O R D E R
For more than a decade, a father and son have been feuding over control and management of a family-owned car dealership. The closely held company that owns the dealership has two shareholders: the trust of the father and mother, which is the minority shareholder; and the son, who is the majority shareholder. The trustees of the
NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with Fed. R. App. P. 32.1
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trust brought this action against the son and the company (at least the third such lawsuit between the two sides). The trustees alleged that the son engaged in unauthorized self-dealing. After two rounds of summary judgment motions and a bench trial, the district court found in favor of the trust, entered judgment against the company and the son, ordered dissolution of the company, and placed it into receivership.
On appeal, the son challenges the district court's findings regarding the damages the trust suffered due to his violations of Wisconsin law. These findings form the basis of the judgment entered against the company, which is no longer a party to this appeal. The son also challenges the judgment against him for civil theft. He argues that the district court clearly erred in finding he had the requisite specific intent and contends that claim preclusion bars the court's award of damages in part. We affirm.
I
In 1976, Carl Schneider formed Hybrid Car Store, Inc. (the "Company"), which owns and operates a car dealership in La Crosse, Wisconsin. About a decade later, Chris Schneider, Carl's son, became the Company's general manager. (For convenience's sake, we will refer to them by their first names.)
Carl granted Chris a 25 percent interest in the Company; Carl and his wife, Narcelle Schneider, each retained a 37.5 percent interest. Eventually, Carl and Narcelle established an estate plan and created The Carl and Narcelle Schneider Trust. Carl and Narcelle each placed their interests in the Company into the Trust. The Trust consequently became the majority shareholder of the Company with a 75 percent interest at the time. The estate plan also established certain restrictions on the transfer of the Company's stock.
A
The feud giving rise to this legal dispute began in 2008 when Narcelle removed her 37.5 percent interest in the Company from the Trust and transferred it to Chris, thereby rendering Chris the majority shareholder of the Company with a 62.5 percent interest. Carl sued Chris and the Company in state court in 2014, alleging that the stock transfer violated the estate plan and that Chris had violated his fiduciary duty to the Company and to the Trust as the minority shareholder.
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Disagreeing with Carl, the state court found that Chris had not violated his fiduciary duty to the Company or the Trust. However, the court held that Narcelle's transfer had violated certain agreements related to Chris as well as Narcelle's estate plan. As a result, the court entered judgment for the Trust and against Chris personally, ordering him to pay the value of the ownership interest that Chris had improperly received from Narcelle ($562,500). It also ordered him to pay the Trust $56,250 for dividends that he had wrongfully withheld from it and interest. After the state-court action was resolved, Chris was unable to pay for the judgment. And so, he had the Company (over the Trust's objection) issue him a loan of $281,196.61 and a dividend payment of $281,303.39 to help pay the judgment. He then provided the Trust with a $562,500 cashier's check from the Company and a $56,250 check drawn from the Company's account.
About two years later, Chris also had the Company indemnify him for the legal expenses he had incurred in the state-court action, which amounted to $395,574.81. He used the funds to pay off the loan he owed to the Company and took the remainder in cash. Chris did not pay back the $56,250.
In the meantime, Carl, individually and on behalf of the Trust, brought another action against Chris and the Company in 2015 in the Western District of Wisconsin. As relevant to that action, the dealership leased its land from the Trust. In 2012, the Company repaved the parking lot and replaced the building's roof, and Carl alleged that Chris had improperly assessed those expenses to Carl personally in the form of an account receivable, instead of assessing the expenses to the Company, which was responsible for repairs on the property. Carl later filed a motion to voluntarily dismiss that case, and the court dismissed it with prejudice.
In 2018, Chris wanted to sell the dealership to Dahl Automotive. During the negotiations, the Company's lease expired, and it agreed to a one-year renewal of the lease at $40,000 per month in rent. Chris, convinced that Dahl would object to such a high lease rate, negotiated a side deal with Dahl (unbeknownst to the Trust) to provide Dahl $15,000 in monthly rent subsidies.
In March 2019, Dahl purchased the dealership and substantially all of its assets. Chris then arranged to have the Company pay the rent subsidies to Dahl, rather than paying it out of his own pocket. By the end of 2021, Chris still had not distributed the proceeds from the sale to the Company's shareholders.
