Each year, the U.S. Court of Appeals for the Seventh Circuit and Wisconsin’s two federal district courts issue decisions interpreting Wisconsin statutes and common law. Although federal court interpretations of Wisconsin law are not binding on Wisconsin courts, they influence how Wisconsin law develops, including in cases pending in Wisconsin state appellate courts and circuit courts.

This article reviews eight recent federal decisions interpreting and applying Wisconsin statutes and common law in the areas of tort law, civil procedure, business law, and trade secret law.

Wisconsin’s Long-Arm Statute

In Ikon Transportation Services Inc. v. Texas Made Trucking LLC, the U.S. District Court for the Western District of Wisconsin addressed Wis. Stat. section 801.05(5)(b), part of Wisconsin’s long-arm statute, which provides for jurisdiction in actions that arise out of services for the defendant in Wisconsin authorized or ratified by the defendant.¹

Ikon Transportation Services is a Wisconsin-based company that coordinates the shipment of goods.² Ikon was hired by a contractor to coordinate shipping, from Texas to Kentucky, cargo manufactured by Advanced Containment Systems Inc.³ The cargo was damaged in Houston when employees of Advanced Containment instructed the driver to move the truck before securing the cargo.⁴ Ikon paid for the damaged cargo and sought recovery from Advanced Containment.⁵ But the Western District court held that it lacked personal jurisdiction over Advanced Containment under the long-arm statute.

Because there was no direct contractual link between Ikon and Advanced Containment, Ikon could not show that it performed services for Advanced Containment in Wisconsin.⁶ Instead, both had contracted with the contractor, which acted as the intermediary. Advanced Containment’s incidental benefit from Ikon’s services in Wisconsin was not sufficient to satisfy the statute.

Ikon also failed to show that Advanced Containment ratified Ikon’s services by loading the cargo onto the truck.⁷ Merely loading the cargo was not a definitive manifestation of intent to ratify Ikon’s performance.⁸ Advanced Containment had not executed a bill of lading with Ikon indicating that it agreed to its terms or otherwise signaled that Advanced Containment knew about and accepted Ikon’s services in Wisconsin. Nor did Ikon have evidence that Advanced Containment had actual knowledge of Ikon’s Wisconsin-based services.

Wisconsin’s Safe-Place Statute – Constructive Notice

Wisconsin’s safe-place statute, Wis. Stat. section 101.11, establishes a heightened duty of care for employers with respect to allegedly unsafe conditions on their premises. To recover, however, a plaintiff must in most circumstances show that the defendant had notice of the unsafe condition. In Neuzerling v. Costco Wholesale Corp., the U.S. District Court for the Eastern District of Wisconsin explored the issue of constructive notice.⁹

The plaintiff slipped and fell on water in a hallway.¹⁰ The evidence on summary judgment showed that an employee checked for hazards every hour and had inspected the hallway 15 minutes before the plaintiff fell and did not see any water on the floor.¹¹

The Eastern District court noted that the safe-place statute does not require a property to be free of all hazards, and an unsafe condition must have existed long enough for a reasonably diligent owner to discover and repair it to constitute constructive notice.¹² This normally requires evidence about the length of the time the unsafe condition existed.¹³

The store’s hourly inspections, the inspection of the hallway 15 minutes before the accident, and lack of evidence that any employees were in the hallway between the inspection and the accident were sufficient to show that Costco did not have constructive notice of the water.¹⁴ The court distinguished cases in which an employee had a constant line of sight on the scene of the accident, the condition resulted from the way the defendant displayed merchandise, or the condition allegedly accumulated over a multiday period.¹⁵ The claim under the safe-place statute failed without evidence of how long the water was on the floor or that Costco’s procedures were insufficient to reasonably discover hazards.¹⁶

UCC Battle of the Forms

An area of frequent dispute concerns which provisions of purchase order and invoice terms and conditions become a part of the contract between commercial parties. The Eastern District had an opportunity to weigh in on the current law in Hydraulics International Inc. v. Amalga Composites Inc.¹⁷

