Marquardt Management Services, Inc. v. Attic Angel Association, Inc.

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.
November 22, 2023
A party may file with the Supreme Court a
Samuel A. Christensen petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2023AP137 Cir. Ct. No. 2022CV636

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT IV

MARQUARDT MANAGEMENT SERVICES, INC. AND RIVERSONG, INC.,

PLAINTIFFS-APPELLANTS,

V.

ATTIC ANGEL ASSOCIATION, INC., MARY ANN DRESCHER,
CLAUDIA BROWN, SUSAN BUSH, AND DEREK BUCKLEY,

DEFENDANTS-RESPONDENTS.

APPEAL from an order of the circuit court for Dane County: JULIE
GENOVESE, Judge. Affirmed in part; reversed in part and cause remanded for
further proceedings.

Before Graham, Nashold, and Taylor, JJ.

¶1 TAYLOR, J. Marquardt Management Services, Inc., and Attic
Angel Association, Inc., jointly formed Riversong, Inc., for the purpose of
No. 2023AP137

developing a senior living campus in Verona, Wisconsin. In doing so, they
executed numerous contracts and documents.

¶2 Riversong failed to get approval from the City of Verona to build the
senior living campus on the property it intended to purchase and develop.
Nonetheless, Riversong continued to search for sites in and around the Verona
area to develop a long-term care campus. At some point, Attic Angel began
working with a separate organization to develop an independent care facility in
Verona.

¶3 Marquardt and Riversong (collectively, the “Plaintiffs”) sued Attic
Angel, alleging that it breached two provisions of the parties’ Member
Agreement—the “Area of Exclusivity” and “Confidentiality” provisions—and the
covenant of good faith and fair dealing implied in that contract. Riversong also
asserted individual claims against four Riversong board of directors who were
affiliated with Attic Angel (the “defendant directors”) for breach of fiduciary
duties and for usurpation of corporate opportunity. In response, Attic Angel and
the defendant directors (collectively, the “Defendants”) filed a motion to dismiss
the causes of action for failure to state a claim. The circuit court granted the
motion and dismissed all of the Plaintiffs’ claims. The Plaintiffs now appeal.

¶4 We conclude that the circuit court properly dismissed the Plaintiffs’
claims against Attic Angel regarding the Area of Exclusivity provision and the
implied covenant of good faith and fair dealing. We also conclude that the court
properly dismissed Riversong’s claim against the defendant directors for
usurpation of corporate opportunity. We conclude, however, that the complaint
included sufficient factual allegations to state a claim against Attic Angel
regarding breach of the Confidentiality provision and against the defendant

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directors for breach of fiduciary duty. Accordingly, we affirm the circuit court’s
order in part, reverse in part, and remand for further proceedings consistent with
this opinion.

BACKGROUND

¶5 When considering a motion to dismiss, all well-pleaded facts in a
complaint must be accepted as true. Cattau v. National Ins. Servs. of Wis., 2019
WI 46, ¶4, 386 Wis. 2d 515, 926 N.W.2d 756. The following facts are from the
complaint and two contracts that the circuit court incorporated by reference.

¶6 Marquardt and Attic Angel are both Wisconsin nonstock
corporations that manage and operate long-term care facilities.

¶7 In early 2018, Marquardt commissioned a market feasibility analysis
regarding a potential long-term care project in the area of Verona, Wisconsin.

¶8 In June 2018, after preliminary discussions regarding the potential
for a long-term care facility1 in the Verona area, Marquardt and Attic Angel jointly
formed Riversong, Inc., a nonstock corporation. In doing so, Marquardt and Attic
Angel executed a series of documents and contracts, including the Senior Living
Campus Development Joint Venture Agreement (“JVA”), the LPC1, Inc., Member

1
The parties use various terms to describe the “senior living campus” that Riversong
intended to develop. For purposes of consistency and because it appears to accurately describe
the scope of the project considered, we will generally use the term “long-term care facility” to
describe the facility or campus the parties contemplated developing, which included both
independent and assisted living facilities and services. We also note that this term is used
throughout the complaint.

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Agreement (“MA”), Articles of Incorporation, and Bylaws.2 These corporate
documents were executed on the same day that Riversong was formed. Both the
JVA and the MA are relevant to this appeal.

¶9 The JVA states that Marquardt and Attic Angel shall form, as a joint
venture, a Wisconsin nonstock, not-for-profit corporation for the purpose of
acquiring a specific, 160-acre parcel in Verona (the “160-acre site”), on a portion
of which they would develop a “senior living campus.” The JVA provides that
this corporation would enter into a “Development Agreement” with the town of
Verona. However, according to the terms of the JVA, if the corporation failed to
execute the Development Agreement by November 30, 2018, the JVA would
automatically terminate.

¶10 The JVA also provides that Riversong is to be managed by a board
of directors with seven members, four of whom would be designated by Attic
Angel and three of whom would be designated by Marquardt.3 The Attic Angel
designees on Riversong’s board were defendant Mary Ann Drescher, who, at all
relevant times, served as Attic Angel’s president and CEO and as Riversong’s
president, as well as defendants Claudia Brown, Susan Bush, and Derek Buckley,
who, at all relevant times, served on Attic Angel’s board of directors.

2
In briefing to this court, the parties refer to the jointly formed corporation as
“Riversong.” However, the name “Riversong” does not appear in either the JVA or the MA, the
two contracts at issue here. Rather, both documents refer to “LPC1, Inc.” Although it is unclear
from the record, we assume without deciding that, at some point, LPC1, Inc., became Riversong,
Inc. Accordingly, we follow the parties’ lead and refer to the jointly formed corporation as
“Riversong.”
3
The JVA states, in pertinent part: “The Joint Venture shall be managed by its board of
directors (“Board of Directors”). The Board of Directors will initially be comprised of 7
members. [Attic Angel] shall have the right to designate 4 members of the Board of Directors.
[Marquardt] shall have the right to designate 3 members of the Board of Directors.”

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¶11 According to the JVA, the MA “govern[s] all rights and obligations
of the members of the Joint Venture.” For its part, the MA imposes “certain
restrictions, rights, powers, duties and obligations” on the “Members”—i.e., Attic
Angel and Marquardt. As relevant here, the MA contains an “Area of
Exclusivity” provision stating that Riversong is to be the “exclusive provider” of
long-term care facilities within five miles of “the main campus of the
Corporation.” The MA also contains a “Confidentiality” provision prohibiting
members from disclosing or using any confidential information for purposes
outside the joint venture.4 Unlike the JVA, the MA does not set forth any
conditions for its automatic termination, but provides that an individual member
may withdraw from the corporation for any reason. The withdrawing member
must give at least 180 days’ written notice of its withdrawal to the other member
and to Riversong. Upon receipt of the notice, the non-withdrawing member may
trigger the dissolution of the corporation.

¶12 In the months following its formation, Riversong sought to obtain
approval from the City of Verona planning commission for the development of
between 60 and 80 acres of the 160-acre site. After the planning commission
raised concerns about the proposed project, it was “mutually determined” that the
planned project was “unlikely to succeed.” As a result, Marquardt and Attic
Angel did not execute the Development Agreement by the November 30, 2018
deadline, and the JVA automatically terminated.

4
The relevant portions of these provisions of the MA are reproduced later in this
opinion.

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¶13 After the termination of the JVA until mid-2020, the Riversong
board of directors continued to meet, and multiple proposals were presented to and
discussed by the Riversong directors regarding alternative locations in and around
Verona for long-term care campus locations. According to the complaint,
however, the defendant directors rejected those proposals “without significant
explanation or discussion.”

¶14 In December 2018, defendant director Drescher informed Matt
Mauthe, Marquardt’s CEO and Riversong director, that Attic Angel was exploring
the possibility of working with a separate entity to develop and manage a senior
living project in Verona. In response, Mauthe informed Drescher that engaging in
such negotiations and/or participating in such a project with a separate entity
would violate its contractual and other obligations to Riversong.

