Vol. 85, No. 5, May 2012
Statute of Limitation – Economic Loss Doctrine
Kalahari Devs. LLC v. Iconica Inc., 2012 WI App 34 (filed 23 Feb. 2012) (ordered published 28 March 2012)
In 1999, Iconica entered into a design-build contract for the construction of the Kalahari resort and waterpark, which was completed in May 2000. In May 2008, Kalahari employees noticed moisture damage to the facility's walls, and in April 2010, Kalahari Developments LLC (Kalahari) sued Iconica and its insurer for the defective design or installation of vapor barriers in the walls. The circuit court granted summary judgment in favor of Iconica and dismissed the claims.
The court of appeals affirmed in an opinion written by Judge Lundsten. First, the court held that Kalahari's contract claims were time-barred under its interpretation of Wis. Stat. section 893.89, which is a statute of repose (see ¶ 6).
"[A]t a minimum, Kalahari was required to bring its contract action within Wis. Stat. § 893.89's ten-year time limit. But as § 893.89(3)(a) instructs, we look to see whether the contract damages sought are time-barred by a statute of limitations before they would be barred under § 893.89. That search quickly leads to the statute of limitations applicable to actions for contract damages, Wis. Stat. § 893.43. It is undisputed that, under this six-year statute of limitations, Kalahari's contract claim would be barred because the alleged breach occurred no later than May 2000, and this action was commenced in April 2010" (¶ 10). "In sum, when an action is one for contract damages, Wis. Stat. § 893.89(3)(a) directs that its ten-year time limit be compared with the time limit applicable to contract actions to see which is shorter, and that the shorter limit applies. The result is that Kalahari's contract claim is time-barred by the statute of limitations on contract actions" (¶ 11).
The court rejected Kalahari's contention that the six-year statute of limitation, Wis. Stat. section 893.43, is directed at causes of action while actions for damages are controlled by the ten-year limit. "Even though § 893.43 is not limited to contract actions seeking damages, that statute nonetheless applies to such actions, and that is what we have here" (¶ 14). Next, the court rejected Kalahari's contention that Wis. Stat. section 893.89(3)(b) extends the ten-year time period because this approach led to an "absurd result," which it illustrated in the opinion (¶ 20).
The court also held that Kalahari's professional-negligence claim was barred by the economic loss doctrine. There was no disputed factual issue regarding the contract's predominant purpose, which was to build the resort and waterpark (see ¶ 32). Courts had held in prior cases that construction contracts are predominantly for products, not services, and thus are controlled by the economic loss doctrine. Finally, the court refused to construe Insurance Co. of North America v. Cease Electric Inc., 2004 WI 139, 276 Wis. 2d 361, 688 N.W.2d 462, as carving an exception in the doctrine for malpractice actions against professionals (see ¶ 36).
"And, we know from subsequent supreme court cases that where, as here, a contract is for a mixture of products and services, we apply the predominant purpose test to determine if a contract is for products or services.... If it is predominantly a contract for a service, then we apply the rule from Cease Electric that the economic loss doctrine does not bar a tort claim.... Nothing in Cease Electric, properly read, stands for the proposition that courts should treat some categories of services differently for purposes of the economic loss doctrine" (id.).
Carrying Concealed Weapon – "Dangerous Weapon" – Firearms
State v. Powell, 2012 WI App 33 (filed 22 Feb. 2012) (ordered published 28 March 2012)
A jury convicted Powell of carrying a concealed and dangerous weapon (CCW) in violation of Wis. Stat. section 941.23 and of felony bail jumping based on the CCW offense. On appeal, he argued that the circuit court erred when it denied his motion for a directed verdict at the close of the state's case during his trial; Powell argued that the state did not provide evidence that the firearm seized from him operated by the force of gunpowder and therefore failed to prove that the firearm was a dangerous weapon. He relied on Wisconsin Jury Instructions – Criminal 910, which defines a dangerous weapon as "any firearm, whether loaded or unloaded. A firearm is a weapon that acts by force of gunpowder" (¶ 9). The weapon involved was a loaded .38 caliber semi-automatic handgun.
