Vol. 83, No. 3, March 2010
Guardian ad Litem – Adversary Counsel – Client Interviews
Jennifer M. v. Maurer, 2010 WI App 8 (filed 22 Dec. 2009) (ordered published 27 Jan. 2010)
Jennifer M. is an adult woman subject to a limited guardianship order. The court appointed her father as her guardian and Maurer, an attorney, as her guardian ad litem (GAL). Jennifer also has her own adversary counsel. Jennifer’s parents are divorced. Jennifer’s mother filed a petition to remove Jennifer’s father as guardian. The circuit court denied Jennifer’s motion to dismiss the petition and her request that Maurer not be reappointed as GAL, a request Jennifer made because of her belief that Maurer favored contacts between Jennifer and her mother that Jennifer opposed. The court also ordered the parties, including Jennifer, to participate in mediation. Based on a desire to prevent undue stress to Jennifer, the court ordered that Maurer interview Jennifer “one-on-one” outside the presence of Jennifer’s adversary counsel and report back to the court.
The court of appeals reversed in an opinion written by Judge Brunner. “The sole issue raised by this case is whether a circuit court has authority to order a represented adult ward to submit to an interview with her guardian ad litem, outside the presence of her counsel and over her attorney’s objection, where the order also requires the guardian ad litem to report the content of the interview to the circuit court” (¶ 1). Under Wis. Stat. chapter 54, an adult ward may be represented by both a GAL and an adversary attorney, who perform very different roles (see ¶¶ 7-8). The Rules of Professional Conduct, particularly SCR 20:4.2’s “no-contact” provision, do not directly prohibit the interview outside counsel’s presence (see ¶ 9).
Nonetheless, the “policies underlying the no-contact rule are of sufficient importance in guardianship cases that the right to counsel guaranteed by Wis. Stat. § 54.42(1)(b) includes the ward’s right to have counsel present during an interview with the guardian ad litem for the purpose of making a report to the court” (¶ 11). “Our limited review of the record has revealed no actual misconduct by the parties involved in this litigation, and we do not mean to imply a party has committed any. The question we are confronted with today is a narrow one of law. The guardian ad litem must interview the ward as part of his or her general duties. Wis. Stat. § 54.40(4)(a). We simply hold the interview must be conducted in the presence of a represented ward’s adversary counsel” (¶ 12).
Bettendorf v. Microsoft Corp., 2010 WI App 13 (filed 22 Dec. 2009) (ordered published 27 Jan. 2010)
This case involves the reasonableness of attorney fees expended in the settlement of an antitrust case against Microsoft. The plaintiffs’ law firm requested $22.63 million in attorney fees, which the circuit court trimmed to $4 million after Microsoft objected and vigorously litigated the issue. Plaintiffs’ counsel then requested an additional $2.3 million in fees plus expenses incurred during the fee litigation itself. The trial judge cut that amount to $1.25 million, plus expenses, in a carefully worded 66-page opinion. Both parties appealed.
The court of appeals affirmed in an opinion, authored by Judge Curley, that addresses numerous issues relating to attorney-fee litigation, particularly the reasonableness of a fee and the problem of inaccurate and even deceptive time keeping. Microsoft argued that plaintiffs’ counsel should have been sanctioned for their pursuit of excessive fees, especially their “deception and lack of candor” in, for example, reporting time that was spent on pending litigation in other states. The court of appeals held that the trial judge, however, properly exercised his discretion in not imposing sanctions. The trial judge found that the plaintiffs’ “attorneys’ apparent lack of forthrightness was venial at worst and has been expiated by [their] complete openness about those time entries, combined with [their] willingness to simply withdraw the request for reimbursement of them” (¶ 24). The judge also properly considered that no one had been “actually deceived” by the inaccurate records.
Next, the court of appeals rejected Microsoft’s contention that plaintiffs’ counsel should not have been awarded fees for time spent litigating the fee petition. Here the court focused on the lodestar methodology employed by the trial judge, the core of which involves the multiplication of reasonable hours by a reasonable rate before considering other factors (see ¶ 30). The trial judge, for example, slashed the requested time by 1,500 hours (one-third) and then used a “blended average rate of $400 per hour” (¶ 34). The court of appeals remanded the case for a determination of whether plaintiffs’ counsel also were entitled to fees incurred in litigating this appeal.
