Schuetta v. Aurora National Life Assurance Company

Filing 53

ORDER signed by Judge J P Stadtmueller on 6/12/14 granting 33 defendant's motion for summary judgment in all remaining respects and dismissing with prejudice the plaintiff's equitable estoppel and breach of implied duty claims; the entirety of plaintiff's claims now having been dismissed with prejudice, this action is DISMISSED with prejudice. See Order. (cc: all counsel)(nm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
LEO R. SCHUETTA,
Plaintiff,
v.

Case No. 13-CV-1007-JPS

AURORA NATIONAL LIFE
ASSURANCE COMPANY,

ORDER
Defendant.
On May 8, 2014, the Court issued an order granting in part and
denying in part the defendant’s motion for summary judgment. (Docket #44).
However, the Court denied summary judgment with respect to only two
issues and allowed the defendant, Aurora National Life Assurance Company
(“Aurora”), to further brief those issues. (Docket #44 at 22). The defendant
took the Court up on its offer, and filed a brief arguing that it should be
granted summary judgment on those two remaining claims. (Docket #45).
The plaintiff, Leo Schuetta (“Schuetta”), responded, arguing that the Court
should deny summary judgment and hold a trial on the remaining matters.
(Docket #47). The defendant filed a reply brief (Docket #49).
This matter now having been fully briefed, the Court turns to decide
it. Because the Court amply set out the background facts in its prior summary
judgment order, the Court will not delve into them again, here. Rather, the
Court will address only the legal merits of the parties’ arguments.
1.

EQUITABLE ESTOPPEL
The Court left open the issue of summary judgment on Mr. Schuetta’s

equitable estoppel claim because the parties had not adequately addressed
whether the doctrine of equitable estoppel may be used as a claim. (Docket
#44 at 17). It is clear from Wisconsin case law that equitable estoppel may be

used as a defense—a “shield” as the Court and parties are referring to it; less
clear to the Court was whether Wisconsin recognizes equitable estoppel as
a claim—a “sword.” See, e.g., Mohamed v. Reinhart Boerner Van Deuren, S.C.,
No. 10-CV-753, 2012 WL 1491860, *3 (E.D. Wis. Apr. 26, 2012) (citing Milas v.
Labor Ass’n of Wisconsin, Inc., 214 Wis. 2d 1, 11–12, 571 N.W.2d 656 (1997);
Hocking v. City of Dodgeville, 326 Wis.2d 155, 174 n.10, 785 N.W.2d 398 (2010);
Kenseth v. Dean Health Plan, Inc., 610 F.3d 452, 456, 463 (7th Cir. 2010)).
In response to the Court’s invitation for further briefing, Aurora
submitted several cases that clearly establish that Wisconsin does not
recognize an equitable estoppel claim. Most importantly, in Utschig v.
McClone, referring to equitable estoppel as “estoppel in pais,” the Wisconsin
Supreme Court noted that: “‘The effect of an estoppel in pais is to prevent the
assertion of what would otherwise be an unequivocal right…Such an
estoppel operates always as a shield, never as a sword.…and it does not of
itself create a new right.’” 16 Wis. 2d 506, 509, 114 N.W.2d 854, 855–56 (1962)
(quoting 19 Am. Jur., Estoppel, sec. 40, p. 639; citing 31 C.J.S. Estoppel §§ 59,
62)). The Wisconsin Supreme Court reaffirmed that position in Hoffman v. Red
Owl Stores, Inc., pointing out that the traditional concept of estoppel “merely
serves as a shield and cannot serve as a sword to create a cause of action,”
and distinguishing promissory estoppel, which is a cause of action—but is
not at issue, here. 26 Wis. 2d 683, 696, 133 N.W.2d 267, 274 (1965) (citing
Utschig, 114 N.W.2d at 855–56); see also Murray v. City of Milwaukee, 2002 WI
App 62, ¶ 15 & n. 10, 252 Wis. 2d 613, 642 N.W.2d 541. The Wisconsin Court
of Appeals reiterated that point in Murray:
In his brief, Murray describes his claim of equitable estoppel as
“an equitable cause of action based upon his reliance on the
City's historic practices.” However, equitable estoppel
(estoppel in pais) is a bar to the assertion of what would
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otherwise be a right; it does not of itself create a right. Thus,
Murray must establish his right to recover attorney fees from
the City on some basis other than equitable estoppel; equitable
estoppel does not establish that right.
Murray, 2002 WI App 62, ¶ 15 & nn. 9–10 (citing Utschig, 114 N.W.2d at
855–56; internal and other citations omitted). The Wisconsin Court of
Appeals and judges in the Eastern District of Wisconsin have agreed. See, e.g.,
Baures v. North Shore Fire Dept., 2003 WI App 103, ¶ 30 & n.7, 264 Wis. 2d 815,
664 N.W.2d 113 (citing various cases that discuss the distinction between
equitable and promissory estoppel and noting that equitable estoppel
functions as a shield); Third Educ. Grp., Inc. v. Phelps, No. 07-C-1094, 2009 WL
2150686, at *10–*11 (E.D. Wis. May 15, 2009) (noting that equitable estoppel
generally is not treated as a claim, but addressing the claim anyway, because
it would still fail); Eivaz v. Edwards, No. 12-C-910, 2013 WL 989843, at *4 (E.D.
Wis. Mar. 13, 2013) (noting that equitable estoppel “is an affirmative
defense”).
To be sure, the legal issue has suffered over the years from a lack of
clarity. See, e.g., Mohamed, 2012 WL 1491860, at *3 (citing Milas, 571 N.W.2d
at 660, (1997); Hocking, 785 N.W.2d at 407 & n.10; Kenseth, 610 F.3d at 456,
463). Mohamed perhaps best exemplifies the confusion, as it relies on two
cases1 that implied the existence of an equitable estoppel claim (but then did
not analyze the issue in great depth) and does so while also noting the
limitation of its holding: “at this juncture of the proceedings, [the defendant]
has not established that equitable estoppel is only an affirmative defense.”
2012 WL 1491860, at *3. In Hocking, the Wisconsin Supreme Court mentioned
that the plaintiffs “argue[d] that they satisfy the requirements of an equitable

