Wisconsin Lawyer
Vol. 79, No. 10, October 2006

Supreme Court Digest

by Prof. Daniel D. Blinka &
Prof. Thomas J. Hammer

Administrative Law Criminal Procedure

Taxation

Administrative Law

Racine Harley-Davidson Inc. v. Wisconsin Division of Hearings & Appeals, 2006 WI 86 (filed 6 July 2006)

The substantive dispute in this case centered on what documents constitute a motor vehicle dealer agreement under Wis. Stat. section 218.0116(8). More specifically, the dispute focused on whether the document (a zip code list) by which Harley-Davidson assigned territory to a Harley-Davidson dealer was part of the motor vehicle dealer agreement under the statute. In a published decision, the court of appeals gave great weight deference to the decision of the Division of Hearings and Appeals (DHA) that Harley-Davidson's assignment of territory to the dealer was not part of the motor vehicle dealer agreement between the parties. Accordingly, the court of appeals determined that Harley-Davidson's unilateral modification of the assignment of territory did not trigger the requirement in section 218.0116(8) of an administrative determination of good cause for the modification of a motor vehicle dealer agreement. See 2005 WI App 6.

In a majority decision authored by Chief Justice Abrahamson, the supreme court reversed the court of appeals. The supreme court agreed with the circuit court that the zip code list is part of the motor vehicle dealer agreement between the par-ties under section 218.0116(8). "We conclude that read together, Wis. Stat. § 218.0101(1) and (13); § 218.0114(9) and (11); and § 218.0116 (1)(r), (7), and (8); and the purpose of §§ 218.0101 to 218.0163, support the conclusion that a more reasonable interpretation of the statutes than that of the [DHA] is that a manufacturer's assignment of territory is an essential aspect of the franchise relationship and therefore part of the motor vehicle dealer agreement" (¶ 94).

(Editors' Note: A substantial part of this very long opinion deals with the level of deference (great weight, due weight, or no deference) that a court should accord administrative agency decisions. The court of appeals gave great weight deference to the DHA's decision that the zip code list, used by Harley-Davidson to assign territory to a dealership, was not part of the motor vehicle dealer agreement between the parties under section 218.0116(8). The supreme court concluded that "interpretation of a motor vehicle dealer agreement under § 218.0116(8)(a) is a matter of first impression and that the [DHA] lacks the requisite expertise and experience for its statutory interpretation to be accorded great weight deference. Even if we were to grant due weight deference to the statutory interpretation of the [DHA] of § 218.0116(8)(a) in the present case, we do not adopt the [DHA's] statutory interpretation of § 218.0116(8)(a) because, [as summarized above], another interpretation is more reasonable"(¶¶ 57-58).)

Justice Prosser filed a concurring opinion in which he joined the majority opinion but wrote separately to reference his concurrence in Hilton v. Department of Natural Resources, 2006 WI 84 (digested below). Justice Roggensack also concurred in an opinion that was joined by Justices Wilcox and Butler.

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Hilton v. Department of Natural Resources, 2006 WI 84 (filed 6 July 2006)

An unincorporated association, whose members all own an interest in a riparian lot, has for many years placed an unpermitted pier, with boat slips, that extended from the riparian lot into Green Lake. The pier currently is 249 feet long and contains 22 boat slips. Between 1998 and 2002, staff of the Wisconsin Department of Natural Resources (DNR) advised the association that "the existing pier and any proposed expansion exceeded Wis. Stat. § 30.13 (1997-98) standards to maintain a pier without a permit; that the Association must apply for a permit if it wished to maintain the current pier or any pier exceeding the § 30.13 (1997-98) standards; if the Association did not reduce the pier to meet the standards, or submit a permit application, the DNR would seek an abatement hearing under § 30.03 (1997-98)" (¶ 7).