The court then turned to the cross-appeal, in which plaintiffs’ counsel complained about the amount of the fee award. In affirming, the court of appeals considered a range of fact-intensive considerations under SCR 20:1.5, including the dollar value of the Wisconsin settlement in light of those obtained in other states, hourly rates, and the appropriate “multiplier” (see ¶ 43). The trial judge did not, for example, abuse his discretion in determining that plaintiffs’ counsels’ efforts were only 25 percent responsible for the settlement. “Although the Bettendorf attorneys wish that the trial court had analyzed things differently to support the positions they advance, ‘a court need give only a concise but clear explanation of its reasons for the fee award when the reasonableness [of the requested fee] is challenged’” (¶ 53).
Finally, the trial judge properly trimmed plaintiffs’ counsels’ fee request for time spent litigating the fee dispute itself. The trial judge cut the request from $2.3 million to $1.25 million largely because he thought that a full third of the total time was unnecessary. The plaintiffs cited no legal authority for the proposition that the trial judge had to identify specific expenses or time spent that was unreasonable.
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Medical Malpractice – “Contracts to Cure”
Van Hierden v. Swelstad, 2010 WI App 16 (filed 30 Dec. 2009) (ordered published 27 Jan. 2010)
Van Hierden injured his left thumb and hand in a work-related accident and underwent surgery on the same day to repair it. Following the surgery, he developed reflex sympathetic dystrophy, which resulted in persistent pain in the base of his left thumb. Van Hierden was ultimately referred to Dr. Swelstad, a surgeon, regarding the possibility of having a sympathectomy performed to alleviate the pain.
According to Van Hierden, Swelstad told him, “We’re going to get rid of your pain and we’re going to get you back to work.” Following his consultation with Swelstad, Van Hierden elected to have the sympathectomy performed and he executed a written consent-for-surgery form that included, among other things, the following language: “I am aware that the practice of medicine and surgery is not an exact science and I acknowledge that no guarantees have been made to me concerning the results of the operation or procedure(s)” (¶ 3).
Swelstad performed the sympathectomy but, according to Van Hierden, the surgery did not end his pain nor did it allow him to return to work. Rather, he claimed that his pain worsened and he has since undergone an extensive course of medical treatment and incurred economic and noneconomic losses, including severe unrelenting pain that has left him totally disabled.
Van Hierden brought suit against Swelstad on the theory that Swelstad breached a contract to cure him. The circuit court ruled as a matter of law that a contract was never formed and, therefore, granted Swelstad’s motion for summary judgment. It ruled that Swelstad’s statement “‘is a textbook case of a mere expression of intention, opinion, or prophecy,’ and that ‘a reasonable person in the position of [Van Hierden] would not have understood this statement to create a binding warranty or contract’” (¶ 6).
In a decision authored by Judge Bridge, the court of appeals affirmed. The court began its analysis with the general rule that “physicians are neither the warrantor of a cure, nor the guarantor of the result of his or her treatment. Wisconsin courts have recognized, however, that a physician may bind himself or herself by contracting to cure a patient or to accomplish a particular result” (¶ 9). “The law recognizes that a doctor’s contract to cure must be express, since a promise to cure is neither implied nor presumed in the contract between doctor and patient. … Further, there must be clear proof that the contract was made in order for a physician to be held liable for breach of contract under such circumstances” (¶ 10).
In this case the plaintiff placed much reliance on the doctor’s statement that “we’re going to get rid of your pain and we’re going to get you back to work.” The appellate court did not need to decide whether this statement, viewed by itself, constituted a contract to cure because there was a very significant additional fact: Van Hierden signed a form acknowledging that no particular result was promised. “In light of this express acknowledgement, it would be unreasonable to conclude that Van Hierden had been given and relied upon a guarantee concerning the result of the surgery. Accordingly, we conclude that summary judgment was properly granted in favor of Dr. Swelstad” (¶ 13).