1

Mohamed relied on Milas only to set out the elements of equitable estoppel.

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estoppel claim,” but then noted the confusing nature of that argument and
pointed out that the plaintiff “assert[ed] that they [were] not claiming
equitable estoppel.” 785 N.W.2d at 407 & n. 10. In other words, the Wisconsin
Supreme Court did not clearly recognize an equitable estoppel claim, merely
mentioned it in passing in describing the plaintiffs’ argument. In Kenseth, the
Seventh Circuit assumed that an equitable estoppel claim existed, but did so
cursorily on its way to affirming the dismissal of such a claim and without
citing any Wisconsin case law on the topic.
However, despite the confusion, the Wisconsin Supreme Court’s
holding in Utschig has never been questioned and, in fact, still stands as a
crisp and clear statement of the law: equitable estoppel (or estoppel in pais)
serves only as a defense or “shield,” and never as a claim or “sword.” See,
e.g., Utschig, 114 N.W.2d at 855–56; Red Owl, 133 N.W.2d at 274; Murray, 2002
WI App 62, ¶ 15 & nn. 9–10. Meanwhile, Mr. Schuetta’s citations to the
contrary are either wholly inapposite or not binding upon this Court. The
Court, therefore, will apply Utschig’s holding, and dismiss Mr. Schuetta’s
equitable estoppel claim, as the Court finds that Wisconsin does not
recognize such a claim.
2.

BREACH OF IMPLIED DUTY OF GOOD FAITH
On the breach of implied duty claim, Aurora points out that “[u]nder

