Farmers Automobile Insurance v. Union Pacific Railway Co.

¶ 1. This is a review of a published decision of the court of appeals1 affirming the entry of summary judgment against Joseph Donaubauer ("Donaubauer") by the Circuit Court for Milwaukee County, Francis Wasielewski, Judge. This case is a dispute between an insurer and an insured over the proper replacement value of a home that had burned down. Donaubauer, the homeowner, challenges the validity and outcome of an appraisal award determining the replacement value of the home.

¶ 2. Three issues concern us today. First, did the circuit court err when it compelled Donaubauer to participate in the binding appraisal process? Second, should the appraisal award be vacated or modified? Third, did the circuit court err in denying Donaubauer's request to depose the appraiser and a third party contractor who assisted in the appraisal process?2

¶ 3. We hold that the circuit court did not erroneously exercise its discretion in enforcing the agreement between the parties to participate in the binding appraisal process. We also hold that the circuit court properly affirmed the appraisal award because there was no evidence that the appraisers engaged in fraud, bad faith, material mistake, or that they lacked understanding of their contractually assigned task. Finally, *58we hold that the circuit court did not erroneously exercise its discretion when it denied Donaubauer the opportunity to conduct discovery into the appraisal process. For these reasons, the holding of the court of appeals is affirmed.

I. BACKGROUND

¶ 4. On April 15, 2003, Joseph Donaubauer's home located at 9277 South Pennsylvania Avenue in Oak Creek, Wisconsin was completely destroyed by a fire. Apparently, sparks from a Union Pacific train running near Donaubauer's home started a grass fire that spread to his property.

¶ 5. Donaubauer had purchased a homeowner's insurance policy from The Farmers Automobile Insurance Association ("Farmers")3 with a policy period running from October 1, 2002, through October 1, 2003. The policy had several different types of coverage.

¶ 6. First, Donaubauer's policy contained a "Dwelling" coverage for which he received $301,350. This payment consisted of the full $287,000 limit of liability under this coverage, plus five percent for debris removal. Donaubauer also had "Personal Property" coverage. Farmers paid the full limit of $172,200 for this coverage. Third, Donaubauer's policy had "Loss of Use" coverage for which Farmers paid an additional $57,400 —again the full limit for that policy coverage. Thus, apart from the coverage for replacement value at issue in this case, Farmers paid Donaubauer approximately *59$530,950 for claims relating to his home burning down.4

¶ 7. The coverage Donaubauer purchased also included a "Home Guard Endorsement" (hereafter, the "Policy"). The Policy provided additional coverage above the $287,000 "Dwelling" limit if the cost to replace the home was more than this amount. Several provisions of the Policy are relevant to this dispute.

¶ 8. The Policy defines "replacement value" as "the current cost at time of loss, without deduction for depreciation, to replace the damaged, destroyed or stolen property with articles of like kind and quality."

¶ 9. In order to receive benefits under the Policy, the contract provided: "You agree to .. . [rjepair or replace the damaged dwelling with equivalent construction and use on the same premises."5 In another place it further specifies "[Farmers] will not be liable for any loss under this endorsement until actual repair or replacement is completed."

¶ 10. The Policy also contained what we will call the "appraisal clause." It states as follows:

Appraisal. If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you *60or we may request that the choice be made by a judge of a court of record in the state where the residence premises is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to an umpire. A decision agreed to by any two will set the amount of loss.

¶ 11. After his home burned down, Donaubauer submitted a claim under the Policy. Donaubauer then obtained an estimate for the replacement value of his home of approximately $553,000. In June 2003, Farmers obtained its own estimate of the replacement value; it totaled $380,819. Donaubauer argued that this offer was substantially below the true replacement value, and in the latter part of 2003, Farmers increased its offer to $471,000.

¶ 12. On April 12, 2004, Donaubauer filed suit in the Milwaukee County Circuit Court,6 alleging that Farmers refused to pay him the replacement value of the home pursuant to the terms of the Policy. His claims included misrepresentation, bad faith, and breach of contract. Farmers responded that they had no obligation to pay under the Policy until Donaubauer actually replaced his home, which he had not done.

¶ 13. Litigation regarding Donaubauer's contract claims ensued. On January 24, 2005, Donaubauer obtained another estimate for the cost of rebuilding his home, this time for $720,309.