¶15 In May 2020, while Riversong was still exploring potential real
estate in Verona, Mauthe received a call from a contractor who questioned why
Marquardt was not participating in a bidding process for a development project in
Verona involving Attic Angel and an unknown third party, later identified as
Forward Development Group (“Forward”).

¶16 At a subsequent May 2020 Riversong board meeting, the defendant
directors disclosed Attic Angel’s involvement with Forward to develop and
manage an independent living facility, in which Attic Angel would have an equity
position. Riversong’s attorney warned that such a relationship with Forward could
violate the MA’s Area of Exclusivity provision and potentially create a conflict of
interest.

¶17 In August 2020, Attic Angel provided Marquardt with notice of its
intent to withdraw from Riversong, which became effective in February 2021.

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¶18 The Plaintiffs sued Attic Angel and the four defendant directors.
Their complaint alleges that Attic Angel violated its contractual obligations under
the MA, including its obligations under the Area of Exclusivity and
Confidentiality provisions. The complaint also alleges that the defendant directors
individually violated their fiduciary duties to Riversong and usurped a corporate
opportunity that should have been made available to Riversong.

¶19 Attic Angel moved to dismiss the Plaintiffs’ claims for failure to
state a claim pursuant to WIS. STAT. § 802.06(2)(a)6. (2021-22).5 The circuit court
granted the motion and dismissed all of the claims. The Plaintiffs appeal.

DISCUSSION

¶20 The Plaintiffs argue that their complaint6 alleged sufficient facts as
to each of their claims to survive a motion to dismiss for failure to state a claim.
We address each of the claims in turn.

I. Governing Principles and Standard of Review.

¶21 As noted, the Plaintiffs request that we review the circuit court’s
dismissal of all of the claims in their complaint for failure to state a claim. See

5
All references to the Wisconsin Statutes are to the 2021-22 version unless otherwise
noted.

The operative complaint for the purposes of this appeal is the “First Amended
6

Complaint.” For ease of reference, we refer to the First Amended Complaint simply as “the
complaint.”

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No. 2023AP137

WIS. STAT. § 802.06(2)(a)6.7 Whether a complaint states a claim upon which
relief can be granted is a question of law, and we review de novo a circuit court’s
order granting a defendant’s motion to dismiss. Data Key Partners v. Permira
Advisers LLC, 2014 WI 86, ¶17, 356 Wis. 2d 665, 849 N.W.2d 693.

¶22 Pursuant to WIS. STAT. § 802.02, pleadings shall contain “[a] short
and plain statement of the claim, identifying the transaction or occurrence or series
of transactions or occurrences out of which the claim arises and showing that the
pleader is entitled to relief.” Sec. 802.02(1)(a). When considering a motion to
dismiss, the pleadings are to be liberally construed so as to do substantial justice.
Sec. 802.02(6); Doe v. Archdiocese of Milwaukee, 2005 WI 123, ¶35, 284 Wis.
2d 307, 700 N.W.2d 180. We accept as true all facts well-pleaded in the
complaint and the reasonable inferences therefrom. Kaloti Enters., Inc. v. Kellogg
Sales Co., 2005 WI 111, ¶11, 283 Wis. 2d 555, 699 N.W.2d 205; Data Key, 356
Wis. 2d 665, ¶19. It is the sufficiency of the facts alleged that controls whether a
claim is properly pled. Doe, 284 Wis. 2d 307, ¶19. In order to satisfy this
requirement, “[p]laintiffs must allege facts that, if true, plausibly suggest a
violation of applicable law.” Data Key, 356 Wis. 2d 665, ¶21. We do not accept
as true legal conclusions that are stated in the complaint. Id., ¶19.

¶23 This appeal additionally requires us to interpret the language of
written contracts. The interpretation of an unambiguous contract presents a
question of law. Tufail v. Midwest Hosp., LLC, 2013 WI 62, ¶22, 348 Wis. 2d

7
WISCONSIN STAT. § 802.06(2)(a) states, in pertinent part: “Every defense, in law or
fact, except the defense of improper venue, to a claim for relief in any pleading, whether a claim,
counterclaim, cross claim, or 3rd-party claim, shall be asserted in the responsive pleading thereto
if one is required, except that the following defenses may at the option of the pleader be made by
motion: …. 6. Failure to state a claim upon which relief can be granted.”

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631, 833 N.W.2d 586. “When construing contracts that were freely entered into,
our goal ‘is to ascertain the true intentions of the parties as expressed by the
contractual language.’” Town Bank v. City Real Est. Dev., LLC, 2010 WI 134,
330 Wis. 2d 340, ¶33, 793 N.W.2d 476 (citation omitted). “Contract language is
construed according to its plain or ordinary meaning, consistent with ‘what a
reasonable person would understand the words to mean under the circumstances.’”
Tufail, 348 Wis. 2d 631, ¶28 (citation omitted). “Where the terms of the contract
are clear and unambiguous, we construe the contract according to its literal terms.”
Id., ¶26.

¶24 Finally, this appeal requires us to interpret statutes. When
interpreting statutes, Wisconsin courts begin “with the language of the statute. If
the meaning of the statute is plain, we ordinarily stop the inquiry.” State ex rel.
Kalal v. Circuit Ct. for Dane Cnty., 2004 WI 58, ¶45, 271 Wis. 2d 633, 681
N.W.2d 110. “Statutory language is given its common, ordinary, and accepted
meaning.” Id.; see WIS. STAT. § 990.01(1). The interpretation of a statute is a
question of law that we review de novo. Mueller v. Edwards, 2017 WI App 79,
¶5, 378 Wis. 2d 689, 904 N.W.2d 392.

II. Incorporation by Reference.

¶25 Before analyzing the substance of the claims at issue, we must first
address the documents we will consider in doing so. Although the parties’ dispute
involves the interpretation and interaction of the JVA and the MA, which were
referenced throughout the Plaintiffs’ complaint and are central to their claims,
neither document was attached to the complaint. They were, however, attached to
the Defendants’ motion to dismiss. Additionally, the Plaintiffs attached the
minutes of three Riversong board meetings to their memorandum of law in

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opposition to the Defendants’ motion to dismiss. The JVA, the MA, and the
minutes of those three board meetings were all considered by the circuit court
through the “incorporation by reference” doctrine.

¶26 Although a reviewing court cannot add facts in the process of
liberally construing the complaint, see Doe, 284 Wis. 2d 307, ¶19, a court may
consider a document attached to a motion to dismiss without converting the
motion into one for summary judgment8 if the document “was referred to in the
plaintiff’s complaint, is central to his or her claim, and its authenticity has not been
disputed.” Soderlund v. Zibolski, 2016 WI App 6, ¶37, 366 Wis. 2d 579, 874
N.W.2d 561. In effect, the incorporation by reference doctrine provides that, in
some instances in which a plaintiff refers to a document in the plaintiff’s
complaint, the defendant may then submit the document to the court without
converting the defendant’s dismissal motion to a motion for summary judgment.
The doctrine prevents a plaintiff from evading dismissal simply by failing to attach
to the complaint a document that proves the claim has no merit. Id., ¶38 (quoting
Brownmark Films, LLC v. Comedy Partners, 682 F.3d 687, 690 (7th Cir. 2012)).

¶27 Like the circuit court, we conclude that, in addition to the complaint,
it is appropriate to consider the JVA and the MA which were attached to the
Defendants’ motion to dismiss. These documents are referred to throughout the
Plaintiffs’ complaint, are central to the Plaintiffs’ claims, and raise no authenticity
disputes. The Riversong board meeting minutes, however, which the Plaintiffs

8
See WIS. STAT. § 802.06(2)(b) (“If on a motion asserting the defense described in
par. (a)6. to dismiss for failure of the pleading to state a claim upon which relief can be granted,
… matters outside of the pleadings are presented to and not excluded by the court, the motion
shall be treated as one for summary judgment and disposed of as provided in [WIS. STAT.
§] 802.08.”).

