Vol. 85, No. 4, April 2012
Collective-Arbitration Waivers in Consumer Contracts – Substantive Unconscionability Attack Rejected
Cottonwood Financial LTD v. Estes, 2012 WI App 12 (filed 31 Jan. 2012) (ordered published 29 Feb. 2012)
Defendant Estes took out several loans from Cottonwood Financial's The Cash Store, a payday lender. Each loan agreement contained an arbitration provision that stated that, with the exception of small claims matters, all disputes between the parties would be resolved by binding arbitration. The arbitration agreement required Estes to waive her ability to proceed as part of a class.
In an earlier decision in this case, the court of appeals concluded that the arbitration agreement was substantively unconscionable. (Substantive unconscionability addresses the fairness and reasonableness of the contract provision subject to challenge.) The Wisconsin Supreme Court vacated this decision and remanded this case to the court of appeals for reconsideration in light of the U.S. Supreme Court's decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). Concepcion held that a state law that classified most collective-arbitration waivers in consumer contracts as unconscionable, and thus unenforceable, was preempted by the Federal Arbitration Act (FAA) (see ¶ 2). The U.S. Supreme Court determined there is a conflict between requiring the availability of classwide arbitration and the overarching purpose of the FAA, which is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings (see ¶ 11).
In a decision authored by Judge Peterson, the court of appeals in the present case concluded that "Concepcion's holding is clear: the FAA preempts any state law that classifies an arbitration agreement as unconscionable, and therefore unenforceable, simply because the agreement prohibits an individual from proceeding as a member of a class. Accordingly, under Concepcion, the waiver of classwide proceedings in Estes's arbitration agreement with Cottonwood does not render the agreement substantively unconscionable" (¶ 12). The appellate court also rejected a number of additional unconscionability arguments advanced by Estes.
First-Degree Reckless Homicide – "Utter Disregard for Human Life"
State v. Geske, 2012 WI App 15 (filed 4 Jan. 2012) (ordered published 29 Feb. 2012)
Following a motor vehicle collision in which two persons were killed, the defendant was charged with and ultimately convicted by a jury of two counts of first-degree reckless homicide. The evidence revealed the defendant drove at a speed of more than 80 miles per hour on a major street in Green Bay after consuming prescription pills and alcohol and that her blood alcohol content was .072 two hours after the crash. She drove through a red light and crashed into a vehicle that had entered her path, killing two occupants in the other vehicle. On appeal, she argued that there was insufficient evidence supporting the "utter disregard for human life" element of the crime of first-degree reckless homicide. Central to this argument was her contention that she swerved just before the crash to avoid a collision and thereby showed regard for human life. In a decision authored by Judge Hoover, the court of appeals affirmed.
Relevant factors to consider in determining whether conduct shows utter disregard for human life include "what the defendant was doing; why the defendant was engaged in that conduct; how dangerous the conduct was; how obvious the danger was; and whether the conduct showed any regard for life. Ultimately, we 'consider the totality of the circumstances when determining whether the defendant showed some regard for life" (¶ 11) (citations and internal quotations omitted).
The appellate court concluded the evidence was sufficient on the utter-disregard-for-human-life element. Said the court, "Geske was driving over eighty miles per hour on a major, well-traveled city street after consuming alcohol and prescription pills. She never braked or slowed down before running the red light, even though her view to the right – where the victims' car came from – was obscured by a large sign. These factors demonstrate an utter disregard for human life, regardless of whether Geske attempted a last-moment swerve. A legally intoxicated person driving over eighty miles per hour through the city could not reasonably expect to avoid any collision by swerving at the last moment. Given the totality of the situation here, Geske's ineffectual swerve failed to demonstrate a regard for human life" (¶ 18).
In reaching this conclusion, the court distinguished cases involving a swerve or other evasive maneuvers to avoid a collision in which the supreme court found that defendants showed regard for human life. See Wagner v. State, 76 Wis. 2d 30, 250 N.W.2d 331 (1977); Balistreri v. State, 83 Wis. 2d 440, 265 N.W.2d 290 (1978). The court of appeals concluded the facts in the present case were in essence more egregious than those considered in the Wagner and Balistreri decisions (see ¶¶ 19-21).