¶ 14. On March 22, 2005, Farmers sent a letter to Donaubauer raising several issues. Farmers stated that *61the Home Guard Endorsement was clear that disbursement under the Policy was contingent upon Donaubauer actually repairing or replacing the dwelling. Farmers also asserted that the lawsuit violated the Policy and demanded resolution of the disagreement over the replacement value via the process outlined in the Policy's appraisal clause. Farmers stated that the Policy's appraisal clause, once invoked, was binding on the parties. Farmers also named its designated appraiser pursuant to the appraisal clause, and requested that Donaubauer designate his appraiser. Finally, Farmers stated that if Donaubauer "disagrees with the analysis set forth herein," he should respond in writing with "the legal and factual basis for the disagreement."

¶ 15. On March 25, 2005, Donaubauer sent a reply letter stating that he understood Farmers was requesting an appraisal and that he had to respond within 20 days (per the Policy). Donaubauer had recently had surgery, however, so he requested that Farmers toll the 20 day requirement until Donaubauer's doctor determined he was healthy enough to continue with the litigation. Farmers promptly responded by letter and granted Donaubauer's request.

¶ 16. On May 12, 2005, Donaubauer's attorney called the attorney for Farmers and informed him that Donaubauer was close to recovery, and that Donaubauer had agreed to the appraisal process referenced in the previous correspondence. Farmers' attorney confirmed this conversation by letter that same day, requesting that Donaubauer select his appraiser when he was sufficiently well.

¶ 17. The next day, May 13, 2005, Donaubauer's attorney confirmed by letter that Donaubauer was "willing to fulfill his contractual obligations and participate in the appraisal that your client has requested." *62Donaubauer confirmed again via letter on June 1, 2005, that he was "able to participate in the appraisal process" and asked to be contacted regarding the next step.

¶ 18. Farmers followed up on June 9, 2005, by-explaining that the appraisal process would commence with Donaubauer's selection of an appraiser. The parties' respective appraisers would then select a third appraiser, the umpire, and proceed with the appraisal process outlined in the Policy. On June 27, 2005, Donaubauer informed Farmers of his selected appraiser.

¶ 19. On July 26, 2005, Farmers moved for summary judgment and dismissal of Donaubauer's lawsuit on the grounds that Farmers had no obligation to make payments under the Policy until Donaubauer completed repair or replacement of the dwelling. On September 16, 2005, the Milwaukee County Circuit Court agreed that, under the Policy, Donaubauer had to complete the actual repair or replacement of his home before Farmers was obligated to make further payments. The court dismissed with prejudice Donaubauer's claims and causes of action for misrepresentation, and deferred ruling on Donaubauer's other claims until after the appraisal process had been completed.

¶ 20. On September 29, 2005, Donaubauer sent a letter to Farmers indicating that he would only continue the appraisal process if it was not conducted pursuant to the Policy, and was simply considered part of the mediation process and non-binding.

¶ 21. On October 10, 2005, Farmers sent a response in which it stated that it was "not willing to deviate from the appraisal process that our Clients agreed to as is set forth in the insurance policy." On October 21,2005, Donaubauer replied that he was agreeing to continue with the Policy's appraisal process except to the extent that it would be binding. Farmers re*63sponded again on October 27,2005, that it was unwilling to agree to an appraisal process that was not binding because the Policy provided for binding appraisal, because non-binding appraisal would be a waste of time, and because Donaubauer had already agreed to the appraisal process.

¶ 22. On November 17, 2005, Farmers asked the circuit court to enforce the appraisal agreement between the parties. Donaubauer acknowledged that he had agreed to the appraisal process outlined in the Policy, but he argued that the Policy's appraisal process was not binding, and that Farmers had misled him into thinking it was binding. He further argued that the court should relieve him from the agreement because under Lynch v. Am. Family Mut. Ins. Co., 163 Wis. 2d 1003, 1011-14, 473 N.W.2d 515 (Ct. App. 1991), he asserted, an insured is not required to participate in the appraisal process when the insurance company failed to demand the appraisal prior to the insured's lawsuit. Farmers argued that the appraisal clause, once invoked by either party, was binding on the parties. Farmers also maintained that it would set bad precedent to allow Donaubauer to withdraw from an agreement because he subsequently found case law that might have, if known earlier, led the party to take a different course of action. On January 10, 2006, the circuit court rejected Donaubauer's arguments and granted Farmers' motion to enforce the agreement.