Over the course of seven months Hydraulics purchased fiberglass from Amalga. Hydraulics’ purchase orders incorporated Hydraulics’ terms and conditions, which contained a provision stating that Hydraulics objected to any additions, exceptions, or changes to the terms unless approved in writing.¹⁸ Hydraulics sued Amalga, claiming the spools were defective.¹⁹

Amalga moved to dismiss, arguing the claim was untimely under a one-year limitation period contained in the terms and conditions in Amalga’s invoices to Hydraulic.²⁰ The court walked through the provisions of Wis. Stat. section 402.207 to determine whether the one-year limitations period applied.²¹

The Eastern District court said that Amalga’s acceptance of Hydraulics’ purchase order was expressly made conditional on Hydraulics assenting to Amalga’s terms and conditions, and therefore Amalga’s acceptance of the purchase order did not operate as an acceptance of Hydraulics’ offer under Wis. Stat. section 402.207(1).²² Because Hydraulics’ purchase order expressly limited acceptance to its terms, the limitation period could not come in under Wis. Stat. section 402.207(2).²³

But the conduct of the parties clearly recognized the existence of a contract (ordering, shipping, and paying for the fiberglass).²⁴ Therefore, under Wis. Stat. section 402.207(3), the terms of the contract consisted of the terms on which the writings agreed, as well as any supplementary terms incorporated under other provisions of the UCC.²⁵

Amalga asserted that Hydraulics’ failure to object to Amalga’s terms and conditions over multiple transactions showed that the limitation period was incorporated by the parties’ course of dealing.²⁶ The court agreed that the limitation period could constitute a supplementary term, which are not limited to standardized UCC gap-fillers. But whether the parties’ course of conduct incorporated the provision was a question of fact that could not be decided on the pleadings.²⁷

Trade Secrets – Customer List

Whether a customer list is subject to trade-secret protection can turn on the details of the list and the process by which it is created. The Eastern District weighed in on this issue in Charles Schwab & Co. v. LaGrant.²⁸

After the defendant agreed to a permanent injunction against using knowledge he acquired at Schwab to contact former clients, he used his memory to create a list of high-net-worth clients, and then staff members at his new employer looked up their contact information.²⁹ The Eastern District court refused to grant a motion for contempt and held that the injunction was unenforceable.³⁰

The injunction required the defendant to keep his former employer’s information private, making it a nondisclosure agreement subject to Wis. Stat. section 103.465.³¹ Under that statute the injunction was unenforceable because it lacked geographic and temporal limitations.³² Schwab argued the customer list was a trade secret; trade secrets are excepted from the rule requiring geographic and temporal limits on nondisclosure agreements.³³

The court held that the list was not a trade secret because it was merely a list of high-net-worth individuals the defendant knew personally, and their contact information was derived from public sources.³⁴

Unjust Enrichment – Measurement of Compensatory Damages

Under Wisconsin law, an unjustly enriched party can be liable for the value of the benefit it received.³⁵ That value can be measured in multiple ways, and it is not always easy to determine which method should be used. In Epic Systems Corp. v. Tata Consulting Services Ltd., the Seventh Circuit examined one approach in the context of misappropriation of trade secrets.

Epic Systems, a developer of healthcare software, sued Tata Consulting Services (TCS), a consultant for one of Epic’s customers, for unlawfully accessing and downloading documents containing Epic’s trade secrets and other confidential information about Epic’s software.³⁶ Epic alleged that TCS incorporated some of the information it obtained into a “comparative analysis” of Epic’s software and TCS’s competing product, which TCS wanted to begin selling in the United States.³⁷

A jury found TCS liable and awarded $140 million in compensatory damages related to the comparative analysis, as well as punitive damages.³⁸ On appeal, TCS argued that the compensatory damages award vastly overstated the value of any benefit TCS had obtained. The Seventh Circuit began its analysis by restating two principles that govern the measurement of unjust enrichment damages: they must be 1) measured by the benefit conferred and 2) proved to a reasonable certainty.³⁹

Regarding the first element, the court recognized that the value of a benefit can be measured in multiple ways. In situations in which money or services are received, recovery can be measured by the sum received or the value of the services.⁴⁰ But TCS did not receive money or services – it obtained proprietary information about a competitor’s product that it used to improve its own. The question was how that benefit should be measured.

