of compensation is applicable.”).
A defendant could rebut the presumption by showing, for
example, that the plaintiff waited too long to claim payment,
suggesting that she did not expect to be paid for her services.
E.g., Wallin v. Fraipont (In re St. Germain’s Estate), 17 N.W.2d 582
(Wis. 1945) (no recovery when plaintiff waited four years before
requesting payment).
 The use of presumptions in these cases is unsurprising because
presumptions are employed where it is difficult to prove the
existence of a fact. In the case at hand, the parties and the district
court focused too heavily on presumptions and unnecessarily
complicated the analysis. There is no need for a presumption
where, as here, there is direct and circumstantial evidence about
Lindquist’s expectation of payment.
Nos. 08-1067 & 08-1689                                      19

gratuitiously. We think this argument goes too far. In the
cited cases, the courts considered the underlying domestic
factual setting. In that context, under ordinary circum-
stances, it is reasonable to believe that the plaintiffs either
expected to be paid or did not expect to be paid; the
services are either gratuitous or not, and there is little room
for a middle ground. This generalization does not necessar-
ily apply across the board or so easily translate to
the commercial sphere where the negotiations of sophisti-
cated parties focus on contingencies and other complex
considerations.
   An example highlights our concern about extending the
“gratuitous” factor outside the domestic context in which
it usually appears. Imagine that a client asks a lawyer to
represent her in litigation. The lawyer agrees to accept the
case on a contingent-fee basis but demands 70% of the
verdict. The client accepts the contingent-fee arrangement
but balks at the 70% figure. They battle back and forth
without agreeing on percentage. The two decide neverthe-
less that the lawyer will represent the client. The case goes
to trial, and the client loses.
  Under Lindquist’s theory of quantum meruit, because
the legal services were not performed gratuitously, the
lawyer prevails in a quantum-meruit action against the
client. The inequity of this result is readily apparent.
Contingent-fee payments are well established in legal
practice, and under any conceivable understanding, the
lawyer would have recovered nothing when his client lost.
In the language of quantum meruit, the lawyer reasonably
expected compensation, but only if he won the case; he did
20                                    Nos. 08-1067 & 08-1689

not expect compensation—or his expectation of compensa-
tion was unreasonable—if he lost. Now suppose the lawyer
had won the case and he seeks to collect under quantum
meruit. The court equitably supplies a price term, looking
to the parties’ negotiations, the percentage other lawyers
collect in the community for similar work, the prevailing
ethical standards in the profession, and the like. Cf. Tonn v.
Reuter, 95 N.W.2d 261 (Wis. 1959) (providing payment to
lawyer with contingent-fee contract who is discharged
without cause prior to occurrence of contingency).
  In this example, if courts were to pay a lawyer under
quantum meruit when he wins and when he loses, the
lawyer will be grossly overcompensated. He is better off,
or as well off, in either state of the world because he did not
enter into the contract. This result in effect requires the
client, perhaps too poor to have paid the lawyer by the
hour, to supply insurance against a risk the two parties
appreciated when they formed their relationship. Further-
more, such a result twists incentives. Ex ante the lawyer
now prefers not to contract and is more indifferent to his
client’s success, undermining a key rationale for contin-
gency arrangements—whether for a lawyer, as in this
hypothetical, or a general manager, as in our case. The only
fair and administrable rule is to let the lawyer take the bad
with the good. If the contingency does not materialize, the
lawyer should lose on the quantum-meruit action. See Liss
v. Studeny, 879 N.E.2d 676, 681-83 (Mass. 2008) (holding
that quantum-meruit claim does not accrue where lawyer
and client entered a contingent-fee contract and contin-
gency does not occur).
Nos. 08-1067 & 08-1689                                    21

  This is not to suggest that the lawyer necessarily cannot
recover under quantum meruit when the contingency does
not materialize. Suppose the client frustrates the lawyer’s
ability to win the case or fires the lawyer on the eve of a
winnable trial. The result will depend on the facts and
circumstances of each case. The trial court is generally in
the best position to consider the facts and weigh the
equities, and appellate courts should generally affirm
when convinced that the correct equitable considerations
have been regarded. Nevertheless, it should be clear from
this discussion that the parties’ failed negotiations are
relevant under quantum meruit—and, of course, under
unjust enrichment, whose elements expressly include
equity—because they can show, perhaps decisively, what
the plaintiff expected when he rendered services. They
may also show whether any expectation of compensation
was reasonable.

