ROBERT L. KROENLEIN TRUST by and through DEBORAH ALDEN, Successor Trustee, and CHUGWATER BREWING COMPANY, INC., a Wyoming Corporation, Appellants (Plaintiffs),
GARY BRUCE KIRCHHEFER, COMMODORE BAR, INC., RICK L. BOWEN, SILVER DOLLAR BAR OF LUSK, LLC., and LARRY H. HALLIGAN, Appellees (Defendants)
[Copyrighted Material Omitted]
Appeal from the District Court of Goshen County. The Honorable William J. Edelman, Judge.
Representing Appellants: Patrick J. Crank of Crank Legal Group, P.C., Cheyenne, WY.
Representing Appellees: Matthew R. Sorenson and Madison M. Brown of Daly & Sorenson, LLC, Gillette, WY for Appellee Gary B. Kirchhefer; and Frank J. Jones, Wheatland, WY, for Appellees Commodore Bar, Inc. and Rick L. Bowen; and Robert Todd Ingram and Scott J. Olheiser of Ingram/Olheiser, P.C., Casper, WY, for Appellees Silver Dollar Bar of Lusk, LLC and Larry R. Halligan. Argument by Ms. Brown.
Before BURKE, C.J., and HILL,[*] KITE, DAVIS, and FOX, JJ.
[¶1] Plaintiffs, the Robert L. Kroenlein Trust and Chugwater Brewing Co., Inc., brought an action against Defendants alleging claims for conversion and fraud arising out of Defendant Gary Kirchhefer's alleged theft of beer from Plaintiffs' store and his subsequent sale of that stolen beer to the other named Defendants. The district court found Plaintiffs' claims barred by the governing statutes of limitation and granted Defendants' motion for summary judgment. In so ruling, the district court applied the discovery rule, found no disputed issues of material fact, and concluded that based upon when Plaintiffs knew or should have known of their losses, the four-year statutes of limitation for fraud and conversion barred their action. The district court further concluded that the doctrine of collateral estoppel barred Plaintiffs from litigating the question of when the statutes of limitation began to run because a federal court had dismissed Plaintiffs' federal claims as time-barred based on application of the discovery rule.
[¶2] On appeal, Plaintiffs contend that the district court erred in applying the discovery rule to the fraud and conversion statutes of limitation. Alternatively, they contend that if the discovery rule does apply, the doctrine of collateral estoppel is inapplicable and disputed issues of fact precluded summary judgment. We hold that the discovery rule does apply to the fraud and conversion statutes of limitation. We agree with Plaintiffs, however, and conclude that the doctrine of collateral estoppel does not apply and that disputed issues of fact precluded summary judgment. We therefore reverse.
[¶3] Plaintiffs frame the issues on appeal as follows:
I. Does the " discovery rule" apply to W.S. § 1-3-106 which explicitly provides that a plaintiff's cause of action does not accrue until " the wrongdoer is discovered?"
II. Did the trial court correctly rely on the doctrine of collateral estoppel in granting summary judgment?
III. Has the trial court failed to follow decisions of this Court by failing to recognize that Defendants engaged in a series of continuing tortious acts?
[¶4] J& B Package Liquor (J& B) is a liquor store located in Torrington, Wyoming. J& B was originally owned by the Robert L. Kroenlein Trust (Kroenlein Trust), and prior to November 2004, was operated and managed by Robert Kroenlein and his wife, Betty Kroenlein. In November 2004, both Robert and Betty Kroenlein passed away and their daughter, Deborah Alden, became the successor trustee of the Kroenlein Trust. The Kroenlein Trust assets were distributed in December 2005, and at that time, Ms. Alden received ownership of J& B. In March 2006, Ms. Alden transferred ownership of J& B to Chugwater Brewing Company, Inc., a Wyoming corporation owned by Ms. Alden and her husband, Eric Alden.
[¶5] Eric Alden is an attorney, and at the time of his in-laws Robert and Betty Kroenlein's deaths in 2004, he was serving as the Platte County Attorney and living and
working in Wheatland, Wyoming. Mr. Alden acted as attorney for the estates of Robert and Betty Kroenlein, and from the date of their deaths in November 2004 until his term as Platte County Attorney ended at the close of 2006, Mr. Alden oversaw J& B's operations from Wheatland. In particular, from November 2004 to the close of 2006, Mr. Alden would usually speak daily with J& B's manager, Margaret Hauf, and on weekends he would travel to Torrington to check in on the store. Mr. Alden also met with J& B's accountant every few months during this period.
[¶6] In mid-2005, Mr. Alden found inconsistencies in some of J& B's accounting reports. Specifically, Mr. Alden observed that in some months, the amounts J& B was spending on beer purchases exceeded the revenue J& B derived from beer sales. These discrepancies continued off and on through 2005 and 2006, and Mr. Alden took a number of steps in an effort to identify the cause of the beer losses, including discussions with J& B's bookkeeper, review of the manner in which beer sales were keyed into the register and adjustments to that procedure, review of beer delivery schedules and its impact on revenue reports, and review of video taken by J& B's existing videotape recording system.
