Oakwood JT Klein, LLC v. Oakwood Acquisition, LLC

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.
February 24, 2022
A party may file with the Supreme Court a
Sheila T. Reiff 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. 2020AP1990 Cir. Ct. No. 2019CV1044

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT IV

OAKWOOD JT KLEIN, LLC,

PLAINTIFF-APPELLANT-CROSS-RESPONDENT,

V.

OAKWOOD ACQUISITION, LLC,

DEFENDANT-RESPONDENT-CROSS-APPELLANT.

APPEAL and CROSS-APPEAL from an order of the circuit court
for Dane County: RHONDA L. LANFORD, Judge. Affirmed in part; reversed in
part and cause remanded for further proceedings.

Before Blanchard, P.J., Kloppenburg, and Nashold, JJ.

¶1 BLANCHARD, P.J. This is a dispute over the enforceability of a
contract for the sale of six acres of land by Oakwood Acquisition, LLC
(Acquisition) to Oakwood JT Klein, LLC (JT Klein). The contract, an “offer to
No. 2020AP1990

purchase,” contemplates construction of affordable senior housing, to be financed
with the assistance of income tax allocations under a low-income housing, tax-
credit program that was administered by a state agency. After a board member for
the parent entity of potential seller Acquisition purported to “cancel” the deal, JT
Klein filed this action for breach and anticipatory breach of contract, seeking
damages or specific performance in the form of completion of the planned sale.

¶2 The circuit court granted Acquisition’s motion for summary
judgment dismissing JT Klein’s claims. The court based this decision on the
following undisputed facts: a contingency in the offer to purchase regarding
potential tax credits was not met, this contingency is for the benefit of both parties,
and therefore the contract is unenforceable unless both parties waive the failure to
meet the contingency, which Acquisition has not done. JT Klein contends that the
court erred because the undisputed facts show that the tax-credit contingency has
been met. In the alternative, JT Klein argues that, even if the undisputed facts
show that the contingency has not been met, the contract unambiguously grants to
JT Klein the unilateral right to waive the contingency, which JT Klein exercised.
The parties also disagree about whether we should affirm the court’s summary
judgment ruling based on Acquisition’s argument that the evidence is undisputed
that it has an ownership interest in JT Klein and, based on that interest, JT Klein
could not waive the contingency unless Acquisition authorizes a waiver.

¶3 Applying a plain language interpretation of the contract to
undisputed facts, we conclude that Acquisition is correct that the contract
contingency has not been met, thus requiring waiver of the contingency to prevent
the contract from being unenforceable. However, we separately conclude that JT
Klein correctly interprets the contract to give JT Klein the unilateral right to waive
the contingency and that JT Klein has done so. Further, we reject Acquisition’s

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argument based on its alleged ownership interest in JT Klein. Accordingly, we
reverse the circuit court’s grant of summary judgment dismissing JT Klein’s
claims against Acquisition based on the tax-credit contingency in the offer to
purchase and remand for further proceedings.

¶4 Acquisition cross-appeals the circuit court’s denial of its motion for
sanctions against JT Klein and its counsel under WIS. STAT. § 895.044 (2019-20).1
Acquisition argues that the court erred in rejecting the following alternative
grounds for imposing sanctions: JT Klein allegedly brought this action in bad
faith, for the sole purpose of harassing Acquisition; or, JT Klein or its counsel
knew or should have known that the action lacked a reasonable basis in law or
equity. We conclude that Acquisition’s arguments are undeveloped and
accordingly affirm the circuit court on this issue.

BACKGROUND

¶5 Acquisition’s parent entity is Oakwood Lutheran Senior Ministries
(Ministries), which owns a retirement community in Madison. Adjoining the
retirement community is a parcel of approximately six acres of vacant land owned
by Acquisition that would be the site of the planned senior housing development
project at issue here. Agents for Ministries began meeting in 2018 with real estate
developer JT Klein Company, Inc. (Klein Co.) about plans to use Acquisition’s
vacant land for the proposed project. As part of those plans, Klein Co. ended up
incorporating the entity Oakwood JT Klein, LLC, a party to this action, which we
have been referring to as “JT Klein.” These discussions involved communications

1
All references to the Wisconsin Statutes are to the 2019-20 version unless otherwise
noted.

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between Jacob Klein, the owner of Klein Co. and eventual registered agent for JT
Klein, and Rick Bova, then the chief executive officer of Ministries.

¶6 On June 19, 2018, Jacob Klein gave Bova three proposed transaction
documents:

(1) The main contract at issue in this appeal, the enforceability of which is
the focus of the parties’ arguments: an “offer to purchase.” This sets
forth JT Klein’s offer to purchase Acquisition’s land. It lists JT Klein
as the land buyer and Acquisition as the seller.

(2) What the parties refer to as a “letter of intent.” This is a letter from
Jacob Klein on behalf of Klein Co. to an executive of an Acquisition-
affiliated entity seeking confirmation as to anticipated obligations to be
undertaken by each side.

(3) What the parties refer to as a “land-loan agreement.” This describes
Acquisition as proposing to make a “Land Loan” to JT Klein to “help
finance” the project. It lists JT Klein as the borrower and describes
Acquisition as committing to “contribute land” in a way that would be
“collateralized in the form of a Loan to the Project.”

¶7 On June 28, 2018, Jacob Klein signed the offer to purchase and land-
loan agreement on behalf of JT Klein. Bova signed these same documents on
behalf of Acquisition, with Klein receiving Bova’s signature pages on June 29,
2018. However, neither party signed the letter of intent.

¶8 The offer to purchase contains two sets of references that address the
same general topic of the contingency at issue in this appeal, although using
different language. The contingency is that the offer to purchase is enforceable
only if financing for the project is supported by the allocation of income tax
credits under a low-income housing tax-credit program. These allocations would
come from the Wisconsin Housing and Economic Development Authority
(WHEDA). Explaining briefly (and as discussed in more detail below), the offer

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to purchase consists of two parts: a form document and a non-form addendum.
The form portion states in part that the offer is “contingent on the project receiving
tax credit reservation from WHEDA in [WHEDA’s] next allocation of credits.”
We call this “the next allocation provision.” The addendum contains different
provisions relating to the tax-credit contingency.

¶9 June 29, 2018, the day Klein received the signed offer to purchase
and land-loan agreement, was the deadline set by WHEDA for the submission of
applications for its next allocation of credits. Klein Co. submitted an application
on June 29 for tax credits for the project. Klein Co.’s application identified JT
Klein as a “to be formed” entity that would own the project and that would be
affiliated with Acquisition.