¶ 23. After additional disputes regarding the meaning of "current replacement cost,"7 the appraisal *64process moved forward. The appraisers obtained information about the home from numerous sources, including government records and personnel, information supplied by Donaubauer, and even the individual who installed the cabinets in Donaubauer's home.

¶ 24. On September 8, 2006, all three appraisers, including Donaubauer's selected appraiser,8 agreed on a replacement value of $396,260.75 and an actual cash value of $248,579.68. The appraisal award itself was a two-page document itemizing the components of the award, along with the replacement cost and actual cash value for each.9 It was signed by each party's selected appraiser and the umpire.

¶ 25. Around this same time, the homebuilder the appraisers had worked with to compute their award submitted a home proposal to Donaubauer. This proposal included interior and exterior layout plans, and a detailed listing of included features such as hardwood floors, a security system, and air conditioning, to name a few. The proposed home was 3,264 square feet, and the contract price was listed at $356,718.75.10 This home proposal was not part of the appraisal award.

¶ 26. Donaubauer was unhappy with the appraisal award, and on December 7, 2006, filed a motion with the circuit court to have the award vacated or modified. Donaubauer argued that the appraisers failed *65to appreciate their role in the process. He pointed first to the communications between the appraisers, which he had obtained, claiming that they displayed significant confusion by the appraisers and inappropriate judgments regarding the attractiveness or unattractiveness of certain features of his original home. These judgments influenced their award, he maintained.11 Donaubauer also pointed out that the home proposal from the third-party contractor was more than 600 square feet smaller and came with completely different design features than his old home. He asserted that this also shows the appraisers did not understand their role. On December 15, 2006, Donaubauer informed the circuit court of his desire to conduct depositions of the appraisers and possibly the home builder in order to support his motion to vacate or modify the appraisal award.

¶ 27. On February 8, 2007, Farmers moved to quash Donaubauer's discovery. On March 21, 2007, Farmers renewed its motion for summary judgment on Donaubauer's breach of contract claim. On May 16, 2007, Judge Wasielewski granted Farmers' motion to quash Donaubauer's discovery requests and denied Donaubauer's motion to modify or vacate the appraisal award.

¶ 28. On June 1, 2007, Donaubauer moved for a stay of the circuit court proceedings until after the court of appeals determined whether it would accept Donaubauer's petition for leave to appeal a non-final *66order. On June 13, 2007, Farmers moved for summary judgment on Donaubauer's bad faith claim. On June 20, 2007, Judge Wasielewski denied Donaubauer's motion to stay the circuit court proceedings, and granted Farmers' renewed motion for summary judgment on Donaubauer's breach of contract claims. On July 24, 2007, Judge Wasielewski granted Farmers' motion for summary judgment on Donaubauer's bad faith claims.

¶ 29. Donaubauer then appealed, and in a published decision, the court of appeals rejected Donaubauer's claims, affirming the circuit court on all counts.12 We accepted review and now address Donaubauer's claims regarding his compelled participation in the appraisal process, vacating or modifying the appraisal award, and the denial of discovery into the appraisal award.

II. STANDARD OF REVIEW

¶ 30. This case involves the construction of an insurance contract, which we review de novo. Cunningham v. Metro. Life Ins. Co., 121 Wis. 2d 437, 450, 360 N.W.2d 33 (1985). We are also reviewing the decisions of the circuit court on whether to grant discovery and relieve Donaubauer from his agreement to participate in the appraisal. We review these decisions for erroneous exercise of discretion. Schauer v. DeNeveu Homeowners Ass'n, 194 Wis. 2d 62, 70, 533 N.W.2d 470 (1995); Earl v. Gulf & W. Mfg. Co., 123 Wis. 2d 200, 204, *67366 N.W.2d 160 (Ct. App. 1985). We review the trial court's decision to grant summary judgment to Farmers and confirm the appraisal award de novo. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315-17, 401 N.W.2d 816 (1987).

III. DISCUSSION

A.

¶ 31. The first issue is whether the circuit court erred in compelling Donaubauer to participate in the binding appraisal process. Donaubauer maintains that he did not agree to engage in binding appraisal, only the appraisal process specified in the appraisal clause of the Policy, which he believes is non-binding.