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attached to their response to the Defendants’ motion to dismiss, were not even
mentioned in the Plaintiffs’ complaint. We will therefore not consider the board
meeting minutes submitted by the Plaintiffs.9

III. Breach of Contract.

¶28 “A complaint states a claim for breach of contract when it alleges:
(1) a contract between the plaintiff and the defendant that creates obligations
flowing from the defendant to the plaintiff; (2) failure of the defendant to do what
it undertook to do; and (3) damages.” Brew City Redevelopment Grp., LLC v.
Ferchill Grp., 2006 WI App 39, ¶11, 289 Wis. 2d 795, 714 N.W.2d 582, aff’d,
2006 WI 128, 297 Wis. 2d 606, 724 N.W.2d 879. On appeal, the Plaintiffs argue
that the complaint alleges sufficient facts to state the following claims for breach
of contract: (1) Attic Angel violated the Area of Exclusivity provision; (2) Attic
Angel violated an implied covenant of good faith and fair dealing; and (3) Attic
Angel violated the Confidentiality provision. We address each argument below.

A. Area of Exclusivity.

¶29 The MA’s Area of Exclusivity provision states in relevant part:

[T]he Corporation shall be the exclusive provider of:
(i) independent living facilities and services; and
(ii) assisted living facilities and services in the geographic
area identified as the five (5) mile radius surrounding the
main campus of the Corporation.[10]

9
Because we conclude that the board meeting minutes submitted to the circuit court do
not fall within the incorporation by reference doctrine and we will therefore not consider them,
we do not consider the Plaintiffs’ claim that the circuit court erroneously treated these minutes as
“exhaustive.”
10
“The Corporation” referenced in the MA and the JVA refers to Riversong.

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The complaint alleges that Attic Angel violated this provision by “agreeing to
participate” in another independent living facility with Forward within five miles
of “all potential Verona real estate identified by Marquardt and Riversong for
Riversong’s long-term care campus in violation of the Member Agreement.”

¶30 We conclude that the complaint fails to state a claim for breach of
the Area of Exclusivity provision for the reasons set forth below.11

¶31 The parties focus their arguments on the meaning of the phrase “the
main campus of the Corporation” in the MA, including whether this phrase should
be read together with the definitions of “Property” as set forth in the MA and the
JVA. We decline to resolve whether the phrase “the main campus of the
Corporation” necessarily refers to a campus on the original 160 acres of Verona
land initially contemplated for purchase and development by the parties described
in the JVA, or whether it could also have been intended to refer to a campus on
any other property that the parties might later purchase and develop as “the main
campus of the Corporation.” Resolving this dispute is not necessary to
determining whether Attic Angel breached the Area of Exclusivity. Under either
interpretation, we conclude that the complaint fails to state a claim for breach of
contract because, as we now explain, it is undisputed that “the main campus of the
Corporation” never existed.

11
Although not raised by the parties, we question whether the Plaintiffs’ claimed breach
of the MA’s Area of Exclusivity provision sufficiently pleads facts which plausibly show that
they are entitled to relief on their allegation that Attic Angel merely agreed to develop an
independent living facility with Forward. The parties do not identify any precedent for the
proposition that a party’s agreement to engage in activities that could constitute a future breach of
contract, but which may or may not come to fruition, is sufficient to plausibly allege a breach of
contract claim. However, because this issue is not raised by the parties, we do not address it.

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¶32 The language of the Area of Exclusivity provision unambiguously
contemplates a “geographic area” that is centered around the “main campus of the
Corporation.” However, Riversong never actually purchased real estate for a
“senior living campus” or developed any long-term care facilities. Therefore,
there was never any “main campus” from which to draw the five-mile radius. If
Riversong’s main campus was meant to refer to the specific property described in
the JVA, that property was never acquired, no senior living campus was
developed, and no area of exclusivity was established. Alternatively, if “the main
campus of the Corporation” is interpreted more broadly to encompass the main
campus on any other property in Verona that the parties might later acquire and
develop, then again, no such property was ever acquired, no campus was ever
developed, and no area of exclusivity was established. The Plaintiffs fail to
identify any specific “geographic area” subject to this Area of Exclusivity
provision because Riversong has no existing “main campus” upon which long-
term care facilities have been erected nor from which long-term care services are
provided. In other words, there is no “geographic area” identified by the Plaintiffs
from which a five-mile area of exclusivity radius can be drawn, because it is
impossible to draw a five-mile radius around a nonexistent point. Hence, there
was never an area of exclusivity established for Attic Angel to breach.

¶33 The Area of Exclusivity provision cannot reasonably be interpreted
in the way that the Plaintiffs assert. According to the Plaintiffs, this phrase refers
to “all potential Verona real estate identified by Marquardt and Riversong for
Riversong’s long-term care campus.” This argument fails because, as explained,
the Area of Exclusivity provision requires an existing “main campus of the
Corporation.” There is no language in either the MA or the JVA that indicates that
the Area of Exclusivity provision attaches to a nonexistent, hypothetical senior

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living campus that might be built on any property in Verona or surrounding areas
that is merely considered by the parties for purchase. Therefore, the Area of
Exclusivity provision never took effect and does not create any obligations
flowing from Attic Angel to the Plaintiffs. See id. (holding that a breach of
contract claim requires a contract between the plaintiff and the defendant that
creates obligations flowing from the defendant to the plaintiff).12

¶34 On this basis, we conclude that the Plaintiffs’ complaint fails to state
a claim that Attic Angel breached the Area of Exclusivity provision.

B. Implied Covenant of Good Faith and Fair Dealing.

¶35 “Every contract implies good faith and fair dealing between the
parties to it, and a duty of cooperation on the part of both parties.” Beidel v.
Sideline Software, Inc., 2013 WI 56, ¶27, 348 Wis. 2d 360, 842 N.W.2d 240. A
party can be liable for breach of this covenant “even though all the terms of the
written agreement may have been fulfilled.” Reetz v. Advocate Aurora Health,
Inc., 2022 WI App 59, ¶30, 405 Wis. 2d 298, 983 N.W.2d 669; see also Beidel,
348 Wis. 2d 360, ¶10 (“[M]ere compliance in form, not in substance[,] is a breach
of the covenant of good faith that accompanies every contract.” (internal quotation
marks and citation omitted)). Nonetheless, this cause of action requires an
enforceable contractual obligation. Reetz, 405 Wis. 2d 298, ¶31. Thus, to state a
claim for a breach of this covenant, “the plaintiff must plead that a valid contract

12
The Plaintiffs vaguely argue that Attic Angel has a contractual duty to “refrain from
engaging in business activities relating to independent and/or assisted living within the area
outlined,” but that is not what the plain language of the MA states. Attic Angel has no
contractual obligation to stay out of a five-mile radius from a nonexistent “main campus” of
Riversong.

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with express, definite, enforceable terms exists, and that the breaching party acted
without good faith in its performance of that contract.” Id.

¶36 Here, the complaint alleges that Attic Angel violated the MA’s
implied covenant of good faith and fair dealing by failing to “reasonably consider
Marquardt’s proposed sites for a project based in Verona in furtherance of …
Riversong’s stated goals and intentions as outlined in the Member Agreement.”
According to the complaint, Attic Angel did so to ensure that it “would not be
contractually prohibited from entering into an agreement with a third[ ]party for
the operation of an independent and/or assisted living project pursuant to the Area
of Exclusivity provision.”

¶37 We conclude that the complaint fails to state a claim for breach of
this implied covenant because it does not identify any enforceable contractual
obligation. The Plaintiffs do not allege that Attic Angel sabotaged the parties’
efforts to move forward with the long-term care facility contemplated in the JVA.
They additionally fail to identify anything in the MA that obligated Attic Angel to
consider alternative sites for a potential long-term care campus when the plan for
the campus contemplated in the JVA fell through.

¶38 In setting forth this cause of action, the complaint only identifies the
MA’s “Area of Exclusivity” provision. This provision, however, does not impose
any enforceable contractual obligations on Attic Angel to continue to consider
alternative sites. As explained above, this provision prohibits the parties from
developing a long-term care facility within five miles of “the main campus of the
Corporation.” Although there is no dispute that the MA constituted a valid
contract between the parties, because Riversong never acquired any property or
erected long-term care facilities, there was never a “main campus of the

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Corporation” from which a five-mile area of exclusivity could be drawn. Because
the MA does not impose a contractual obligation to consider alternative sites, Attic
Angel could not have breached its obligations under the Area of Exclusivity
provision in bad faith. Therefore, the complaint fails to state a claim for breach of
the implied covenant of good faith and fair dealing.13 See id.