¶10 On June 30, 2018, Jacob Klein filed the articles of incorporation for
JT Klein. Jacob Klein also prepared an operating agreement, dated June 30.
Based on the operating agreement, the newly formed JT Klein was held solely by
Klein Co.2

2
We assume without deciding that JT Klein—the party to this action and the LLC
formed by developer Klein Co. soon after the execution of the offer to purchase, with Klein Co.
as its sole owner—is the “Oakwood JT Klein” entity listed as “the buyer” in the offer to
purchase. Following this assumption, our analysis of the parties’ arguments at times determines
the extent to which actions taken by what might be referred to as “JT Klein the party and LLC”
are consistent with the rights of “the buyer” under the offer to purchase. See, e.g., infra note 10.
We make these assumptions to simplify our discussion, but we do not intend to resolve in either
direction that issue of corporate identity. That is, we express no view regarding any argument
that might be advanced by the parties on remand regarding this assumption or any directly related
topic, such as whether it was proper for Klein Co. to create a solely owned LLC purporting to act
as the buyer. See infra note 4. Acquisition at times in its briefing on appeal may mean to suggest
that “JT Klein the party and LLC” should not be considered “the buyer” identified in the offer to
purchase, as for example when it notes that the identity of “the buyer” was disputed by the parties
in the circuit court. However, as addressed in the Discussion section below, the closest that
Acquisition comes to raising such a point on appeal is to make the following argument: the only
evidence in the summary judgment materials is that Acquisition has an interest in “Oakwood JT
Klein.” And, as we discuss below, we reject this ownership-of-JT-Klein argument.

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¶11 In August 2018, while the result of the tax-credit application was
still pending, a board member for Ministries informed Jacob Klein that the board
had decided to “cancel” the project and took the position that Klein Co. should not
“invest any[ ]more resources in it.”

¶12 Later in August, WHEDA denied the June application for tax credits
submitted by Klein Co. Despite the purported cancellation of the project by the
Ministries board member, at some point prior to a January 2019 deadline for
another round of allocations, Klein Co. submitted to WHEDA a second
application for tax credits for the project. In January 2019, WHEDA granted the
requested tax-credit allocations.

¶13 Acquisition and JT Klein engaged in communications through the
fall of 2018 and into 2019 about the enforceability of the three transaction
documents described above. Pertinent here, Jacob Klein, acting on behalf of JT
Klein and through legal counsel, notified Acquisition of the following by letter
dated February 1, 2019: JT Klein was waiving all “diligence contingencies” in the
offer to purchase and that JT Klein was ready, willing, and able to complete
performance on the terms of the offer to purchase. Acquisition responded that it
was not bound by the offer to purchase, in part because, according to Acquisition,
Bova lacked actual or apparent authority to bind Acquisition through his signature
on the offer to purchase.

¶14 JT Klein commenced this lawsuit against Acquisition, alleging a
breach of contract and anticipatory breach of contract, and seeking a declaratory
judgment that the offer to purchase was enforceable. Both parties brought motions
for summary judgment. Acquisition also moved for sanctions under WIS. STAT.
§ 895.044.

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¶15 In their respective motions for summary judgment, the parties
disputed whether JT Klein could unilaterally waive the signed offer’s contingency
that tax credits had to be timely allocated. Acquisition took the further position
that there were issues of fact regarding Bova’s actual or apparent authority to bind
Acquisition to the offer to purchase, precluding summary judgment in JT Klein’s
favor.3

¶16 The circuit court granted Acquisition’s motion for summary
judgment and denied JT Klein’s motion. The court assumed that the next
allocation provision in the offer to purchase was an unmet contingency and
determined that the contingency was intended to benefit both parties. Therefore,
the court concluded, JT Klein could not unilaterally waive the provision to prevent
the offer to purchase from becoming unenforceable—that is, both parties, as
beneficiaries, needed to waive the provision, and it was undisputed that
Acquisition did not do so. The court did not address the issue of Bova’s actual or
apparent authority to bind Acquisition to the offer to purchase.

¶17 JT Klein moved for reconsideration. It argued in part, and for the
first time, that the tax-credit contingency had been met because Klein Co. had
eventually obtained tax credits, in WHEDA’s January 2019 allocation (in contrast
to the August 2018 allocation). The circuit court denied both JT Klein’s motion
for reconsideration and Acquisition’s motion for sanctions.

3
Acquisition also made an argument in the circuit court related to a deadline stated in
the offer to purchase by which Acquisition had to accept the offer to purchase. Acquisition
argued that there were genuine issues of material fact as to whether both parties had, through their
conduct, implicitly waived objection to Acquisition’s failure to accept the offer by the deadline.
However, we do not discern Acquisition to make any argument on appeal that relates to this topic
and therefore we deem it abandoned for purposes of this appeal.

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¶18 JT Klein appeals the circuit court’s grant of Acquisition’s motion for
summary judgment dismissing JT Klein’s claims.4 Acquisition cross-appeals the
court’s denial of its motion for sanctions, which we address further below.

DISCUSSION

I. Summary Judgment

¶19 We review the circuit court’s decision to grant summary judgment
de novo. See Raasch v. City of Milwaukee, 2008 WI App 54, ¶6, 310 Wis. 2d
230, 750 N.W.2d 492. “Summary judgment must be granted when there is no
genuine issue of material fact and a party is entitled to judgment as a matter of
law.” Id. (citing WIS. STAT. § 802.08(2)). We also interpret contracts de novo.
See id.

¶20 We begin by providing additional standards regarding contract
interpretation. We then address a threshold issue regarding the next allocation
provision. The threshold issue is whether, for purposes of summary judgment, the
provision established the need for a waiver to allow the offer to remain
enforceable even though the contingency was not met. As explained below,
applying a plain meaning interpretation to the terms of the offer to purchase in the

4
JT Klein appears to further argue that it is entitled to summary judgment based on its
exercise of its unilateral right to waive the contingency. But it fails to provide support for this
argument. In particular, JT Klein does not address evidence that Acquisition presented in the
circuit court that Acquisition argues could support a reasonable inference that, regardless of the
contingency waiver issue, the offer to purchase is unenforceable because Bova, the person who
signed the offer to purchase, lacked apparent or actual authority to bind Acquisition to the offer to
purchase. In this appeal we resolve only JT Klein’s narrow argument that it was not appropriate
to grant Acquisition’s motion for summary judgment dismissing JT Klein’s claims based
specifically on the tax-credit contingency in the offer to purchase. We leave for proceedings
following remand the resolution of all other issues, apart from the sanctions issue raised by
Acquisition in its cross-appeal, which we separately resolve below.

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context of the undisputed evidence, we conclude that the tax credits were not
awarded to the project in the “next allocation” of tax credits by WHEDA and thus
waiver was required. Having reached that conclusion, we turn to the issue of
whether JT Klein could unilaterally waive the contingency. We explain below
why we conclude, based on our interpretation of the offer to purchase as a whole,
that JT Klein could unilaterally waive the tax-credit contingency, and also
conclude that it is undisputed that JT Klein did waive the contingency.