The court of appeals also rejected the defendant's arguments that computer-simulated accident reconstruction evidence was erroneously admitted, and that the circuit court erroneously exercised its sentencing discretion.
Appeal Based on Destruction of Evidence – Arizona v. Youngblood – Guilty Plea Waiver Rule
State ex rel. Harris v. Milwaukee City Fire & Police Comm'n, 2012 WI App 23 (filed 24 Jan. 2012) (ordered published 29 Feb. 2012)
Harris pleaded guilty to eight counts of first-degree sexual assault in 1988. In 2006, he filed a citizen complaint with the Milwaukee Fire and Police Commission regarding the rape kits of the sexual assault victims; in his complaint, he alleged the Milwaukee Police Department destroyed the kits in contravention of its policies regarding evidence retention. The commission investigated Harris's assertion and concluded no violation of police department policy had occurred.
Harris then filed a petition for a writ of mandamus in which he asked the circuit court to order the commission to conduct an additional investigation and hearing regarding the destruction of the four rape kits. The circuit court issued a decision and order in which it denied Harris's petition. The circuit court determined that although Harris had a clear legal right and the commission had a positive and plain duty to inquire further regarding the destruction of the rape kits, Harris would not suffer any substantial damage should the petition be denied and had other, adequate legal remedies at his disposal, and the doctrine of latches precluded his claim.
In a decision authored by Judge Curley, the court of appeals affirmed. The court began by noting that Harris premised his petition for a writ of mandamus on the theory that if he could show that police acted in bad faith in destroying the rape kits, then he could, pursuant to Arizona v. Youngblood, 488 U.S. 51 (1988), appeal his criminal conviction. In Youngblood, the Supreme Court held that the failure to preserve potentially useful evidence does not constitute a denial of due process of law unless a criminal defendant can show bad faith on the part of the police (see ¶ 10).
The appellate court concluded that Harris's premise was flawed because Youngblood does not apply in this case. In Youngblood, a jury convicted the defendant, whereas Harris pleaded guilty. "This distinction is important because, in Wisconsin, '[a] guilty plea, made knowingly and voluntarily, waives all nonjurisdictional defects and defenses, including alleged violations of constitutional rights prior to the plea.' As this court and the trial court have already found, Harris knowingly and voluntarily pled guilty to eight counts of sexual assault. Thus, we hold that Harris waived his right to appeal his conviction based on any allegations of bad faith regarding the post-conviction destruction of potentially useful evidence. Because we so hold, we need not inquire as to whether the trial court erroneously exercised its discretion when it denied Harris's petition" (¶ 11) (citations omitted).
Guilty Plea Hearing – Failure to Advise Defendant That Court Is Not Bound by Plea Agreement – No Manifest Injustice – Harmless Error
State v. Johnson, 2012 WI App 21 (filed 24 Jan. 2012) (ordered published 29 Feb. 2012)
The state charged the defendant with two counts of second-degree sexual assault of a child. Pursuant to a plea agreement, the defendant agreed to plead guilty to the first count in exchange for the state's recommendation to dismiss and read in the second count. At the plea hearing, the court explained the state's recommendation, the rights that are given up by entering a guilty plea, the maximum penalties for one count of sexual assault of a child, and various other admonitions required by Wis. Stat. section 971.08 and State v. Bangert, 131 Wis. 2d 246, 389 N.W.2d 12 (1986). The court did not, however, inform the defendant that it was not bound by the plea agreement, as it was required to do under State v. Hampton, 2004 WI 107, 274 Wis. 2d 379, 683 N.W.2d 14. The court accepted the plea agreement, and the defendant entered a plea of guilty to one count of sexual assault. The court sentenced the defendant to 20 years of initial confinement followed by 15 years of extended supervision.
The defendant sought to withdraw his guilty plea on the ground that the court failed to inform him that it was not bound by the plea agreement and that his plea was therefore not entered knowingly, voluntarily, and intelligently. The circuit court denied the motion (apparently without a hearing). In a decision authored by Judge Kessler, the court of appeals affirmed.