¶39 The Plaintiffs argue that Attic Angel’s alleged sabotage of
Marquardt’s proposals for alternative sites was sufficient to state a claim for
breach of the implied covenant of good faith and fair dealing. Specifically, the
Plaintiffs rely on the following statement from the circuit court’s written order:
“[I]f Attic Angel or its board members had in some way sabotaged the approvals,
then Riversong could claim that Attic Angel had committed an actionable breach
of good faith and fair dealing.” The Plaintiffs misinterpret the court’s statement.
When this statement is read in context, it is clear that the court was referring to a
hypothetical sabotage of the Verona planning commission’s approval of the
specific 160-acre Verona site described in the JVA, not a sabotage of the
Plaintiffs’ proposals for alternative sites. As explained above, the Plaintiffs do not
point to any allegations in the complaint that Attic Angel sabotaged the planning
commission’s approvals. Therefore, the circuit court properly dismissed this cause
of action for failure to state a claim.

13
Although the Plaintiffs mention the rule that a bad faith claim can be present even if
no terms of the contract were violated, they do not develop any argument on that basis. Because
this argument is undeveloped, we decline to address it. See State v. Pettit, 171 Wis. 2d 627, 647,
492 N.W.2d 633 (Ct. App. 1992) (holding that this court may decline to address undeveloped
arguments because we “cannot serve as both advocate and judge”).

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C. Confidentiality.

¶40 The Confidentiality provision in the MA limits a member’s authority
to disclose or use confidential information belonging to “the Corporation,” i.e.,
Riversong, or the other member. Confidential information14 is defined as:

trade secrets, proprietary information and confidential
information belonging to the Corporation [or the other
Member] that are not generally known to the public,
including information concerning business plans, financial
statements and other information provided pursuant to this
Agreement, operating practices and methods, expansion
plans, strategic plans, marketing plans, contracts, customer
lists or other business documents that the Corporation [or
the other Member] treats as confidential, in any format
whatsoever (including oral, written, electronic or any other
form or medium).

¶41 The MA protects confidential information belonging to Riversong or
the other member, with limited (inapplicable) exceptions:

[N]o Member will, directly or indirectly, disclose or use
(other than solely for the purposes of such Member
monitoring and analyzing its investment in the Corporation
and performing its obligations under this Agreement),
including use for personal, commercial or proprietary
advantage or profit, any Corporation Confidential
Information [or Other Member Confidential Information]
of which such Member is or becomes aware.

This provision, by its plain language, prohibits both the direct and indirect
“disclos[ure] or use” of such confidential information for a member’s personal,
financial, or proprietary benefit.

14
The MA refers to confidential information belonging to the Corporation, i.e.,
Riversong, as “Corporation Confidential Information.” Confidential information belonging to the
other Member is referred to in the MA as “Other Member Confidential Information.” The MA
collectively refers to “Corporation Confidential Information” and “Other Member Confidential
Information” as “Confidential Information.”

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¶42 The complaint alleges that Attic Angel violated the Confidentiality
provision by impermissibly utilizing the market feasibility study and other
confidential information:

Attic Angel impermissibly utilized Corporate Confidential
Information and/or Other Member Confidential
Information belonging to Riversong and/or Marquardt,
including a market feasibility study conducted by
Marquardt, in violation of the Member Agreement for
which Attic Angel is liable to both Marquardt and
Riversong for damages relating to the loss of propriet[ar]y
information concerning the Verona long-term care market.

According to the complaint, Attic Angel “utilized” this information when “making
its decision to negotiate with and eventually enter into an agreement with a
third[ ]party for an assisted and/or independent living project in Verona, WI.”
Although the market feasibility study is not attached to the complaint, the
complaint alleges the following facts about that study: “On or about January 31,
2018, Marquardt engaged PMD Advisory Services, LLC to complete a market
feasibility analysis for a potential long-term care project in the area of Verona,
WI.”15

¶43 We conclude that these factual allegations and the reasonable
inferences therefrom, when taken as true, are sufficient to state a claim for breach
of the Confidentiality provision. See Data Key, 356 Wis. 2d 665, ¶19.

¶44 First, the complaint alleges sufficient facts to show that the
Confidentiality provision creates a contractual obligation flowing from Attic

15
In its briefing to this court, the Plaintiffs provide more details as to the contents of the
market feasibility study. We do not consider these added details because they are not mentioned
in the complaint and because the market feasibility study was neither attached to the complaint
nor incorporated by reference.

18
No. 2023AP137

Angel to the Plaintiffs. See Brew City, 289 Wis. 2d 795, ¶11. Specifically, the
complaint identifies the portions of this provision that prohibit Attic Angel from
directly or indirectly “disclos[ing]” or “us[ing]” confidential information except in
limited circumstances inapplicable here. The MA also establishes that this duty of
confidentiality applied while Attic Angel was a member of Riversong and for five
years following Attic Angel’s withdrawal from Riversong. There is no dispute
that the Confidentiality provision was in existence and applicable during the
timeframe in question.

¶45 Next, the complaint alleges sufficient facts to plausibly demonstrate
that Attic Angel breached its obligation under the Confidentiality provision by
using the market feasibility study in its work with Forward. See id. As an initial
matter, the complaint plausibly alleges that this study meets the broad definition of
either “Corporation Confidential Information” or “Other Member Confidential
Information,” which includes “proprietary information and confidential
information belonging to the Corporation [or the other Member] that are not
generally known to the public” and “other information provided pursuant to this
Agreement … that the Corporation [or the other Member] treats as confidential.”
Here, the complaint specifically alleges that the market feasibility study “belong[s]
to Riversong and/or Marquardt” and indicates that it contains “proprietary
information concerning the Verona long-term care market.” It is reasonable to
infer from these allegations that the information in the study is “not generally
known to the public.” The complaint also alleges that Marquardt individually
commissioned this study regarding the feasibility of a long-term care project in the
Verona area, and subsequently engaged in “preliminary discussions” with Attic
Angel regarding the potential for a long-term care campus in the Verona area
before the parties executed the JVA and the MA in June 2018. It is reasonable to

19
No. 2023AP137

infer that this market feasibility study was provided to, or the contents shared with,
Attic Angel.

¶46 Additionally, the complaint alleges that Attic Angel used the market
feasibility study for purposes that are not allowed under the Confidentiality
provision. Specifically, the complaint states that Attic Angel “utilized” the study
“[i]n making its decision to negotiate with and eventually enter into an agreement
with [Forward].” When accepted as true, this factual allegation plausibly
demonstrates that Attic Angel violated the Confidentiality provision by “us[ing]”
confidential information for purposes other than for “monitoring and analyzing its
investment in [Riversong]” or “performing its obligations under [the MA].”16

¶47 Our conclusion that the complaint states sufficient facts which
plausibly show that Attic Angel breached its obligations under the Confidentiality
provision is bolstered by the complaint’s allegation that, in December 2018,
Drescher informed Mauthe that Attic Angel was “exploring” the possibility of
working with a separate entity to develop and manage a senior living community
in Verona. A reasonable inference that could be drawn from this allegation is that
Attic Angel was improperly using the information in the market feasibility study
regarding Verona’s long-term care market to pursue a business relationship with
Forward.

16
In its brief to this court, the Plaintiffs contend that Attic Angel’s CEO stated that Attic
Angel decided to work with Forward in part because of information from the market feasibility
study. We will not consider this factual allegation from the Plaintiffs’ brief because it was not
included in the complaint nor in the incorporation by reference documents. Data Key Partners v.
Permira Advisers LLC, 2014 WI 86, ¶19, 356 Wis. 2d 665, 849 N.W.2d 693 (“[A] court cannot
add facts in the process of construing a complaint.”).

