Vol. 82, No. 7, July 2009
Direct Actions – Derivative Actions
Krier v. Vilione, 2009 WI 45 (filed 10 June 2009)
In 1991 Krier and Michael Vilione formed three separate entities as part of a waste disposal business. Each company performed a different function. Accounting services were provided by an accounting firm that employed Michael’s brother, Donald. By 2002, Krier learned that Michael, abetted by Donald’s creative accounting, had allegedly stolen about $1.2 million from one of the companies, EOG Environmental. Krier began litigation but soon entered into a comprehensive settlement with Michael that rejuggled various debts and ownership interests. As a result, Krier no longer held any stock in EOG Environmental. The settlement did not include Donald.
Two years later, Krier and the other two corporate entities sued Donald and his accounting firm (“the accountants”). In sum, the plaintiffs alleged that the accountants “either (1) failed to discover the alleged misappropriations; (2) knew of the misappropriations but ‘fail[ed] to disclose’ or prevent them; or (3) ‘acted together’ ‘purposefully’ and ‘intentionally’ with Michael Vilione to allegedly misappropriate the funds” (¶ 10). The plaintiffs contended that had they known this information, they would have “ceased to do business with EOG Environmental” (id.). The circuit court granted summary judgment in favor of the accountants. The court of appeals reversed.
The supreme court reversed the court of appeals in an opinion authored by Justice Ziegler. The majority’s conclusions are summarized as follows: “The plaintiffs do not have standing to assert these claims against the defendant for at least three reasons. First, the plaintiffs’ claims are inconsistent with traditional corporate law principles and the damages sought are far beyond that afforded to a plaintiff in a derivative action. In order to initiate a derivative action, a plaintiff must be a current shareholder of the subject corporation. Second, the plaintiffs’ claims are quite distinguishable from accountant third-party liability jurisprudence, which has traditionally allowed claims for the foreseeable injuries resulting from the accountant’s negligent acts, i.e., the injuries that result when a third party takes action based upon reasonable reliance on misinformation provided by an accountant. Third, the damages claimed by the plaintiffs do not correspond with the claims alleged” (¶ 18). Moreover, public policy considerations barred the claims in any event, and the statute of limitation also foreclosed the breach-of-fiduciary-duty claim.
Justice Bradley, joined by Chief Justice Abrahamson, dissented. The majority opinion, they argued, is in “direct conflict” (¶ 89) with the recent decision in Notz v. Everett Smith Group, Ltd., 2009 WI 30, and thus will trigger “confusion in the law” (¶ 84). The dissent further asserted that the majority mischaracterized the “central allegations of the plaintiffs’ complaint” (¶ 90).
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Sufficiency of Evidence – Habitual Criminality – Persistent Repeater
State v. Long, 2009 WI 36 (filed 27 May 2009)
A jury convicted the defendant of second-degree sexual assault and false imprisonment. The judge found that for sentencing purposes, he was a persistent repeater under Wisconsin’s three-strikes law, Wis. Stat. section 939.62(2m)(b)1. The court of appeals affirmed.
The supreme court affirmed in part and reversed in part in an opinion written by Justice Bradley. Applying settled law, the court held that sufficient evidence supported both convictions. It also concluded, however, that the defendant was not a persistent repeater as that term is defined in the habitual criminality statutes. The three-strikes law applies when a defendant who has committed two or more serious felonies commits yet another serious felony. The statute demands the following: “(1) the conviction date for the first offense must have preceded the violation date for the second offense, and (2) the conviction date for the second offense must have preceded the violation date for the current Wisconsin offense” (¶ 40).
The defendant’s prior crimes occurred in Minnesota. Both convictions preceded the present Wisconsin offense. Nonetheless, “the conviction date of the Hennepin County offense was not before the violation date of the Washington County offense. Likewise, the conviction date of the Washington County offense was not before the violation date of the Hennepin County offense. Neither of Long’s previous convictions occurred ‘before the date of violation of … the other felon[y] for which [Long] was previously convicted.’ Therefore, the previous convictions listed in the criminal complaint do not satisfy the statutory requirements for sentencing under the persistent repeater statute” (¶ 42).
The supreme court remanded the case and noted that it presents “several new and complex issues” (¶ 46). The court provided a roadmap that addresses the circumstances under which the state might “substitute” different prior convictions for purposes of the persistent repeater status. It also discussed the type of documentary evidence that may be used to prove the dates and the nature of the prior convictions (see ¶¶ 47–59).