After the DNR received complaints about the pier but no permit application was submitted, the DNR ultimately requested an abatement hearing. An administrative law judge (ALJ) determined that the existing pier violated public rights because it exceeded the "reasonable use" threshold, negatively impacted the aquatic habitat, and created a safety hazard. After considering both the rights of riparians and the rights of the public, the ALJ determined that the association should be limited to a 226-foot pier with no more than 11 slips (a number the ALJ concluded represented the "historic use" of the pier) (see ¶ 10). The DNR expressly adopted the ALJ's decision. On review in the circuit court, the judge set the number of allowable slips at 17. The court of appeals reversed the circuit court. It determined that the circuit court had applied an improper standard of review and substituted its judgment for the decision adopted by the DNR. The court of appeals, therefore, reinstated the DNR's determination.

In a majority decision authored by Justice Crooks, the supreme court affirmed the court of appeals. The court first concluded that "because the DNR did not appeal the decision of the ALJ, and adopted by rule the decision as its own, the decision is entitled to great weight deference, because it is a decision within the DNR's area of expertise and satisfies the other necessary criteria" (¶ 2).

The court further concluded that the DNR's decision was reasonable, consistent with applicable law, and supported by substantial evidence in the record (see ¶ 2). The court said that when considering actions that affect navigable waters in the state, one must start with the public trust doctrine, according to which the state holds the beds of navigable waters in trust for all its citizens (see ¶ 18). "However, the public trust analysis requires the DNR to go beyond the [Wis. Stat. § 30.12(1g)(f) (2003-04)] statutory presumption [regarding the size of piers and the number of boat slips permitted] to determine what the `reasonable use' is in light of the relevant facts particular to each situation. In this case, the ALJ examined environmental impact, natural scenic beauty, historic use, safety, the statutory presumption, the absence of a permit, and the DNR's delayed enforcement, among other factors, in determining `reasonable use.' There is ample evidence in the record that the ALJ considered the relevant factors in this case and weighed them appropriately in light of the public trust doctrine. We conclude, therefore, that the decision of the DNR is consistent with applicable law" (¶ 22). On the facts of the case the court also concluded that the DNR's decision was reasonable, supported by substantial evidence in the record, and neither arbitrary nor capricious (see ¶ 43). Applying great weight deference, the supreme court therefore affirmed the ALJ's decision and, thus, the DNR's decision.

(In a footnote the court noted that "the DNR recently adopted new rules regarding the regulation of piers. Included in these rules is a provision to `grandfather' in existing piers too big to qualify for an exemption, up to a certain size. It is unclear whether the Association pier would be within the category of piers eligible for `grandfathering.' We also note that there is an effort by several legislators to set standards on piers, different from those of the DNR" (¶ 7 n.7).)

Chief Justice Abrahamson filed a concurring opinion in which she joined the majority but wrote separately to reference the analysis of judicial deference to agency decisions in Racine Harley-Davidson Inc. v. Division of Hearings & Appeals, 2006 WI 86 (summarized above). Justice Prosser also concurred in a decision that was joined by Justices Wilcox and Roggensack.

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Criminal Procedure

State v. Roberson, 2006 WI 80 (filed 30 June 2006)

The defendant was convicted of delivering cocaine. He claimed that his trial counsel was ineffective for failing to file a motion to suppress two out-of-court identifications made by police officers on the ground that the identifications immediately followed a warrantless entry into his home that he alleged was illegal. The circuit court denied the postconviction motion without a hearing, concluding among other things that "there was no reasonable probability that the failure of [the defendant's] counsel to file a suppression motion would have altered the result of the proceedings" (¶ 20). In a published decision the court of appeals affirmed both the judgment of conviction and the motion denying postconviction relief. See 2005 WI App 195. In a majority decision authored by Justice Butler, the supreme court affirmed the court of appeals.

The state argued that the defendant failed to allege sufficient facts that would have satisfied his burden of making a specific offer of proof that the suppression motion would have succeeded and therefore failed to establish that his counsel provided ineffective assistance. Among other things the state argued that the defendant could not prove prejudice, which is a necessary element of an ineffective assistance of counsel claim, because the record conclusively shows that the subsequent in-court identifications of the defendant by the officers (one of whom purchased the cocaine from the defendant while the other generally observed the defendant's activities) were admissible.