  3. Contracts Implied in Fact and Implied in Law
  Before we apply these principles to this case, we pause to
clarify some terminology that often creates confusion in
this area of the law. As we have noted, quantum meruit
and unjust enrichment are quasi-contract actions (obliga-
tions imposed by law in the absence of a contract). Ramsey,
484 N.W.2d at 333. Wisconsin cases sometimes refer to
quantum meruit as a contract “implied by law.” E.g., id.
(“Recovery in quantum meruit is allowed . . . on the basis
of a contract implied by law . . . .”); Gename, 153 N.W.2d at
574 (same). The Wisconsin Supreme Court distinguishes
quantum meruit/contracts implied by law from unjust
22                                    Nos. 08-1067 & 08-1689

enrichment, where there is no implied contract at all.
Ramsey, 484 N.W.2d at 333 (“No contract is implied in an
action for unjust enrichment.”). Contra W IS. JURY
INSTRUCTION-C IVIL 3028 (“Contracts implied in law (Unjust
Enrichment)”). This distinction makes sense because there
need not be any prior relationship between the plaintiff
and defendant for recovery under an unjust-enrichment
claim. (Suppose, for example, the plaintiff mistakenly
builds a house on the wrong plot of land resulting in a
windfall for the defendant, who advantageously happens
to own that plot of land.)
  Wisconsin also recognizes contracts “implied in fact,” but
a “quasi-contract or contract implied-in-law differs mark-
edly from a contract implied-in-fact.” Stromsted v. St.
Michael Hosp. of Franciscan Sisters (In re Estate of Stromsted),
299 N.W.2d 226, 228 n.1 (Wis. 1980). In contrast to quantum
meruit, an implied-in-fact contract is governed by general
contract principles. In Theuerkauf, 306 N.W.2d at 657, the
Wisconsin Supreme Court explained that a contract
implied in fact
      . . . requires, the same as an express contract, the
     element of mutual meeting of minds and of intention
     to contract. The two species differ only in methods of
     proof. One is established by proof of expression of
     intention, the other by proof of circumstances from
     which the intention is implied as matter of fact.
Id. (quoting Wojahn v. Nat’l Union Bank, 129 N.W. 1068,
1077 (Wis. 1911) (internal quotation marks omitted)); accord
1 W ILLISTON § 1.5, at 31 (“[A]n implied-in-fact contract
arises from mutual agreement and intent to promise, when
Nos. 08-1067 & 08-1689                                    23

the agreement and promise have simply not been ex-
pressed in words.”).
  Thus, Wisconsin recognizes two types of “implied
contracts,” but only implied-in-fact contracts rely on
contract-formation and breach principles. Compounding
the confusion that arises from this linguistic similarity,
some Wisconsin cases on quantum meruit invoke implied-
in-fact contract cases to describe when a presumption of
expected compensation arises. See, e.g., Steffes, 290 N.W.2d
at 702 (citing Wojahn, 129 N.W. at 1077, an implied-in-fact
contract case). But given the authoritative clarification of
quantum meruit in Ramsey, as well as the strong words in
Stromsted, we are convinced that the Wisconsin Supreme
Court considers quantum-meruit actions to be conceptually
separate from contracts implied in fact.

C. The District Court’s Treatment of the Quantum-
Meruit Claim
  Much of the confusion in this case arose from the parties’
and the district court’s reliance on Theuerkauf v. Sutton. As
Lindquist acknowledged in its brief in this court,
Theuerkauf is an implied-in-fact contract case. It mentions
quantum meruit only once and does so at the end of the
opinion when it quotes Mead v. Ringling, 64 N.W.2d 222, for
the proposition that quantum meruit will prevent the
statute of frauds from barring enforcement of an otherwise
enforceable implied-in-fact contract. Theuerkauf, 306
N.W.2d at 663. This proposition is true but not relevant in
our case. Theuerkauf describes when a court can presume
24                                   Nos. 08-1067 & 08-1689

that services are valuable, but value to the defendant is
immaterial in quantum-meruit cases. See, e.g., Barnes, 123
N.W.2d 543.
  The district court’s misplaced reliance on Theuerkauf
permeated this case. In denying summary judgment, the
court cited Theuerkauf to describe the elements of quantum
meruit. Accordingly, the court thought the value of the
services to defendant established a presumption bearing on
“[t]he ultimate inquiry[:] whether the parties came to a
mutual agreement by the words, conduct or course of
dealing, as shown by [the] parties’ external expressions of
intention.” This substitution of the Theuerkauf implied-in-
fact contract elements in place of the proper Ramsey
quantum-meruit elements was a mistake of law that
affected the court’s summary-judgment ruling.
  The conceptual confusion continued throughout the trial.
The district court excluded all evidence relating to the
parties’ negotiations, reasoning that such evidence was
irrelevant because this was not a breach-of-contract case.
This was a mistake. It is true that this is not a breach-of-
contract case (there was insufficient proof of either an
express or implied-in-fact contract), but the background
evidence remains highly relevant. The parties’ course of
conduct, their actions, and their failed negotiations all bear
on whether Lindquist reasonably expected compensation
at the time Middleton requested, and Miller rendered, his
services.
  The district court also erred in its order amending its
previous judgment. Recounting the earlier proceedings, the
court noted that Lindquist had established a rebuttable
Nos. 08-1067 & 08-1689                                        25