Legal Standards

¶21 Our supreme court has provided the following pertinent standards
for contract interpretation:

[O]ur goal “is to ascertain the true intentions of the parties
as expressed by the contractual language.” Stated another
way, the best indication of the parties’ intent is the
language of the contract itself, for that is the language the
parties “saw fit to use[.]” We construe the contract
language according to its plain or ordinary meaning. “If
the contract is unambiguous, our attempt to determine the
parties’ intent ends with the four corners of the contract,
without consideration of extrinsic evidence.” Only when
the contract is ambiguous, meaning it is susceptible to more
than one reasonable interpretation, may the court look
beyond the face of the contract and consider extrinsic
evidence to resolve the parties’ intent.

Town Bank v. City Real Est. Dev., LLC, 2010 WI 134, ¶33, 330 Wis. 2d 340, 793
N.W.2d 476 (citations omitted).

Whether Tax Credits Were Obtained In “Next Allocation”

¶22 JT Klein argues that the circuit court improperly granted
Acquisition’s motion for summary judgment on the ground that the terms of the
next allocation provision in the offer to purchase have not been met. JT Klein’s

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argument is that there is at least one reasonable interpretation of the offer to
purchase under which the provision is satisfied: the “next allocation of credits”
language in the offer to purchase refers to WHEDA’s allocation of credits in
January 2019, and there is no dispute that JT Klein submitted a successful
application resulting in the January 2019 allocation. According to JT Klein, the
August 2018 allocation, for which the project received no credits, can only be
reasonably understood to be the “current” allocation, not the “next” allocation.5
Acquisition responds that, under a plain language interpretation of the offer to
purchase, “next” could reasonably refer only to the August 2018 allocation. We
agree with Acquisition’s contract interpretation. We begin by addressing the
meanings of “next” and “allocation” under a plain language interpretation of the
strict terms of the offer to purchase. Then we separately turn to extrinsic evidence
submitted on summary judgment to determine whether tax credits were in fact
obtained in the next allocation.

¶23 To repeat, the pertinent language is that the offer to purchase is
“contingent on the project receiving tax credit reservation from WHEDA in its
next allocation of credits.” JT Klein does not dispute Acquisition’s argument that
the plain meaning of “next” as pertinent here, is “nearest in time or immediately
following.” See Next, AMERICAN HERITAGE DICTIONARY (5th ed. 2020). Nor
does JT Klein seriously dispute that this meaning should be applied based on the
perspective of the contracting parties when they executed the offer in June 2018.
Thus, the offer to purchase is in pertinent part contingent on two events: that

5
Acquisition argues that JT Klein forfeited this argument that the tax-credit contingency
was met because JT Klein failed to raise it in the circuit court until it moved for reconsideration.
We assume without deciding that JT Klein preserved this argument in the circuit court and reject
the argument for the reasons stated in the text.

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WHEDA reserved tax credits for the development project associated with the land
being sold and that it specifically did so in the allocation occurring immediately
following the parties’ execution of the offer to purchase.

¶24 We turn to the extrinsic evidence presented on summary judgment to
determine whether this aspect of the contingency, when interpreted as we have just
explained, was met. See Marshall & Ilsley Bank v. Milwaukee Gear Co., 62
Wis. 2d 768, 776, 216 N.W.2d 1 (1974) (evidence from outside the contract
admissible when “‘not directed toward the contents of the agreement, but to
establish a condition precedent, the happening of which was necessary before it
became a binding contract’” (quoted source omitted)). Extrinsic evidence in the
summary judgment materials in this case reveals the following undisputed facts
regarding the shared understanding of the contracting parties about how WHEDA
allocated tax credits. WHEDA would: (1) set a specific deadline date for the
submission of tax-credit applications by developers for whatever development
projects they would like to be allocated credits during that cycle; (2) review all
applications submitted by the deadline, using criteria not at issue in this appeal;
and (3) within a few months after the application deadline, report which projects
were allocated tax credits.

¶25 We now recap the pertinent, undisputed facts. Klein Co. submitted
two applications to WHEDA on behalf of JT Klein. The first was submitted on
the day of the application deadline, June 29, 2018, the same day Jacob Klein
received Bova’s signature on the offer to purchase. This application was accepted
by WHEDA, but it met with failure: no tax credits for the project were allocated
by WHEDA in August 2018. Klein Co. submitted another application, this time
before the next deadline in January 2019, which met with success: the project was
allocated credits later that month.

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¶26 Applying the unambiguous meaning of “next allocation” to this
evidence, the allocation of tax credits “nearest in time” to June 2018 was
WHEDA’s August 2018 allocation, in which the project was not allocated credits,
and therefore the contingency was unmet.

¶27 JT Klein does not dispute any of the above points underlying our
interpretation of “next allocation” and the contingency having been unmet based
on the failure of the application for the August 2018 allocation. Instead, JT Klein
effectively asks us to rely on certain extrinsic evidence regarding the meaning of
the contractual term “next allocation.” Specifically, JT Klein points to the
subjective interpretations of Jacob Klein and Bova that the January 2019
allocation was the “next allocation” and the August 2018 allocation was the
“current allocation.”6 However, as noted above, we consider extrinsic evidence
regarding the meaning of contractual terms “[o]nly when the contract is
ambiguous,” and here the meaning of “next” in the phrase “next allocation of
credits” is unambiguous. See Town Bank, 330 Wis. 2d 340, ¶33.

6
Because we rely on our plain meaning interpretation of the offer to purchase, as
explained in the text, we have no basis to consider the testimony by Klein and Bova on the
meaning of the contractual term “next allocation.” However, for context we now briefly
summarize their testimony interpreting the contract language and explain why we conclude that
their shared interpretation cannot be squared with the contract language actually used in light of
the undisputed facts. Both effectively purported to interpret “allocation” as addressing not only
WHEDA’s awarding of credits (e.g., the awarding of one batch of credits in August 2018 and
then awarding another batch of credits in January 2019) but also to all elements of the overall
process in which WHEDA received and reviewed applications for credits, a process that had
already begun on the day that the offer to purchase was executed and that would continue through
WHEDA’s review of all applications submitted on or before that day. Under this interpretation,
the first application here, filed on the June 29, 2018 deadline, was part of an allocation process
that was already underway, with the “next allocation” (meaning, the entire process) beginning
sometime after that point, when WHEDA began accepting applications for the January 2019
allocation. This view is directly at odds with the specific, unambiguous contract language, which
is tied only to the “next allocation,” not to the not yet begun process or cycle of applications for
later-in-time allocations.