In a decision authored by Judge Kessler, the court of appeals affirmed the conviction. It noted that the CCW statute prohibits the carrying of a concealed and dangerous weapon and that the term dangerous weapon is defined in relevant part by the Criminal Code as "any firearm, whether loaded or unloaded." Wis. Stat. § 939.22(10). Neither statute defines firearm any further.
The appellate court concluded that "neither the statutes nor case law required the jury in this case to separately determine whether the .38 caliber semi-automatic pistol Powell attempted to conceal operated by 'force of gunpowder.' Rather, the jury was required to decide whether the pistol was a 'firearm' for the purposes of determining whether it was a dangerous weapon. [One of the arresting officers] testified in detail as to the circumstances leading to his discovery of the weapon. [Both arresting officers] identified the gun as a loaded .38 caliber semi-automatic pistol. [One of the arresting officers and a crime lab witness] both interchangeably referred to the weapon as a 'firearm' and a 'gun.' Further, in weighing the evidence, the jury was permitted to take into account matters of common knowledge, observations and experience in the affairs of life. Common knowledge suggests that at this point in time, one would have to be devoid of any media source not to understand that firearms fire bullets as a result of ignited gunpowder. The operation of firearms is constantly depicted in movies, television, video games and books. Testimony explaining the obvious, that the pistol operated by force of gunpowder, was not necessary to prove that it was a dangerous weapon" (¶ 14) (citations omitted).
Traffic Stop – License Plates
State v. Boyd, 2012 WI App 39 (filed 1 Feb. 2012) (ordered published 28 March 2012)
Boyd was stopped by police officers because his car had no front license plate, although it did have an Illinois rear plate. The officers found marijuana in the car. The circuit court denied Boyd's motion to suppress the marijuana on grounds that the stop was unlawful.
The court of appeals affirmed in an opinion written by Chief Judge Brown. Illinois issued Boyd two plates. Wisconsin statutes require that "'[w]henever 2 registration plates are issued for a vehicle, one plate shall be attached to the front and one to the rear of the vehicle.' (Emphasis added.) This means that, if any state issues two plates, the corresponding automobile must display two plates to drive legally in Wisconsin" (¶ 1) (quoting Wis. Stat. § 341.15(1)). Put differently, the two-plate provision is not limited to Wisconsin-issued plates.
The court also held that another statute governing vehicle registration in Wisconsin, Wis. Stat. section 341.40, was inapplicable. "The language referencing a single plate in § 341.40(1)(a) is simply the first of a list of criteria that vehicles registered in a jurisdiction other than Wisconsin must meet in order to be exempt 'from the laws of this state providing for the registration of the vehicles.' In other words, having been issued at least one plate is a condition precedent for exemption, not a display requirement. And since § 341.40(1)(a) does not address how nonresidents are to display license plates, there is no conflict with § 341.15(1)" (¶ 6).
Sentence Modification – "New Factors" – Postsentencing Fruits of Defendant's Substantial Presentencing Assistance to Law Enforcement
State v. Boyden, 2012 WI App 38 (filed 1 Feb. 2012) (ordered published 28 March 2012)
The defendant was convicted of theft, operating a vehicle without consent, and obstructing an officer. Before sentencing, he provided material information to law enforcement officers regarding the criminal activity of a specified individual (Fouse) and the latter's drug trafficking gang. The substantial fruits of Boyden's information were not realized until approximately one year after he was sentenced when, relying on that information and citing the defendant as the source thereof, the police obtained a search warrant and recovered firearms, cocaine, gang-related materials, and other evidence with the end result being the indictment and conviction of Fouse on federal firearms and drug charges.
Among the issues before the court of appeals was whether the fruits of a defendant's substantial presentence assistance to law enforcement, which are revealed only after the defendant has been sentenced, may constitute a "new factor" for purposes of sentence modification. A new factor is "a fact or set of facts highly relevant to the imposition of sentence, but not known to the trial judge at the time of original sentencing, either because it was not then in existence or because, even though it was then in existence, it was unknowingly overlooked by all of the parties" (¶ 5) (citation omitted).