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B
Carl and his daughter, Mary Schneider, in their capacities as trustees of the Trust, filed this suit on behalf of the Trust against Chris and the Company in December 2019 in the Western District of Wisconsin.1As relevant here, the Trust alleged that Chris had
(1) caused the Company to issue improper loans to him in violation of Wisconsin law;
(2) breached his fiduciary duty to the shareholders as an officer, director, and majority shareholder of the Company by improperly issuing those loans, structuring the sale of the dealership to Dahl to benefit himself, and failing to distribute proceeds from the sale of the dealership to the shareholders; and (3) committed civil theft by using Company funds to issue the loans. For relief, the Trust requested the judicial dissolution of the Company, declaratory judgment, the appointment of a receiver, and an equitable accounting.
After two rounds of summary judgment motions, the district court ruled that Chris had violated Wisconsin law by issuing Company loans to himself without shareholder approval. The court also held that Chris had violated his fiduciary duty to the Trust in several ways. As for damages, however, the court determined that factual disputes necessitated a trial.
Before the damages trial, the Trust moved to amend its complaint based on newly discovered evidence. According to the Trust, in 2021, Chris instructed the Company accountant to create a promissory note, purportedly from Carl, to cover the roof and parking lot expenses from 2012, plus interest, even though Carl had no knowledge of it. As the Trust tells it, Chris contrived to have the Trust pay this fraudulent promissory note by issuing a dividend from the Company and applying the Trust's share of the dividend to the note while issuing a corresponding dividend to himself. The district court denied the Trust's motion but permitted the parties to present evidence of these issues at trial.
After a bench trial, the district court determined that Chris had improperly taken payments or dividends from the Company as follows:
• $56,250 to satisfy a portion of the state-court judgment against him;
• $387,625.81 for legal fees Chris incurred in the state-court action;
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• $191,500 in rent subsidies Chris had promised to Dahl;
• $197,580 in dividends to the Trust that Chris applied to the 2021 fabricated promissory note; and
• As-yet undetermined amounts Chris received from the Company for legal fees he incurred litigating the present action. The district court treated these payments to Chris as constructive dividends from the Company, which in turn triggered the Company's obligation to pay corresponding dividends to the Trust. Thus, the district court entered a judgment ordering the Company (but not Chris) to pay $553,905.49 to the Trust.2 In addition to requiring the Company to pay these amounts to the Trust, the district court found Chris personally liable for civil theft as to the $56,250 component of the state-court judgment, the Dahl rent subsidies, and the dividend used to pay off the fabricated promissory note. As a result, the judgment required Chris to pay the Trust exemplary damages equal to actual damages for the three incidents, which totaled $321,330. Moreover, the court ordered Chris to reimburse the Company for the legal fees it incurred for defending the suit.
Lastly, as part of the judgment, the district court ordered that the Company be dissolved, its assets be distributed to the shareholders, and Rebecca DeMarb be appointed as receiver to handle the Company's affairs during its dissolution. Chris subsequently filed a motion to amend the judgment to correct certain errors not relevant here, and the court granted the motion and entered an amended judgment. After the amended judgment was entered, Chris's counsel filed a notice of appeal on behalf of Chris and purportedly the Company. The Company's receiver, however, contested Chris's right to appeal the judgment on behalf of the Company. The district court agreed with the receiver, finding that Chris lacked the authority to file an appeal on the Company's behalf. The receiver then intervened in this appeal, and the Trust and the receiver moved to dismiss the appeal, arguing again that the receiver was the only one that had the authority to litigate in the Company's name. We agreed and dismissed the Company from this appeal, leaving only Chris's individual-capacity claims. The parties did not dispute our jurisdiction in their merits briefing. But less than
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a week before oral argument, the Trust submitted a supplemental brief challenging Chris's standing to appeal the amended judgment to the extent it ordered the Company (and not Chris) to pay dividends to the Trust. We asked the parties to provide supplemental briefing on this issue.