The supreme court concluded that "the in-court identifications of Roberson were properly admitted into evidence, regardless of whether the warrantless entry was illegal and regardless of whether the out-of-court identifications were inadmissible. We therefore conclude that Roberson's counsel's failure to move to suppress the out-of-court identifications did not prejudice his defense. We decline to address Roberson's challenge to the warrantless entry and out-of-court identifications immediately following the warrantless entry because exclusion of the out-of-court identifications would not alter the outcome of our analysis" (¶ 3).

The admissibility of an in-court identification depends on whether that identification has been tainted by illegal activity (see ¶ 32). An illegal search is irrelevant to the admissibility of any evidence that does not actually flow from that illegal activity. An in-court identification is admissible, therefore, if the court determines that it is based on an independent source (see ¶¶ 33-34). "We conclude that the officers' capacity to identify Roberson during trial neither resulted from nor was biased by the alleged unlawful police conduct. Even assuming that the entry was illegal and the subsequent out-of-court identifications were inadmissible, the police acquired nothing from the illegal entry or the subsequent out-of-court identifications that was relevant to their ability to identify Roberson at trial, and there is no evidence to show that the subsequent in-court identification testimony was somehow tainted" (¶ 40).

The supreme court further concluded that the circuit court did not err in denying the defendant a hearing on his postconviction motion. A circuit court has the discretion to deny a hearing on a claim of ineffective assistance of counsel if the record conclusively demonstrates that the defendant is not entitled to relief (see ¶ 43).

Chief Justice Abrahamson filed a dissenting opinion that was joined by Justice Bradley.

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State v. Young, 2006 WI 98 (filed 12 July 2006)

The most important question before the court in this case involved the standard to be used to determine when a "seizure" of the person occurs. The defendant maintained that a person is seized "only if, in view of all of the circumstances surrounding the incident, a reasonable person would have believed that he was not free to leave," which is the test first articulated in United States v. Mendenhall, 446 U.S. 544, 554 (1980). The state took the position that a person is seized when an officer applies physical force, however slight, to restrain the person's movement or when the person submits to a show of authority. This is the test in California v. Hodari D., 499 U.S. 621, 626 (1991). In State v. Kelsey C.R., 2001 WI 54, ¶33, 243 Wis. 2d 422, 626 N.W.2d 777, the Wisconsin Supreme Court adopted the Hodari D. test "for when a seizure occurs." Nevertheless, the defendant argued that article I, section 11 of the Wisconsin Constitution provides greater protections than the Fourth Amendment and that the Wisconsin Supreme Court should join the state courts that choose to follow Mendenhall rather than Hodari D. (see ¶¶ 3-4).

In a majority opinion authored by Justice Prosser, the supreme court affirmed the court of appeals and concluded that the Mendenhall and Hodari D. tests "can coexist and that the Hodari D. test applies when a suspect refuses to submit to a show of authority" (¶ 5). The latter is what happened in this case. When an officer stopped his marked squad car in the street next to a car that was behind the parked car in which the defendant was a passenger, activated his emergency flashers (not the red-and-blue rolling lights), and exited the squad car to approach the defendant's car to investigate suspicious activity, the defendant exited and began to walk away, twice ignoring the officer's commands to stop. The defendant then ran to a nearby house but was caught by the officer on the porch and was arrested after a struggle.

Said the court, "Hodari D. compels the conclusion that Young was not seized until [the officer] physically apprehended him on the porch of the house" (¶ 26). "Hodari D. ... supplements the Mendenhall test to address situations where a person flees in response to a police show of authority" (¶ 38). "Mendenhall is the appropriate test for situations where the question is whether a person submitted to a police show of authority because, under all the circumstances surrounding the incident, a reasonable person would not have felt free to leave" (¶ 37).

(Editors' Note: The defendant in this case urged the court to reject Hodari D. and to interpret the Wisconsin Constitution to afford greater protection to individual liberty interests than does the Fourth Amendment. The court did not do so, indicating that "[w]e embrace the Fourth Amendment jurisprudence of the United States Supreme Court when we perceive soundness in Supreme Court analysis and value in uniform rules. We follow that course in this case" (¶ 30).)