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Unilateral Waiver of Contingency

¶28 We turn now to the waiver issue, which involves a dispute over
whether JT Klein alone could waive the tax-credit contingency or whether both
parties needed to waive it. JT Klein argues that, even if the undisputed facts
triggered the contingency under a proper interpretation of pertinent terms in the
offer to purchase and therefore a waiver is required, summary judgment is
inappropriate because the addendum to the offer to purchase unambiguously gives
JT Klein the right to unilaterally waive the contingency.7

¶29 Acquisition argues that the next allocation provision in the form
portion of the offer to purchase unambiguously creates, separately from the terms
of the addendum to the form, a tax-credit contingency as a benefit to both sides of
the related transactions. For this reason, Acquisition contends, waivers by both
parties are necessary under the terms of the offer to purchase based on a canon of
contract interpretation. As discussed in more detail below, the canon is that a
contingency in a contract may not be waived to the disadvantage of a party for
whom the contingency was created to provide a benefit. See Goebel v. First Fed.
Sav. & Loan Ass’n of Racine, 83 Wis. 2d 668, 677, 266 N.W.2d 352 (1978) (a
party may not waive a provision of a contract when “the waiver would deprive the
non-waiving party of a benefit under the provision in question”). Alternatively,
Acquisition makes an argument based on extrinsic evidence. It argues that

7
We reject Acquisition’s assertion that JT Klein forfeited its arguments that it could
unilaterally waive the tax-credit contingency by failing to make those arguments in the circuit
court. Acquisition fails to persuade us that JT Klein did not preserve its arguments by arguing in
the circuit court that there was no basis to consider extrinsic evidence and that, under the terms of
the offer, JT Klein had a unilateral right to waive the contingency. In addition, Acquisition fails
to show how it was deprived of the ability to provide additional evidence in the circuit court to
attempt to rebut any allegedly forfeited argument.

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extrinsic evidence establishes beyond a genuine dispute that the next allocation
provision was included to benefit both parties (again, separate from the addendum)
and therefore it cannot be unilaterally waived by JT Klein. Acquisition’s
arguments appear to be either that the addendum contains a separate unilateral
right to waive a contingency different from that contained in the next allocation
provision, or that the addendum “merely confirms that … JT Klein could cancel”
the signed offer if tax credits were not approved for the project.

¶30 As we explain, we conclude that the only reasonable interpretation
of the offer to purchase is that the next allocation provision in the form portion of
the offer must be construed as part and parcel of the more detailed and
unambiguous provisions in the addendum—together all these provisions form a
single definition of the tax-credit contingency. That is, the offer to purchase is
unambiguous on this topic when properly construed as a complete document,
which is how the offer to purchase on its face directs the reader to construe it.
Accordingly, we conclude that summary judgment on the ground that JT Klein
could not unilaterally waive the failure to obtain tax credits is inappropriate.
Before explaining this conclusion further, we summarize the pertinent provisions
in the offer to purchase. Further below, we address Acquisition’s arguments that
the next allocation provision requires waiver by both parties.

¶31 The offer to purchase consists of a filled-in offer to purchase land
form and an addendum that was incorporated by reference as “Addendum A.” As

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noted above, the form lists JT Klein as “the buyer” and Acquisition as “the
seller.”8

¶32 Two sections of the offer to purchase address the agreement being
contingent on a WHEDA tax-credit allocation: three lines of the form portion of
the offer, consisting of a section entitled “additional provisions/contingencies”;
and a group of provisions within a section of the non-form addendum entitled
“buyer’s contingencies.”

¶33 What we have been calling the next allocation provision consists of
the following three lines in the form, with emphasis added:

See Addendum A. This Offer will terminate and be of no
further force and effect if Buyer’s financing is not obtained
and construction has not commenced on or before
December 15, 2019. This Offer is also contingent on the
project receiving tax credit reservation from WHEDA in its
next allocation of credits.

¶34 The “buyer’s contingencies” section of the addendum contains a
provision entitled “final contingencies.” Among the final contingencies is a “tax
credits” contingency. The “tax credits” contingency provides in full:

Tax credits. Buyer may cancel this agreement in the event
buyer is unsuccessful in earning an award of low income
housing tax credits from [WHEDA]. Seller and buyer
agree that buyer will determine, at buyer’s sole discretion,
which type of tax credits to apply for based on buyer’s
intended use.

8
To avoid unnecessary distraction to the reader, we omit some formatting used in the
offer to purchase that has no bearing on our analysis. This mostly involves the omission of
capitalization that appears in the original.

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The introductory paragraph of the “final contingencies” states that “the buyer may
terminate this agreement unilaterally” “[i]f any of the final contingencies,”
including the tax-credit contingency, “have not been satisfied on or before”
September 1, 2019. Another addendum provision establishes that each of the final
contingencies are “for the buyer’s benefit.” This provision further explains that
the “buyer, in its sole discretion may waive this [i.e., may waive any unmet,
‘final’] contingency by written notice of waiver to seller” and again states that the
buyer may also terminate the signed offer.

¶35 Considering the pertinent addendum provisions together, they
unambiguously give JT Klein a unilateral right to choose whether to waive the
unenforceability of the offer to purchase that otherwise results if the tax credits
were not included in WHEDA’s next allocation. That is, contrary to Acquisition’s
argument, there is no reasonable way to interpret the addendum references to the
tax-credit contingency as in some sense confirming JT Klein’s side of a bilateral
right to waive the contingency. If the addendum controls how to apply all
provisions dealing with tax-credit contingency in the offer to purchase, then JT
Klein had the exclusive right to waive any such contingency before September 1,
2019. The issue then becomes whether the “next allocation” provision referenced
in the form portion of the offer to purchase is subject to these addendum
provisions.

¶36 It is true that the next allocation provision is located outside of the
“buyer’s” and “final contingencies” sections of the addendum. In itself, this could
weigh toward considering the next allocation provision to fall outside the scope of
the addendum provisions regarding who benefits from those contingencies and
who has the right to waive them. Further, the issue is not resolved simply on the
ground that the addendum trumps the “next allocation” provision, as JT Klein may

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mean to argue, because it contains more detailed language. That is, while our
analysis is consistent with application of the general rule that more specific
contract language on a topic controls over more general language on the same
topic, this case does not present a classic application. See Isermann v. MBL Life
Assur. Corp., 231 Wis. 2d 136, 153, 605 N.W.2d 210 (Ct. App. 1999) (“Where
there is an apparent conflict between a general and a specific provision, the latter
controls.”). It is not a classic application because the “next allocation” provision
contains one detail (i.e., that approval in the “next” WHEDA allocation is
required) not addressed in the addendum and further it is not clear that any portion
of the next allocation provision directly conflicts with any portion of the
addendum.

¶37 However, we nonetheless conclude that interpreting the “next
allocation” provision as separate from the tax-credit contingency provisions of the
addendum would be unreasonable. Inherent in such an interpretation would be the
unreasonable premise that the parties intended to create not one but two
contingencies related to the WHEDA tax credits. One contingency (in the form
portion) would address the topic in a relatively general way and the other (in the
addendum) would provide a simultaneous, but separate and more detailed, set of
directions on how to handle the tax credits. To construe these as two distinct
contingencies would be unreasonable because it posits that the parties intended to
leave unaddressed issues about how the next allocation provision operates that are
addressed in detail in the addendum. This includes who applies for the credits,
who can terminate the agreement if the credits are not obtained, who can waive
failure to obtain the credits, and how either waiver or termination occur.