Wisconsin law, a party may not be liable for a breach of the implied duty of
good faith where ‘a contracting party complains of acts of the other party
which are specifically authorized in their agreement.’” (Docket #49 at 3
(quoting Super Valu Stores, Inc. v. D-Mart Food Stores, Inc., 146 Wis.2d 568, 577,
431 N.W.2d 721, 726 (Ct. App. 1988). That is because “it would be a
contradiction in terms to characterize an act contemplated by the plain
language of the parties’ contract as a ‘bad faith’ breach of that contract.” Id.
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That principle is important, here, because the plain language of the
parties’ contract clearly contemplated Aurora’s ability to say nothing to Mr.
Schuetta regarding his obligation to file documentation to start receiving his
benefits. Specifically, the contract states that: “The Company will not be
responsible for any failure of the Deferred Participant to submit such
documentation in a timely manner.” (PPFF ¶ 13). In other words, under the
contract, Aurora was authorized to say nothing; certainly it had no obligation
to alert Mr. Schuetta to his failure to file the required documents or to pay
him in the absence of those documents. Rather, Mr. Schuetta had an
affirmative obligation to file those documents in order to receive his annuity
payments; he failed to do so, and the parties’ contract contemplated that
benefits would not be paid until he rectified that failure. Accordingly,
Aurora’s mere failure to alert him to his obligation to turn in those
documents cannot be a breach of the implied duty of good faith, because
Aurora’s action was explicitly contemplated and authorized by the parties’
agreement. E.g. Super Valu Stores, 431 N.W.2d at 726.
Mr. Schuetta argues that this finding would allow Aurora to engage
in all sorts of devious behavior—to deliberately withhold information when
he contacted them; to lie to him to induce his failure to submit the required
documents—but that is a different issue. Whereas the contract explicitly
allows for Aurora to do nothing until Mr. Schuetta filed the required
paperwork, it certainly does not authorize Aurora to take such deliberately
misleading actions or otherwise act in bad faith. In other words, that situation
would fall outside of Super Value Stores’ holding, which otherwise applies to
Aurora’s failure to notify Mr. Schuetta of the missing paperwork
Thus, if Mr. Schuetta could demonstrate that sort of deliberate action
or bad faith on Aurora’s part, then he would be entitled to judgment; the
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problem is that he has no evidence to support such a finding. To be sure, at
this summary judgment stage of the proceedings, the Court must view the
record in the light most favorable to Mr. Schuetta and draw all reasonable
inferences in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
The Court cannot weigh the evidence or decide which party’s submissions
and testimony are more believable. Id. Nonetheless, as the non-movant, Mr.
Schuetta was required to supply his own evidence that would demonstrate
a material issue of fact for a trial. In re Pansier, 451 F. App’x 593, 596 (7th Cir.
2011) (citing Fed. R. Civ. P. 56; Anderson, 477 U.S. at 250; Serednyj v. Beverly
Healthcare LLC, 656 F.3d 540, 547 (7th Cir.2011)). A genuine issue of material
fact exists only “‘if the evidence is such that a reasonable jury could return
a verdict for the nonmoving party,’” and the nonmoving party “may not rest
on mere allegations or denials in its pleadings” to establish such an issue but
instead “‘must set forth specific facts.’” Serednyj, 656 F.3d at 547 (citing
Anderson, 477 U.S. at 248, 250).
At this juncture, Mr. Schuetta has not submitted any evidence that
would establish bad faith or even create an inference thereof. He points to
only three separate occasions on which Aurora could have somehow misled
him: in a 1990 telephone call; in failing to respond to his 1990 letter; and, in
failing to notify him of his obligations after he signed a 1994 agreement to
participate in Aurora’s predecessor’s rehabilitation plan. To begin, none of
Mr. Schuetta’s actions created a duty for Aurora to take any specific action.
As the Court previously noted, Mr. Schuetta has no recollection of the
contents of his 1990 telephone call and, therefore, could very well have been
instructed to file the required documents and merely forgotten to do so.
Certainly, he has not presented any evidence that could possibly establish
that Aurora misled Mr. Schuetta or somehow acted in bad faith during that
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conversation. As to the 1990 letter and 1994 agreement, neither created a
duty for Aurora to act and Aurora’s failure to respond would not constitute
misleading or bad faith activity. If anything, the 1990 letter would have
served only to confuse a recipient; perhaps, it would have prompted a
follow-up call, but by no means would the failure to respond to such a
confusing letter—specifically after a representative had recently spoken to
Mr. Schuetta—constitute bad faith or otherwise misleading action. The 1994
agreement was an election to participate in a rehabilitation plan. Mr. Schuetta
has not established that it was sent only to already-retired individuals;
instead, it may have been sent to any person with an annuity contract,
whether retired or not. In any case, Mr. Schuetta’s return of the agreement
would not necessarily have prompted Aurora to look into Mr. Schuetta’s
account further.
In sum, Mr. Schuetta’s argument appears to boil down to the
following: on a few occasions, Aurora had the opportunity to check into Mr.
Schuetta’s account, realize he was retired, realize he had not submitted the
required

documentation,

and then should have

requested

that

documentation from him. But under the contract, Aurora was authorized to
wait until Mr. Schuetta’s submission of the required documents before
paying him benefits. It had no obligation to keep track of his submission or
non-submission of those documents. Thus, Aurora could not have violated
an implied duty of good faith and fair dealing by simply failing to alert Mr.
Schuetta to his obligation to file the required forms. E.g. Super Valu Stores, 431
N.W.2d at 726. Perhaps, pursuant to an implied duty of good faith and fair
dealing—implied into the contract, because the contract does not authorize
such activity, Aurora could not mislead Mr. Schuetta or take other bad faith
action. But the evidence simply does not include any evidence of such
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activity nor does it even create an inference of bad faith. To be sure, whether
there has been a breach of an implied duty is generally a question for the
jury. Tang v. C.A.R.S. Prot. Plus, Inc., 2007 WI App 134, ¶ 41, 301 Wis. 2d 752,
734 N.W.2d 169 (citing Wisconsin Natural Gas Co. v. Gabe’s Constr. Co., 220
Wis.2d 14, 24 n. 6, 582 N.W.2d 118 (Ct.App. 1998)). But, here, where Mr.
Schuetta’s proffered evidence on the point is so lacking, even if the Court
submitted the question to the jury and the jury found a breach, the Court
would ultimately be required to reach this same conclusion on a motion for
judgment notwithstanding the verdict. There simply is no dispute of
fact—Aurora accepts all of Mr. Schuetta’s contentions—and even drawing
every reasonable inference in Mr. Schuetta’s favor, the Court cannot possibly
find that Aurora took any misleading action or engaged in any activity in bad
faith. Therefore, the Court must dismiss this claim.2
3.