20
No. 2023AP137

¶48 Finally, the complaint alleges that Attic Angel’s breach of the
Confidentiality provision caused damages. See id. The complaint specifically
asserts that the Plaintiffs incurred “damages relating to the loss of propriet[ar]y
information concerning the Verona long-term care market.” The complaint also
alleges that Attic Angel’s breach of the Confidentiality provision caused at least
$75,000 in damages to Marquardt and an unspecified amount of monetary damage
to Riversong.17 Therefore, we conclude that the Plaintiffs have alleged sufficient
facts to state a claim for breach of the Confidentiality provision against Attic
Angel.

¶49 The Defendants argue that the complaint does not contain sufficient
factual allegations to state a claim for breach of the Confidentiality provision.
According to the Defendants, the complaint “lacks facts as to what Attic Angel
disclosed; when; to whom; and how such disclosure caused Marquardt and
Riversong harm.” We disagree. As explained above, the complaint contains
enough factual allegations to survive a motion to dismiss. The complaint

17
Technically, the complaint states that the $75,000 in damages was caused by the
defendant directors’ breach of the MA, not Attic Angel’s breach. Nonetheless, because this
allegation is under the heading addressing Plaintiffs’ claims against Attic Angel and because the
complaint does not allege that the defendant directors violated the contractual terms of the MA,
we infer that the complaint intended to allege that these damages were caused by Attic Angel’s
alleged breach of the MA.

Additionally, the complaint alleges that both Marquardt and Riversong were damaged by
Attic Angel’s alleged breach of confidential information. The complaint specifically alleges that
Marquardt suffered damages in excess of $75,000, and we can infer from that allegation that
Marquardt suffered those damages when Attic Angel used its confidential information for a
purpose outside the MA. Although the complaint does not specify a monetary amount for
Riversong’s damages, the Defendants do not argue that Riversong’s claim for breach of the
Confidentiality provision should be dismissed on that basis, and we decline to conclude that it
should. As a result, we conclude that the complaint’s factual allegations sufficiently allege that
Attic Angel’s breach of the Confidentiality provision caused damages to both Marquardt and
Riversong.

21
No. 2023AP137

explicitly identifies the market feasibility study as the confidential information that
was used by Attic Angel, describes how that study falls under the definition of
confidential information, alleges the manner in which Attic Angel impermissibly
used that information, and alleges that this conduct caused damages. See id.
Although these allegations are not especially detailed, they are more than merely
“a formulaic recitation of the elements of a cause of action.” Cattau, 386 Wis. 2d
515, ¶5.

¶50 The Defendants also argue that the Plaintiffs were required to plead
that “Attic Angel actually shared the [study].” This argument fails because the
Confidentiality provision prohibits both the disclosure and the use of confidential
information. Because the complaint alleges that Attic Angel impermissibly
“utilized” the study for its own benefit, the complaint need not also allege that
Attic Angel shared the study. We therefore reverse the circuit court’s dismissal of
the Plaintiffs’ claim for breach of the Confidentiality provision.

IV. Breach of Fiduciary Duty.

¶51 Next, the complaint alleges that the defendant directors—i.e.,
Drescher, Brown, Bush, and Buckley—breached their fiduciary duties to
Riversong by failing to act in Riversong’s best interests and unreasonably
obstructing Riversong’s attempts to create a long-term care campus in Verona. A
claim alleging a breach of fiduciary duty must satisfy three elements: (1) the
defendant had a fiduciary duty; (2) the defendant breached that duty; and (3) the
breach of duty caused injury to the plaintiff. Berner Cheese Corp. v. Krug, 2008
WI 95, ¶40, 312 Wis. 2d 251, 752 N.W.2d 800. Specifically, the complaint
alleges that the defendant directors breached their fiduciary duties pursuant to
three exceptions to the “business judgment rule” as set forth under WIS. STAT.

22
No. 2023AP137

§ 181.0855(1)(a), (c), and (d). For the following reasons, we conclude that the
complaint states a plausible claim for breach of fiduciary duty pursuant to the
exception set forth under § 181.0855(1)(a).

¶52 We address each element of a claim for breach of fiduciary duty in
turn.

A. Existence of Fiduciary Duty.

¶53 The first element of a breach of fiduciary duty claim is that a
fiduciary duty exists. “It is well established that a corporate … director is under a
fiduciary duty of loyalty, good faith and fair dealing in the conduct of corporate
business.” Modern Materials, Inc. v. Advanced Tooling Specialists, Inc., 206
Wis. 2d 435, 442, 557 N.W.2d 835 (Ct. App. 1996). A director of a corporation
owes this fiduciary duty to the corporation based on their status as a director of the
corporation. Id. at 443. This fiduciary duty is distinct from any contractual duty
that the director may owe to the corporation. See Benjamin Plumbing, Inc. v.
Barnes, 162 Wis. 2d 837, 856-57, 470 N.W.2d 888 (1991). Unlike a fiduciary
duty, a contractual duty to the corporation arises from an agreement between the
corporation and the director. See id. (distinguishing between a corporate director’s
liability that the director incurred as a result of their status as a director and the
liability that the director incurred as a result of their contractual relationship with
the corporation). When these distinctions are applied to this case, it becomes
easier to distinguish between the breach of contract claims and the breach of
fiduciary duty claim: the former claims arise from a contractual duty and the latter
claim arises out of the duties of loyalty, good faith and fair dealing owed by the
defendant directors to Riversong because of their status as Riversong’s directors.

23
No. 2023AP137

¶54 In the present case, the circuit court determined that the complaint
failed to state a claim for breach of fiduciary duty against the defendant directors
because, after the JVA terminated, Attic Angel was under no contractual
obligation to continue to work with the Plaintiffs to develop an alternate site. The
complaint’s breach of fiduciary duty claim, however, is based on the defendant
directors’ status as directors of Riversong and their duties of loyalty, good faith,
and fair dealing that results from that status, and not on any specific contractual
duty that they owed to Riversong. Though the JVA did terminate, the MA
survived and the defendant directors continued to serve on the Riversong board.

¶55 On appeal, the Defendants do not dispute that the defendant directors
were directors of Riversong and, as a result, that they owed fiduciary duties of
loyalty, good faith, and fair dealing to Riversong. See WIS. STAT. § 181.0103(9)
(defining “director” as including “an individual elected or appointed … to act as a
member of the board”). Instead, the Defendants argue that because the Plaintiffs
fail to “plead around the Business Judgment Rule,” they fail to state a claim for
which relief can be granted. We now address the application of the business
judgment rule (BJR) to Riversong’s claims.18

18
We recognize that the defendant directors also owed a fiduciary duty to the members
of Riversong—i.e., Marquardt and Attic Angel. O’Leary v. Board of Dirs., Howard Young Med.
Ctr., Inc., 89 Wis. 2d 156, 168, 278 N.W.2d 217 (Ct. App. 1979) (holding that directors of a
nonstock corporation owe a fiduciary duty to both the corporation and its members). However,
the complaint does not allege—and the Plaintiffs do not argue on appeal—that the defendant
directors’ alleged conduct breached their fiduciary duty to the members. Therefore, we only
address whether the complaint states a claim for breach of the defendant directors’ fiduciary duty
to Riversong.

24
No. 2023AP137

B. Breach of Fiduciary Duty.

¶56 In considering whether the defendant directors breached their
fiduciary duty to Riversong, we must analyze the application of statutory
immunity laws which Wisconsin courts have treated as codifying the BJR. See
Data Key, 356 Wis. 2d 665, ¶32. The BJR is a century-old “judicially created
doctrine that contributes to judicial economy by limiting court involvement in
business decisions where courts have no expertise and contributes to encouraging
qualified people to serve as directors by ensuring that honest errors of judgment
will not subject them to personal liability.” Reget v. Paige, 2001 WI App 73, ¶17,
242 Wis. 2d 278, 626 N.W.2d 302. The purpose of the common law BJR is to
prevent courts from “second-guessing business decisions.” Data Key, 356 Wis. 2d
665, ¶34. As explained by our supreme court in 1946:

[T]his court will not substitute its judgment for that of the
board of directors and assume to appraise the wisdom of
any corporate action. The business of a corporation is
committed to its officers and directors, and if their actions
are consistent with the exercise of honest discretion, the
management of the corporation cannot be assumed by the
court.

