Court Opinion

ID: 771407
Source: CourtListenerOpinion
Date Created: 2012-04-18 10:51:02+00
Date Added: 2024-06-11T17:55:57.428108
License: Public Domain

234 F.3d 1010 (7th Cir. 2000)
Fredric Karl Saecker, Plaintiff-Appellant,v.William H. Thorie and Doar, Drill & Skow, S.C., Defendants-Appellees.
No. 00-2257
In the  United States Court of Appeals  For the Seventh Circuit
Argued November 15, 2000Decided December 12, 2000

Appeal from the United States District Court  for the Western District of Wisconsin.  No. 99-C-671-S--John C. Shabaz, Chief Judge.
Before Posner, Easterbrook, and Kanne, Circuit Judges.
Posner, Circuit Judge.

1
This is a diversity suit  for legal malpractice, and at once we confront an  issue of federal subject-matter jurisdiction. The  plaintiff's jurisdictional statement, in  violation of 7th Cir. R. 28(a)(1), does not  indicate the state of citizenship of either the  plaintiff or the defendants, who compound the  error in their jurisdictional statement by  failing both to point out the error and to supply  the missing information. From the record it is  apparent that the plaintiff is a citizen of  Minnesota and the individual defendant a citizen  of Wisconsin; but what of the law-firm defendant?  The name of the firm is followed by "S.C.," and  while its counsel informs us that this means  "service corporation" and that the firm is  incorporated and has its principal place of  business in Wisconsin, he confessed to being  unacquainted with the nature of a Wisconsin  service corporation either generally or in  reference to its status for purposes of the  diversity jurisdiction. If the service  corporation is assimilated to a regular business  corporation, then jurisdiction is of course  secure; but if it is assimilated to a  partnership, including a limited partnership, or  to an L.L.C. (limited-liability company), the  existence of diversity would depend on the  citizenship of the partners, Carden v. Arkoma  Associates, 494 U.S. 185, 195-96 (1990); Northern  Trust Co. v. Bunge Corp., 899 F.2d 591, 594 (7th  Cir. 1990); Cosgrove v. Bartolotta, 150 F.3d 729,  731 (7th Cir. 1998), which the record does not  disclose.

2
The answer is given by our decision in Cot  v.  Wadel, 796 F.2d 981, 983 (7th Cir. 1986), where  we held, primarily to avoid multiplying confusing  distinctions within the category of corporations,  that a professional corporation is to be treated  the same as a regular business corporation, even  if the professional corporation does not protect  its principals from personal liability or serve  to raise capital from passive investors. See also  Saxe, Bacon & Bolan, P.C. v. Martindale, Hubbell,  Inc., 710 F.2d 87, 89 (2d Cir. 1983); cf. CCC  Information Services, Inc. v. American Salvage  Pool Ass'n, 230 F.3d 342, 346 (7th Cir. 2000);  National Ass'n of Realtors v. National Real  Estate Ass'n, Inc., 894 F.2d 937, 939 (7th Cir.  1990); Mutual Service Casualty Ins. Co. v.  Country Life Ins. Co., 859 F.2d 548, 550-51 (7th  Cir. 1988). "Service corporation" is Wisconsin's  name for professional corporation, see Wis. Stat.  sec.sec. 180.901-.921; Wausau Medical Center,  S.C. v. Asplund, 514 N.W.2d 34, 37, 44 (Wis. App.  1994), and so comes within the rule of the Cot case.

3
Cot  was a "first generation" professional-  corporation case. The original impetus for the  formation of professional corporations was to  obtain tax benefits, not to limit liability. Even  today, some professional-corporation statutes do  not limit the personal liability of the  principals of such a corporation, corresponding  to partners in the traditional law-firm  partnership. But many do. (See the useful  discussions in Christopher C. Wang, "Breaking Up  Is Hard to Do: Allocation of Fees From the  Unfinished Business of a Professional  Corporation," 64 U. Chi. L. Rev. 1367 (1997), and  Debra L. Thill, "The Inherent Powers Doctrine and  Regulation of the Practice of Law: Will Minnesota  Attorneys Practicing in Professional Corporations  or Limited Liability Companies Be Denied the  Benefit of Statutory Liability Shields?" 20 Wm.  Mitchell L. Rev. 1143 (1994).) Wisconsin's  service-corporation statute is one of them. It  protects the shareholders of such a corporation  from vicarious liability for the negligence or  other misconduct either of the corporation itself  or of the other shareholders. Wis. Stat. sec.  180.1915. The statute does not shield the lawyer  or other professional from unlimited liability  for acts of the corporation in which he is  personally complicit; and that means that if a  lawyer practicing by himself incorporates as a  service corporation, he obtains no limitation of  his personal liability at all. But that is  equally true of the limited liability of  shareholders of ordinary business corporations:  they are not insulated from unlimited personal  liability for acts on behalf of the corporation  for which they could be sued personally.