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Guilty Plea Hearings – Role of Plea Questionnaire/Waiver of Rights Form
State v. Hoppe, 2009 WI 41 (filed 29 May 2009)
The duties of the judge at guilty plea hearings and the role of the Plea Questionnaire/Waiver of Rights standard court form at those hearings are at the heart of this appeal. In the words of the Wisconsin Supreme Court in State v. Brown, 2006 WI 100, 293 Wis. 2d 594, 716 N.W.2d 906, it is the judge’s duty at a plea hearing to address the defendant personally and do all the following:
1) “determine the extent of the defendant’s education and general comprehension so as to assess the defendant’s capacity to understand the issues at the hearing;”
2) “ascertain whether any promises, agreements, or threats were made in connection with the defendant’s anticipated plea, his [or her] appearance at the hearing, or any decision to forgo an attorney;”
3) “alert the defendant to the possibility that an attorney may discover defenses or mitigating circumstances that would not be apparent to a layman such as the defendant;”
4) “ensure the defendant understands that if he [or she] is indigent and cannot afford an attorney, an attorney will be provided at no expense to him [or her];”
5) “establish the defendant’s understanding of the nature of the crime with which he [or she] is charged and the range of punishments to which he [or she] is subjecting himself [or herself] by entering a plea;”
6) “ascertain personally whether a factual basis exists to support the plea;”
7) “inform the defendant of the constitutional rights he [or she] waives by entering a plea and verify that the defendant understands he [or she] is giving up these rights;”
8) “establish personally that the defendant understands that the court is not bound by the terms of any plea agreement, including recommendations from the district attorney, in every case where there has been a plea agreement;”
9) “notify the defendant of the direct consequences of [the] plea;” and
10) “advise the defendant that ‘[if you are not a citizen of the United States of America, you are advised that a plea of guilty or no contest for the offense [or offenses] with which you are charged may result in deportation, the exclusion from admission to this country or the denial of naturalization, under federal law,’ as provided in Wis. Stat. § 971.08(1)(c)” (¶ 18).
At the guilty plea hearing in this case, the circuit court judge did little more than confirm with the defendant that he had gone over the plea questionnaire form with his attorneys and understood its contents. In short, the court simply incorporated the form into the plea colloquy (see ¶ 26). In a unanimous decision authored by Chief Justice Abrahamson, the supreme court concluded that the plea colloquy was deficient on its face (see ¶ 7).
The supreme court noted that “[a] circuit court may use the completed Plea Questionnaire/Waiver of Rights Form when discharging its plea colloquy duties. ‘A circuit court has significant discretion in how it conducts a plea hearing’ and may, ‘[w]ithin its discretion, … incorporate into the plea colloquy the information contained in the plea questionnaire, relying substantially on that questionnaire to establish the defendant’s understanding’” (¶ 30) (footnote omitted). “A circuit court may not, however, rely entirely on the Plea Questionnaire/Waiver of Rights Form as a substitute for a substantive in-court plea colloquy. Although a circuit court may refer to and use a Plea Questionnaire/Waiver of Rights Form at the plea hearing, the plea hearing transcript must demonstrate that the circuit court used a substantive colloquy to satisfy each of the duties listed in Brown [as catalogued above]. The point of the substantive in-court plea colloquy is to ensure that the defendant’s guilty plea comports with the constitutional requirements for a knowing, intelligent, and voluntary plea” (¶ 31).
The supreme court continued: “The Plea Questionnaire/Waiver of Rights Form provides a defendant and counsel the opportunity to review together a written statement of the information a defendant should know before entering a guilty plea. A completed Form can therefore be a very useful instrument to help ensure a knowing, intelligent, and voluntary plea. The plea colloquy cannot, however, be reduced to determining whether the defendant has read and filled out the Form. Although we do not require a circuit court to follow inflexible guidelines when conducting a plea hearing, the Form cannot substitute for a personal, in-court, on-the-record plea colloquy between the circuit court and a defendant” (¶ 32) (footnote omitted).
Search and Seizure – Vehicle Stops Based on Probable Cause and Reasonable Suspicion
State v. Popke, 2009 WI 37 (filed 27 May 2009)
At 1:30 a.m., a police officer observed the defendant negotiate a turn into the correct lane of traffic but then “swerve” into the left lane. According to the officer, three-quarters of the defendant’s vehicle was to the left of the center of the road, which was marked by a black strip of tar. The defendant then moved back into the proper lane but “overcompensated” and as a result “almost hit the curb” on the right-hand side of the road. The defendant’s vehicle then began to “fade back” toward the middle of the road and “nearly struck th[e] median” (¶ 4). The officer made these observations as the vehicle traveled approximately one block.