In State v. Doe, 2005 WI App 68, 280 Wis. 2d 731, 697 N.W.2d 101, the court of appeals recognized that a defendant's substantial and important assistance to law enforcement after sentencing may constitute a new factor that the circuit court can take into consideration when deciding whether modification of a sentence is warranted. The Doe court adopted the federal sentencing-guideline provisions concerning sentence reductions for substantial assistance given to authorities before sentencing (see ¶ 12).
Those guidelines direct the court to consider the following factors: "(1) the court's evaluation of the significance and usefulness of the defendant's assistance, taking into consideration the government's evaluation of the assistance rendered; (2) the truthfulness, completeness, and reliability of any information or testimony provided by the defendant; (3) the nature and extent of the defendant's assistance; (4) any injury suffered, or any danger or risk of injury to the defendant or his family resulting from his assistance; (5) the timeliness of the defendant's assistance" (¶ 13).
In this case, the appellate court concluded that "the postsentence fruits of a defendant's substantial presentence assistance to law enforcement authorities may constitute a new factor. We adopt the Doe factors for the court's use in assessing whether postsentence fruits constitute a new factor warranting sentence modification because it is highly relevant to the imposition of the sentence" (¶ 17) (emphasis added).
Child Caregiver Law
Childcare Licensing – Permanent Bar Based on Fraudulent Activity Involving Food Stamps
Jamerson v. Department of Children & Families, 2012 WI App 32 (filed 7 Feb. 2012) (ordered published 28 March 2012)
Jamerson owned a group childcare facility. The Wisconsin Department of Children and Families revoked her childcare license because it concluded that, under Wisconsin's new caregiver law (2009 Wis. Act 76), she is permanently barred from holding a group childcare license as a result of convictions more than 20 years ago of what the department claimed were offenses involving fraudulent food stamps and public assistance. Jamerson appealed the revocation, and an administrative law judge granted the department's motion to dismiss the appeal without a hearing. The circuit court affirmed. In a decision authored by Judge Curley, the court of appeals reversed.
At the heart of this appeal is the new Wis. Stat. section 48.685(5)(br)5., which permanently bars individuals convicted of "fraudulent activity" involving food stamps from obtaining a caregiver license. It was undisputed that Jamerson was convicted in 1991 of offenses under two separate statutes: Wis. Stat. § 49.127(2m) (1989-90) and Wis. Stat. § 49.12(1) & (6) (1989-90). However, the record does not provide any facts regarding the specific actions underlying these convictions.
The appellate court indicated that it did not know whether the convictions stem from a single bout of ongoing behavior or from separate actions, although the fact that the judgment of conviction provides different dates on which the two differing statutes were violated strongly persuaded the court that the convictions derived from different actions (see ¶ 18).
Jamerson's first conviction involved Wis. Stat. section 49.127 (1989-90), "Food stamp offenses"; subsection (2m) of that statute, under which Jamerson was convicted in 1991, provided that "[n]o person may knowingly fail to report changes in income, assets or other facts as required under 7 USC 2015(c)(1) or regulations issued under that provision."
The appellate court held that "a conviction under Wis. Stat. § 49.127(2m) (1989-90) does not, as a matter of law, show that an offender has partaken in a 'fraudulent activity' regarding food stamps for purposes of permanent prohibition under Wis. Stat. § 48.685(5)(br)5. First, nowhere does this subsection mention fraud. Indeed, the offense defined by § 49.127(2m) does not include an element intrinsic to fraud: the intent to induce another party to act to its detriment" (¶ 20).
The court concluded that further factual inquiry is required to determine whether Jamerson's failure to report "changes in income, assets, or other facts" as required by the federal food stamp law was in fact done with the intent to induce another to act to his or her detriment. In other words, said the court, "there is an issue of fact here entitling Jamerson to a hearing" (id.)
Jamerson's other conviction involved Wis. Stat. section 49.12(1) and (6) (1989-90), which criminalized the making of false representations to secure public assistance and further defined as a fraud the continued receipt of public assistance after failing to promptly notify the government of receipt of any income or assets. Although section 49.12(6) (1989-90) did in fact state that an offense involving the failure to notify the proper agency about received assets or income "shall be considered a fraud," the court of appeals could not conclude, without further factual inquiry, that Jamerson's conviction under this statute permanently bars her from obtaining a license pursuant to Wis. Stat. section 48.685(5)(br)5.