¶38 Further, the following additional features of the offer to purchase
point toward harmonizing the next allocation provision with the addendum by

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interpreting the next allocation provision as merely adding one additional detail to
a single tax-credit contingency, subject to the addendum’s specific instructions.
The next allocation provision focuses on the same topic as one of the final
contingencies—the awarding of tax credits by WHEDA for the development of
the land to be sold. The addendum is specifically referenced as a source of
additional contingencies. Indeed, it is the first reference in the section containing
the next allocation provision. See supra, ¶34.

¶39 In addition, interpreting the tax-credit contingency as a singular
topic in the offer to purchase makes sense because the next allocation language
adds one detail to the otherwise more specific procedure for handling the tax-
credit contingency laid out in the addendum. Together, the provisions establish
that the buyer was to apply for the next allocation of WHEDA credits, and if the
application was unsuccessful the buyer had until September 1, 2019, to
unilaterally decide whether to waive that deficiency.

¶40 We turn to Acquisition’s specific arguments in favor of its
interpretation that the next allocation provision cannot be unilaterally waived by
JT Klein. Acquisition briefly contends that ambiguities in the offer to purchase
“must be construed against” JT Klein, because “Jacob Klein drafted the majority
of the Offer, particularly Addendum A.” See Walters v. National Props., LLC,
2005 WI 87, ¶14, 282 Wis. 2d 176, 699 N.W.2d 71 (“courts construe ambiguous
language ‘most strongly’ against the drafter” (quoted source omitted)). However,
Acquisition does not identify an ambiguity that could be construed against JT
Klein. Moreover, Acquisition does not provide legal support for the general
notion that this rule is to be applied when only some or much of the drafting of a
document, as opposed to all of it, was performed by a party, much less does it
provide support for the more specific application of the rule under the particular

18
No. 2020AP1990

circumstances here. Notably, the next allocation provision was not added by
Jacob Klein. Instead, it was drafted into the form portion of the offer by Justin
Oeth, an attorney whom Bova asked to review the offer to purchase, and the
parties dispute who Oeth represented at the time.

¶41 We turn to Acquisition’s position that the signed offer is
unambiguous in its favor. Acquisition argues that it is unreasonable to interpret
the next allocation provision as merely part of the addendum’s description of a
single tax-credit contingency. Acquisition contends that this interpretation would
render the next allocation provision “meaningless, inexplicable, or mere
surplusage.” This argument is not entirely clear, but it apparently rests on the
premise that aspects of the full text of the next allocation provision are
irreconcilably in conflict with how the addendum addresses the topic of waiver of
the final contingencies. We reject this premise. Acquisition focuses on the use of
the word “project” in the next allocation provision, which it contends
communicates an intent to enter into a jointly operated project. However,
Acquisition provides no support from any place in the four corners of the contract
that the term “project” refers to a joint venture of the buyer and seller. Further,
Acquisition does not explain how the concept of a joint venture would necessarily
require a reasonable reader of the contract to ignore the clearer and more specific
provisions of the addendum that address the tax-credit contingency topic.

¶42 Acquisition also points to the fact that the next allocation provision
states that “the offer” is contingent on the tax-credit allocation, and not that one
party’s performance is contingent. But this fact does not advance Acquisition’s
argument. It serves only to highlight the limited content of the next allocation
provision in addressing the tax-credit contingency and does not create conflict
between the “next allocation” language and the addendum. As we have explained,

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No. 2020AP1990

the more detailed addendum terms must be consulted for a complete
understanding of the tax-credit contingency.

¶43 As an alternative to its arguments based on the text of the next
allocation provision, Acquisition argues that we may look to extrinsic evidence to
determine who benefits from the existence of the contingency, which dictates who
has the ability to waive the contingency.9 As one part of this argument,
Acquisition points to the “general rule,” see Godfrey Co. v. Crawford, 23 Wis. 2d
44, 49, 126 N.W.2d 495 (1964), that “a party to a contract can waive a condition
that is for his benefit,” and its corollary that the party seeking unilateral waiver can
do so only if the condition benefits the waiving party alone, see Goebel, 83
Wis. 2d at 677 (a party’s waiver cannot be unilateral when “the waiver would
deprive the non-waiving party of a benefit under the provision in question”). As a
specific justification for reliance on extrinsic evidence to determine who benefits
from the next allocation provision, Acquisition purports to rely on cases
addressing whether a provision of a contract should be understood to be a
“condition precedent”—that is, whether one party’s performance is contingent on
satisfaction of the condition. See Kubly v. DOR, 70 Wis. 2d 74, 78, 233 N.W.2d
369 (1975) (explaining that the question of whether to make performance
“‘contingent or otherwise, must be gathered from the language used, the situation
of the parties, and the subject-matter of the contract, as presented by the
evidence’”) (quoted source omitted)).

9
More precisely, Acquisition contends that extrinsic evidence “confirm[s] the plain
language of the Offer.” But we have already explained our plain language interpretation, which
defeats Acquisition’s arguments. All the same, in favor of Acquisition, we treat as a standalone
argument Acquisition’s reliance on extrinsic evidence regarding who benefits from the “next
allocation” provision.

20
No. 2020AP1990

¶44 Much could be said regarding Acquisition’s reliance on these cases,
but the following is a sufficient basis to reject the argument. The argument,
including the request that we resort to extrinsic evidence, rests on a premise that is
inconsistent with our reasoning above. The faulty premise is that the addendum
does not exist and in its absence the next allocation provision is ambiguous.
Acquisition does not explain how, in interpreting the contract as a whole, the next
allocation provision may reasonably be considered in isolation.

¶45 Explaining further, we see nothing in cases such as Godfrey and
Goebel to suggest that a “general rule” can be applied to nullify unambiguous
contract terms such as the waiver language in the addendum that we have
determined is unambiguous. See Goebel, 83 Wis. 2d at 679 (noting its conclusion
rested on “canons of construction” “designed to aid in the ascertainment” of the
parties’ intention, but that “necessarily yield to any contrary intention …
ascertained from the contract as a whole”). As JT Klein notes, both Godfrey and
Goebel addressed contract provisions that were silent both as to whether a
particular party could waive them and as to whom the parties understood would
benefit from the provision. See Godfrey, 23 Wis. 2d at 50; Goebel, 83 Wis. 2d at
679 (noting failure of mortgage note’s drafter to include terms unilaterally
permitting drafting party to change maturity date). Put differently, the principles
noted in Godfrey and Goebel could be helpful in determining who must waive the
next allocation provision only if the addendum did not already address that very
issue and we have concluded that it does. Similarly, Kubly does not shed light on

