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    2002 Significant Court Decisions

    In his annual feature, the author highlights what he believes are significant Wisconsin Supreme Court and Court of Appeals decisions for the year 2002.

    Daniel Hildebrand

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    Wisconsin LawyerWisconsin Lawyer
    Vol. 76, No. 6, June 2003

    2002 Significant Court Decisions

    In his annual feature, the author highlights what he believes are significant Wisconsin Supreme Court and Court of Appeals decisions for the year 2002.

    gavelby Daniel W. Hildebrand

    Attorney-Client

    • Lane v. Sharp Packaging Systems Inc.1 involved a discovery dispute in a suit arising from the termination of Lane by his employer, Sharp Packaging Systems. Lane issued a subpoena duces tecum requesting documents from a lawyer and the law firm regarding their representation of Sharp. Prior to his termination, Lane had served as executive vice president and also was a member of Sharp's board of directors. The lawyer had provided legal advice to Sharp and its two principal shareholders regarding the terms for the proposed termination of Lane's employment and also did considerable work for Sharp and its shareholders on other legal matters.

    The Wisconsin Supreme Court held that the subpoenaed documents, including billings and time records, were privileged as confidential communications between attorney and client under Wis. Stat. section 905.03. The court also held that Lane, as a former officer and director of Sharp, was not entitled to waive the privilege. Also, Lane was not entitled to see the privileged documents even though, as a former corporate director, he would have been entitled to see the documents when they were created. The court believed that the billing records were privileged because they would directly or indirectly reveal the substance of the client's confidential communications to the lawyer.

    Lane also argued that the "crime-fraud" exception to the attorney-client privilege applied, because he was alleging that a distribution to the shareholders was a fraudulent conveyance that was accomplished to dilute an interest that he had in the value of minority shares of stock he held at the time of his termination. Although a mere allegation of fraud is insufficient to defeat the privilege, the burden of alleging fraud is low. Although Lane met the initial burden, the circuit court should have conducted an in camera review of the documents to determine whether the legal services were rendered in furtherance of fraud.

    Three justices dissented. They argued that because Lane was a member of the board of directors when the legal services were provided, he was entitled under corporate law to receive communications from the corporation's lawyer. In the instant case, the directors have the authority to determine whether to issue dividends. The distribution to the shareholders was made without a prior meeting of the board of directors, without notice to Lane, without his knowledge, and with the advice of counsel who was paid with corporate funds.

    Torts
    • In Stephenson v. Universal Metrics Inc.,2 Stephenson, individually and on behalf of the estate of his deceased wife, brought suit against John Kreuser contending that the defendant had indicated to a bartender that he would drive Michael Devine home from an employee party. Based on that assurance, the bartender provided more alcohol to Devine. Kreuser later decided not to drive Devine home. Devine, while intoxicated, caused the accident that resulted in the death of Stephenson's wife.

    Daniel W. HildebrandDaniel W. Hildebrand is a shareholder of DeWitt Ross & Stevens S.C., Madison. He is a former president of the Dane County Bar Association and the State Bar of Wisconsin. He is a member of the ABA Standing Committee on Ethics and Professional Responsibility and is Wisconsin's state delegate to the ABA House of Delegates, and recently was nominated to be a member of the ABA Board of Governors. He also is a member of the American Academy of Appellate Lawyers and has a substantial appellate practice.

    The Wisconsin Supreme Court held that Kreuser's agreement to drive Devine home, coupled with Kreuser's later decision not to drive Devine home, could be viewed as a failure to exercise ordinary care. However, the court held that Wis. Stat. section 125.035 immunized Kreuser from liability because he procured alcohol for Devine and that public policy would preclude liability.

    Wis. Stat. section 125.035(2) provides that a person is immune from civil liability arising out of the act of procuring alcohol beverages for another person. Kreuser was aware that the bartender was not going to serve alcohol to Devine unless the bartender knew that someone would be driving him home. This amounted to "procuring" alcohol for Devine.