"This is so, first, because no offense under Wis. Stat. § 49.12 (1989-90) is included in the list of offenses enumerated in § 48.685(5)(br)5. Second, we cannot conclude, as the ALJ determined and as Respondents would have us conclude – that Jamerson's 'fraud' under § 49.12(1) & (6), does in fact refer to a food stamp offense because there is no evidence in the record supporting that conclusion. There is also no evidence in the record that the same course of behavior formed the basis for Jamerson's violations of § 49.12 and Wis. Stat. § 49.127(2m) (1989-90)" (¶ 22).
"This is not to say that the facts underlying a food stamp violation under Wis. Stat. § 49.127(2m) (1989-90) could never constitute fraud relating to public assistance as defined by Wis. Stat. § 49.12(1) & (6) (1989-90). While it does appear that a food stamp offense under § 49.127(2m) could be the kind of failure to notify constituting fraud under § 49.12(6), we do not know, without further factual inquiry, whether this is true in Jamerson's case" (¶ 23).
Accordingly, the appellate court reversed the circuit court's order and reversed the department's determination that Jamerson's convictions, as a matter of law, permanently prohibited her from holding a group childcare license. Although Jamerson's convictions are not disputed, whether the facts underlying those convictions warrant a permanent prohibition of her licensure is disputed, and requires further factual development at an administrative hearing (see ¶ 25).
Bankruptcy – Occurrence of Injury Before Bankruptcy Filing and Discovery of Injury After Bankruptcy Filing
Williamson v. Hi-Liter Graphics LLC, 2012 WI App 37 (filed 29 Feb. 2012) (ordered published 28 March 2012)
The sole issue in this case was whether Williamson's misrepresentation claims against the defendants are part of his bankruptcy estate such that he had no standing to sue on those claims in state court. Williamson, who owned The Peloton Group Inc., (TPG), sold some of TPG's assets to Hi-Liter Graphics in 2007. At the time of the sale, TPG issued checks to pay in full outstanding withholding-tax obligations, and although Hi-Liter allegedly agreed and represented to Williamson that it would honor the withholding-tax check payments, it never did so.
Williamson filed for bankruptcy in 2008, after the alleged misrepresentations had taken place but before the state assessed Williamson for unpaid withholding-tax payments. Williamson claimed he did not discover that the injury had occurred until more than one year after the bankruptcy filing. The circuit court dismissed Williamson's complaint for lack of standing.
In a decision authored by Chief Judge Brown, the appellate court noted that federal case law reveals that claims that are "sufficiently rooted in the pre-bankruptcy past" belong to the bankruptcy estate. It held that "Wisconsin's 'discovery of injury' rule will not save Williamson here because that rule's purpose is to mark when the statute of limitations begins to run in state tort actions. That rationale, a judicially created exception to our state's tort statute of limitations, cannot be used by Williamson to usurp the right of the federal bankruptcy estate to bring that action. Because Williamson's financial interest in the misrepresentation claim arose prior to the filing of his bankruptcy petition, it is the property of his bankruptcy estate and he has no standing to sue" (¶ 1).
CGL Policy – "Employee" Exclusion
Borntreger v. Smith, 2012 WI App 35 (filed 23 Feb. 2012) (ordered published 28 March 2012)
The Smiths operated a farm that was insured under a commercial general liability (CGL) policy issued by Auto-Owners. A farm worker was injured on the job and sued the Smiths. The insurer denied coverage on grounds that the policy excluded an "employee." The circuit court granted summary judgment in favor of the insurer.
The court of appeals affirmed in an opinion authored by Judge Lundsten. The CGL policy provided that a temporary worker is not an "employee" for purposes of coverage. Thus, if the injured worker was a "temporary worker," there is coverage, but if he was not a temporary worker, he fell within the policy's exclusion (see ¶ 6). The policy defined a temporary worker as "a person who is furnished to you to substitute for a permanent 'employee' on leave or to meet seasonal or short-term workload conditions" (¶ 7). The Smiths contended that the policy was ambiguous about whether the "furnished to you" language applies to seasonal and short-term workers; they conceded that it clearly applies to substitutes.