LIABILITY FOR ACTIONS OF PREDECESSOR
Finally, even if the Court’s dismissal of the two remaining claims for

the reasons discussed above were in error, the Court would still be obliged
to dismiss the claims. The entirety of the above discussion ignores the fact
that Aurora did not, itself, take any of the actions that Mr. Schuetta now
complains of. In fact, it was Aurora’s predecessor, Executive Life Insurance
Company (“Executive Life”), that took every action that could possibly be
treated as misleading Mr. Schuetta or invoking his reliance. As Aurora
correctly points out, Mr. Schuetta does not even dispute that the 1990 to 1994
conduct that could give rise to the equitable estoppel and breach of implied
2

The Court notes that this action may seem contrary to its conclusions in its
prior order (Docket #44 at 19–20), but this conclusion rests heavily on the clarified
state of the law, which shows that Aurora’s mere failure to alert Mr. Schuetta to his
obligation to file documents is not a breach of an implied duty of good faith and fair
dealing, a point that was not fully addressed in prior briefing.

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duty claims occurred entirely during the “period prior to the Effective Date”
of Aurora’s Reinsurance and Assumption Agreement with Executive Life.
Aurora not being the party at fault, there is only one question:
whether Aurora agreed to assume Executive Life’s liabilities, such that
Aurora could be held liable for Executive Life’s activities (which, as the
Court already discussed, it does not find would actually form the basis
for liability). Aurora’s and Executive Life’s Reinsurance and Assumption
Agreement explicitly made clear that Aurora did not assume Executive
Life’s liability “for any claim seeking the recovery of Extra-Contractual
Damages…occurring in or otherwise relating to the period prior to the
Effective Date,” of the contract. (Docket #46, Ex. 1, at 2). The Reinsurance and
Assumption agreement defines “Extra-Contractual Damages” as “those
amounts awarded in excess of benefits due under the Contracts….” (Docket
#46, Ex. 1, at 2). The Court previously determined that Mr. Schuetta’s breach
of contract claim failed and that the totality of benefits due under the contract
were paid to Mr. Schuetta by check; therefore, any amount it awarded to him
for a breach of implied duty or equitable estoppel claim would be in excess
of the benefits due under his annuity contract. Accordingly, the Reinsurance
and Assumption Agreement makes clear that Executive Life retained
responsibility for those claims. Moreover, even if that were not clear, Aurora
did not obtain Executive Life’s stock and there is no evidence that Aurora
was aware of Mr. Schuetta’s claims, such that principles of successor liability
could dictate that Aurora took accepted liability for those claims, as Mr.
Schuetta argues.

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For all of these reasons, Aurora is not the proper party against whom
the two remaining claims could possibly lie. Therefore, the Court would be
obliged to dismiss those claims, even if it had not already determined that
dismissal was required for the other reasons described above.
4.

CONCLUSION
For all of these reasons, the Court is obliged to grant the defendant’s

motion for summary judgment on the remaining two claims, to the extent
that it had not done so earlier, and to dismiss those claims with prejudice.
Accordingly,
IT IS ORDERED that, the defendant having provided further briefing
on its motion for summary judgment (Docket #33) as requested by the Court
(Docket #44), the defendant’s motion for summary judgment (Docket #44) be
and the same is hereby GRANTED in all remaining respects and the
plaintiff’s equitable estoppel and breach of implied duty claims be and the
same are hereby DISMISSED with prejudice; and
IT IS FURTHER ORDERED that, the entirety of plaintiff’s claims now
having been dismissed with prejudice, this action be and the same is hereby
DISMISSED with prejudice.
The Clerk of Court is directed to enter judgment accordingly.
Dated at Milwaukee, Wisconsin, this 12th day of June, 2014.
BY THE COURT:

J.P. Stadtmueller
U.S. District Judge

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