¶ 32. The circuit court's decision to grant Farmers' motion to enforce the out-of-court written agreement between the parties was within the trial court's discretion. Gaugert v. Duve, 2001 WI 83, ¶ 44, 244 Wis. 2d 691, 628 N.W.2d 861. We look for reasons to sustain a trial court's discretionary decision. Schauer, 194 Wis. 2d at 71. We will not reverse the court's discretionary act if the record indicates that the court exercised its discretion and that there was a reasonable basis for the court's decision. State ex rel. M.L.B. v. D.G.H., 122 Wis. 2d 536, 542, 363 N.W.2d 419 (1985); Micro-Managers, Inc. v. Gregory, 147 Wis. 2d 500, 515, 434 N.W.2d 97 (Ct. App. 1988). While reasonable persons may disagree with a court's action, "all that this court need find to sustain a discretionary act is that the trial court examined the relevant facts, applied a proper standard of law, and, using a demonstrated rational process, reached a conclusion that a reasonable judge could reach." Loy v. Bunderson, 107 Wis. 2d 400, 414-15, 320 N.W.2d 175 (1982).

*68¶ 33. Donaubauer concedes that he agreed to participate in the appraisal process specified in the appraisal clause of the Policy.13 Donaubauer argues that he should not have been compelled to participate in binding appraisal, though, for two reasons. First, he asserts that the appraisal process in the Policy was non-binding. Second, he argues that the circuit court was wrong to force him to abide by an agreement when Lynch, 163 Wis. 2d at 1011-14, according to Donaubauer, precludes an insurance company from invoking a Policy's appraisal process after a lawsuit has been filed, and when the insurance company had a reasonable amount of time to invoke the appraisal process before the suit commenced.

¶ 34. Regarding his first argument, Donaubauer is simply wrong that the Policy's appraisal process is nonbinding. The appraisal clause in the Policy provides:

*69Appraisal. If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the residence premise is located. The appraisers will separately set ' the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to an umpire. A decision agreed to be any two will set the amount of loss.

This provision is plain and unambiguous. It provides for an appraisal process that may be invoked by either party. If and when one party invokes this clause, the other side must abide by it. Each party then selects its own appraiser, and the appraisers select an umpire (or if they cannot, a judge does so). The appraisers work to determine the amount of loss, and the amount agreed upon by any two appraisers "will set the amount of loss."14 The text of the provision clearly provides for an appraisal process that may be invoked by either party and "will set the amount of loss" upon its completion.15

*70¶ 35. Donaubauer's second argument is that he justifiably relied on Farmers' representations that Donaubauer must participate in the appraisal process once invoked by Farmers. The root of Donaubauer's problem with the agreement is that, after agreeing to the appraisal process, he found a case {Lynch) that he believes would have allowed him to refuse Farmer's demand to participate in the Policy's appraisal process. He asserts that this means Farmers misrepresented the Policy's provisions, that there was a mutual mistake of law, and that the circuit court should have allowed him to withdraw from his agreement to participate in the appraisal process.

¶ 36. Initially, we note, though we need not decide, that it is far from conclusive that Lynch would have prevented Farmers from invoking and enforcing the appraisal process here as Donaubauer asserts. Lynch did not hold that invocation of a binding appraisal clause is per se precluded after one party files suit. Rather, Lynch held that the insurer in that case could not invoke the appraisal clause when it "had ample opportunity" to do so before suit was filed. Lynch, 163 Wis. 2d at 1013. We need not reach Lynch's application here because the parties agreed in writing to the appraisal process specified in the Policy.

¶ 37. It is also clear that there was no mutual mistake as Donaubauer claims. A mutual mistake is "one reciprocal and common to both parties, where each *71alike labors under a misconception in respect to the terms of the written instrument." Cont'l Cas. Co. v. Wis. Patients Comp. Fund, 164 Wis. 2d 110, 117, 473 N.W.2d 584 (Ct. App. 1991). "[A] party's mistake as to the scope, meaning or impact of a written instrument is a ground for attacking the validity of a contract only if the mistake is based on a past or present fact." Milwaukee Women's Med. Serv., Inc. v. Scheidler, 228 Wis. 2d 514, 526, 598 N.W.2d 588 (Ct. App. 1999) (citing Cont'l Cas. Co., 164 Wis. 2d at 118 (emphasis added)).

