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Mrozek v. Intra Financial Corp.6/9/2005
The court of appeals in the case before us also relied on Sure-Snap Corp. v. State Street Bank & Trust Co., 948 F.2d 869 (2d Cir. 1991), for its conclusion that claim preclusion bars PMI's negligence claim against Mallery. Sure-Snap was a Chapter 11 proceeding wherein the debtor filed objections to the banks' proofs of claim. Id. at 871. The validity of the banks' liens was litigated and upheld in the bankruptcy proceeding and on appeal to the district court. Id. When the final bankruptcy hearing was held in Sure-Snap's bankruptcy, "no pending claims [were] alleged against the banks." Id. Almost one year after the debtor's plan of reorganization was confirmed by the bankruptcy court, Sure-Snap brought lender liability claims against the banks. Id. at 872. The court concluded that the lender liability claims were the same cause of action that had already been litigated in bankruptcy court when Sure-Snap objected to the validity of the banks' liens, and it applied claim preclusion dismissing the action. Id. Aside from the significant differences in a Chapter 11 proceeding, where the debtor is in possession of the assets during the bankruptcy and subsequent reorganization, and a Chapter 7 proceeding, where an independent trustee is named to serve the bankruptcy estate, Sure-Snap is a garden variety claim preclusion case. Sure-Snap litigated its claims against the banks once, and it had no right to do so again in a different forum. DePratt, 113 Wis. 2d at 311. PMI has never litigated its claim against Mallery.
We conclude that Morlan and Dewsnup provide the better reasoned view of the effect that a trustee's abandonment of property has on a Chapter 7 debtor's ability to proceed on a scheduled claim that has not been subject to administration. An abandoned claim "reverts to the debtor and stands as if no bankruptcy petition was filed." Dewsnup, 908 F.2d at 590; see also Mundell v. Mundell, 858 So. 2d 768, 771-72 (La. Ct. App. 2003) (concluding that claims that were abandoned by the trustee in bankruptcy could not form the basis for claim preclusion). Accordingly, we conclude that the order closing the bankruptcy proceeding did not operate as a final judgment on PMI's claim. Therefore, claim preclusion is not applicable to its claim against Mallery for the negligent provision of legal services, and the circuit court erred in granting summary judgment against PMI on this basis.
D. Joint Claims
Finally, PMI and Mrozek argue that Mallery's negligence resulted in lost profits for PMI and rendered Mrozek's contract to manage the AmericInn worthless because her compensation was based on the profitability of PMI. The court of appeals summarized the plaintiffs' burden in proving damages for lost profits:
Damages for lost profits need not be proven with absolute certainty, but the claimant must produce sufficient evidence . . . on which to base a reasonable inference as to a damage amount. To establish lost profits, the claimant must produce evidence of the business's revenue as well as its expenses. Assertions as to the amount of lost profits have no evidentiary value unless supported by figures showing profits and losses.
Lindevig v. Dairy Equip. Co., 150 Wis. 2d 731, 740, 442 N.W.2d 504 (Ct. App. 1989) (citations omitted). In situations like this, where a new business has no previous profit history, the court of appeals has provided further guidance on how lost profits may be recovered, stating that the party seeking lost profits must "present credible comparable evidence or business history and business experience sufficient to allow a fact finder to reasonably ascertain future lost profits." T & HW Enters. v. Kenosha Assocs., 206 Wis. 2d 591
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