II
We begin by addressing our jurisdiction. See Fischer v. Magyar Államvasutak Zrt.,
892 F.3d 915, 918 (7th Cir. 2018) ("[W]e remain a court of limited jurisdiction. We must ensure our authority over a specific case or controversy covers the party seeking our review."). Of particular relevance here, we are mindful that "[t]here are both constitutional and prudential limitations on the jurisdiction of the federal courts." G & S Holdings LLC v. Cont'l Cas. Co., 697 F.3d 534, 540 (7th Cir. 2012) (citing Warth v. Seldin,
422 U.S. 490, 498 (1975)). The former "enforces the Constitution's case-or-controversy requirement" while the latter "embodies judicially self-imposed limits on the exercise of federal jurisdiction." Winkler v. Gates, 481 F.3d 977, 979 (7th Cir. 2007) (citation modified).
As an initial matter, the Trust contends that because the Company has been dismissed from this appeal, we lack jurisdiction to review the portion of the amended judgment that requires the Company to pay the Trust. But the fact that the court has ordered the Company to pay the Trust does not necessarily preclude Chris's standing to appeal that judgment. See Accident Fund Ins. Co. of Am. v. Custom Mech. Constr., Inc., 49 F.4th 1100, 1106 (7th Cir. 2022) (concluding third-party defendant had standing to appeal even though it was not bound by the judgment, because it had sufficient stake in the resolution of the action).
"Standing to appeal requires an injury caused by the judgment …." Id. (internal quotation marks omitted). And, as the Trust concedes, Chris's interest as a shareholder of the Company will be diminished when the Company satisfies the judgment. Presumably, for this reason, the Trust does not contest Chris's Article III standing on appeal. See Rawoof v. Texor Petroleum Co., 521 F.3d 750, 756 (7th Cir. 2008) (concluding that the appellant had satisfied "the minimum requirements of constitutional standing by virtue of an asserted indirect injury" as the "sole shareholder" of corporation). But, as we have noted, "in addition to constitutional-standing requirements … there are prudential limitations on a federal court's power to hear cases." Id. at 756 (citations omitted). And "[o]ne well-established prudential-standing limitation is the principle that a litigant cannot sue in federal court to enforce the rights of third parties."
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Id. at 757 (citations omitted); see also G & S Holdings, 697 F.3d at 540-41 (same). A particular iteration of this doctrine is the shareholder-standing rule, which declares that
"a shareholder generally cannot sue for indirect harm he suffers as a result of an injury to a corporation." Rawoof, 521 F.3d at 757 (citations omitted). Whether Chris's purported harm from the amended judgment against the Company is direct or derivative is determined by the law of the state of incorporation— in this case, Wisconsin. See Massey v. Merrill Lynch & Co., Inc., 464 F.3d 642, 645 (7th Cir. 2006). And under Wisconsin law, "a corporation's shareholders do not have standing to bring a direct claim seeking redress for an injury to the corporation, but instead the claim for an injury to a corporation belongs to the corporation itself." Arrowhead Sys., Inc. v. Grant Thornton LLP, 394 Wis. 2d 840, ¶ 62 (Wis. Ct. App. 2020) (citing Rose v. Schantz, 201 N.W.2d 593, 597 (Wis. 1972)).
This rule would appear to scotch Chris's ability to challenge the judgment against the Company. Chris, however, invokes a widely recognized exception to the shareholder-standing rule that allows a shareholder to vindicate the corporation's interest "if the corporation's management has refused to pursue the action for reasons unrelated to good-faith business judgment." Rawoof, 521 F.3d at 757. Even assuming that Wisconsin recognizes such an exception, Chris has not established that the exception applies here. In his view, the receiver's refusal to prosecute the appeal illustrates that the Company's failure to contest the amended judgment is "for reasons other than good-faith judgment." This is particularly so, he argues, because he offered to pay for the costs of the appeal. But even if this were accurate (and there is some evidence indicating otherwise), Chris offers no reason why this alone is enough to establish bad faith on the part of the receiver. Chris also relies on another exception to the shareholder-standing rule that
"allows a shareholder to pursue an action originating from an injury to the corporation if he has suffered a direct, personal injury independent of the derivative injury common to all shareholders." Rawoof, 521 F.3d at 757; see Park Bank v. Westburg, 832 N.W.2d 539, 547, ¶ 40 n.6 (Wis. 2013) (recognizing direct action for shareholders seeking relief "due to injuries that the plaintiff individually suffered"). In Chris's view, the amended judgment against the Company causes him a direct and personal injury because the district court ordered the Company to make a payment to the Trust and not to him. But this logic suffers from several flaws.