The court held that the furnished-to-you condition unambiguously applied to both categories. "It is readily apparent that the definition is structured so that the 'furnished to you' language introduces two parallel clauses separated by 'or': 'furnished to you to substitute for a permanent 'employee' on leave or to meet seasonal or short-term workload conditions (emphasis added). This structure leaves no doubt that the two individual clauses starting with the words 'to substitute and 'to meet' are both modified by the 'furnished to you' lead-in language" (¶ 10). The court was unpersuaded by case law from other states or by provisions within the Worker's Compensation Act.
The Smiths also contended that the record raised a factual issue about whether the injured worker had been "furnished." The court of appeals held that the Smiths forfeited this argument by not raising it with the circuit court and, in any event, the record failed to reflect the worker was furnished by anyone.
Homeowner's Insurance – "Accident" – Physical Assault – Noninsured Location
Schinner v. Gundrum, 2012 WI App 31 (filed 2 Feb. 2012) (ordered published 28 March 2012)
Gundrum, age 21 and an insured under his parent's homeowner's insurance policy, hosted a party, during which underage individuals consumed alcohol in a shed on his parent's property. A minor, Cecil, became belligerent and then assaulted and injured another partygoer, Schinner. At no time did Gundrum personally participate in or assist Cecil in the assault. Schinner sued Gundrum and the homeowner's policy insurer (West Bend), alleging that Gundrum was responsible because he had furnished the alcohol for the party. The circuit court dismissed West Bend, based on its conclusion that there was no "accident" or covered "occurrence" within the policy's meaning, and that the assault occurred at a noninsured location.
The court of appeals reversed in an opinion written by Judge Blanchard. First, Gundrum's conduct was an accident. "[W]e agree with Schinner that the assault was an 'accident' from Gundrum's standpoint, and it was also an 'accident' from Schinner's standpoint. We therefore conclude that the assault was an 'occurrence,' at least for purposes of determining an initial grant of coverage under the Gundrums' policy. Although it may seem counterintuitive to think of an assault as accidental, we rely on Wisconsin case law that has addressed whether an assault is an 'accident' for purposes of insurance coverage" (¶ 10).
Courts have held in several cases that whether injuries were an accident is to be assessed from the standpoint of the injured person (see ¶ 11). The court stated that it made no difference that the assault here was committed by a third party (Cecil) instead of an insured (see ¶ 15). One case, however, appears to hold that the assault must be judged from the standpoint of the insured, not the injured person. That case, however, was less than clear on this point (see ¶ 19). More important, the ambiguity did not matter; the "result is the same because the assault was an accident from both the standpoint of the injured party (Schinner) and the insured (Gundrum)" (¶ 21).
Next, the court also reversed the circuit court's finding that there was no coverage because the injury occurred on a noninsured location (see ¶ 25). The assault occurred in a shed that was on the family's business property but was used to store personal property. Regardless, "Schinner's injuries do not 'aris[e] out of' the shed under the terms of the policy because, while it was the undisputed physical situs of injury, no particular condition of the premises correlates to the basis of liability for the injury. Therefore, the exclusion does not apply" (¶ 28). "That is, there is no evidence that Gundrum's liability arises because of some condition of the shed; no condition of the shed was a cause of the assault or Schinner's injuries" (¶ 32).
Tribal Immunity – Corporations – Insurers
Koscielak v. Stockbridge-Munsee Community, 2012 WI App 30 (filed 14 Feb. 2012) (ordered published 28 March 2012)
An Indian tribe acquired the assets of the Pine Hills Golf Club, which it chartered as a "subordinate organization and economic enterprise" under its tribal constitution in 1996. The tribal council retained, among other powers, its authority to approve any waiver of trial immunity. The charter explicitly provided that Pine Hills was "clothed" with the tribe's sovereign immunity. In 2007, the tribe also purchased a commercial general liability (CGL) policy that contained no provision waiving immunity or precluding the insurer from asserting tribal immunity. Koscielak was injured when he fell in the Pine Hills' parking lot in 2008. A lawsuit was filed against Pine Hills. The circuit court granted summary judgment to Pine Hills, ruling that the plaintiffs' claims were barred by the tribe's sovereign immunity.