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Intimidation of Crime Victim – Wis. Stat. section 940.44(2) – Elements
State v. Freer, 2010 WI App 9 (filed 3 Dec. 2009) (ordered published 27 Jan. 2010)
Freer was involved in an altercation with another man. The victim reported the incident, and Freer received a citation for disorderly conduct. On the same day that a criminal complaint charging Freer with disorderly conduct was filed, Freer left an intimidating message relating to the victim on the answering machine of a friend of the victim.
Based on this alleged threat, Freer also was charged with intimidating a victim, pursuant to Wis. Stat. section 940.44(2). He moved to dismiss this charge, claiming that the statute did not apply to his conduct because the alleged act of intimidation occurred after the victim caused a complaint to be sought (a sequence of events that was undisputed). The circuit court denied the motion to dismiss, and the defendant was convicted of the charged offense following a jury trial. He appealed the conviction and the order denying his motion to dismiss. In a decision authored by Judge Higginbotham, the court of appeals affirmed.
Wisconsin Statute section 940.44(2) prohibits a person from “knowingly and maliciously prevent[ing] or dissuad[ing], or attempt[ing] to so prevent or dissuade” a crime victim or a person acting on his or her behalf from
“[c]ausing a complaint, indictment or information to be sought and prosecuted and assisting in the prosecution thereof” (emphasis added). The defendant argued that the multiple use of the conjunctive “and” in this statute means that the prosecution is required to prove that the act of intimidation prevented or dissuaded the victim from doing each of the acts specified in the statute. Because the alleged act of intimidation occurred after the victim caused a complaint to be sought, the defendant contended that he did not violate this law. The state urged that the word “and” in the statute ought more properly be read in the disjunctive.
The appellate court concluded that the statute is ambiguous and that resort to extrinsic sources (namely, the statute’s legislative history) is necessary to discern its meaning. Based on that history, it concluded that “the legislature intended the victim intimidation statute to prohibit any act of intimidation that seeks to prevent or dissuade a crime victim from assisting in the prosecution. Accordingly, we read ‘and’ in the phrase ‘causing a complaint to be sought and prosecuted and assisting in the prosecution thereof’ in the disjunctive, and thereby conclude that Wis. Stat. § 940.44(2) prohibits knowingly or maliciously preventing or dissuading a crime victim from providing any one or more of the following forms of assistance to prosecutors: (1) causing a complaint, indictment or information to be sought; (2) causing a complaint to be prosecuted; or (3) assisting in the prosecution” (¶ 24). Said the court, “We reject Freer’s argument that § 940.44(2) excludes from its reach alleged acts of intimidation, such as Freer’s, which occur after a victim has caused a complaint to be sought” (¶ 27).
Sexual Assault – Children – Medical Necessity
State v. Lesik, 2010 WI App 12 (filed 1 Dec. 2009) (ordered published 27 Jan. 2010)
Lesik was convicted of sexually assaulting his then seven-year-old stepdaughter. At trial, he contended that any touching or penetration had been done for “proper medical purposes.”
The court of appeals affirmed his convictions in an opinion written by Judge Peterson. The court rejected Lesik’s contention that the sexual assault statute was unconstitutional because it did not contain a medical-care exception. The court construed the argument as one of unconstitutional overbreadth, namely, that the statute also applied to constitutionally protected conduct that the state may not punish (see ¶ 9). “When a statute is challenged as unconstitutionally overbroad, however, the statute can be ‘cured’ by means of judicial interpretation, which provides for a narrowing and validating construction of the law” (¶ 10).
The court of appeals held that it would be “absurd to imagine the legislature intended to include legitimate medical, health care and hygiene procedures within the bounds of ‘sexual intercourse’ for the sexual assault of a child statute.... [Relying on a prior case,] we also conclude here that ‘sexual intercourse’ as used in the sexual assault of a child statute does not include ‘bona fide medical, health care, and hygiene procedures.’ Because this construction of Wis. Stat. § 948.02 – which the circuit court also applied – cures the statute’s silence regarding medically appropriate conduct, the statute is not unconstitutionally overbroad” (¶ 13). Finally, the court also held that the medical-care instruction read by the trial judge “fully and completely conveyed Lesik’s theory of defense” (¶ 17).