    The court also held that public policy would apply to preclude liability. The injury is out of proportion to Kreuser's culpability. Even though intoxicated, Devine maintained control over his own actions. Allowing recovery would put an unreasonable burden upon the tortfeasor. Kreuser could not reasonably have been expected to maintain control over Devine in order to prevent him from leaving the party on his own. Allowing recovery would enter a field that has no sensible or just stopping point. It is difficult to determine the point at which a person who agrees to drive assumes the duty to drive.

    Two justices dissented. This case is about Kreuser's failure to keep a promise to drive Devine home, a promise to keep this dangerous intoxicated person off the road. Kreuser's negligence in failing to keep the promise increased the risk of an immediate and foreseeable harm. Public policy is that people who deliberately fail to keep their promises are liable when that failure has such foreseeable, immediate, and tragic consequences. The state's public policy is to reduce death and injury on roads caused by drunk drivers by encouraging people not to drink and drive and by encouraging the use of designated drivers.

    Administrative Law

    • Mallo v. Wisconsin Dep't of Revenue3 addressed the issue of whether the department exceeded its authority under Wis. Stat. section 70.32(2r) when it promulgated Wis. Admin. Code § Tax 18.08. Section 18.08 provided for the immediate valuation of agricultural land for tax purposes based upon its "use" value rather than "market" value. In 1974, the Wisconsin Constitution was amended to provide an exception for agricultural land from the uniform rule of taxation.4 In 1995, the Legislature enacted Wis. Stat. section 70.32(2r) to change the manner of value assessment of agricultural land from market value to use value. The Legislature directed that after assessments were initially frozen at the 1995 assessed value, the phase-in assessment would begin in 1998 "or upon completion of the Farmland Advisory Council's recommendation and promulgation of rules ending no later than December 31, 2008." In 1999, the Farmland Advisory Council recommended that the department implement rules to assess agricultural land at full use value as of Jan. 1, 2000.

    The Mallos challenged the rules as being contrary to the Legislature's intention. They argued that the structure of the statute mandated that there be a 10-year phase-in commencing in 1998 and ending in 2008 so that the use value assessments would be gradually implemented over that 10-year period. The court rejected this argument, holding that if the Legislature intended or desired a mandatory 10-year phase-in, it easily could have chosen words to accomplish a fixed date in the statute. The court held that the Legislature intended to grant the department authority to implement full-use value assessment, upon advice from the Council, before Jan. 1, 2009.

    Two justices dissented. They agreed with the Attorney General's opinion that interpreted the statute so as to require a 10-year phase-in to implement use value assessment of agricultural land.

    Contracts

    • Putnam v. Time-Warner Cable5 applied the voluntary payment doctrine to preclude cable television customers from recovering the portion of monthly late payment fees that they claim constitute unlawful liquidated damages. Time-Warner imposed a $5 late payment fee on cable customers who failed to pay their monthly cable bill by the time specified in the contract. Customers alleged that the late fee did not bear a reasonable relationship to the costs incurred as a result of late payment and further alleged that the actual cost was between $0.38 and $0.48. The customers also alleged that collection of late fees constitutes a double recovery because nonpayment collection costs are incorporated into the rates that are approved by the Federal Communications Commission.

    Time-Warner contended that the voluntary payment doctrine precluded the customers' claims. The customers voluntarily paid the fees and did not do so under protest or as a result of any fraudulent conduct. However, the customers alleged that they did not possess knowledge of all of the facts and that they also lacked a meaningful opportunity to contest the late fees.

    The voluntary payment doctrine goes to the willingness of a person to pay a bill without protest as to its correctness or legality. The voluntary payment doctrine allows entities that receive payment to rely upon those funds and use them for future activities. Also, the doctrine operates as a means to settle disputes without litigation by requiring the party contesting the payment to notify the payee of its concerns. This enables a payee who has acted wrongfully to rectify the situation. The customers' contention that they lacked full information goes to a mistake of law rather than a mistake of fact. Customers knew about the $5 late fee and the circumstances under which they would be exposed to it.

    The court also concluded that the customers' claim for declaratory relief should be heard. Declaratory relief would conclusively determine legal rights under the customers' agreement with Time-Warner as well as a declaration as to the legality of the future imposition of Time-Warner's late payment fee.