The panel adopted the “avoided research and development costs” approach. It looked to see what it would have cost TCS to develop its product absent the “head start [it] gained in development and competition” through misappropriation.⁴¹ Reviewing the evidence about how TCS had strategized about moving into the domestic market and had used Epic’s information to identify and address shortcomings in TCS’s competing product, the panel upheld the jury’s conclusion that TCS had avoided significant costs by using Epic’s product in the comparative analysis, and that the labor and development costs TCS likely avoided aligned with the jury’s compensatory damages award.⁴²

Products Liability – Identification of Allegedly Defective Product

Wisconsin Statutes section 895.046(3) was enacted in 2011 and requires a plaintiff to connect a manufacturer or others in an allegedly defective product’s chain of distribution or promotion to the specific product that caused the plaintiff’s injuries.⁴³ In Frase v. Ashland Chemical Co., the Western District discussed the level of specificity required in a complaint to proceed under this statute.⁴⁴ The district court sought to balance a defendant’s need for reasonable notice of the grounds for a plaintiff’s claim with the reality that plaintiffs sometimes need discovery to identify the specific product that caused their injuries.

Frase’s estate asserted negligence and strict-liability claims against several oil and chemical companies, alleging that Frase developed mylodysplastic syndrome as the result of workplace exposure to “Benzene-Containing Materials,” such as solvents, blends, and “other toxic and hazardous chemicals.”⁴⁵ Several of the defendants moved to dismiss, arguing that the complaint did not comply with Wis. Stat. section 895.046(3).⁴⁶

After finding the statute applicable to the estate’s claims, the district court deemed the supporting allegations too vague to give the defendants fair notice or to plausibly state a claim under Wis. Stat. section 895.046(3).⁴⁷ It focused on the estate’s inclusion of “other toxic and hazardous chemicals” in the list of products that allegedly caused Frase’s injuries, finding that language “impossibly broad” because it could include the defendants’ entire product lines.⁴⁸

The estate argued that the defendants could narrow the universe of products at issue by determining which benzene-containing products they sold to the manufacturing plant at which Frase worked. The district court did not find this argument convincing: The estate still had the burden to identify with greater specificity the product or products it was claiming to be defective.⁴⁹ Section 895.046 was enacted “in part to limit overbroad products liability claims,” but the estate had offered only “broad category descriptions” in its complaint, which were not sufficient to withstand a motion to dismiss.⁵⁰

Civil Procedure – Claim Preclusion

Claim preclusion can bar the litigation of claims that were or could have been raised in a prior lawsuit. Under Wisconsin law, a prior action will bar later claims if 1) the prior suit ended in a final judgment on the merits, 2) the two lawsuits involve the same causes of action, and 3) the same parties or their privies are involved in both lawsuits.⁵¹ The Western District applied this test in Adams Outdoor Advertising Ltd. P’ship v. City of Madison.⁵²

A Madison ordinance regulates the location, height, and other aspects of large billboard advertising signs in the city.⁵³ The ordinance restricts these advertising signs in ways that do not apply to other, smaller types of signs. In 1990, Adams Outdoor Advertising (hereinafter Adams) brought an inverse condemnation action against the city after it amended the ordinance and required Adams to remove some of its advertising signs.⁵⁴ The parties eventually settled that lawsuit, which resulted in the entry of a stipulated judgment dismissing with prejudice all claims that were or could have been raised in the lawsuit based on the underlying facts.⁵⁵