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For one, Chris cannot credibly argue that he was injured by the relief the district court granted to the Trust to rectify harm that he himself caused. For another, we cannot discern any harm to Chris flowing from the relief provided to the Trust beyond the diminished value of his shares in the Company. And to the extent that he argues that the diminution of his shares amounts to a personal injury because the Company is closely held, that argument has been squarely rejected by Wisconsin courts. See Arrowhead Sys., 394 Wis. 2d at ¶ 72 (observing "firm adherence by our [state] supreme court to the shareholder-standing rule even when the corporation has but one shareholder").3
In reality, what Chris complains about is an injury to the Company. Indeed, his brief concedes as much, stating that "Paragraph 1 of the Amended Judgment may technically injure the Company as it orders money to be paid from it[.]" As a result, we conclude that he lacks prudential standing to challenge the provisions of the amended judgment directed at the Company.
III
Turning to the portion of the amended judgment that applies to Chris personally, he contests the judgment on two grounds. First, he argues that the results of the prior federal litigation between him and Carl over the dealership parking lot and roof precluded the Trust from seeking any damages from Chris related to those improvements. Second, he contends that the district court's finding that he committed civil theft was clearly erroneous. "We review the district court's legal conclusions following a bench trial de novo and its factual findings for clear error." PNC Bank, Nat'l Ass'n v. Boytor, 109 F.4th 495, 503 (7th Cir. 2024).
A
Chris argues that the doctrine of claim preclusion barred the district court from awarding damages to the Trust for "the dealership improvement issue" raised in the prior federal action. To determine whether the damages award is claim-precluded, we apply Wisconsin law. See Ghelf v. Town of Wheatland, 132 F.4th 456, 470 (7th Cir. 2025).
"Claim preclusion bars all subsequent actions between the same parties as to all matters
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that were litigated or that might have been litigated in the former proceeding." Id. (quoting Adams Outdoor Advert. Ltd. P'ship v. City of Madison, 56 F.4th 1111, 1117 (7th Cir. 2023)). In general, "three elements must be satisfied for claim preclusion to apply:
(1) an identity of the parties or their privies in the prior and present lawsuits; (2) a final judgment on the merits in the prior action; and (3) an identity of the causes of action in the two suits." Id. (internal quotation marks omitted).
Chris's argument falters on the third element. Wisconsin has adopted the
"transactional approach" to determining whether there is an identity of claims between two suits. Kruckenberg v. Harvey, 694 N.W.2d 879, 886, ¶ 25 (Wis. 2005). A transaction consists of "a common nucleus of operative facts." Id. at ¶ 26. "Under this analysis, all claims arising out of one transaction or factual situation are treated as being part of a single cause of action, and they are required to be litigated together." Parks v. City of Madison, 492 N.W.2d 365, 368 (Wis. Ct. App. 1992).
Recall that in 2015, Carl filed a lawsuit against Chris, alleging that Chris improperly assessed the expenses of certain work performed at the dealership in 2012 to Carl personally in the form of an account receivable. The disputed promissory note, however, was executed by Chris in 2021, and Chris had the Company pay the distribution related to that promissory note that year. Thus, although the note was ostensibly related to the work done in 2012, Chris's conduct that gave rise to the claim for civil theft occurred many years later, thereby "creat[ing] a new set of operative facts." Fed. Nat'l Mortg. Ass'n v. Thompson, 912 N.W.2d 364, 366, ¶ 6 (Wis. 2018); see Menard, Inc. v. Liteway Lighting Prods., 698 N.W.2d 738, 751, ¶ 41 (Wis. 2005) ("Material operative facts occurring after the decision of an action with respect to the same subject matter may in themselves, or taken in conjunction with the antecedent facts, comprise a transaction which may be the basis of a second action not precluded by the first.") (quoting Restatement (Second) of Judgments § 24 cmt. f. (A.L.I. 1982)); Fed. Nat'l Mortg. Ass'n, 912 N.W.2d at 366, ¶ 7 (no identity of causes of actions where "[t]he borrower's default resulting from the borrower's failure to make an installment payment due after dismissal of the first lawsuit was not and could not have been litigated in the first lawsuit").4
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B
Chris next argues that the district court clearly erred in finding that he had committed civil theft under Wisconsin Statutes §§ 895.446 and 943.20(1)(b), when he obtained $56,250 from the Company to help satisfy the state-court judgment; directed the Company to pay the Dahl rent subsidies; and applied a dividend declared to the Trust to the fabricated 2021 promissory note. As he sees it, the district court ignored his sincerely held beliefs about his authority to take these actions as well as his attempts to repay the amounts in question.
