Vol. 76, No. 6, June
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.
by Daniel W. Hildebrand
- 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
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
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.
- 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. 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
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.
- 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.
- 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
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.
- 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
- 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.
12002 WI 28, 251 Wis. 2d 68, 640
22002 WI 30, 251 Wis. 2d 171, 641
32002 WI 70, 253 Wis. 2d 391, 645
Const. art. VIII, § 1 104
52002 WI 108, 255 Wis. 2d 447, 649
62002 WI 129, 257 Wis. 2d 80, 654
72002 WI 65, 253 Wis. 2d 298, 646