The officer then stopped the defendant and arrested him on a charge of operating a vehicle while intoxicated (as a third-time offender). The defendant moved the circuit court to suppress any evidence that was derived from the traffic stop; he argued that the officer had neither probable cause to believe that a traffic violation had occurred nor reasonable suspicion that criminal activity was afoot. The state argued that the traffic stop was reasonable because the officer had probable cause to believe that a traffic violation – driving left of center contrary to Wis. Stat. section 346.05 – had been committed. The circuit court denied the defendant’s motion to suppress the evidence. The defendant subsequently pleaded no contest to operating a motor vehicle while under the influence of an intoxicant.
The defendant appealed, and the court of appeals reversed the circuit court’s decision. In its unpublished decision the court of appeals concluded that the officer did not have probable cause to believe a traffic violation had occurred. “The court of appeals reasoned that the defendant’s ‘conduct did not constitute driving down the wrong side of the road within the meaning of [Wis. Stat.] § 346.05’ because the defendant crossed the center of the road only ‘momentarily.’ In addition, the court of appeals concluded that the officer did not have reasonable suspicion that a traffic or criminal code violation had occurred. The court of appeals reasoned that, under the totality of the circumstances, the State did not show ‘specific and articulable facts’ that warranted this intrusion. The appellate court determined that it was not uncommon for vehicles to momentarily cross the center of the road, there was no testimony to establish how close the defendant came to striking the curb, and that no erratic driving was recounted by the officer. Therefore, the court of appeals concluded that the traffic stop did not comport with constitutional protections, and as a result, the [denial of the motion to suppress] was reversed and the judgment of conviction vacated” (¶ 8).
In a unanimous decision authored by Justice Ziegler, the supreme court reversed the court of appeals. Applying the principle that an officer may conduct a traffic stop when he or she has probable cause to believe a traffic violation has occurred (see ¶ 13), the court concluded that “the police officer had probable cause to believe a traffic code violation had occurred, namely operating left of center pursuant to Wis. Stat. § 346.05, and therefore, the traffic stop was reasonable. The officer watched as the defendant drove left of center, and as a result, the officer had probable cause to believe a traffic violation was being committed” (¶ 17).
The court also concluded that the officer had reasonable suspicion that the defendant was operating a motor vehicle while under the influence of intoxicants. “Even if no probable cause existed, a police officer may still conduct a traffic stop when, under the totality of the circumstances, he or she has grounds to reasonably suspect that a crime or traffic violation has been or will be committed” (¶ 23). Said the court, “The officer in this case made the following observations over the course of approximately one block at 1:30 a.m.: The defendant was driving with three-quarters of the vehicle left of the center of the road; the vehicle then moved back into the proper lane but almost hit the curb; the defendant’s vehicle then faded back towards the middle of the road and nearly struck the median. Under the totality of the circumstances, we conclude that the accumulation of these facts gives rise to a reasonable suspicion that the defendant was operating a motor vehicle while intoxicated” (¶ 26).
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Medicare – Medigap – Reimbursement
Froedtert Memorial Luth. Hosp. v. National States Ins. Co., 2009 WI 33 (filed 13 May 2009)
KL purchased a Medigap policy from National States in 1998. She was hospitalized at Froedtert Memorial Lutheran Hospital in 2000 and died in 2001, having exhausted her Medicare Part A benefits. National States covered part of her medical expenses under the Medigap policy, but more than $130,000 in outstanding medical expenses remained. The circuit court ruled that National States was responsible for the balance. The court of appeals affirmed.
The supreme court affirmed in part and reversed in part in an opinion written by Justice Prosser. The crux of the case was whether National States was obligated to reimburse Froedtert at the lower Medicare rate or at the hospital’s “standard” rate (see ¶ 34). No authority prohibited the hospital from billing KL at its standard rate after her Medicare Part A benefits were exhausted. The relevant policy language provided: “If maximum benefits have been paid under Medicare for in-patient hospital expense, including the lifetime reserve days, we will pay all further expense incurred for hospital confinement that would have been covered by Medicare Part A’ (Emphasis added.)”
(¶ 35). The court held that this language was ambiguous and “that National States is liable to Froedtert for the full amount of [KL]’s hospital expense at Froedtert’s standard billing rate” (¶ 43).
The supreme court reversed the circuit court’s imposition of statutory interest under Wis. Stat. section 628.46. On these facts the insurer’s obligation to pay was “fairly debatable,” particularly in light of “unsettled policy” and the “absence of controlling precedent” (¶ 65).
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