Section 895.446 grants a private right of action to any person who suffers damage or loss as a result of intentional conduct that is prohibited by various theft-related criminal statutes, including § 943.20. See Wis. Stat. § 895.446. The statute also provides for exemplary damages when the elements of § 943.20 are proven by a preponderance of the evidence. Id. § 895.446(2), (3)(c). In turn, theft under § 943.20(1)(b) requires, in relevant part, that the defendant acquired possession of money "by virtue of his office, business, or employment" and "intentionally use[d] … such money … without the owner's consent, contrary to his or her authority, and with intent to convert to his or her own use or to the use of any person except the owner." Wis. Stat. § 943.20(1)(b). First, the district court found that Chris knowingly used corporate funds to pay $56,250 of the state-court judgment. Chris argued that the state-court judgment should have been entered against the Company, but the district court found that, even if this were the case, Chris should have sought to amend the judgment, not "usurp corporate resources to pay it." In any event, the court noted that Chris's "post-trial explanation"
was "unsupported by the evidence." Chris "knew that the obligation to pay the $56,250 was his, not the company's." Given the trial record, the district court's findings were not clearly erroneous.
Second, the district court found that Chris knowingly used corporate funds to pay the rent subsidies to Dahl without the Company's consent. The court reasoned that because "Chris consciously kept the rent subsidy secret," he "knew that it was improper to use corporate funds to pay the rent subsidy." Chris maintains that he was only ensuring that the Company would meet its rental obligations. But, as the court observed, the Company "did not have any obligation to pay the $15,000 monthly rent subsidy for Dahl; Chris himself did." This finding too was not clearly erroneous. Third, the district court found that Chris knowingly took an improper dividend to cover the promissory note he had fabricated in Carl's name to cover the cost of the
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roof and parking lot work in 2012. Chris argues that the district court ignored his belief that the dismissal of the federal action justified his assessment of the debt against the Trust. This is incorrect. In fact, the court recognized that Chris "may have believed he was justified taking reimbursement for the roof repair and paving." Nevertheless, "he knew," the court found, "that the amounts were disputed and that he did not have the authority to simply take the money from the [Company] with an illegitmate dividend derived from a phony promissory note." These determinations too find adequate support in the record.
Chris next contends that the district court ignored his attempt to pay these funds back to the Company. But, as the district court noted, intent to repay is immaterial for purposes of § 943.20(1)(b). See Wis. Jury Intructions-Criminal 1444, cmt. 7 (2022) ("Under section 943.20(1)(b), an intent to pay back the money or restore the property at a later time is not a defense even though such intent existed contemporaneously with the act of conversion.").
Accordingly, Chris has failed to demonstrate that the district court clearly erred in finding that he committed civil theft under Wisconsin law.5
C
Finally, Chris argues that we should reverse the district court's award of the attorneys' fees and costs incurred by the Trust during the proceedings below. But Chris's notice of appeal was filed before the district court entered its fees order, and Chris neither amended the notice of appeal nor filed a supplemental one. We therefore decline to consider his objections to the fees order. See Leahy v. Bd. of Tr. of Cmty. Coll. Dist. No. 508, 912 F.2d 917, 923 (7th Cir. 1990).
That said, we will remand the case for the limited purpose of determining the amount of attorneys' fees and costs the Trust incurred on appeal. See Helfrich v. Carle Clinic Ass'n, P.C., 328 F.3d 915, 919 (7th Cir. 2003) ("When fees have been awarded in the district court on the authority of a fee-shifting statute, the costs of appellate work are automatically shifted.") (citing Comm'r of INS v. Jean, 496 U.S. 154, 162-63(1990)).
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* * * For the foregoing reasons, we decline to review the amended judgment to the extent it ordered the Company to pay damages to the Trust, and we AFFIRM the amended judgment entered against Chris Schneider. We REMAND this case to the district court to entertain the Trust's requests for the attorneys' fees and costs incurred for this appeal.
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