presumption of intended fair payment, which “left the
possibility that at trial, defendant could avoid liability . . .
by coming forward ‘with evidence sufficient to rebut and
overcome the presumption of the existence of an implied
contract in fact.’ ” (Citing Theuerkauf and emphasis added.)
We have already explained why this importation of
implied-in-fact contract principles was improper here.
  Accordingly, we conclude that the district court miscon-
strued the liability principles of quantum meruit under
Wisconsin law and consequently mistried the claim. This
was understandable given the inconsistencies in some of
the caselaw. Nevertheless, the claim must be retried; the
district court’s legal error led to the exclusion of relevant
evidence on the central question of whether Lindquist
reasonably expected compensation for Miller’s services. See
Dandridge v. Williams, 397 U.S. 471, 476 n.6 (1970) (“When
attention has been focused on other issues, or when the
court from which a case comes has expressed no views on
a controlling question, it may be appropriate to remand the
case rather than deal with the merits of that question . . . .”).

D. The District Court’s Treatment of the Unjust-Enrich-
ment Claim
   In contrast to the quantum-meruit claim, the district
court correctly identified the three elements for liability
under unjust enrichment. The question for us is whether
the court correctly applied these elements. It was not clear
error to find that Miller conferred a benefit to Middleton.
Both sides presented evidence of what transpired at the
dealership during Miller’s tenure. The judge found
26                                  Nos. 08-1067 & 08-1689

Lindquist’s evidence and argument on this point to be
more credible and persuasive. On the second element of
the claim, there is no question that Middleton accepted
whatever benefit Miller conferred.
   Our concern lies with the third element of unjust enrich-
ment—whether “it would be inequitable [for Middleton] to
retain the benefit without payment.” See Seegers, 236
N.W.2d at 230. We are not convinced that the district court
properly weighed the equities in this case. The court
oversimplified this aspect of the claim, essentially reducing
it to this question: May an employer equitably withhold
payment from an employee who worked for 11 months?
The facts and context here make this claim more compli-
cated. As we have noted, the district court excluded key
areas of evidence relating to the parties’ negotiations and
their understandings about the terms under which Miller
would work for Middleton. The district court also excluded
evidence that Miller continued to promise Middleton that
Lindquist would soon come forward with a $500,000 cash
infusion in return for an ownership share in Middleton, but
Lindquist of course never made that promised payment.
  It also appears that the court excluded evidence that
Middleton rolled back Miller’s operational changes as soon
as he left, perhaps to undercut Miller’s claim that his
efforts would eventually turn Middleton around. This
evidence would tend to favor Lindquist’s position. These
evidentiary decisions flowed from a legal error: the court’s
too-narrow view of the equitable element of unjust enrich-
ment. Accordingly, this claim too must be retried.
  If the court determines on remand that Lindquist ex-
pected to be paid only if Miller turned Middleton profit-
Nos. 08-1067 & 08-1689                                    27

able and that Miller did not turn Middleton profitable after
a fair attempt, then the court should enter judgment for
Middleton under both quantum meruit and unjust enrich-
ment. If the facts are as Middleton describes them, then
Lindquist gambled and lost on its bet. Equity requires that
it internalize the consequences.

E. Damages
  We conclude with a brief word about damages, which we
need not fully address in light of our decision on liability.
The district court calculated damages in part by comparing
Miller to a consultant who charges auto dealerships a
couple thousand dollars a day for his services. We see
nothing in the record to suggest that any general manager
is compensated in this way. Also, while the court ex-
pressed concern about compensating Miller based on
Middleton’s profits when none existed, the parties should
be able to provide evidence of how general managers are
paid in dealerships that lose money. Finally, Middleton
argues that because Miller worked at several dealerships at
one time, he should be paid as if he worked only part-time.
Here again, additional facts could help the analysis. (Does
a dealership pay its general manager less if he works for
several companies at once? Are general managers instead
given a certain amount per dealership, which is multiplied
for each dealership a manager services?) There should be
no need to resort to conjecture when the answers are
obtainable.
28                                   Nos. 08-1067 & 08-1689

                     III. Conclusion
  For the foregoing reasons, we R EVERSE the district court’s
judgment on both the quantum-meruit and unjust-enrich-
ment claims, and R EMAND for further proceedings consis-
tent with this opinion.

                           2-25-09