The appellate court specified that "[t]he only defect at issue in this appeal is whether a Bangert/Hampton violation occurred when the circuit court did not inform Johnson that it was not bound by the plea agreement. The State concedes that the circuit court erred; however, given that the circuit court accepted the plea agreement, Johnson has not demonstrated that withdrawal of his plea 'is necessary to correct a manifest injustice.' 'A manifest injustice occurs when there has been a serious flaw in the fundamental integrity of the plea.' Johnson was not affected by the defect in his plea colloquy; in fact, he received the benefit of the plea agreement. The criminal complaint charged Johnson with two counts of second-degree sexual assault of a child. Each charge carried a maximum prison sentence of forty years. In accepting the State's recommendation and dismissing the second count, the circuit court reduced Johnson's potential prison time by forty years. Johnson, therefore, was not subject to a manifest injustice as the circuit court's failure to inform him that it was not bound by the plea agreement was an 'insubstantial defect'" (¶ 12) (citations and internal quotations omitted).
As for the need for an evidentiary hearing on the defendant's motion to withdraw his plea, the court of appeals followed the reasoning of the supreme court in State v. Cross, 2010 WI 70, 326 Wis. 2d 492, 786 N.W.2d 64, that requiring an evidentiary hearing for every small deviation from the circuit court's duties during a plea colloquy is simply not necessary for the protection of a defendant's constitutional rights (see ¶ 13). "Because the circuit court accepted the plea bargain, Johnson cannot demonstrate a violation of his constitutional rights" (id.).
The court of appeals also concluded that Cross implicitly allowed it to hold the error at issue in this case harmless. Said the court, "[c]learly the error did not contribute to the outcome of Johnson's plea hearing, nor were his substantial rights affected. Johnson's situation is not one in which the circuit court failed to inform him that it was not bound by the plea agreement and then imposed a larger sentence than what was recommended as part of the plea agreement. Johnson received exactly what he bargained for when the second count was dismissed. Further, Johnson does not claim that he would not have pled guilty, or admitted in open court to sexually assaulting his daughter, had the court expressly informed him that it did not have to dismiss the second count. Johnson, therefore, has not demonstrated that this plea was not entered into knowingly, voluntarily or intelligently" (¶ 14).
"Occurrence" – Economic Loss – Business Risk Exclusions
Acuity v. Society Ins., 2012 WI App 13 (filed 5 Jan. 2012) (ordered published 29 Feb. 2012)
A meat processing plant, VPP, hired contractors to remove and reinstall a wall in the plant in such a way that the plant could continue operation. During construction, soil erosion caused damage to other parts of the plant, necessitating repairs and triggering additional expenses. VPP's insurer, Acuity, paid more than $600,000 for the repairs and additional expenses. Acuity commenced this subrogation action against the building contractors and their commercial general liability (CGL) insurer, Society Insurance. The circuit court granted summary judgment in Society's favor, ruling that there had been no covered "occurrence" within the policy's terms.
The court of appeals reversed in an opinion written by Judge Higginbotham. The partial collapse of the plant's engine room was an occurrence within the meaning of the policy and the case law, including American Family v. American Girl, 2004 WI 2, 268 Wis. 2d 16, 673 N.W.2d 65. The contractor's use of faulty excavation techniques led to "accidental soil erosion" that damaged other parts of the plant (see ¶ 17). "The lessons of American Girl [and other cases] are that while faulty workmanship is not an 'occurrence,' faulty workmanship may cause an 'occurrence.' That is, faulty workmanship may cause an unintended event, such as soil settling in American Girl … or, in this case, the soil erosion, and that event – the 'occurrence' – may result in harm to other property" (¶ 24). The court distinguished several other cases involving intentional torts.
Nor did the economic loss doctrine preclude coverage. Again relying on American Girl, the court held that "even assuming the economic loss doctrine bars VPP's negligence claim, based on the allegations of the amended complaint, there was property damage caused by an 'occurrence' within the meaning of Society's CGL policy" (¶ 31).
