Stephanie Mueller v. Julie Maslowski

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
July 26, 2023
A party may file with the Supreme Court a
Samuel A. Christensen petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2021AP2131 Cir. Ct. No. 2020CV826

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT II

STEPHANIE MUELLER,

PLAINTIFF-APPELLANT,

V.

JULIE MASLOWSKI, YOUNG AND MASLOWSKI, LLP AND WISCONSIN
LAWYERS MUTUAL INSURANCE COMPANY,

DEFENDANTS-RESPONDENTS.

APPEAL from an order of the circuit court for Winnebago County:
SCOTT C. WOLDT, Judge. Affirmed.

Before Gundrum, P.J., Neubauer and Grogan, JJ.

Per curiam opinions may not be cited in any court of this state as precedent

or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).
No. 2021AP2131

¶1 PER CURIAM. Stephanie Mueller appeals an order dismissing her
legal malpractice claims against her former attorney Julie Maslowski, the law firm
Young and Maslowski, LLP, and Wisconsin Lawyers Mutual Insurance Company
(collectively, “Maslowski”). In the underlying action, Mueller, as a beneficiary,
unsuccessfully sued the trustee of two trusts, alleging breaches of various fiduciary
duties. The circuit court dismissed her claims for procedural reasons and on their
merits. On appeal, we concluded three of Mueller’s claims were properly
dismissed as time-barred.

¶2 Mueller then commenced the present action against Maslowski for
legal malpractice as to the time-barred claims. To prove legal malpractice,
Mueller would have had to demonstrate that she would have prevailed on those
claims had they been timely filed. Maslowski sought summary judgment, which
the circuit court granted based on its determination that Mueller was foreclosed by
issue preclusion from relitigating the underlying claims.

¶3 The issue on appeal is whether the circuit court correctly determined
that the earlier dismissal of Mueller’s claims should be given preclusive effect.
Citing a comment to § 27 of the Restatement (Second) of Judgments, Mueller
contends it should not. She reasons that issue preclusion does not apply because
we decided her earlier appeal only on statute-of-limitations grounds.

¶4 But our earlier opinion also affirmed the circuit court’s discretionary
decision to award a significant amount of attorneys’ fees. That award was based
on its determination that Mueller’s claims were factually unsupported—a
determination that would be called into question if Mueller was successful in the
present lawsuit. Accordingly, assuming without deciding that the Restatement

2
No. 2021AP2131

comment is a correct statement of Wisconsin law, we conclude the circuit court in
the present case properly applied issue preclusion. We affirm.

BACKGROUND

¶5 Our prior decision sets forth many of the background facts, which
we need not repeat here. See Mueller v. Krohn, No. 2018AP25, unpublished slip
op. (WI App July 17, 2019) (hereinafter, Mueller I). Krohn is the trustee of two
trusts under which Mueller is a beneficiary. In the earlier action, Mueller filed a
petition for judicial intervention seeking damages and removal of Krohn as trustee
based on various alleged breaches of fiduciary duties.1 Krohn and the
UW Foundation filed motions for summary judgment.

¶6 The circuit court2 dismissed all of Mueller’s claims, concluding the
trustee’s actions were consistent with the establishing documents and were proper
exercises of the trustee’s discretion concerning the administration of the trusts. In
its oral decision, the court concluded that there was “no question” that Mueller had
failed to put forth evidence demonstrating a breach of fiduciary duties by the
trustee. The court continued:

I think this case has been replete with meritless, baseless,
and unfounded litigation throughout. I don’t find anything
that remotely borders on … suggest[ing] that … Krohn
hasn’t [sic] done anything other than an exemplary job as
Trustee of these Trusts, exercising the discretion that [the
settlor] wanted her to exercise consistent with the terms and
understanding of these Trusts. I don’t find anything.

1
The University of Wisconsin Foundation (“UW Foundation”), also a beneficiary, was
named as a respondent along with Krohn.
2
The Honorable Richard J. Nuss presided over the underlying proceedings.

3
No. 2021AP2131

¶7 The court addressed Mueller’s arguments to the contrary, finding her
claims wholly lacking any credible evidence to support them. The court
determined that the evidence Mueller had presented “would [not] remotely draw
anybody of minimal intelligence to conclude” that there had been a breach of
fiduciary duty. It declined in its oral decision to address the specifics of every
claim Mueller had raised; rather, it stated it was adopting the law and argument
contained in Krohn’s and the UW Foundation’s summary judgment briefing.

¶8 Finally, the court commented upon the “inordinate expense”
incurred by Krohn and the UW Foundation in defending Mueller’s frivolous
claims. It reiterated that it regarded Mueller’s claims as “baseless, meritless, and
unfounded” and that the evidence gave rise to no other conclusion than that Krohn
had acted within the bounds of her discretion as trustee. The court therefore
ordered that Krohn and the UW Foundation be awarded reasonable attorneys’ fees
out of the trust income, which would otherwise have been directed to Mueller.
The attorneys’ fees and expenses amounted to more than $324,000.