In 2016, Adams applied for permits to relocate, modify, or replace some of its signs.⁵⁶ After all but one application was denied, Adams brought an action challenging the ordinance as unconstitutional under the First Amendment.⁵⁷ The city sought summary judgment, arguing that the stipulated judgment in the 1990 suit barred Adams’ claims. Because the same parties were involved in both actions, the district court’s analysis focused on the first two elements of Wisconsin’s three-part claim-preclusion test.⁵⁸

The district court concluded that both elements were present. First, the stipulated judgment in the first action constituted a final judgment on the merits because it required the dismissal of all claims that were or could have been raised in that action.⁵⁹

Next, to determine whether the two lawsuits involved the same causes of action, the district applied Wisconsin’s “transactional approach” under which all claims arising out of a transaction or set of facts must be litigated in the same action.⁶⁰

Adams offered two reasons why its claims were not barred, but the district court rejected both. First, the court disagreed with Adams that its first lawsuit had been limited to a specific set of permit denials, noting that its prior complaint had sought an order declaring the ordinance unconstitutional.⁶¹

Adams also argued that claim preclusion did not apply because the city had amended the ordinance after its first lawsuit. Again the court disagreed: The intervening amendments could only bar application of claim preclusion if they would allow Adams to raise a constitutional claim that was unavailable in 1990.⁶² After reviewing amendments the city had enacted in 2009, 2015, and 2017, the district court concluded that only one (relating to digital signs) was potentially significant enough to avoid the bar of claim preclusion.⁶³ After rejecting additional arguments Adams presented concerning exceptions to claim preclusion, the district court concluded that the doctrine barred nearly all Adams’ claims.⁶⁴

Wisconsin Deceptive Trade Practices Act

Wisconsin Statutes section 100.18 prohibits making false, deceptive, or misleading statements “in this state” for the purpose of inducing consumers to purchase land or goods.⁶⁵ In T&M Farms v. CNH Industries America LLC, the Eastern District addressed whether liability under the statute requires that the advertisement or the advertiser be present in Wisconsin.⁶⁶

Farms located in Arkansas and Alabama brought a putative class action against CNH asserting common-law and statutory (Wis. Stat. section 100.18) claims arising out of the farms’ purchase of CNH cotton-picking machines. CNH moved to dismiss the Wis. Stat. section 100.18 claim on multiple grounds, including that the plaintiffs had not seen or acted on the allegedly false advertising statements in Wisconsin.⁶⁷

In relevant part, Wis. Stat. section 100.18(1) prohibits persons intending to sell a product from making, publishing, or placing a deceptive or misleading statement to the public “in this state.”⁶⁸ CNH did not sell or advertise its cotton pickers in Wisconsin; instead, it targeted its advertising for these machines at southern states where cotton is farmed.⁶⁹ But the plaintiffs argued that CNH had nonetheless “made” the allegedly false statements “in this state” because they came from CNH’s Wisconsin headquarters.⁷⁰

The district court disagreed, finding that T&M’s reading of “in this state” was unsupported by the surrounding statutory language and at odds with the statute’s purpose.⁷¹ With regard to the statutory language, the court focused on the way the terms “make” and “in this state” interact in the statute.

Because the statute can reach statements that appear in Wisconsin but are made by persons located elsewhere, the district court concluded that the better reading of the key language was that a person “makes” a statement in Wisconsin when the person causes the statement to exist in Wisconsin rather than when the person is present in Wisconsin and causes the statement to exist somewhere else.⁷² In the court’s view, this understanding comported with the statute’s underlying purpose, which is to protect Wisconsin residents from misleading advertising, not to regulate those in Wisconsin who advertise beyond the state’s borders.⁷³

Cite to 93. Wis. Law. 36-41 (December 2020).

Endnotes

¹ Ikon Transp. Servs. Inc. v. Texas Made Trucking LLC, No. 19-cv-296-jdp, 2020 WL 416765 (W.D. Wis. Jan. 27, 2020) (slip copy).

² Id. at *1.

³ Id. at *2.

⁴ Id.

⁵ Id.

⁶ Id. at *3.

⁷ Id. at *4.

⁸ Id.