Steven v. Hale-Haas Corp., 249 Wis. 205, 221, 23 N.W.2d 620 (1946).

¶57 In 1987, Wisconsin adopted statutory immunity protections for
directors of corporations.19 These statutory protections provide directors of
corporations with a legal shield against monetary liability for breach of fiduciary
duty claims. See Kenneth B. Davis, Jr., The Business Judgment Rule in

19
Specifically, the legislature passed 1987 Wis. Act 13, which created WIS. STAT.
§ 180.307. This statute was the precursor to WIS. STAT. § 180.0828(1), the immunity statute at
issue in Data Key.

25
No. 2023AP137

Wisconsin, 2015 WIS. L. REV. 475, 484 (2015). Only when certain exceptions
apply, such as willful misconduct or a willful failure to deal fairly with the
corporation on a matter concerning a material conflict of interest, is the director
not entitled to immunity.

¶58 In Data Key, our supreme court addressed the relationship between
Wisconsin’s notice pleading standard and WIS. STAT. § 180.0828(1).20 The court
began by holding that § 180.0828(1) codified Wisconsin’s common law BJR.21
Data Key, 356 Wis. 2d 665, ¶32. The court then explained that monetary claims
against a corporate director for breach of fiduciary duty must be analyzed through

20
WISCONSIN STAT. § 180.0828(1) provides:

(1) Except as provided in sub. (2), a director is not liable
to the corporation, its shareholders, or any person asserting rights
on behalf of the corporation or its shareholders, for damages,
settlements, fees, fines, penalties or other monetary liabilities
arising from a breach of, or failure to perform, any duty resulting
solely from his or her status as a director, unless the person
asserting liability proves that the breach or failure to perform
constitutes any of the following:
(a) A willful failure to deal fairly with the corporation or
its shareholders in connection with a matter in which the director
has a material conflict of interest.
(b) A violation of criminal law, unless the director had
reasonable cause to believe that his or her conduct was lawful or
no reasonable cause to believe that his or her conduct was
unlawful.
(c) A transaction from which the director derived an
improper personal profit.
(d) Willful misconduct.
21
Whether statutory immunity, rather than “codifying” the common law BJR, provides
an additional layer of director protection is the topic of robust scholarly discussion. See
Kenneth B. Davis, Jr., The Business Judgment Rule in Wisconsin, 2015 WIS. L. REV. 475, 485-89
(2015). To what extent the common law BJR continues to provide corporate protections beyond
statutory immunity is not an issue raised by either party, and we will not address it here.

26
No. 2023AP137

the lens of § 180.0828(1) because that statute “provides that a director is not liable
unless the facts describing the director’s actions” constitute one of the exceptions
to that statute. Id., ¶35 (internal quotation marks omitted). Accordingly, the court
held that notice pleading requires plaintiffs to plead facts sufficient to avoid the
statutory immunity provided in § 180.0828(1). Id., ¶43. Hence, to state a claim
against a corporate director for monetary liability arising from a breach of the
director’s fiduciary duty, a plaintiff must plead facts sufficient to plausibly show
that the actions of the director fall under one or more of the exceptions to statutory
immunity under § 180.0828(1). Id., ¶¶36, 39.

¶59 Directors of nonstock corporations are immunized from monetary
liability for a breach of fiduciary duty under WIS. STAT. § 181.0855(1). Because
this statute is identical in all material respects to WIS. STAT. § 180.0828(1) (the
statute analyzed in Data Key), we apply the rule announced in Data Key to our
analysis of § 181.0855(1) in the present case. This statute provides, in relevant
part:

(1) IN GENERAL. … [A] director or officer is not
liable to the corporation, its members or creditors, or any
person asserting rights on behalf of the corporation, its
members or creditors, or any other person, for damages,
settlements, fees, fines, penalties or other monetary
liabilities arising from a breach of, or failure to perform,
any duty resulting solely from his or her status as a director
or officer, unless the person asserting liability proves that
the breach or failure to perform constitutes any of the
following:

(a) A willful failure to deal fairly with the
corporation or its members in connection with a matter in
which the director or officer has a material conflict of
interest.

….

(c) A transaction from which the director or officer
derived an improper personal profit or benefit.

27
No. 2023AP137

(d) Willful misconduct.

Sec. 181.0855(1).22

¶60 Here, the complaint alleges that the defendant directors breached
their fiduciary duties of care, loyalty, and good faith to Riversong “by engaging in
business activities directly competing with Riversong and unreasonably
obstructing Riversong’s attempts to create a long-term care campus in Verona.”
The complaint alleges that the defendant directors are liable for this conduct
pursuant to the three exceptions to the BJR set forth in WIS. STAT.
§ 181.0855(1)(a), (c), and (d). We first address the exception in § 181.0855(1)(a).

1. WISCONSIN STAT. § 181.0855(1)(a).

¶61 The first exception set forth under WIS. STAT. § 181.0855(1)(a)
requires a “willful failure to deal fairly with the corporation or its members in
connection with a matter in which the director or officer has a material conflict of
interest.” For the following reasons, we conclude that the complaint alleges
sufficient facts to state a claim under this exception to statutory immunity.

¶62 First, the complaint alleges that the defendant directors had a
“material conflict of interest” in certain “matter[s].” See id. The complaint
identifies the pertinent “matter[s]” as the defendant directors “engaging in

22
WISCONSIN STAT. § 181.0855(1)(b) addresses a violation of criminal law. There is no
such contention here, so we do not address it in this opinion.

We also observe that WIS. STAT. § 181.0855(1), by its terms, does not apply to an action
against the nonstock corporation itself or to a monetary or other action against a director or
officer of a nonstock corporation that does not arise solely from a breach of his or her fiduciary
duty. In those situations, Wisconsin’s common law BJR may control. See Davis, supra, at
487-88.

28
No. 2023AP137

business activities directly competing with Riversong and unreasonably
obstructing Riversong’s attempts to create a long-term care campus in Verona to
the benefit of Attic Angel and the detriment of Riversong.” With respect to the
defendant directors’ obstruction of Riversong’s attempts to locate alternative sites,
the complaint alleges that “representatives of Marquardt proposed numerous long-
term care campus locations in Verona which were dismissed without significant
explanation or discussion by representatives of Attic Angel serving on the
Riversong Board.”

¶63 The complaint also alleges that the defendant directors had a
“material conflict of interest” in these matters when they were “making decisions
between courses of action that benefit either Riversong or Attic Angel, but not
both.” Although the complaint does not elaborate on this alleged conflict of
interest, it is reasonable to infer from the allegations in the complaint that the
defendant directors’ consideration of proposals for alternative sites for the
Riversong facility involved a conflict between their loyalties to Riversong and
their loyalties to Attic Angel. Specifically, when the defendant directors were
asked to consider the proposals for alternative Riversong sites, they owed a duty of
loyalty to act in Riversong’s best interest in attempting to secure a new site for
developing a Riversong long-term care facility. Yet at the same time they were
considering these proposals, the complaint alleges that the defendant directors, as
Attic Angel board members, also had loyalties to Attic Angel, which was allegedly
working with Forward to develop a potentially competing long-term care facility
in Verona. Indeed, if the defendant directors had approved a site for the Riversong
facility, the MA’s Area of Exclusivity provision could have inhibited Attic Angel
from developing a different long-term care facility in Verona with Forward. As a
result, the defendant directors allegedly had undisclosed divided loyalties on a

29
No. 2023AP137

material issue, i.e., Riversong’s development of a long-term care facility in
Verona. The complaint therefore alleges sufficient facts to plausibly show that the
defendant directors had a “material conflict of interest” when considering and
rejecting various proposals for alternative sites for a Riversong facility. 23