¶9 We affirmed in the ensuing appeal. Our opinion broke down the
summary judgment proceedings at the claim level, and we concluded three of
Mueller’s claims were properly dismissed as time-barred under the applicable
statute of limitations.3 Mueller I, ¶¶21-26. Our opinion also addressed Mueller’s
assertion that the circuit court erroneously exercised its discretion by awarding
Krohn and the UW Foundation attorneys’ fees. We concluded that determination

3
We also rejected on its merits the claim that Krohn had breached her fiduciary duties by
entering into certain farming contracts. Mueller I, ¶27 n.3. Thus, in addition to the rationale set
forth in the remainder of this opinion, that particular claim is foreclosed by issue preclusion
because our decision specifically reached a determination on the merits.

4
No. 2021AP2131

was supported by a logical rationale and was consistent with, and supported by,
the facts of record. Id., ¶¶28-30. The Wisconsin Supreme Court denied a petition
for review.

¶10 Mueller then filed the present action against Maslowski, asserting
that Maslowski had breached the legal services contract and committed legal
malpractice by failing to file the three underlying claims within the one-year
limitations period. Maslowski sought summary judgment, asserting in part that
Mueller’s claims had been litigated on their merits to a final judgment in the
earlier proceedings and were therefore barred by issue preclusion. Following a
hearing, the circuit court agreed with Maslowski, remarking that the circuit court
in the underlying action was “saying in the strongest terms possible that this is in
essence a frivolous case and there’s nothing you can prove and you have had your
day in court and that is why he did what he did with respect to attorney fees in this
case clearly.” Mueller now appeals.

DISCUSSION

¶11 Determining whether issue preclusion applies is a two-step process.
First, the court must determine “whether the issue or fact was actually litigated and
determined in the prior proceeding by a valid judgment in a previous action and
whether the determination was essential to the judgment.” Estate of Rille v.
Physicians Ins. Co., 2007 WI 36, ¶37, 300 Wis. 2d 1, 728 N.W.2d 693. This
presents a question of law, which this court reviews de novo. Id.

¶12 Second, the court must determine whether applying issue preclusion
comports with principles of fundamental fairness. Id., ¶38. A nonexclusive list of
five factors aids circuit courts in this determination. Id. We review a circuit
court’s determination on the second prong for an erroneous exercise of discretion.

5
No. 2021AP2131

Id. We will affirm if the court applied the proper standard of law and, using a
demonstrated rational process, reached a reasonable conclusion. Id., ¶39.

¶13 “Issue preclusion analysis requires us to identify the issue decided in
the prior proceeding and to compare it with the allegedly precluded issue.”
Portage Cnty. Bank v. Deist, 159 Wis. 2d 793, 799, 464 N.W.2d 856 (Ct. App.
1990). Because a legal malpractice claim is a “suit within a suit,” Helmbrecht v.
St. Paul Ins. Co., 122 Wis. 2d 94, 103, 362 N.W.2d 118 (1985), the operative
analysis here focuses on whether the three claims dismissed on statute-of-
limitations grounds would have succeeded but for Maslowski’s allegedly untimely
filing.

¶14 Mueller generally acknowledges that the circuit court in Mueller I
dismissed the relevant claims both on statute-of-limitations grounds and on their
merits. Mueller argues that this dual ruling is of no moment, however, because
this court in Mueller I only addressed whether the three claims at issue were time-
barred.4 Accordingly, she contends that a comment to the Restatement (Second)
of Judgments applies here and counsels against the application of issue
preclusion: “If the appellate court upholds one of [the circuit court’s alternative]
determinations as sufficient and refuses to consider whether or not the other is
sufficient and accordingly affirms the judgment, the judgment is conclusive as to
the first determination.” RESTATEMENT (SECOND) OF JUDGMENTS § 27 cmt. o
(AM. L. INST. 1982).

4
Maslowski, emphasizing the section headings in our opinion, argues that our decision
also reached the merits of Mueller’s claims. For purposes of this opinion, and except as set forth
in footnote 3, we assume without deciding that our opinion was limited to addressing the
dismissal of the relevant claims on statute-of-limitations grounds.

6
No. 2021AP2131

¶15 Even if that comment o. is a controlling statement of the law in
Wisconsin, we nonetheless conclude issue preclusion was appropriate here.
Though we arguably declined to reach the merits of the relevant breach claims in
Mueller I (preferring to resolve those matters on statute-of-limitations grounds),
we also affirmed the circuit court’s discretionary decision to award attorneys’ fees
to Krohn and the UW Foundation. As set forth above, that fee award was directly
tied to the determination in the earlier action that Mueller’s claims were legally
meritless based on a complete lack of evidence to support them. In upholding the
fee award, we commented upon the “logical rationale” employed by the circuit
court, which encompassed the court’s reasoning that the fees were warranted
because Krohn and the UW Foundation had devoted significant resources to
responding to Mueller’s factually dubious claims.