4
There is thus no tension with National Ass'n of  Realtors v. National Real Estate Ass'n, Inc.,  supra, 894 F.2d at 940, which carved an exception  to the rule of Cot  v. Wadel for cases in which  the shareholders of a corporation rather than the  corporation itself are the real parties in  interest; in that case it is their citizenship,  not that of the corporation, that counts. See  also CCC Information Services, Inc. v. American  Salvage Pool Ass'n, supra, 230 F.3d at 347;  Northern Trust Co. v. Bunge Corp., supra, 899  F.2d at 594. The exception is inapplicable to  this case. Apart from Thorie himself, the  personal assets of the shareholders of Doar,  Drill & Skrow, S.C., are not at risk.

5
Any tension between Cot  and later cases derives  not from National Ass'n of Realtors v. National  Real Estate Ass'n but from the limited  partnership and L.L.C. cases, since,  functionally, they are even closer to standard  business corporations than are professional (or  service) corporations yet they are treated as  ordinary partnerships for purposes of determining  whether there is diversity jurisdiction. But as  neither party has asked us to reexamine Cot , and  no case has questioned its rule, and the  Wisconsin service-corporation goes far to  assimilate professional to standard business  corporations, we shall adhere to the rule of that  case at least for now.

6
On the merits, the district judge granted  summary judgment for the defendants on the ground  that Wisconsin's six-year statute of limitations  for legal malpractice, Wis. Stat. sec. 893.53,  had run. In January of 1990, the plaintiff,  Saecker, represented by the individual defendant,  Thorie (a member of the defendant firm), had been  convicted in a Wisconsin state court of rape and  other crimes and sentenced to 15 years in prison.  Saecker's family had wanted DNA testing of bodily  fluids and hair found on the victim of the rape,  but Thorie had advised against this on the  erroneous ground that the results of DNA testing  would not be admissible at Saecker's trial.  Saecker's appellate remedies were exhausted on  April 2, 1991, but in subsequent postconviction  proceedings in which he was represented by new  counsel he successfully moved for the DNA  testing, which exonerated him. In October of  1996, after a new trial was ordered, all charges  against him were dropped. He brought this suit in  May of 1999. The district court ruled that the  statute of limitations had begun to run on April  2, 1991, when the Wisconsin Supreme Court denied  Saecker's petition to review the affirmance of  his conviction, and so expired before he brought  his suit.

7
Under Wisconsin law a statute of limitations  begins to run when the plaintiff discovers or  should have discovered both his injury and the  person who, and the act that, were the probable  cause of the injury. See Borello v. U.S. Oil Co.,  388 N.W.2d 140, 146 (Wis. 1986); Smith v.  Herrling, Myse, Swain & Dyer, Ltd., 565 N.W.2d  809, 811 (Wis. App. 1997); Wiskunas v. Birnbaum,  23 F.3d 1264, 1266 (7th Cir. 1994). He needn't  know that he has a claim against that person for  that act; he has the statutory period to  determine whether he has a claim and if so to  prepare and file his suit, and that is time  enough given that he knows that he has been  injured and knows also who injured him and by  what conduct.

8
The parties agree that the date of injury was  April 2, 1991, and in view of their agreement we  need not speculate on alternative possibilities,  such as the date of his conviction. Cf. Smith v.  Herrling, Myse, Swain & Dyer, Ltd., supra, 565  N.W.2d at 811-12. The quarrel is over the date on  which Saecker discovered or should have  discovered that the likely cause of the injury  was Thorie's failure to obtain a DNA test that  would have averted the conviction. April 2, 1991,  the date selected by the district court, is too  early. Saecker had no reason to believe that  Thorie was giving him erroneous advice about the  admissibility of DNA evidence. He had no reason  to believe, therefore, that his conviction had  been caused by a decision of his lawyer. He did  have reason to believe this by January 17, 1993,  the date on which his new lawyer moved for an  order to conduct a DNA test; and this date was  more than six years before he sued. He could not  be certain then that Thorie had injured him by  failing to have made such a motion, because he  could not be certain what the outcome of the test  would be. The fact that he passed the test,  however, suggests that he had a good idea he  would pass it (that is, he knew he was innocent).  He knew enough, we think, to have set the statute  of limitations running. See id. at 811; Wiskunas  v. Birnbaum, supra, 23 F.3d at 1266.

9
Though not mentioned by the parties, the  Wisconsin courts might hold that the statute of  limitations was tolled until October 1996, when  the state finally dropped all charges against  Saecker. In most states, including Wisconsin, a  legal malpractice suit against a criminal defense  attorney requires a showing that the criminal  defendant (that is, the malpractice plaintiff)  actually was innocent, implying acquittal and  more--that the defendant really was innocent and  wasn't just acquitted because the state could not  carry its heavy burden of proof. E.g., Harris v.  Bowe, 505 N.W.2d 159, 162 (Wis. App. 1993);  Mahoney v. Shaheen, Cappiello, Stein & Gordon,  727 A.2d 996, 998-99 (N.H. 1999); Wiley v. County  of San Diego, 966 P.2d 983, 991 (Cal. 1998);  Peeler v. Hughes & Luce, 909 S.W.2d 494, 497-98  (Tex. 1995). The thinking behind this rule is  that a guilty person should not be allowed to  reduce his punishment by getting a money judgment  against his lawyer.