[¶7] In January 2007, Mr. Alden moved to Torrington. J& B's accounting reports continued to reflect beer shortfalls, and Mr. Alden continued to investigate the cause of these losses. J& B had one distributor that delivered Coors products to the store and another distributor, Orrison Distributing (Orrison), that delivered Budweiser and Miller products to the store. By the end of the summer of 2007, Mr. Alden had concluded that the shortfall stemmed from the Orrison deliveries. In October 2007, Mr. Alden had additional surveillance cameras installed to monitor the back of the store where Orrison deliveries were made. With that surveillance system, Mr. Alden discovered that Defendant Gary Kirchhefer, an Orrison employee, was stealing beer paid for by J& B and intended for delivery to J& B. In its order dismissing Plaintiffs' federal claims, the federal district court described the scheme to which Defendant Kirchhefer admitted:
As the beer salesman, Kirchhefer would order (presale) the beer for J & B Liquors the day before it was delivered, making an electronic order via his computer to Orrison. The following day a delivery truck driver for Orrison would off-load the beer in the alley next to the back door of J & B Liquors. Kirchhefer would then arrive and dismiss the delivery driver and " kindly" take what J & B actually needed into the store coolers and put the excess beer, ordered and paid for by J & B, into his van. Kirchhefer would then take the beer he had stolen from J & B Liquors and give it away to customers in exchange for keeping and ordering some of the less popular products, such as Tequiza or sell it.
Robert L. Kroenlein Trust v. Kirchhefer, 2013 WL 1337385, * 2 (D. Wyo. 2013) (citations omitted).
[¶8] On August 15, 2011, Plaintiffs filed a complaint against Defendants in the federal district court for the district of Wyoming. The complaint asserted federal claims for violation of the Racketeer Influenced and Corrupt Organization Act (RICO) and state claims for conversion and fraud. On March 31, 2013, the federal district court granted Defendants summary judgment on the federal claims, finding that as a matter of law those claims were time-barred. The court reasoned:
Plaintiffs assert that it was only upon Kirchhefer's arrest and subsequent interview that they learned of Bowen and Halligan's " involvement" and scheme. However, as noted in Dummar v. Lummis, 543 F.3d at 621, a plaintiff need not be aware of the pattern of racketeering activity before the statute of limitations begins to run. Moreover, Plaintiffs' argument was expressly, if not implicitly rejected in Rotella v. Wood, 528 U.S. 549, 120 S.Ct. 1075, 145 L.Ed.2d 1047 (2000) (discovery of injury caused to the business triggers start of statute of limitations not discovery of other elements of claim--such as pattern of RICO activity). The undisputed facts establish that in the Fall of 2005 Plaintiffs were aware of the
injury to their business and, had they then exercised due diligence, they would have known of their cause of action. Accordingly, having failed to bring their RICO claims until August 15, 2011, they are barred by the four-year statute of limitations.
Robert L. Kroenlein Trust, 2013 WL 1337385, * 8.
[¶9] The federal court entered its summary judgment order on March 31, 2013. The federal court's order did not address the statutes of limitation for the state law claims for conversion and fraud, and the court dismissed those claims without prejudice. Kroenlein, 2013 WL 1337385, * 9. On April 10, 2013, Plaintiffs filed a complaint in the state district court for the Eighth Judicial District asserting claims against Defendants for conversion and fraud. Through their complaint, Plaintiffs alleged that Defendant Kirchhefer stole approximately $337,326.00 in Orrison products from J& B during the years 2002 through 2007.
[¶10] Defendants filed separate motions for summary judgment and joinders in each others' motions, and then on June 9, 2014, Defendants filed a joint motion for summary judgment. They argued: 1) Plaintiffs' fraud claim was barred by the statute of limitations because Plaintiffs could have, with a reasonably diligent investigation, discovered the fraud as early as 1997; 2) Plaintiffs' conversion claim was barred by the statute of limitations because they could have discovered the wrongdoing as early as 2002; 3) the doctrine of continuing torts does not apply; and 4) the doctrine of collateral estoppel bars Plaintiffs from re-litigating the discoverability of the beer conversion and the failure to exercise reasonable diligence to discover the beer theft. Plaintiffs opposed the summary judgment motions, asserting, among other arguments, that the discovery rule does not apply to the statutes of limitation for conversion and fraud and that the Wyoming Supreme Court decisions holding otherwise should be overturned.
[¶11] On October 14, 2014, the district court entered its Order Granting Summary Judgment. The district court rejected Plaintiffs' argument concerning the applicability of the discovery rule, and without recitation of the particular undisputed facts and supporting evidence the court found material to its decision, the court concluded:
Plaintiffs knew that they had been injured years before they made any efforts to discover by whom. In fact, they were put on notice by their accountant -- arguably a rather reliable source of information in matters involving discrepancies in bookkeeping -- several years before they took any steps to locate the source of the discrepancy. It took several additional years for them to take inventory of their goods, yet Plaintiffs state had it not been for their " extraordinary investigative efforts" the wrongdoer would never have been discovered. This Court reaches the same conclusion as the Federal District Court regarding the facts of this case and the discovery of Defendant Kirchhefer's actions. The scheme employed by Kirchhefer was not complex, certainly was not carried out in hiding, and was easily discoverable by Aldens, had they chosen to look. Thus, this Court finds the statute of limitations has run, because the Plaintiffs knew or should have known of the claim well before four years prior to commencement of this action.
Moreover, this Court holds Plaintiffs are precluded from litigating the above issues anyway as they were recently determined by the Federal District Court, and such determination triggered the application of the doctrine of collateral estoppel. The Wyoming Supreme Court has noted collateral estoppel applies when " a right, question or fact distinctly put in issue and directly determined by a court of competent jurisdiction ... cannot be disputed in a subsequent suit between the same parties or their privies." Goodman v. Voss, 2011 WY 33, 248 P.3d 1120, 1126 (Wyo. 2011). In the present case, the parties to the Federal action were identical, the issues of both the discovery of the fraud and the actions of the parties were determined on the merits by the Federal District Court after affording the parties an opportunity to be heard; therefore, this Court is
not at liberty to allow Plaintiffs the opportunity to ...