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Confessions – Right to Counsel
State v. Forbush, 2010 WI App 11 (filed 29 Dec. 2009) (ordered published 27 Jan. 2010)
Forbush was arrested on warrants for attempted sexual assault and false imprisonment. During custodial interrogation, he waived his Miranda rights and made incriminating statements. The circuit court suppressed his incriminating statements on the ground that they were obtained in violation of Forbush’s right to counsel. A law firm had contacted the district attorney’s office and indicated it would represent Forbush. Under the rule of State v. Dagnall, 2000 WI 82, 236 Wis. 2d 339, 612 N.W.2d 680, police officers were prohibited from questioning him without his attorney being present.
The court of appeals reversed in an opinion authored by Judge Peterson. The Dagnall rule rested squarely on the Supreme Court decision in Michigan v. Jackson, 475 U.S. 625 (1986). The Supreme Court, however, overruled Jackson in Montejo v. Louisiana, 129 S. Ct. 2079 (2009). “We agree with the State that when the Supreme Court overruled Jackson, it also effectively overruled Dagnall. Not only did Dagnall’s holding rely on the Jackson rule, but Montejo eschewed Dagnall’s central tenet: that the right to an attorney is automatically invoked as soon as a defendant is represented…. Montejo overruled this interpretation of the Sixth Amendment” (¶ 13).
The court of appeals rejected the defense argument that the Wisconsin Constitution nonetheless provided an independent foundation for the Dagnall rule. The right to assistance of counsel is identical under the federal and the state constitutions. Moreover, Dagnall’s holding “was based entirely” on Jackson. Finally, case law history before Dagnall did not preclude police from questioning charged and represented defendants (see ¶ 16).
Investigative Detentions – Collective Knowledge of Police – Proofs at Suppression Hearing
State v. Pickens, 2010 WI App 5 (filed 23 Dec. 2009) (ordered published 27 Jan. 2010)
This case concerns (among many issues) whether a court may, when determining the existence of reasonable suspicion for an investigative detention, consider that officers have knowledge of the fact that a person is suspected by other officers of prior criminal behavior. The defendant was subjected to an investigative detention because the detaining officer had seen a flier in a police briefing area stating that the defendant was a suspect in a shooting incident. However, at the suppression hearing, there was no testimony about the facts supporting that suspicion.
In a decision authored by Judge Lundsten, the court of appeals characterized it as an undeniable fact that police officers often properly act on the basis of the knowledge of other officers without knowing the underlying facts. “For example, under the collective knowledge doctrine, an investigating officer with knowledge of facts amounting to reasonable suspicion may direct a second officer without such knowledge to stop and detain a suspect” (¶ 12). In a footnote, the court further noted that, under the collective-knowledge doctrine, there are situations in which the information in the hands of an entire police department may be imputed to officers on the scene to help establish reasonable suspicion or probable cause (see ¶ 11 n.1) (citing State v. Alexander, 2005 WI App 231, 287 Wis. 2d 645, 706 N.W.2d 191).
However, in a collective-knowledge situation, “if a defendant moves to suppress [evidence obtained as a result of the stop], the prosecutor must prove the collective knowledge that supports the stop. Proof is not supplied by the mere testimony of one officer that he relied on the unspecified knowledge of another officer. Such testimony provides no basis for the court to assess the validity of the police suspicion – it contains no specific, articulable facts to which the court can apply the reasonable suspicion standard” (¶ 13). Said the court, “We do not hold that police officers must have personal knowledge of all the facts needed to support a seizure before acting. Rather, our focus is on what comes later – proof at a suppression hearing. As to the suppression hearing in this case, we do not know what the prosecutor could have presented to show that it was reasonable to suspect that [the defendant] was involved in a prior shooting; we only know that the prosecutor did not present such evidence. Accordingly, we conclude that our reasonable suspicion determination may not include consideration of the investigating officers’ bare knowledge that other officers suspected that [the defendant] was involved in a prior shooting” (¶ 17).
Search and Seizure – Auto Stops – Tinted Windows – Reasonable Suspicion
State v. Conaway, 2010 WI App 7 (filed 23 Dec. 2009) (ordered published 27 Jan. 2010)
A police officer stopped a vehicle because of a suspected window-tint violation. According to the Wisconsin Administrative Code, rear-window tinting is permitted only if the window allows at least 35 percent of light to pass through, except that this limitation does not apply to tinting done during the original manufacture of a vehicle. The stop resulted in the discovery of heroin and drug paraphernalia in the car.