The supreme court also addressed questions relating to the sufficiency of the evidence to support the defendant's convictions for obstructing an officer and resisting an officer. The questions concerned whether the officer was acting with lawful authority when he ordered the defendant to stop (an element of the obstructing charge) and whether he was acting with lawful authority when he chased and apprehended the defendant (an element of the resisting charge). As to the former, the court concluded that, on the facts of this case, the officer had reasonable suspicion that the defendant was involved in criminal activity before he issued his second command to the defendant to stop (see ¶ 76); with regard to the latter the court held that the officer had probable cause to arrest the defendant before he physically apprehended the defendant (see ¶ 78). Accordingly, as to both charges, the officer was acting with lawful authority. The court held that the marijuana that was seized at the time of arrest and that formed the basis for a drug charge against the defendant was discovered during a valid search incident to arrest (see ¶ 77).

Justice Butler filed an opinion concurring in part and dissenting in part. Justice Bradley filed a dissenting opinion that was joined by Chief Justice Abrahamson.

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Taxation

Adams Outdoor Advertising Ltd. v. City of Madison, 2006 WI 104 (filed 13 July 2006)

The plaintiff, Adams Outdoor Advertising Ltd., challenged as excessive the city of Madison's personal property tax assessments of the plaintiff's billboards for the years 2002 and 2003. There was no dispute that billboards are personal property, subject to the personal property tax. The questions the supreme court accepted on certification concern how an assessor should arrive at the value of a billboard and what elements of the billboard may be included in the assessment. Wisconsin Stat. section 70.34 provides that "[a]ll articles of personal property shall, as far as practicable, be valued by the assessor upon actual view at their true cash value[,]" and that assessments should be performed in accordance with the Property Assessment Manual.

The Property Assessment Manual and case law set forth a three-tier assessment methodology to ascertain true cash value. If there has been no recent sale of the subject property, an assessor must consider sales of reasonably comparable properties. Only if there has been no arm's-length sale and there are no reasonably comparable sales may an assessor use any of the third-tier assessment methodologies. When determining fair market value using tier three, an assessor may consider all the factors collectively that bear on the property's value. These factors include cost, depreciation, replacement value, income, industrial conditions, location and occupancy, sales of like property, book value, amount of insurance carried, value asserted in a prospectus, and appraisals produced by the owner. The income approach, which seeks to capture the amount of income the property will generate over its useful life, and the cost approach, which seeks to measure the cost to replace the property, both fit into this analytic framework (see ¶¶ 34-35). Before 1994 the city of Madison used the cost approach to appraise billboards; since then it has used the income approach.

In a majority decision authored by Justice Prosser, the supreme court concluded that "[t]he City was entitled to use third tier methods of assessment to assess Adams' billboards because there was not a recent arms-length sale of the property and Adams did not produce evidence of reasonably comparable sales" (¶ 3). It also held that, "[a]lthough net income from billboard rentals may be a factor to consider in a third tier analysis, it cannot be the sole controlling factor in determining value. When the Madison City Assessor acknowledged that he considered but rejected all other approaches and factors, his assessment contravened long-standing assessment principles articulated in Waste Management of Wisconsin, Inc. v. Kenosha County Board of Review, 184 Wis. 2d 541, 558, 516 N.W.2d 695 (1994); Bischoff, 81 Wis. 2d at 619; and State ex rel. I.B.M. Corp. v. Board of Review, 231 Wis. 303, 311-12, 285 N.W. 784 (1939), as well as the prevailing practice for assessing billboards throughout Wisconsin and the United States" (¶ id.).

The court further concluded that the city erred by including the value of billboard permits in the assessment of Adams' billboards. Billboard permits are not tangible personal property. For property tax purposes, billboard permits constitute an interest in real property, as defined by Wis. Stat. section 70.03 (see ¶ 92).

Chief Justice Abrahamson filed a dissenting opinion that was joined by Justice Bradley.

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