¶ 38. A party entering into an agreement, though, is responsible for evaluating the obligations it takes on before entering into that agreement. See Pac. Indem. Co. v. Wyrembek, 183 F.Supp. 252, 255 (E.D. Wis. 1960). A mistake of law by a party who fails to research and protect its legal rights, and who fails to fully consider the legal consequences of entering into an agreement, particularly when that party is represented by counsel, does not usually constitute grounds to rescind the agreement. See Milwaukee Women's Med. Serv., Inc., 228 Wis. 2d at 526.

¶ 39. Here, there was no mutual misconception regarding a past or present fact. The issue is that Donaubauer did not contest Farmers' assertion that he must submit to binding appraisal. Certainly, even had he known about Lynch, Donaubauer could have entered into the agreement to submit to the Policy's appraisal process anyway. As the court of appeals explained:

[W]e are not aware of any authority that permits a party to withdraw from an agreement based on that party's ignorance of case law that might have affected a decision whether to enter into that agreement. A rule that allowed a party to undo an agreement based on what was discovered during post-agreement legal research would make all agreements hostage to agreement-remorse.

*72¶ 40. The ultimate question on review is even more deferential. We are confined to determining whether the circuit court erroneously exercised its discretion in enforcing the agreement between the parties. The circuit court had ample reason to bind Donaubauer to his word. Allowing a party to withdraw from an agreement because it did not apprehend the applicable law beforehand sets a dangerous precedent. At the end of the day, "[t]he fact that a[n] [agreement] appears by hindsight to have been a bad bargain is not sufficient by itself to warrant relief." Pasternak v. Pasternak, 14 Wis. 2d 38, 46, 109 N.W.2d 511 (1961). The circuit court exercised its discretion in this regard and had a reasonable basis for its decision. Therefore, the circuit court did not err in compelling Donaubauer to participate in the binding appraisal process to which he previously agreed.

B.

¶ 41. The second issue is whether the circuit court should have vacated or modified the appraisal award. Donaubauer asserts that the appraisal award should be vacated because the appraisers did not understand their task.

¶ 42. The appraisal process is usually conducted pursuant to a contract, here a contract for insurance. A court's review of an appraisal award is therefore grounded in principles of contract interpretation.16 An *73appraisal process is an agreement by parties to a contract to allow third party experts to determine the value of an item. The court's role is not to determine whether the third party experts accurately valued the item (as if the court itself could do better job), but whether the third party experts understood and carried out the contractually assigned task. The obvious point of contracting for an appraisal process is to keep a jury or court out of that decision. Courts have an obligation to enforce this aspect of an agreement between parties by asserting only limited power to review appraisal awards.

¶ 43. Appraisals also deserve a more deferential review because the appraisal process is a fair and efficient tool for resolving disputes. First and foremost, the process is fair to both parties. It allows each to appoint an appraiser of their own liking, with a neutral umpire as the deciding vote. Appraisals also promote finality, are time and cost-efficient, and place a difficult factual question — the replacement value of an item — into the hands of those best-equipped to answer that question. As a form of alternative dispute resolution, the appraisal process is favored and encouraged. See generally, State v. P.G. Miron Constr. Co., 181 Wis. 2d 1045, 1055, 512 N.W.2d 499 (1994) ("It has been the policy of this state and this court to foster arbitration as an alternative to litigation. The advantage of such a process lies in the avoidance of the formalities, delay, and expense of litigation." (citations omitted)).

¶ 44. Appraisals, then, are presumptively valid. They should not be lightly set aside, even if the court disagrees with the award. Dechant v. Globe & Rutgers Fire Ins. Co., 194 Wis. 579, 581, 217 N.W. 322 (1928). An appraisal may be set aside only upon the showing of *74fraud, bad faith, a material mistake, or a lack of understanding or completion of the contractually assigned task. Id.; see also 44A Am. Jur. 2d Insurance § 1665 (2009); Cent. Life Ins. Co. v. Aetna Cas. & Sur. Co., 466 N.W.2d 257, 260 (Iowa 1991); Wells v. Am. States Preferred Ins. Co., 919 S.W.2d 679, 683 (Tex. App. 1996). Unhappiness with the amount of an appraisal award is not enough to set it aside. Dechant, 194 Wis. at 581 (holding that even a substantial difference between the appraisal award and the loss as determined by the jury was not sufficient to set aside an award).