¶64 The Defendants argue that the complaint does not sufficiently allege
that the defendant directors had a “material conflict of interest” because their
affiliation with Attic Angel was a “foundational premise of the joint venture.”
This argument mischaracterizes the complaint’s allegations. As explained, the
complaint alleges that the defendant directors’ affiliation with Attic Angel created
a conflict of interest only in situations where Attic Angel’s interests were contrary
to Riversong’s interests, such as when the defendant directors were considering
proposals for alternative sites for the Riversong facility while Attic Angel was
allegedly working with a separate organization to develop a competing facility.
The complaint does not allege that the defendant directors’ representation of Attic
Angel on the Riversong board of directors created the conflict, as they were
specifically appointed as Attic Angel’s “representatives” on the Riversong board.
Rather, the complaint alleges that the conflict of interest arose when the defendant
directors’ loyalties to Attic Angel diverged from their loyalties to Riversong. See
Quadrant Structured Prods. Co. v. Vertin, 102 A.3d 155, 186 (Del. Ch. 2014) (“If

23
As noted, the complaint appears to allege that the defendant directors also had a
conflict of interest when “engaging in business activities directly competing with Riversong.”
However, the complaint does not allege sufficient facts as to these competing business activities.
For instance, the complaint does not include any allegations that any of the defendant directors
were themselves engaging in competing business activities. Cf. General Auto. Mfg. Co. v.
Singer, 19 Wis. 2d 528, 534, 120 N.W.2d 659 (1963) (holding that a company’s general manager
had a conflict of interest under common law fiduciary duty principles because he was engaged in
a separate business in direct competition with the company). Therefore, we conclude that the
complaint does not allege sufficient facts that the defendant directors’ competing “business
activities” involved a material conflict of interest under WIS. STAT. § 181.0855(1)(a).

30
No. 2023AP137

the interests of the beneficiaries to whom the dual fiduciary owes duties are
aligned, then there is no conflict of interest. But if the interests of the beneficiaries
diverge, the fiduciary faces an inherent conflict of interest.” (citation omitted)).

¶65 Second, the complaint alleges sufficient facts to plausibly show that
the defendant directors’ conduct was a “willful failure to deal fairly” with
Riversong in connection with these matters. Our research reveals that there are no
precedential decisions that have interpreted this requirement in WIS. STAT.
§ 181.0855(1)(a). Nonetheless, courts have interpreted this requirement in another
immunity statute with nearly identical language concerning managers and
members in an LLC. In Gottsacker v. Monnier, 2005 WI 69, ¶31, 281 Wis. 2d
361, 697 N.W.2d 436, our supreme court interpreted the phrase “willful failure to
deal fairly” as meaning that individuals with a material conflict of interest “may
not willfully act or fail to act in a manner that will have the effect of injuring the
[corporation] or its other members.”24 The court explained that “[t]his inquiry
contemplates both the conduct along with the end result, which we view as
intertwined. The inquiry also contemplates a determination of the purpose of the
[corporation] and the justified expectations of the parties.” Id.

24
The court in Gottsacker was interpreting the language of WIS. STAT. § 183.0402(1)(a)
(2001-02). See Gottsacker v. Monnier, 2005 WI 69, ¶31, 281 Wis. 2d 361, 697 N.W.2d 436.
This statute provided in relevant part:

Duties of managers and members. Unless otherwise
provided in an operating agreement:
(1) No member or manager shall act or fail to act in a
manner that constitutes any of the following:
(a) A willful failure to deal fairly with the limited
liability company or its members in connection with a matter in
which the member or manager has a material conflict of interest.

Sec. 183.0402(1)(a) (2001-02).

31
No. 2023AP137

¶66 Courts have also held that this requirement may be satisfied if an
individual with a material conflict of interest misleads or is not honest with the
corporation and its members. For instance, in Marx v. Morris, 2019 WI 34, ¶56,
386 Wis. 2d 122, 925 N.W.2d 112, our supreme court held that there was a
genuine issue of fact as to whether a member of an LLC willfully failed to deal
fairly with the other members of the LLC because he engaged in self-serving
conduct, unfairly influenced a vote of the LLC by failing to give proper notice,
and intentionally misled the other members of the LLC.25 By contrast, in Dixon v.
ATI Ladish LLC, 667 F.3d 891, 896 (7th Cir. 2012), the Seventh Circuit held that
directors who had a material conflict of interest did not willfully fail to deal fairly
with the shareholders because they disclosed their conflict of interest to the
shareholders.26

¶67 In the present case, we conclude that the complaint alleges sufficient
facts to plausibly show that the defendant directors willfully failed to deal fairly
with Riversong by prioritizing their relationship with Attic Angel to the detriment
of Riversong and failing to disclose their material conflict of interest. The
complaint alleges that the defendant directors obstructed Riversong’s attempts to
develop an alternate site for a long-term care facility after Riversong failed to
acquire the initial site. The complaint also alleges that the defendant directors did

25
In Marx, the court interpreted WIS. STAT. § 180.0402(1) (2015-16), a later version of
the statute that was addressed in Gottsacker. Marx v. Morris, 2019 WI 34, ¶56, 386 Wis. 2d 122,
925 N.W.2d 112. Like the version addressed in Gottsacker, the version of this statute addressed
in Marx was, in all relevant respects, identical to WIS. STAT. § 181.0855(1)(a), the statute at issue
here.
26
This case, cited for persuasive value only, interpreted WIS. STAT. § 180.0828(1), the
same statute that our supreme court addressed in Data Key. Dixon v. ATI Ladish LLC, 667 F.3d
891, 896 (7th Cir. 2012). As explained above, this statute is, in all relevant respects, identical to
WIS. STAT. § 181.0855(1)(a), the statute at issue here.

32
No. 2023AP137

not disclose Attic Angel’s business relationship with Forward until after Mauthe
learned of this relationship in May 2020.

¶68 The defendant directors’ alleged conduct fits within the meaning of
“willful failure to deal fairly” as set forth in Gottsacker. First, the allegations in
the complaint indicate that Riversong’s purpose was for the development of a
long-term care facility in Verona. See Gottsacker, 281 Wis. 2d 361, ¶31. Second,
these allegations indicate that “the justified expectations” of Riversong and
Marquardt were that Riversong’s board of directors would continue to search for
alternative sites for the development of a long-term care facility after the
termination of the JVA, even though there was no contractual obligation to do so.
See id. Indeed, according to the allegations in the complaint, the defendant
directors indicated their willingness to search for alternative sites by continuing to
attend Riversong board meetings and considering proposals for alternative sites
after the termination of the JVA. Hence, the complaint plausibly alleges that
Riversong had a justified expectation that the defendant directors would act in
good faith in supporting Riversong’s efforts to secure a site for the development of
a long-term care facility. Finally, Riversong alleges that, by dismissing proposals
for alternative long-term care sites while at the same time pursuing an undisclosed
business relationship with a third party to develop a potentially competing long-
term care facility in Verona, the actions of the defendant directors had “the effect
of injuring the [corporation].” See id. For instance, at the pleadings stage, it is
reasonable to infer that the defendant directors’ alleged conduct may have caused
Riversong to lose a business opportunity and anticipated profits that it would have
received had the defendant directors approved an alternative site for a Riversong
facility.

33
No. 2023AP137

¶69 The defendant directors’ alleged conduct is also consistent with the
interpretation of the phrase “willful failure to deal fairly” as set forth in Marx and
Dixon. As explained above, the complaint alleges that the defendant directors
failed to disclose their conflict of interest when considering alternative sites for the
Riversong facility. It is reasonable to infer that, like the defendant in Marx, this
alleged conduct misled Riversong and the other directors on the Riversong board
of directors and “unfairly influenced” the outcomes of decisions regarding the
alternative sites. See Marx, 386 Wis. 2d 122, ¶56. And, unlike the directors in
Dixon, the defendant directors here did not independently and immediately
disclose their alleged conflict of interest. Instead, according to the complaint, they
considered and rejected alternative sites for the Riversong facility for almost two
years and only disclosed their alleged conflict of interest at the May 2020 board
meeting after a third party alerted Mauthe that Attic Angel had bid on a Verona
development project with another entity, Forward.