⁹ Neuzerling v. Costco Wholesale Corp., No. 18-CV-1539, 2020 WL 4700908 (E.D. Wis. Aug. 13, 2020) (slip copy).

¹⁰ Id. at *1.

¹¹ Id. at *2-3.

¹² Id. at *2.

¹³ Id. (citing Correa v. Woodman’s Food Mkt., 2020 WI 43, ¶ 18, 391 Wis. 2d 651, 943 N.W.2d 535).

¹⁴ Id. at *3-4.

¹⁵ Id.

¹⁶ Id. at *5.

¹⁷ Hydraulics Int’l Inc. v. Amalga Composites Inc., No. 20-CV-371, 2020 WL 5645680 (E.D. Wis. Sept. 21, 2020).

¹⁸ Id. at *1.

¹⁹ Id.

²⁰ Id. at *2.

²¹ Id. at *2-4

²² Id. at *3.

²³ Id.

²⁴ Id.

²⁵ Id.

²⁶ Id. at *3-4.

²⁷ Id. at *4-5.

²⁸ Charles Schwab & Co. v. LaGrant, No. 17-CV-340-JPS, 2020 WL 5868303 (E.D. Wis. Aug. 31, 2020) (appeal filed).

²⁹ Id. at *1-2.

³⁰ Id. at *2.

³¹ Id. at *2-3.

³² Id.

³³ Id. at *3.

³⁴ Id. at *3-4.

³⁵ Epic Sys. Corp. v. Tata Consultancy Servs. Ltd., 971 F.3d 662 (7th Cir. 2020).

³⁶ Id. at 670.

³⁷ Id. at 670-71.

³⁸ Id. at 671.

³⁹ Id. at 673.

⁴⁰ Id.

⁴¹ Id. at 674 (citing 3M v. Pribyl, 259 F.3d 587 (7th Cir. 2001)).

⁴² Id. at 675-76.

⁴³ 2011 Wis. Act 2; Wis. Stat. § 895.046(3). If the plaintiff is unable to make this showing, the plaintiff can proceed under Wis. Stat. section 895.046(4), which codifies Wisconsin’s “risk contribution” doctrine and sets forth the elements a plaintiff must prove to pursue a claim under it.

⁴⁴ Frase v. Ashland Chem. Co., No. 19-cv-273-wmc, 2020 WL 1974190 (W.D. Wis. Apr. 24, 2020) (slip copy).

⁴⁵ Id. at *1.

⁴⁶ Id. at *3.

⁴⁷ Id.

⁴⁸ Id. at *4.

⁴⁹ Id. at **4-5.

⁵⁰ Id. at *5.

⁵¹ Teske v. Wilson Mut. Ins. Co., 2019 WI 62, ¶ 23, 387 Wis. 2d 213, 928 N.W.2d 555.

⁵² Adams Outdoor Advertising Ltd. P’ship v. City of Madison, No. 17-cv-576-jdp, 2020 WL 1689705 (W.D. Wis. Apr. 7, 2020) (appeal filed Apr. 23, 2020).

⁵³ Id. at **1-2.

⁵⁴ Id. at *5.

⁵⁵ Id.

⁵⁶ Id. at *2.

⁵⁷ Id. at *3.

⁵⁸ Id. at *6.

⁵⁹ Id.

⁶⁰ Id. (citing Restatement (Second) of Judgments § 24 (1982)).

⁶¹ Id. at *7.

⁶² Id. at *8.

⁶³ Id. at *9.

⁶⁴ Id. at *10.

⁶⁵ Wis. Stat. §100.18(1).

⁶⁶ T&M Farms v. CNH Indus. Am. LLC, No. 19-C-0085, 2020 WL 5633271 (E.D. Wis. Sept. 21, 2020).

⁶⁷ Id. at *2.

⁶⁸ See Wis. Stat. § 100.18(1).

⁶⁹ T&M Farms, 2020 WL 5633271, at *3.

⁷⁰ Id.

⁷¹ Id.

⁷² Id. at *4.

⁷³ Id.