The vehicle’s occupants moved to suppress the drug evidence. They argued that the stop was not supported by reasonable suspicion that the rear window failed to meet the applicable light-pass-through standard articulated in the Administrative Code. The circuit court agreed and suppressed the evidence. The state appealed, arguing that the officer’s suppression hearing testimony showed that he reasonably suspected a window-tint violation.
In a decision authored by Judge Lundsten, the court of appeals affirmed. It began its analysis with the general proposition that the reasonable suspicion necessary for a lawful vehicle stop does not require ruling out innocent explanations and, if any reasonable inference of wrongful conduct can be objectively discerned, officers may temporarily detain an individual for purposes of investigation.
“It is true, of course, that the officer in this case did not need to be able to ascertain with certainty that there was a window tint violation. Officers need not, and likely cannot, distinguish with the naked eye small variations in the amount of light that passes through suspect windows. Reasonable suspicion does not require such precision. Rather, the officer need only reasonably suspect that the window violates the regulation. Focusing solely on the 35%-light-pass-through requirement, it would be enough, for example, if an officer testifies that he or she is familiar with how dark a minimally complying window appears and that the suspect window appeared similarly dark or darker, taking into account the circumstances of the viewing. Assuming, as we suggest above, that officers cannot tell by observation alone whether a window is precisely at the 35% standard, it follows that, if a window appears to be at about that standard, there is reasonable suspicion that it falls below the standard” (¶ 7).
The problem for the state in this case was not that the officer was unable, before the stop, to conclusively determine that there was a window-tint violation. Instead, the problem was that the officer did not provide any specific, articulable facts supporting reasonable suspicion of a violation. The officer testified that he had 13 years of experience as a state trooper, was trained in the use of a tint meter, and had stopped between 10 and 100 vehicles for what appeared to be window-tint violations. However, he failed to testify whether his suspicions in those cases were ever verified by subsequent testing. “In short, nothing in the officer’s testimony provides a basis for a finding that the officer had the ability to judge whether a tinted rear window came close to or failed to meet the 35%-light-pass-through requirement. [Accordingly], the reasonable suspicion standard was not met” (¶ 13).
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Estate of Stys v. Auto Club Group Ins. Co., 2010 WI App 17 (filed 22 Dec. 2009) (ordered published 27 Jan. 2010)
The plaintiffs were adults whose father was killed by a driver who hit him as he walked on a street. The driver’s insurer paid its policy limits and was dismissed from the suit. The adult children sought to recover additional monies from their father’s underinsured motorist (UIM) coverage with the Auto Club Group. The circuit court granted summary judgment in favor of the UIM insurer.
The court of appeals affirmed in an opinion written by Judge Fine. The court opened by clarifying that only the adult children’s claims were before the court. Neither their father’s estate nor their mother’s estate had appealed. Nor was the court of appeals considering whether the adult children might have derivative claims through the estates (see ¶ 5).
Turning to the UIM coverage issue, the court held that “none of the adult children is an ‘insured person’ under the policy, and thus the underinsured-motorist-coverage provision does not apply to them” (¶ 9). In particular, the adult children were not resident relatives within the policy’s meaning (see ¶ 10). Next the court rejected the adult children’s contention that the policy was fatally ambiguous. “Appellants have pointed us to no law that permits a limits-of-liability provision to trump an insuring agreement, which, as we have seen, is the pivot on which an insurer’s liability must turn” (¶ 14). Finally, their argument that the policy’s language resulted in “illusory” coverage was “without merit” (¶ 17).
Exclusions – Criminal Conduct – Summary Judgment
Gillund v. Meridian Mut. Ins. Co., 2010 WI App 4 (filed 1 Dec. 2009) (ordered published 27 Jan. 2010)
Gillund, a young woman, discovered that her uncle, Pfeiffer, had secretly and without her consent videotaped her while she was either fully or partially unclothed when she was in his home. Criminal charges were brought against Pfeiffer but later dismissed for various reasons. Gillund sued Pfeiffer and three insurers. The circuit court granted summary judgment in favor of all three insurers based on policy exclusions.