¶ 45. Review of an appraisal award should usually be limited to the face of the award.17 See Quinn v. New York Fire Ins. Co., 22 Wis. 2d 495, 500-02, 126 N.W.2d 211 (1964) (holding that because the face of the ap*75praisal award did not include the actual cash value as required by the Policy, the award, on its face, did not comply with the requirements of the Policy and should be set aside). If fraud, bad faith, material mistake, or a lack of understanding of the process are reasonably implicated, it is within a judge's discretion to allow further inquiry or discovery. Ultimately, the greater danger in reviewing appraisal awards is not an unjust award, but litigants second-guessing an award obtained as a result of a process to which they agreed. Courts must not substitute their judgment for that of the appraisers.

¶ 46. In the case at bar, Donaubauer challenges the award on the grounds that the appraisers did not understand their role in the process. Here, the face of the award demonstrates that the appraisers understood and accomplished their contractual task. The appraisal award itemized the components of the valuation and gave the replacement cost and actual cash value for each. The award specified values for the dwelling itself, and gave separate additional values for the second floor kitchen, septic system, exterior concrete, exterior blacktop, shed by the garage, outbuildings, trees, sod, flowers, plants, and shrubs. Nothing on the face of the award demonstrates that the appraisers lacked understanding of their task.

¶ 47. Donaubauer asserts that the communications between the parties evince a misunderstanding of their task. Since we see nothing on the face of the award that supports a misunderstanding, the communications need not be examined. But even if we took these communications into account, we do not believe they show what Donaubauer alleges. When viewed in context, they appear to be the normal back-and-forth between appraisers in an effort to ascertain the true *76replacement value. Donaubauer's focus on the appraisers' communications embodies precisely the kind of second-guessing of the appraisal process we must avoid.

¶ 48. Donaubauer also argues that the replacement value in the appraisal award was not sufficient to provide a replacement of like kind and quality as seen from the discrepancy between his original home and the proposed home from the third-party builder. He notes that the proposed home was 600 square feet smaller, and did not contain many features that were included in his original home.

¶ 49. These are specious arguments. The simple fact is that the home proposal was not part of the appraisal award. It was a proposed home design based on the amount of the award, but it was not a part of the award. Donaubauer certainly had and has the freedom to solicit additional design proposals from other contractors that fit his desired specifications.18

¶ 50. The real issue, of course, is that Donaubauer feels the award was too low. It may be that the award was low, and it may be that Donaubauer cannot obtain a 4,000 square foot home with the same specifications based on the award. Conversely, the award may be too high. That is of no event. The salient fact is that Donaubauer agreed to participate in the binding appraisal process he contracted for in his Policy. There is *77no credible evidence on the face of the award of fraud, bad faith, material mistake, or a failure to understand the contractually assigned task. Therefore, the award should not he set aside.

C.

¶ 51. The final question is whether the circuit court erred when it denied discovery into the appraisal process. Donaubauer argues that because replacement value of the home was at issue, and his discovery requests were relevant to that issue, that his discovery requests were improperly denied. He asserts that if a prima facie case for fraud, bad faith, or failure to appreciate the task exists, then discovery should be allowed.

¶ 52. We agree that if the challenger of the award shows prima facie evidence of a reviewable claim — fraud, bad faith, material mistake, or a failure to understand or complete the contractually assigned task — then discovery is potentially available. Even so, the circuit court is vested with discretion on discovery disputes. Earl, 123 Wis. 2d at 204. The record here is clear that the trial judge examined the relevant facts, applied a proper standard of law, and reached a conclusion that a reasonable judge could reach in precluding Donaubauer from deposing the appraisers and the third-party contractor. See Loy, 107 Wis. 2d at 414-415. The trial judge did not believe the appraisers' communications displayed a misunderstanding of their task, and this was a reasonable conclusion.19 Therefore, we hold that the trial court did *78not erroneously exercise its discretion when it denied Donaubauer's discovery requests.

IV CONCLUSION

¶ 53. We hold that the circuit court did not erroneously exercise its discretion in enforcing the agreement between the parties to participate in the binding appraisal process. We also hold that the circuit court properly affirmed the appraisal award because there was no evidence that the appraisers engaged in fraud, bad faith, material mistake, or that they lacked understanding of their contractually assigned task. Finally, we hold that the circuit court did not erroneously exercise its discretion when it denied Donaubauer the opportunity to conduct discovery into the appraisal process. For these reasons, the holding of the court of appeals is affirmed.

By the Court. — The decision of the court of appeals is affirmed.