21
No. 2020AP1990

this issue. There is no dispute that the offer to purchase was contingent on the
next allocation provision, regardless of the addendum provisions.10

Ownership Of The Buyer

¶46 Although aspects of its argument are unclear, Acquisition appears to
contend that another basis to affirm the circuit court’s grant of Acquisition’s
motion for summary judgment rests on Acquisition purportedly having an
ownership interest in JT Klein. More specifically, Acquisition appears to take the
position that there is no genuine dispute of fact regarding the following:
Acquisition had an interest in JT Klein equal to that of Klein Co. and, based on
this interest, JT Klein could not waive any tax-credit contingency under the
contract without Acquisition joining co-member Klein Co. in authorizing that
waiver. This argument fails for at least two reasons. First, there are genuine
issues of fact as to whether Acquisition ever actually acquired or purported to

10
We reject as undeveloped Acquisition’s brief, unsupported argument that JT Klein
failed to timely waive the tax-credit contingency, which would in theory provide an alternative
basis for affirming summary judgment dismissing JT Klein’s claims. Acquisition specifically
points to the timing of Klein Co. submitting a second application for tax credits relative to events
that include WHEDA’s rejection of the earlier application, but without any explanation as to how
this timing could affect JT Klein’s ability to exercise its rights consistent with the waiver
provisions in the addendum.

Moreover, whatever Acquisition means to suggest, the summary judgment record
establishes beyond genuine dispute that JT Klein waived the failure to obtain tax credits in
WHEDA’s August 2018 allocation. This is so even setting aside JT Klein’s explicit waiver of all
“diligence contingencies,” which under the addendum were separate from the list of “final
contingencies” that covered the topic of WHEDA tax credits. Under the terms of the addendum,
JT Klein retained the right to terminate the agreement if any of its “final contingencies” were not
met. However, under the provisions of the addendum, JT Klein’s failure to exercise this right by
September 1, 2019, resulted in the automatic waiver of any unmet final contingencies. Further,
these same terms require that any termination of the agreement based on an unmet final
contingency be in a writing that explains which contingency is the basis for the termination, and
there is no evidence in the materials that were before the circuit court that JT Klein created such a
writing.

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No. 2020AP1990

exercise such an interest in JT Klein. Second, Acquisition does not provide a
developed argument that Klein Co. was unable to exercise control over JT Klein to
waive the tax-credit contingency consistent with the terms of the offer to purchase.

¶47 The following additional background is pertinent to Acquisition’s
argument. Bova and attorney Oeth (who, to repeat, it is not disputed drafted the
filled-in portions of the next allocation provision) testified to the effect that, at
least during one phase of the negotiations, Jacob Klein and Bova planned for Klein
Co. to form JT Klein as an entity that would be controlled jointly by Klein Co. and
Acquisition. This plan was reflected in the letter of intent by Jacob Klein. It
contemplated that Klein Co. would form a new limited liability company that
would be held jointly and equally by Klein Co. and “Oakwood,” without
specifying whether “Oakwood” signified Acquisition or Ministries or both.11
However, as noted above, the letter of intent was ultimately left unsigned by the
parties. Further, it is undisputed that attorney Oeth conveyed to the parties a
marked-up version of the letter of intent that made clear that even a signed copy
would not be binding on the parties. Further, whatever the parties’ subjective
intentions, there is no dispute that Klein Co. formed JT Klein, with Klein Co. as
the sole member, and never took active steps to bring in Acquisition as an
additional member, equal to Klein Co. or otherwise.12

11
We note that the letter of intent reflected that the new limited liability company would
be the managing member of a separate (also new) entity, which would “own” the project.
However, the parties make no arguments pertaining to this additional proposed new entity and we
address it no further.
12
Acquisition points out that there is no dispute that Bova signed an addendum portion
of the offer to purchase as “Agent for Oakwood JT Klein, LLC.” However, Acquisition does not
develop a supported argument that this evidence could support an alternative ground for summary
judgment in its favor. As noted in the text, there is evidence that neither Bova nor Acquisition
ever became a member of JT Klein, and Jacob Klein testified in his deposition that Bova’s
(continued)

23
No. 2020AP1990

¶48 Acquisition points out that Klein Co. prepared and certified the
contents of the initial, ultimately rejected application for WHEDA tax credits on
behalf of JT Klein, and that JT Klein was listed in the application as “an affiliated
entity of” Acquisition. However, drawing all reasonable inferences in JT Klein’s
favor, this evidence at best merely reinforces the notion that the parties explored,
during one phase of the negotiations, a proposal that Acquisition would obtain
some interest in JT Klein, but that this proposal was not realized by the time the
Ministries board member purported to terminate plans for the project.

¶49 Acquisition notes that there is evidence supporting the reasonable
inference that Jacob Klein, after he received the project termination notice, treated
at least some portions of the unsigned letter of intent as binding. Specifically,
Jacob Klein sent an email to agents for Ministries noting that there was a provision
in the letter of intent regarding a “termination payment” to which Klein Co. could
be entitled. In this email, Jacob Klein purported to calculate what the fee would
amount to as of that date. Acquisition apparently intends to argue that, based on
this position taken by Jacob Klein, JT Klein cannot repudiate other terms of the
letter of intent proposing that Acquisition would be granted an equal ownership
interest in JT Klein with Klein Co. However, Acquisition does not make a

signature with this agency designation was required merely for the purposes of complying with
some unspecified requirement of a planning application to the City of Madison.

Separately, we observe that, while we do not consider extrinsic evidence as part of our
interpretation of the contingency on tax credits contained in the offer to purchase, we do consider
extrinsic evidence in addressing Acquisition’s argument regarding the ownership of the buyer.
This is because the issue that Acquisition apparently intends to raise regarding the ownership of
the buyer is not based on explicit terms of the offer to purchase. We interpret the offer to
purchase to address the sale of land to JT Klein (or at least sale to a contemplated buyer operating
under the same name) but not to address in an unambiguous way the identity of the buyer or its
formation as an entity.

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No. 2020AP1990

supported argument as to how Klein’s position memorialized in the email could
factor into summary judgment review of whether the offer to purchase was
enforceable. At most, Acquisition insinuates a kind of estoppel or implied
contract claim, but without actually developing such an argument. Further, in any
case, Acquisition falls far short of showing that there are no genuine disputes of
material fact relevant to any such claim.