Finally, the court found that the CGL policy's business risk exclusions, both of which involved the term "that particular part," did not bar coverage. "We are persuaded that the phrase 'that particular part' in the k.(5) and k.(6) exclusions applies only to those parts of a building on which the defective work was performed, which is determined based on the scope of the construction agreement. Our reading of 'that particular part' is consistent with the unambiguous language of the policy and cases from other jurisdictions construing similar exclusions in other CGL policies" (¶ 40).
Agents – Election of Remedies – Indemnification
Artisan & Truckers Cas. Co. v. Thorson, 2012 WI App 17 (filed 18 Jan. 2012) (ordered published 29 Feb. 2012)
Thorson purchased $500,000 of UM/UIM coverage on an umbrella policy through his agent, Anson. Progressive Casualty Insurance Co. confirmed the coverage with Anson; the policy itself was issued by Progressive's subsidiary, Artisan & Truckers. Thorson was told to "wait for a bill" when he asked about paying the premium. Ten days later, Thorson's daughter was seriously injured in a car accident with an uninsured driver. After receiving notice of the claim, Progressive and Artisan issued the umbrella policy with an effective date two days after the accident and 11 days after Progressive had confirmed the coverage (see ¶ 3). A flurry of claims resulted. The circuit court ruled that the umbrella policy was not in effect at the time of the accident because Thorson was purchasing a new policy, not renewing an existing one.
The court of appeals reversed in an opinion authored by Judge Reilly. "Progressive was bound by its own actions, as well as the actions of its agent, Anson" (¶ 16). See Wis. Stat. § 628.40. "Thorson was not 'applying' for a new policy. Progressive expressly stated that the switch to Artisan was an 'administrative change' and that Thorson did not have to do anything. Progressive treated the Artisan policy as a 'renewal' of the Progressive policy and never requested nor required Thorson to apply for a new policy" (¶ 18).
The circuit court also erred in dismissing Thorson's and Anson's counterclaims based on the election-of-remedies doctrine. "Wisconsin courts do not favor the election of remedies doctrine; it is to be 'confined to cases where the plaintiff may be unjustly enriched, where the defendant has been misled, or the result is otherwise inequitable or res judicata applies. The real purpose of the doctrine is to prevent double recovery'" (¶ 20).
"[G]iven our holding that coverage was in force on the day of the accident, the circuit court's dismissal of Thorson's and Anson's claims against Progressive had the effect of dismissing Thorson's extra-contractual damages as well as coverage claims. Thorson received his contractual remedies through his settlement with Anson, and thus is not entitled to recover the $500,000 of UM coverage from Progressive. Thorson does, however, retain his claim for extra-contractual damages against Progressive upon remand. Allowing Thorson to pursue his counterclaim against Progressive and Artisan for extra-contractual damages will not unjustly enrich Thorson or result in a double recovery for him, and as such the election of remedies doctrine will not arise upon remand" (¶ 26). It also followed that the election-of-remedies doctrine did not bar Anson's right to contribution or indemnification from Progressive for the money she paid to settle with Thorson.
Truancy – Sanctions – Written Orders
State v. Dylan S., 2012 WI App 25 (filed 24 Jan. 2012) (ordered published 29 Feb. 2012)
Two juveniles, Dylan and Renee, were found to be truant and ultimately sanctioned (home detention) by the circuit court. The court of appeals reversed in an opinion written by Judge Peterson. First, the circuit court lacked statutory authority to impose sanctions because it had never entered a written dispositional order as required by juvenile court procedures. "Here, although the circuit court found that both Dylan and Renee violated dispositional orders, no written dispositional orders were ever entered. Accordingly, the court lacked statutory authority to sanction Dylan and Renee, and the sanctions orders must be reversed" (¶ 21). Nor did the circuit court's written "minutes" sheet suffice as an order. It lacked the judge's signature, as is required of written orders (see ¶ 23).
Finally, the juveniles' failure to object did not foreclose appellate review: "because the minutes sheets themselves do not indicate that they are court orders, Dylan and Renee would not have known to object to the format of the 'orders.' Furthermore, the forfeiture rule is one of judicial administration, and appellate courts have the authority to ignore a forfeiture when a case presents an important recurring issue" (¶ 24).