    Two justices dissented, arguing that the customers could not be expected to pay fees "under protest" when they knew of no basis to protest the late fees at the time of payment. The law, as stated by the majority, means all payors of late fees must automatically protest at the time of payment or lose the right to contest. Three justices dissented, arguing that the circuit court did not abuse its discretion in refusing to consider the customers' declaratory judgment claim.

    Insurance

    • In Frost v. Whitbeck6 the Wisconsin Supreme Court construed the resident-relative exclusion in a homeowner's insurance policy. Tina Frost and her daughter, Brittany, brought suit arising out of alleged dog bites. Tina and Brittany were staying in Whitbeck's home for the summer. Tina and Whitbeck are third cousins separated by eight degrees of kinship; they have the same great-great-grandfather. The court concluded that the word "relative" in the policy exclusion is ambiguous. The word "relative" has a flexible definition and is accompanied with inherent ambiguities. Although the term "relative" at a minimum means a person is related to another by blood, not every person related to another by blood, no matter how distant or remote the connection, is a "relative" within the meaning of the policy. If one accepts Adam and Eve as ultimate parents, the insurer admitted that one has to draw the lines. This shows that the word "relative" is elastic. Construing the ambiguity against the insurer, these persons, although related by blood, were not relatives within the meaning of the policy exclusion. A reasonable insured would interpret the word "relative" to refer only to close family members in terms of degrees of kinship.

    Three justices dissented. They emphasized that Tina and Brittany were actual residents of Whitbeck's household for a substantial period of time. Although the dissenters agreed that blood relations cannot and should not be interpreted to trace back all the way to the beginning of the human race, the parties here are third cousins, related by blood, who know and acknowledge that they are related, recognizing each other as "cousins."

    Criminal Law

    • In State v. Robins7 the defendant was prosecuted for attempted child enticement arising out of an Internet "sting" operation. The issue was whether the child enticement statute is violated when there is no actual child victim, but rather, an adult government agent posing as a child. Wis. Stat. section  948.07 states that whoever, with intent to commit certain acts, causes or attempts to cause any child who has not attained the age of 18 to go into any vehicle, building, room, or secluded place is guilty of a felony. Wis. Stat. section 939.32(3) defines an attempt as one that requires the actor to have an intent to perform acts and attain a result that, if accomplished, would constitute a crime and requires the actor to do acts towards the commission of the crime that demonstrate unequivocally, under all the circumstances, that the actor formed the intent and would commit the crime except for the intervention of another person or some other extraneous factor.

    The court held that the fact that the victims were fictitious was an "extraneous factor" that intervened to make the crime an attempt. The crime of child enticement contains a specific intent element. The intent required is that the perpetrator have an intent to commit an act involving a child. Child enticement is a strict liability offense only in the sense that the state need not prove the defendant's knowledge of the child's minority, and the defendant cannot use mistake as to the child's minority as a defense.

    The court also rejected the legal impossibility defense. The evidence shown at the preliminary hearing satisfied the two elements of the crime of attempt: 1) an intent to commit the crime charged; and 2) sufficient acts in furtherance of the criminal intent to demonstrate unequivocally that it was improbable that the accused would desist from the crime of his or her own free will. The elements were established by the defendant engaging in sexually explicit online chats and emails with the person he thought was a 13-year-old boy for the express purpose of illegally soliciting that boy for sex. He also arranged a meeting time and place to effectuate that purpose, traveling to and arriving at the place where he was arrested.

    Endnotes

    12002 WI 28, 251 Wis. 2d 68, 640 N.W.2d 788.

    22002 WI 30, 251 Wis. 2d 171, 641 N.W.2d 158.

    32002 WI 70, 253 Wis. 2d 391, 645 N.W.2d 853.

    4Wis. Const. art. VIII, § 1PDF 104 KB.

    52002 WI 108, 255 Wis. 2d 447, 649 N.W.2d 626.

    62002 WI 129, 257 Wis. 2d 80, 654 N.W.2d 225.

    72002 WI 65, 253 Wis. 2d 298, 646 N.W.2d 287.




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