¶16 Our opinion in Mueller I is therefore properly read as reaching the
legal merits of Mueller’s claims, and the circuit court here appropriately gave the
earlier judgment preclusive effect. As set forth above, the merits of Mueller’s
claims were actually litigated and determined in the prior proceeding by a valid
judgment, and that determination was essential to the judgment. Put another way,
we would not have affirmed the attorneys’ fees award if the circuit court in
Mueller I had incorrectly determined that Mueller’s claims were unsupported by
the evidence of record.

¶17 Mueller also argues the circuit court here omitted the second step of
the issue preclusion analysis entirely and therefore failed to apply the correct legal
standard. We disagree. While the circuit court’s articulated reasoning could
certainly have been more robust, we will search the record for reasons to sustain
the court’s exercise of discretion. See Lofthus v. Lofthus, 2004 WI App 65, ¶21,
270 Wis. 2d 515, 678 N.W.2d 393.

7
No. 2021AP2131

¶18 Thus, the state of the record that comes to us is an important factor
to consider when determining whether the circuit court erroneously exercised its
discretion. We note that only Maslowski’s summary judgment briefing set forth
an analysis based on all the relevant public policy factors. Mueller’s responsive
argument—approximately one page—explicitly abandoned any argument based
on the first four factors and focused exclusively on the last factor: whether there
were matters of public policy and individual circumstances involved that would
render fundamentally unfair the application of collateral estoppel, including
inadequate opportunity or incentive to obtain a full and fair adjudication in the
initial action. See Estate of Rille, 300 Wis. 2d 1, ¶61. Mueller’s only argument
on that point was essentially that applying issue preclusion under the
circumstances here deprived a legal malpractice plaintiff of the opportunity to
demonstrate causation.

¶19 By advancing only this specific argument, Mueller tacitly collapsed
the fundamental fairness inquiry into the first step of the analysis—whether issue
preclusion could be applied as a matter of law. Her own briefing acknowledged
that her fundamental fairness argument was built on an assumption that we have
rejected above—that issue preclusion was being applied “to claims which were
prevented from being heard on the merits in prior litigation.” As set forth above,
Mueller’s claims were heard on their merits; the circuit court deemed them
entirely lacking an evidentiary basis, and we concluded in Mueller I that that was
a reasonable rationale upon which to award significant attorneys’ fees.

¶20 We further note that, at the summary judgment hearing in this case,
no party further addressed fundamental fairness or the five Estate of Rille factors.
Rather, the argument was directed entirely to whether issue preclusion could be
applied as a matter of law considering this court’s decision in Mueller I.

8
No. 2021AP2131

¶21 Based on the foregoing, we reach several conclusions. First, the
summary judgment hearing transcript shows the circuit court was very familiar
with the parties’ summary judgment briefing. We have no trouble concluding that
under these circumstances it made an implied ruling that the application of issue
preclusion comported with fundamental fairness. See Gittel v. Abram, 2002 WI
App 113, ¶49, 255 Wis. 2d 767, 649 N.W.2d 661 (“[W]hen a court does not
adequately explain a discretionary decision, we may review the record to
determine whether the record supports the trial court’s decision.”).

¶22 Second, and relatedly, to the extent that Mueller now argues the
circuit court’s rationale was inadequate, we conclude she failed to raise the
fundamental fairness issue with sufficient prominence to alert the court that more
explanation was required. See Bilda v. Milwaukee Cnty., 2006 WI App 159, ¶46,
295 Wis. 2d 673, 722 N.W.2d 116 (noting that a litigant must raise an issue with
sufficient prominence such that the circuit court understands it is being called
upon to make a ruling).

¶23 Third, and finally, a reversal under these circumstances would be
unfair to the circuit court. Mueller brazenly declares that “had the circuit court
conducted the required analysis, it would have necessarily concluded that issue
preclusion was inappropriate.” Yet only now on appeal does Mueller attempt to
flesh out her fundamental fairness argument by addressing all of the relevant
Estate of Rille factors. It is well-established that arguments not made to the
circuit court will not be considered for the first time on appeal. State v. Holland
Plastics Co., 111 Wis. 2d 497, 504, 331 N.W.2d 320 (1983); see also
Schonscheck v. Paccar, Inc., 2003 WI App 79, ¶11, 261 Wis. 2d 769, 661
N.W.2d 476 (holding that a fundamental appellate precept is that we will not

9
No. 2021AP2131

blindside circuit courts with reversals based on theories that did not originate in
their forum).

By the Court.—Order affirmed.

This opinion will not be published. See WIS. STAT.
RULE 809.23(1)(b)5 (2021-22).

10