Saecker, Frederic K. v. Thorie, William H.

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-2257
Fredric Karl Saecker,
Plaintiff-Appellant,
v.
William H. Thorie and Doar, Drill & Skow, S.C.,
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Wisconsin.
No. 99-C-671-S--John C. Shabaz, Chief Judge.
Argued November 15, 2000--Decided December 12, 2000
Before Posner, Easterbrook, and Kanne, Circuit Judges.
Posner, Circuit Judge. 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.
The answer is given by our decision in Cote 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 Cote
case.
Cote 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.
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 Cote 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.
Any tension between Cote 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 Cote, 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.
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.
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.
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.
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.
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.
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.
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).
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.
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.
Affirmed.