II. SANCTIONS

¶50 Acquisition cross-appeals the circuit court’s denial of its motion for
sanctions under WIS. STAT. § 895.044. Acquisition argues that the court erred in
determining that Acquisition did not establish by clear and convincing evidence
that JT Klein pursued this lawsuit in bad faith, see § 895.044(1)(a), and without a
reasonable basis in law or equity, § 895.044(1)(b). We understand Acquisition to
argue that the circuit court should have determined that both grounds are met here
based on the only reasonable inferences from the evidence regarding the
knowledge and conduct of JT Klein and its counsel in the lead-up to litigation and
during litigation. Specifically, Acquisition makes two factual allegations in
support of both grounds for sanctions that it suggests the circuit court was
obligated to find: First, that Jacob Klein knew that Ministries officer Bova lacked
authority to bind Acquisition to the offer to purchase; second, that, in an attempt to
get around this fact of which he was aware, Jacob Klein gave false or misleading
testimony on related topics. We affirm the circuit court’s denial of the sanctions
motion. We address pertinent legal standards, provide additional background, and

25
No. 2020AP1990

explain Acquisition’s argument in more detail before explaining our conclusion
further and rejecting Acquisition’s arguments to the contrary.13

¶51 As pertinent here, under WIS. STAT. § 895.044(1), “[a] party or a
party’s attorney may be liable for costs and fees … for commencing, using, or
continuing an action” based on one of the following grounds:

(a) The action … was commenced, used, or
continued in bad faith, solely for purposes of harassing or
maliciously injuring another.

(b) The party or the party’s attorney knew, or
should have known, that the action … was without any
reasonable basis in law or equity and could not be
supported by a good faith argument for an extension,
modification, or reversal of existing law.

Sec. 895.044(1)(a)-(b). The party seeking sanctions carries the burden to establish
either or both of these grounds by clear and convincing evidence. See
§ 895.044(2).

13
We note that the cross-appeal involving potential sanctions against JT Klein may
present an unusual set of circumstances, given our decision in the appeal reversing the summary
judgment granted to Acquisition dismissing JT Klein’s claims. One might wonder why our
resolving the summary judgment issue in favor of JT Klein does not necessarily foreclose some
or all of Acquisition’s arguments that JT Klein should be sanctioned. We now explain why there
are distinct issues to be addressed in the cross-appeal regarding the sanctions motion. The
particular ground on which Acquisition pursues sanctions—its potential defense to the
enforcement of the offer to purchase that its agent Bova did not have actual or apparent authority
to sign it—is distinct from the contract-contingency-based grounds on which the circuit court
granted summary judgment to Acquisition. Further, in the circuit court Acquisition did not
pursue the alleged lack of actual and apparent authority as a basis for summary judgment in its
favor, which would have resulted in dismissing JT Klein’s claims. Instead, Acquisition argued
that the alleged lack of authority was a basis to defeat JT Klein’s competing motion for summary
judgment. Thus, Acquisition did not take the position in the circuit court that there are no triable
issues of fact regarding Bova’s authority, an omission that arguably creates tension with its
argument for sanctions on the ground that JT Klein lacked any basis in law or equity to argue that
Bova had actual or apparent authority. But JT Klein does not now argue that this arguable
tension matters to this cross-appeal and we deny Acquisition’s cross-appeal for the separate
reasons stated in the text.

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No. 2020AP1990

¶52 We apply the following standards in reviewing the circuit court’s
denial of Acquisition’s sanctions motion.14 As to both grounds for sanctions, we
apply a mixed standard of review. See Stern v. Thompson & Coates, Ltd., 185
Wis. 2d 220, 236, 517 N.W.2d 658 (1994); Juneau County v. Courthouse Emps.,
Loc. 1312, AFSCME, AFL-CIO, 221 Wis. 2d 630, 639, 585 N.W.2d 587 (1998).
Under this standard we rely on the circuit court’s findings of fact “unless they are
against the great weight and clear preponderance of the evidence.” See Stern, 185
Wis. 2d at 236. In contrast, whether certain facts “fulfill the legal standard” for
either ground under WIS. STAT. § 895.044(1) is a question of law. See Stern, 185
Wis. 2d at 236.

¶53 Continuing with standards, whether an action was “commenced,
used, or continued in bad faith” under WIS. STAT. § 895.044(1)(a) is a subjective
inquiry. See Stern, 185 Wis. 2d at 236-37. Under this approach, the circuit court
must infer what the party or its attorney’s state of mind was “from the acts and
statements of the person, in view of the surrounding circumstances,” and we “must
accept a reasonable inference drawn” by the circuit court “from established facts if
more than one reasonable inference may be drawn.” Id. at 236-37.

¶54 In contrast, courts use an objective inquiry to determine whether an
action was “without any reasonable basis in law or equity and could not be
supported by a good faith argument for an extension, modification, or reversal of
existing law” under WIS. STAT. § 895.044(1)(b). See Juneau County, 221 Wis. 2d

14
Following the parties, we draw on case law interpreting former WIS. STAT. § 814.025,
which was repealed by order of our supreme court in 2005, but was in many respects similar to
the text of the present-day version of WIS. STAT. § 895.044. Although there are some differences
between former § 814.025 and the modern statute, the parties do not identify and we do not
discern from these differences a basis to depart from the standards of review noted in the text.

27
No. 2020AP1990

at 638-39. This objective standard involves “‘what a reasonable attorney would
have known or should have known under the same or similar circumstances.’” See
id. at 639 (quoted source omitted). The determination of what a party knew or
should have known is a “factual question, and the circuit court’s findings of fact
will not be reversed by an appellate court unless the findings of fact are clearly
erroneous.” Id. (citing WIS. STAT. § 805.17).

¶55 JT Klein’s amended complaint alleged that “[i]t appeared to [JT
Klein] that Mr. Bova had authority to sign” the offer to purchase on behalf of
Acquisition.

¶56 Jacob Klein gave deposition testimony or averred to all of the
following on the topic of what he knew about Bova’s authority to represent the
interests of Acquisition in the proposed project. On June 20, 2018, a little over a
week before Bova signed the offer to purchase, Bova informed Jacob Klein that
Bova required the approval of the Ministries board before the project could move
forward. This was the first that Jacob Klein had heard about a requirement of
board approval. Jacob Klein suggested in an email to Bova that they enter into a
“side” agreement in which further dealings could be contingent on obtaining board
approval at a later date. On two occasions over the following several days, Jacob
Klein asked Bova to teleconference with the Ministries board and get approval
before the June 29 WHEDA application deadline. Jacob Klein assumed that Bova
had gotten board approval when Bova sent him executed signature pages for the
offer to purchase and land-loan agreement. In August 2018, the Ministries board
member emailed Jacob Klein stating Acquisition’s intent to terminate further
development plans, and Jacob Klein called the board member. The board member
did not raise the topic of whether Bova had authority to sign the offer to purchase

28
No. 2020AP1990

in the email or in the phone call. In April 2019, Bova told Jacob Klein that Bova
had obtained the board’s approval to sign the offer to purchase.