10
Until October 1996, Saecker's innocence had not  been determined. But if therefore the running of  the statute of limitations was tolled until then,  this would not help him. The doctrine of  equitable tolling, the doctrine that is  applicable when a plaintiff seeks tolling for  reasons other than acts by the defendant that  prevented him from suing earlier, requires the  plaintiff to sue as early as he can after  expiration of the statute of limitations. E.g.,  Elmore v. Henderson, 227 F.3d 1009, 1013 (7th  Cir. 2000); United States v. Duke, 229 F.3d 627,  630-31 (7th Cir. 2000). Saecker had no excuse for  waiting two and a half years after the charges  against him were dropped to bring his malpractice  suit.

11
The suit is also barred by the doctrine of  judicial estoppel, which forbids a party who has  prevailed in one suit to repudiate the ground on  which he prevailed in order to win a subsequent  suit. E.g., United States v. Hook, 195 F.3d 299,  306 (7th Cir. 1999); Ogden Martin System of  Indianapolis, Inc. v. Whiting Corp., 179 F.3d  523, 526-27 (7th Cir. 1999). Previous federal  cases have treated it as a federal procedural  doctrine applicable regardless of the version of  the doctrine embraced by the state that rendered  the judgment sought to be used to work the  estoppel. Ogden Martin Systems of Indianapolis,  Inc. v. Whiting Corp., supra, 179 F.3d at 527 n.  1; Edwards v. Aetna Life Ins. Co., 690 F.2d 595,  597 n. 4 (6th Cir. 1982); Allen v. Zurich Ins.  Co., 667 F.2d 1162, 1167 n. 4 (4th Cir. 1982).  They have reasoned as follows: the purpose of the  doctrine is to reduce the temptation to fraud in  litigation, Ladd v. ITT Corp., 148 F.3d 753, 756  (7th Cir. 1998); State v. Perry, 548 N.W.2d 817,  821 (Wis. 1996); the interest of the second court  (the one the winner of a previous suit wishes to  persuade on the basis of a ground that he  successfully fought against in that suit) in not  being defrauded is as great as the interest of  the first court; the doctrine is therefore part  of the second court's arsenal of self-protective  weaponry.

12
This conclusion is in tension, however, with 28  U.S.C. sec. 1738, as interpreted by the Supreme  Court in Marrese v. American Academy of  Orthopaedic Surgeons, 470 U.S. 373 (1985). In  holding that section 1738 requires federal courts  to apply the preclusion (res judicata and  collateral estoppel) principles of the state  whose judgment is sought to be used to block  relitigation, the Court expressly rejected, id.  at 385, the argument (which this court, in the  decision that the Court reversed, had adopted,  726 F.2d 1150, 1154 (7th Cir. 1984) (en banc)  (plurality opinion)) that since preclusion is  intended to conserve judicial resources as well  as to spare parties the expense and uncertainty  of relitigation, the court asked to give  preclusive weight to an earlier judgment should  be entitled to give weight to its own views of  the proper scope of preclusion. Judicial estoppel  is a kind of preclusion doctrine, and here it is  a judgment of the State of Wisconsin that is  sought to be used to preclude relitigation of an  issue (the issue of Thorie's negligence).

13
We need not try to resolve the tension in that  case. Wisconsin has a doctrine of judicial  estoppel, and it is identical to the federal  doctrine. See State v. Perry, supra, 548 N.W.2d  at 821-22, referring approvingly to federal  cases, including cases of this court. As there is  no conflict between the federal and Wisconsin  versions of the doctrine, we can proceed to apply  it without resolving the issue flagged in the  preceding paragraph.

14
When Saecker, having in postconviction  proceedings obtained the DNA test results, moved  for a new trial on the basis of newly discovered  evidence, he had to show that the evidence had  not been available to him at trial. Part of the  explanation that he offered, embracing Thorie's  unsound advice, was that DNA evidence was  believed to be inadmissible--which if true would  eliminate the basis for his malpractice claim.  The Wisconsin courts that adjudicated his motion  for a new trial duly held that DNA testing had  been such a novelty in 1990 that Saecker, and so  by implication Thorie, could not be faulted for  not having moved for such testing. This ruling is  inconsistent with the malpractice claim, which  Saecker could have preserved only by arguing in  the postconviction proceedings that his failure  to move for DNA testing at trial was due not to  DNA evidence being inadmissible but rather to  ineffective assistance by his trial counsel.

15
Affirmed.