The court of appeals exercised its discretion to address several additional issues. First, the circuit court lacked authority to impose electronic monitoring as a sanction because the legislature did not list this among the dozen or so possible sanctions a court may consider (see ¶ 26). Second, by statute the circuit court was obligated to disqualify itself from hearing the sanctions motion because its earlier findings "arguably constitute the initiation of a sanctions motion," a disqualifying event (¶ 29). And aside from any statutory disqualification, the circuit court had demonstrated objective bias: "Here, a reasonable person would interpret the court's statements to mean that the court decided Dylan and Renee had violated its dispositional orders before the sanctions hearing. This appearance of partiality reveals a great risk that the court actually did prejudge the sanctions motions" (¶ 30).
Gifts Causa Mortis – "Delivery" Element
Meegan v. Netzer, 2012 WI App 20 (filed 26 Jan. 2012) (ordered published 29 Feb. 2012)
Roger Hansen made mortgage loans to three nieces and was the vendor on a land contract with a great-nephew. Within the four months preceding his death at age 88, he met with an attorney on several occasions for the purpose of making a will, but he died shortly before the time he was scheduled to go to his attorney's office to sign the last will draft his attorney had prepared. At the time of Hansen's death, the total outstanding debt on the four notes was approximately $278,000. Hansen's personal representative included these four notes in Hansen's probate estate.
The debtors and their spouses moved to strike the notes from the inventory of the estate on grounds that Hansen forgave these debts before his death and the pardons amounted to gifts causa mortis and therefore these notes were not part of Hansen's estate. The debtors contended that a notation Hansen made on an early draft of his will, directions he gave in a letter to his attorney, and his approval of the resulting revisions to his will made by his attorney show that Hansen intended to forgive these debts. Another heir opposed the motion to strike. The circuit court agreed with the debtors and granted the motion to strike these notes from the inventory. In a decision authored by Judge Vergeront, the court of appeals reversed.
Under the doctrine of gift causa mortis, also called a gift in contemplation of death, a gift made during the life of the donor becomes effective upon the donor's death if certain requirements are met (see ¶ 1). One of these requirements is that there must be a delivery of the gift (see ¶ 10). The forgiveness of a debt may be a gift (see ¶ 13), and the delivery of a gift of forgiveness of a debt may be accomplished by means other than delivering the debt instrument with signed writing on it canceling the debt (see ¶ 15). Case law establishes that a deed delivered to a third person with instructions to record it and deliver it to the grantee after the grantor's death becomes effective upon delivery to the third person who thereafter holds it as trustee for the grantee (see ¶ 17).
In this case, "[t]he delivery requirement for a gift causa mortis is not satisfied by Hansen's written instructions to his attorney to include in his will provisions forgiving the debts of his nieces and great-nephew" (¶ 19). Said the court, "Hansen did not instruct his attorney to deliver to the debtors his notation on the draft will and the letter to his attorney. Indeed, that was plainly not the purpose for which Hansen gave his attorney these writings. Hansen's purpose for giving his attorney these writings was so that his attorney could include provisions to this effect in his will. There is no factual basis for asserting that Hansen's attorney held these writings in trust for the debtors. Thus, the delivery to the attorney, with no instruction for delivery to any debtor, does not constitute delivery to any debtor" (¶ 18).
Adverse Possession – Statute of Limitation
Engel v. Parker, 2012 WI App 18 (filed 4 Jan. 2012) (ordered published 29 Feb. 2012)
The Engels and the Parkers owned adjoining 40-acre land parcels. A dispute arose over a narrow strip of land between the parcels that was approximately a quarter-mile long and of varying width. The Engel family had owned the parcel since 1954. A fence ran along the entire length of the disputed property line. It was undisputed that the Engel family adversely possessed the area on their side of the fence for 20 years as of 1974. The Parkers bought their parcel in 2003 and discovered during a 2006 survey that the old fence was on their side of the land. The circuit court granted summary judgment to the Engels based on their adverse possession.
The court of appeals affirmed in an opinion authored by Judge Hoover. The Parkers argued that the 30-year statute of limitation for bringing an adverse possession claim started in 1974 and expired in 2004, before the Engels filed suit in 2009. "It is well-settled, however, that the owner-in-possession exception to the statute of limitations applies to owners by adverse possession.… That exception provides: '[The statute of limitations] does not apply to any action commenced or any defense or counterclaim asserted, by any person who is in possession of the real estate involved as owner at the time the action is commenced'" (¶ 7). See Wis. Stat. § 893.33(5).