The court of appeals affirmed in part and reversed in part in an opinion written by Judge Brennan. The court affirmed the ruling that policies issued by Meridian and State Automobile provided no coverage for injuries caused by violations of penal law by the insured (see ¶ 20). “The penal law endorsement excludes from coverage ‘[i]njury caused by a violation of a penal law or ordinance committed by or with the knowledge or consent of an insured.’ Gillund argues that: (1) the exclusion does not apply because Pfeiffer was not convicted of a violation of the penal law and could not be prosecuted for any crime; and (2) the penal law endorsement is ambiguous because it contradicts the grant of coverage for invasion of privacy, and accordingly, the policies’ grant of coverage for invasion of privacy is illusory. Meridian and State Automobile respond that the exclusion for a penal law violation does not require conviction and that the policies’ coverage for invasion of privacy does not contradict the exclusion for penal law violations. We agree with Meridian and State Automobile” (¶ 23).
No party disputed a prosecutor’s remarks that Pfeiffer’s conduct violated state criminal law (see ¶ 25). Nor did this exclusion render coverage illusory. “By comparing the elements of a civil invasion of privacy to those necessary to establish a criminal invasion of privacy, it becomes possible to foresee a civil invasion of privacy that does not violate the criminal law and that would therefore be covered under the policies” (¶ 29).
However, the court of appeals reversed the grant of summary judgment to the third insurer, Harleysville, because of its procedural failures. This insurer never filed a pleading in this matter (see ¶ 36). Moreover, the affidavits were manifestly improper for reasons detailed in the opinion (see ¶ 37). “Where a party files no pleading at all and where its supporting affidavits fail to conform to the statutory requirements of notarization and summary of evidentiary facts on which they rely, we have no basis for affirming the grant of summary judgment” (¶ 38).
Finally, the trial judge erred by entering a finding on Gillund’s residency during the Harleysville policy period, a disputed issue. The court reiterated a warning issued in prior cases: “We have stated innumerable times a motion for summary judgment does not contemplate nor permit a trial upon affidavits or depositions, and that if there are any material facts in dispute or competing reasonable inferences the party resisting the motion is entitled to a trial” (¶ 40).
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Breach of Duty of Loyalty – Liability of Key Employees
InfoCorp LLC v. Hunt, 2010 WI App 3 (filed 8 Dec. 2009) (ordered published 27 Jan. 2010)
InfoCorp LLC (InfoCor) is an authorized reseller of chalkboards, projectors, and other audiovisual products that are purchased by schools and other entities. Hunt was employed by InfoCor to sell these products to clients in several states. After Hunt left InfoCor to take a position with a competitor, InfoCor sued him for breach of a duty of loyalty. InfoCor alleged that Hunt breached that duty when he “‘was not honest in his dealings with InfoCor, began competing with InfoCor and interfered with InfoCor’s relationships with its customers and suppliers’” (¶ 14). (InfoCor also brought other claims against Hunt and his new employer.)
The circuit court found that undisputed facts supported an inference of Hunt’s breach of a duty of loyalty, but that Hunt did not owe a duty of loyalty. It concluded that “`Wisconsin cases clearly establish that employees are judged by a different standard and that only officers or policy making employees owe a duty of loyalty,’ and thus, a salesman in Hunt’s position owed no duty of loyalty to his employer” (¶ 15). The circuit court therefore dismissed InfoCor’s claim against Hunt concerning breach of the duty of loyalty.
In a decision authored by Judge Kessler, the court of appeals reversed. Said the court, “[b]ased on our review of Wisconsin case law, we disagree with the trial court’s legal conclusion, because we conclude that a jury could find that in allegedly acting directly contrary to his employer’s interest in the course of performing his specific duties, Hunt breached a duty of loyalty to his employer.” In reaching this conclusion the court examined several appellate cases that involved the duty of loyalty owed by an employee who is not an officer or director and does not have policy-making authority. These decisions “effectively recognize that there may be ‘key employees’ whose job responsibilities are of such a nature, in the context of the employer’s business, that they may be used to harm the employer. If such employees do harm to their employer during the course of their employment, the employer has a common law remedy for breach of the employee’s duty of loyalty. Whether an employee has such responsibilities as an agent of the employer to create a duty of loyalty must of necessity be determined in the context of the employer’s business and the specific role the employee plays in that business. As we have seen, case law demonstrates that for an employee who is not an officer or director, the status of ‘key employee’ is determined by the specific job responsibilities and the harm to the employer resulting from misuse of those responsibilities” (¶ 31).