¶57 At least for the purposes of this cross-appeal, JT Klein appears to
concede that no evidence has been produced to date that Bova ever in fact
acquired the board’s approval to bind Acquisition to the offer to purchase (aside
from, perhaps, Bova’s alleged statement to Klein in April 2019).15

¶58 At a hearing on Acquisition’s sanctions motion, the circuit court
made the following determinations. Regarding the “bad faith” grounds in WIS.
STAT. § 895.044(1)(a), the court stated that it could not, “on this record alone, find
that [JT Klein] started this litigation for purposes of harassing [Acquisition] by
clear and convincing evidence.” The court then proceeded to discuss whether JT
Klein’s lawsuit was “frivolous,” which we interpret to be remarks related in part to
whether JT Klein had a sufficient legal basis to avoid sanctions under
§ 895.044(1)(b). Specifically, the court determined that, even if JT Klein was
“wrong as a matter of law” regarding whether its claims should survive summary
judgment, this incorrect view did not constitute pursuit of a frivolous claim or
litigation conducted in bad faith.

¶59 Regarding its bad faith claim under WIS. STAT. § 895.044(1)(a),
Acquisition asserts that the circuit court did not make any findings as to what was
in the minds of Jacob Klein or JT Klein’s counsel in commencing and continuing

15
To be clear, we express no opinion as to the potential merits of any argument either
party might make following remand regarding any potential lack-of-authority defense by
Acquisition against enforcement of the offer to purchase. This includes Acquisition’s arguments
that (1) Klein’s deposition testimony that Bova told Klein in April 2019 that Bova had obtained
board approval is hearsay and not subject to any hearsay exception and (2) Bova’s later
deposition testimony conflicts with Klein’s.

29
No. 2020AP1990

this lawsuit against Acquisition. But this ignores the circuit court’s explicit
finding that JT Klein did not pursue its lawsuit with the intent to harass
Acquisition. While the court did not go into detail, this finding is clearly at odds
with Acquisition’s assertions that Jacob Klein “formulated” factual allegations to
adapt to Acquisition’s defenses, suggesting intentional deception. It is
Acquisition’s burden to show that the circuit court clearly erred in finding that bad
faith was not shown, but it fails to offer a developed argument that could satisfy
that burden. It merely points to isolated allegations of fact and asks us to draw
inferences that are critical of Jacob Klein and JT Klein’s counsel, without showing
why we should conclude that the circuit court could not reasonably reject such
inferences.

¶60 The following is an illustrative example. Acquisition repeatedly
references evidence that JT Klein, through Jacob Klein, appeared to take the
position before litigation commenced that the unsigned letter of intent was
enforceable (with respect to its termination fee provisions, as noted above), but
then, after obtaining counsel, withdrew any demand under the letter and instead
exclusively pursued enforcement of the signed offer to purchase. This is a far cry
from showing that the court had to accept this as clear and convincing evidence of
improper intent by Jacob Klein in commencing or pursuing this action. Assuming
that this apparent change in position regarding the letter of intent was based on the
advice of counsel, Acquisition does not begin to develop a supported argument
that this demonstrates that Jacob Klein operated in bad faith, as opposed to simply
gaining understanding and changing his approach based on the advice of legal
counsel.

¶61 Turning to Acquisition’s claim for sanctions under WIS. STAT.
§ 895.044(1)(b), Acquisition fails to show that the circuit court erred in

30
No. 2020AP1990

determining that JT Klein had a reasonable basis in law or equity to commence or
pursue this action. Again, the court’s discussion of this point was not extensive
and did not explicitly address Acquisition’s specific argument that JT Klein lacked
a basis to believe that Bova had apparent or actual authority to bind Acquisition.
However, Acquisition bears the burden to show that the circuit court erred in
denying a motion that required proof by clear and convincing evidence and we
conclude that it does not make a developed argument on this topic.

¶62 Ultimately, Acquisition fails to come to grips with the focus of WIS.
STAT. § 895.044(1)(b), as applied here, on whether the party or attorney knew or
should have known that “the action” lacked any merit, as opposed to beliefs
regarding one of multiple legal theories or elements of theories pursued in support
of an action. Acquisition does not support its apparent position that it is sufficient
to show, as it strenuously argues, that there is no evidence that the Ministries
board ever actually authorized Bova to sign the offer to purchase. Accepting this
as true for purposes of resolving this issue, Acquisition must further show that JT
Klein or its counsel knew or should have known that there was no basis to
commence or continue “the action,” including under a theory that Bova had
apparent authority. However, so far as we can tell, in its briefing on appeal
Acquisition does not substantively address the elements of such a claim or attempt
to meaningfully apply them to the evidence it now points to on appeal.

¶63 Instead of addressing the substance of its theory that Bova lacked
apparent authority, Acquisition merely emphasizes factual bases that may suggest
ways in which it could at trial defend against a claim that Bova had apparent
authority. For example, Acquisition notes that Bova and attorney Oeth testified
that it was Jacob Klein who requested that the offer to purchase should not include
a contingency requiring approval of the Ministries board. Depending on the

31
No. 2020AP1990

details, including potentially critical timing issues, if the testimony were credited it
might contribute with other evidence to prove that Jacob Klein was aware that
board approval was needed and had not been obtained. But these are merely
potential pieces in a puzzle that is not fully formed. They do not establish that
reasonable attorneys in the position of those representing JT Klein would have
known or should have known that no reasonable jury could credit Jacob Klein’s
testimony as summarized above. In sum, Acquisition does not explain why the
circuit court should have granted its motion based on more detailed findings
derived from reliable evidence.

¶64 Acquisition’s sanctions arguments all rest on negative
characterizations of the timing and nature of Jacob Klein’s testimony. But
Acquisition fails to explain why the circuit court in considering the sanctions
motion was obligated to weigh the credibility of Klein’s testimony as Acquisition
does, given the standards of review that Acquisition acknowledges are applied
under WIS. STAT. § 895.044(1).16

16
On a related note, Acquisition cites Jandrt ex rel. Brueggeman v. Jerome Foods,
Inc., 227 Wis. 2d 531, 555, 597 N.W.2d 744 (1999), for the proposition that JT Klein’s counsel
“do[es] not have an unfettered right to rely on … client statements for the factual basis of a
claim.” Acquisition argues that, had counsel for JT Klein adequately investigated Jacob Klein’s
assertions before filing suit, counsel would have discovered that aspects of his testimony were
“easily refutable” and based on assertions that would have “never checked out.” However, the
substance of this Jandrt-based argument appears to be only the following: with adequate
investigation counsel would have discovered grounds to find other witnesses more credible than
Klein. Acquisition does not make a case that adequate investigation would have revealed that JT
Klein had no basis in law or equity to commence or continue a claim that rested in part on a
theory that Bova had actual or apparent authority to bind Acquisition.

32
No. 2020AP1990

CONCLUSION

¶65 For all of these reasons, we reverse the circuit court’s grant of
Acquisition’s motion for summary judgment dismissing JT Klein’s claims, affirm
the court’s denial of Acquisition’s motion for sanctions, and reverse for further
proceedings consistent with this opinion.

By the Court.—Order affirmed in part; reversed in part and cause
remanded for further proceedings.

Not recommended for publication in the official reports.

33