It did not matter that the Engels no longer possessed the land after the Parker's 2006 survey. "[Case law does not] require the party who initially adversely possessed land for the necessary period of time to continue 'adversely' possessing the disputed property to benefit from the exception" (¶ 8). "Here, it is undisputed that Engel adversely possessed the disputed strip of land for the requisite time period, from 1954 to 1974. [Case law] makes clear that Engel is entitled to application of the owner-in-possession exception" (¶ 13).
FELA – Foreseeability – Other Acts
Dalka v. Wisconsin Central Ltd., 2012 WI App 22 (filed 18 Jan. 2012) (ordered published 29 Feb. 2012)
Dalka was employed as a conductor for the Wisconsin Central railroad. A drunk driver in a stolen car drove into the rail yard and toward Dalka, who was working at the time. Dalka severely injured his back and knee as he moved to get out of the car's way. He sued the railroad under the Federal Employers' Liability Act (FELA), alleging it had failed to protect workers from trespassers, and was awarded more than $1 million in damages.
The court of appeals affirmed in an opinion written by Judge Brennan. First, the circuit court properly denied the railroad's dispositive motions – for summary judgment, directed verdict, judgment notwithstanding the verdict, and new trial – all of which rested on the same theory: there was insufficient evidence to support a finding of foreseeable harm under FELA (see ¶ 15). FELA harbors a "relaxed reliability standard" that has been colorfully described by case law as requiring evidence no more substantial "than pigeon bone broth" (¶17). The court of appeals reviewed case law in light of the evidence at trial that the railroad had a trespasser problem that it failed to address (see ¶ 34). Evidence of the railroad's "lax security and …of system-wide handouts" relating to trespassers was properly admitted (¶ 35).
Second, the circuit court properly instructed the jury and was not compelled to frame a separate verdict question on foreseeability (see ¶ 48). Third, other acts evidence involving "prior non-violent trespass" was properly introduced to show the railroad was on notice of its trespasser problem (¶¶ 49, 58). Finally, the circuit court properly barred the railroad from arguing that the drunken trespasser in the stolen car was the sole cause of Dalka's injuries.
Judicial Review – Competency – Adverse Parties
Xcel Energy Servs. v. LIRC, 2012 WI App 19 (filed 24 Jan. 2012) (ordered published 29 Feb. 2012)
On appeal from an administrative law judge's (ALJ's) determination that a worker was permanently partially disabled, the Labor and Industry Review Commission (LIRC) found him to be permanently and totally disabled. His employer, Xcel, filed an action for judicial review in the circuit court. Xcel named LIRC and the worker but did not name its worker's compensation carrier even though the insurer had been joined throughout the administrative proceeding (see ¶ 5). LIRC moved to dismiss on competency grounds based on the failure to name the insurer. The circuit court denied LIRC's motion but confirmed LIRC's order nonetheless.
The court of appeals reversed in an opinion authored by Reserve Judge Cane. Declining to reach the merits, the court held the circuit court lacked competency to adjudicate the action based on Xcel's failure to include all adverse parties, particularly the insurer. The decision rests squarely on Miller Brewing v. LIRC, 166 Wis. 2d 830, 480 N.W.2d 532 (Ct. App. 1992), aff'd, 173 Wis. 2d 700, 495 N.W.2d 660 (1993) (Miller), which held that for worker's compensation purposes, an adverse party "includes any party bound by the Commission's order or award granting or denying compensation to the claimant" (¶ 11) (citation and internal quotations omitted). The insurer was "unquestionably" bound by LIRC's award (¶ 12).
Although the supreme court declined to review to evaluate the rationale of Miller on appeal, the case "is a published, precedential decision from this court, and we are therefore obligated to follow it" (¶ 13). Nor did it matter that LIRC had not filed a cross-appeal in this case; the circuit court lacked competency and had no authority but to dismiss the petition (see ¶ 14).