Accordingly, the court of appeals reversed the circuit court’s grant of summary judgment dismissing InfoCor’s claim that Hunt owed a duty of loyalty to InfoCor that he breached. It remanded that claim so that the pertinent facts may be fully developed at trial (see ¶ 32).
Civil Conspiracy – Duty to Mitigate – Self-incrimination – Double Damages
S.C. Johnson & Sons Inc. v. Morris, 2010 WI App 6 (filed 2 Dec. 2009) (ordered published 27 Jan. 2010)
S.C. Johnson learned that some of its employees had allegedly abused their positions by soliciting bribes and kickbacks from transportation companies, which in turn would submit inflated invoices to fund the scheme. S.C. Johnson sued two of its former employees and the transportation companies, along with some of their employees, including Russell and Buske, for fraud, conspiracy to violate Wis. Stat. section 134.05, and violations of the Wisconsin Organized Crime Control Act (WOCCA). A jury found that Russell and Buske, along with their companies, had engaged in a civil conspiracy to overcharge S.C. Johnson.
The court of appeals affirmed in an opinion authored by Chief Judge Brown. First, the circuit court properly refused to permit Russell to testify based on his earlier invocation of the Fifth Amendment right against self-incrimination, which he sought to abandon halfway through the trial. “We recognize that barring testimony is a severe remedy, and it should not be used if instead of ‘level[ing] the playing field,’ it tilts it strongly in favor of the adversary.... But the preceding legal principles lead us to conclude that the trial court here properly exercised its discretion. One of our tasks in deciding a question of discretion is to look to the record for support of the discretionary ruling by the trial court.... Here, the record convinces us that S.C. Johnson may have expended enough resources during the more than three years of discovery to obtain a substantial amount of information, but it still did not have the information that would answer why the money was there, how it got there, and who was involved. Those pieces of information would no doubt be highly relevant to Russell’s role in the conspiracy. And those missing pieces were what Russell withheld until he unilaterally decided, more than halfway through trial, that the information should be used in his defense, in his own way” (¶ 22).
“The second novel issue Buske and Russell raise is whether a corporate victim of an intentional tort must have actual knowledge of the tort before it is required to mitigate damages, as S.C. Johnson asserts, or whether the duty to mitigate arises when it is shown that the victim might have found out about the tort earlier had there been a better internal corporate investigation mechanism. As Russell and Buske put it, the issue is whether the victim ‘should have known’ that misconduct was occurring” (¶ 23).
The court held that “[i]t makes no sense to us that an injured party should be held responsible for negligently failing to discover that someone else was intentionally harming them. Instead, if one party is intentionally harming another, logic would hold that the duty of the victim should be less than it would be for contractual breaches or negligence. So unless the victim, with actual knowledge of the danger, intentionally fails to act in the protection of his or her own interests or is heedlessly indifferent to them, there is no duty to mitigate an intentional tort” (¶ 29). Furthermore, the record showed that S.C. Johnson did not have actual knowledge of the fraud.
“The third and final novel issue Russell and Buske raise is whether the entire damage should be doubled under WOCCA or if only that portion of a damage verdict attributable to a violation of WOCCA is doubled” (¶ 31). “As we stated earlier in our opinion, WOCCA has both a penal and a civil cause of action component. The penal feature is strictly construed. The civil cause of action feature is liberally construed. The damages incurred as a result of this conspiracy all fall under WOCCA. No damages given by the jury fell outside WOCCA, contrary to the claim by Russell and Buske. Therefore, all the damages from the conspiracy were properly doubled” (¶ 34).
The court of appeals summarily dispatched a series of patently “nonmeritorious” issues, including “bad-acts” evidence and spoliation inferences, that are mostly fact-intensive and thus will not be discussed further.
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