The court of appeals affirmed in an opinion written by Judge Mangerson. The plaintiffs argued that their suit was not barred by sovereign immunity because they sued Pine Hills, not a "tribal entity." In rejecting the plaintiffs' contentions, the court held that a "tribe's immunity 'extends to its business arms'" (¶ 9). The court distinguished case law involving a tribe's purchase of a corporation's stocks, acknowledging that "tribal immunity is not conferred merely by a tribe's purchase of and control over a for-profit corporation" (¶ 10).
The court declined to apply a multifactor test that had been discussed in another case, stating that it had "no applicability outside the specific facts of that case" (¶ 12). Moreover, that multifactor test had with "good reason" never been cited or applied in any other Wisconsin case (see ¶ 14). In sum, the court applied the "general rule of immunity for tribal business" (¶ 15). Congress had not abrogated the tribe's immunity nor had the tribe waived it. Moreover, the tribe took specific steps designed to extend its immunity to Pine Hills (see ¶ 17).
The court also held that the plaintiffs' claims against the CGL insurer were also subject to the tribe's immunity irrespective of the direct-action statute (Wis. Stat. § 632.24). The statute does not "enlarge" coverage or determine liability. In short, the insurer was entitled to assert the tribe's immunity (see ¶ 21).
Wrongful Death – Adult Children – Loss of Society
Bowen v. American Family Ins. Co., 2012 WI App 29 (filed 14 Feb. 2012) (ordered published 28 March 2012)
Sara Bowen was killed while a passenger in a car driven by her husband, Thomas, who survived the crash. Sara's adult children (collectively Bowen) filed a wrongful-death claim against American Family, which insured the car. The circuit court dismissed Bowen's claims.
The court of appeals affirmed in an opinion written by Judge Peterson. Bowen's wrongful-death claim was not permitted by Wis. Stat. section 895.03. "When there are no surviving minor children, the wrongful death recovery 'shall belong and be paid' to the surviving spouse. Wis. Stat. § 895.04(2). Only if there is no surviving spouse does the recovery belong to the lineal heirs under Wis. Stat. § 852.01 – that is, the adult children. Wis. Stat. § 895.04(2). These statutes give the surviving spouse exclusive ownership of the right to recover for the decedent's wrongful death and preclude the adult children from bringing wrongful death claims" (¶ 12).
The court further rejected Bowen's claim that the surviving spouse can "disclaim" the right under the probate code. "The probate statutes Bowen cites have no direct bearing on the issue of who owns the right of recovery in a wrongful death action" (¶ 14). (Reasons for the inapplicability of the probate provisions are discussed in the opinion.) The court also distinguished a case that involved a "narrow fact situation" in which a man murdered his wife (see ¶ 16).
"Finally, Bowen argues that refusing to recognize a surviving spouse's disclaimer of a wrongful death claim frustrates the purpose of Wis. Stat. § 895.03, which states that a person who causes the death of another by a wrongful act shall be liable 'in every such case' where the decedent would have been able to recover damages had he or she not died.... [W]e agree with the circuit court that, while contributory negligence may prevent Thomas from prevailing on a wrongful death claim, that does not mean that no such claim exists. Our holding therefore does not frustrate § 895.03's purpose of permitting wrongful death claims in every case where a suit for damages would have been possible had the decedent survived" (¶ 19).
The court of appeals also rejected Bowen's assertion that "any relative listed in § 895.04(4) may recover loss of society and companionship damages, regardless of whether the relative is entitled to bring a wrongful death action" (¶ 20).
"[We refuse to] read Wis. Stat. § 895.04(4) as expanding the class of claimants who may recover loss of society and companionship damages. Instead, we read § 895.04(4) as limiting the availability of loss of society and companionship damages to certain persons within the class of claimants entitled to bring wrongful death actions. In other words, anyone entitled to bring a wrongful death claim under Wis. Stat. §§ 895.04(1) and (2) may recover pecuniary damages, but loss of society and companionship damages are only available if the claimant is the decedent's spouse, child, parent, or minor sibling. So, for example, if a decedent's adult sibling is entitled to bring a wrongful death claim and recover pecuniary damages, § 895.04(4) nevertheless prevents the sibling from recovering damages for loss of society and companionship" (¶ 21). Bowen's contention was also at odds with the case law.