¶70 Finally, it is reasonable to infer that the defendant directors’ unfair
conduct was “willful” because they allegedly knew of, or at least were made aware
of, the conflict of interest that could arise between their obligations to Riversong
and their relationship with Attic Angel. See Hannigan v. Sundby Pharmacy,
Inc., 224 Wis. 2d 910, 920, 593 N.W.2d 52 (Ct. App. 1999) (holding that the
meaning of the term “willfully” is ordinarily interchangeable with the term
“knowingly”). As explained above, the complaint alleges that Mauthe advised
Drescher in December 2018 that working with a separate entity to develop and
manage a senior living community in Verona could violate Attic Angel’s
contractual and fiduciary obligations. Hence, Drescher was allegedly aware of a
potential conflict between her duties to Riversong and her duties to Attic Angel.
Indeed, the complaint alleges that all of the defendant directors were on Attic

34
No. 2023AP137

Angel’s board of directors. Based on these allegations, it is reasonable to infer not
only that Drescher was aware of a potential conflict of interest, but also that the
other defendant directors would have been aware of that potential conflict. See
Steven, 249 Wis. at 221 (“The business of a corporation is committed to its
officers and directors.”). This inferred knowledge on the part of the defendant
directors further supports our conclusion that the complaint plausibly alleges that
the defendant directors’ failure to deal fairly with Riversong was “willful.”

¶71 In sum, when accepting as true all facts well-pled in the complaint
and all reasonable inferences therefrom, we conclude that the complaint alleges
sufficient facts to plausibly show that the defendant directors breached their
fiduciary duty pursuant to the exception to the BJR set forth in WIS. STAT.
§ 181.0855(1)(a).

2. WISCONSIN STAT. § 181.0855(1)(c) and (d).

¶72 The complaint also alleges that the defendant directors breached
their fiduciary duties pursuant to the exceptions set forth under WIS. STAT.
§ 181.0855(1)(c) and (d). On appeal, Riversong only addresses these two
exceptions in a conclusory manner and does not develop any arguments that the
complaint states a claim under either of these exceptions. Even after the
Defendants asserted in their response brief that Riversong’s arguments regarding
these exceptions were undeveloped, Riversong made no attempt in its reply brief
to develop these arguments. We will not develop these arguments on Riversong’s
behalf. See State v. Pettit, 171 Wis. 2d 627, 647, 492 N.W.2d 633 (Ct. App. 1992)
(holding that this court may decline to address undeveloped arguments because we
“cannot serve as both advocate and judge”); see also A.O. Smith Corp. v. Allstate
Ins. Cos., 222 Wis. 2d 475, 492, 588 N.W.2d 285 (Ct. App. 1998) (“[A] party has

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to adequately, and with some prominence, argue an issue in order for this court to
decide it. It is insufficient to just state an issue on appeal without providing
support for the position and providing legal authority supporting the position.”).
Therefore, we conclude that Riversong has failed to establish that the complaint
states claims under § 181.0855(1)(c) and (d).

C. Injury.

¶73 Finally, the complaint alleges that the defendant directors’ breach of
their fiduciary duty—i.e., their willful failure to deal fairly with Riversong under
WIS. STAT. § 181.0855(1)(a)—caused injury to Riversong. See Gottsacker, 281
Wis. 2d 361, ¶31 (holding that willfully unfair conduct is that which results in
injury to the corporation); Berner Cheese, 312 Wis. 2d 251, ¶40 (holding that a
breach of fiduciary duty claim requires that the breach of duty caused injury to the
plaintiff). Specifically, the complaint alleges that this unfair dealing was “to the
… detriment of Riversong” and caused at least $75,000 in damages. Although the
complaint does not specify how Riversong suffered these damages, it is reasonable
to infer that the defendant directors’ conduct caused Riversong to lose profits that
it anticipated receiving had the defendant directors approved an alternative site for
the Riversong facility, enabling it to develop a long-term care campus and
generate revenue.

¶74 In sum, we conclude that the complaint states a claim for breach of
fiduciary duty only with respect to the exception under WIS. STAT.
§ 181.0855(1)(a).

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No. 2023AP137

V. Usurpation of Corporate Opportunity.

¶75 Under the “doctrine of corporate or business opportunity,” a person
“who occupies a fiduciary relationship to a corporation may not acquire, in
opposition to the corporation, property in which the corporation has an interest or
tangible expectancy or which is essential to its existence.” Racine v. Weisflog,
165 Wis. 2d 184, 190-91, 477 N.W.2d 326 (Ct. App. 1991). In determining
whether a director has usurped a corporate opportunity, Wisconsin courts apply a
two-prong test. Id. at 193. First, the court must determine “whether a corporate
opportunity in fact exists.” Id. at 193-94. Second, the court must determine
whether the seizure of the opportunity by the director was a breach of fiduciary
duties to the corporation. Id. at 195-96. Under the second prong, the court
determines whether any equitable factors exist that show that the director acted in
conformity with their fiduciary duties when they seized the opportunity. Id.; see
also Community Nat’l Bank v. Medical Ben. Adm’rs, LLC, 2001 WI App 98,
¶10, 242 Wis. 2d 626, 626 N.W.2d 340.

¶76 In the present case, the complaint identifies the pertinent “corporate
opportunity” as “the opportunity to invest in and manage the long-term care
project initiated by Forward.” The complaint alleges that the board members
usurped this opportunity “[b]y failing to disclose” this opportunity. We conclude
that the complaint fails to state a claim because there are no factual allegations that
the defendant directors personally acquired property or otherwise took the
corporate opportunity for themselves. See Racine, 165 Wis. 2d at 191 (“[A]
director cannot be allowed to profit personally by acquiring property that he [or
she] knows the corporation will need or intends to acquire.” (emphasis added));
see also Bump Pump Co. v. Waukesha Foundry Co., 238 Wis. 643, 653, 300
N.W. 500 (1941) (rejecting application of the corporate opportunity doctrine

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No. 2023AP137

where the director did not “divert[] any business to [him]self that properly
belonged to the corporation”). Rather, the complaint merely alleges that the
defendant directors failed to disclose the investment opportunity. This allegation
alone is not enough to satisfy the corporate opportunity doctrine.

¶77 On appeal, Riversong argues that the complaint stated a claim
because “it is plausible, if not likely, that discovery will show that Attic Angel and
the Board members acting on its behalf secured identifiable personal gains as a
result of Attic Angel’s conduct in forming a relationship with Forward.”
According to Riversong, it could not provide the specific details of the alleged
corporate opportunity in the complaint because the defendant directors and Attic
Angel intentionally kept that information secret. This argument fails because a
motion for failure to state a claim requires the plaintiff to plead factual allegations
in the complaint that, if true, demonstrate that the plaintiff is entitled to relief. See
Cattau, 386 Wis. 2d 515, ¶6. Because the complaint does not include any factual
allegations that the defendant directors personally acquired a corporate
opportunity, Riversong fails to state a claim for usurpation of corporate
opportunity.27

27
We note that the doctrine of corporate opportunity is a facet of the fiduciary duties of
loyalty and good faith. Racine v. Weisflog, 165 Wis. 2d 184, 190-91, 477 N.W.2d 326 (Ct. App.
1991). As explained earlier, our supreme court has held that a complaint states a claim against a
corporate director for monetary liability arising from their breach of a fiduciary duty only if it
pleads sufficient facts to show that the director’s acts fall within one of the four exceptions set
forth in WIS. STAT. § 181.0855(1) (or any of the analogous statutes governing other types of
corporations). Data Key, 356 Wis. 2d 665, ¶36. Based on this holding in Data Key, we question
whether the cause of action for usurpation of corporate opportunity must meet the pleading
requirements of § 181.0855 or other analogous immunity statutes. Our research reveals that no
Wisconsin court has addressed this issue. Nonetheless, we need not resolve this question because
Riversong’s corporate opportunity claim fails on other grounds.

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No. 2023AP137

CONCLUSION

¶78 For the foregoing reasons, the order of the circuit court is affirmed in
part, reversed in part, and the cause is remanded 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.

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