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Vol. 72, No. 7, July 1999

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Supreme Court Digest

By Prof. Daniel D. Blinka & Prof. Thomas J. Hammer

| Appellate Procedure | Civil Procedure | Employment Law |
| Habeas Corpus | Real Property | Torts |

Clerical Error - Appellate Review - Remedy

State ex rel. Fuentes v. Wisconsin Court of Appeals, No. 98-1534-W (filed 14 May 1999)

Through an inadvertent clerical error, a court of appeals decision affirming Fuentes' conviction was sent to the law firm where his prior attorney had practiced. His present attorney never received notice of the decision until after the court of appeals remitted the record to the circuit court. When the present attorney did receive notice that remittitur had occurred, the 30-day period to petition for review in the supreme court also had expired. The court of appeals "expressed regret" over the mistake but concluded that it "was without power to vacate and reissue the decision after remittitur had occurred."

The supreme court, in an opinion written by Justice Bradley, granted Fuentes' writ of habeas corpus and permitted him time to file a petition for review. First, Fuentes was imprisoned under sentence of the court; therefore, he was deprived of his liberty. Second, he was deprived of a cognizable constitutional right - "the right to effective assistance of counsel in the preparation of a petition for review when appellate counsel is statutorily required." Finally, the writ was his only remedy. The court of appeals lost its jurisdiction following the remittitur. The supreme court was constitutionally empowered to fashion "an appropriate remedy by way of its habeas corpus authority."

Condemnation of Property by Department of Transportation - Appeals - Service on the Attorney General

Wisconsin Department of Transportation v. Peterson, No. 97-2718 (filed 8 June 1999)

In 1994 the Department of Transportation (DOT) condemned property belonging to Henry and Edith Cohen and to Harbor Mall Properties (the Cohens) and recorded the award of damages with the county register of deeds. Nearly two years later the Cohens sought to challenge the amount of the damage award by initiating an appeal under Wis. Stat. section 32.05(9). Rather than serving the DOT directly, the Cohens served the attorney general who is the designated service agent for the State of Wisconsin under section 801.11(3). Though the application for appeal was addressed to and served upon the attorney general, the Cohens named the DOT as the condemnor in the application for appeal.

The circuit court acted on the application and assigned the appeal to the chairperson of the county condemnation commission. DOT filed a petition for supervisory writ of prohibition in the circuit court enjoining the condemnation commission from hearing the Cohens' appeal. DOT contended that the Cohens had not properly appealed their award of damages because they failed to serve the condemnor, the DOT, as required by section 32.05(9). The circuit court denied DOT's petition, DOT appealed, and the court of appeals affirmed.
In a unanimous opinion authored by Justice Bradley, the supreme court affirmed the court of appeals. It concluded that section 32.05(9) can reasonably be interpreted as permitting the property owner to serve the State of Wisconsin rather than the DOT. Therefore the circuit court had authority to assign the Cohens' appeal to the county condemnation commission.

Economic Loss Doctrine - Public Safety Exception

Wausau Tile Inc. v. County Concrete Corp., No. 97-2284 (filed 28 May 1999)

Wausau Tile Inc. manufactures, sells, and distributes pavers to entities around the country. Pavers are concrete paving blocks made of cement and other materials for use mainly in exterior walkways. Wausau contracted with Medusa Corporation to supply the cement for the pavers. Wausau Tile's contract with Medusa contained warranties providing that Medusa would remedy or replace cement that did not meet particular specifications.
In 1996 Wausau Tile filed suit against Medusa (and others) alleging breach of warranty, breach of contract, negligence, indemnification, contribution, and strict liability claims. Wausau claimed that several of the installed pavers had suffered excessive expansion, deflecting, curling, cracking, and/or buckling and that these problems were in part due to high levels of alkalinity in Medusa's cement. Wausau claimed that the expansion and the cracking of the pavers had led to problems and property damages which have given rise to various claims, demands, and suits against Wausau. It alleged that it had sustained monetary damages in remedying the property damage claims, is facing claims for personal injuries, and has suffered and will continue to suffer lost business and profits.

The circuit court concluded that the economic loss doctrine precluded Wausau Tile from maintaining its tort claims against Medusa. The court of appeals certified the case to the supreme court which accepted review. In a decision authored by Justice Crooks, the supreme court affirmed the circuit court.

The economic loss doctrine precludes a purchaser of a product from employing negligence or strict liability theories to recover from the product's manufacturer a loss that is solely economic. Economic loss is the loss in a product's value that occurs because the product is inferior in quality and does not work for the general purposes for which it was manufactured and sold. The doctrine does not preclude a product purchaser's claims of personal injury or damage to property other than the product itself.

In this case damages sought by Wausau Tile can be grouped into three categories: 1) the costs of repairing and replacing cracked, buckled, or expanded pavers; 2) the costs of satisfying third parties' claims that the defective pavers either caused personal injury or damaged property adjoining the pavers, such as curbs and walls; and 3) lost profits and business. The supreme court considered each of these types of damages to determine the applicability of the economic loss doctrine.

With respect to the costs of repairing and replacing the pavers, Wausau Tile argued that these costs do not constitute economic loss because the pavers themselves are property other than the defective product (Medusa's cement). The supreme court disagreed. Damage by a defective component of an integrated system to either the system as a whole or other system components is not the kind of damage to "other property" that would preclude application of the economic loss doctrine. The pavers were integrated systems comprised of several component materials, including Medusa's cement. The supreme court rejected Wausau Tile's contention that the pavers constituted property other than the defective cement.

Next, the court rejected Wausau Tile's claims for damages in the amounts it expended or anticipates that it will expend to remediate third parties' claims of damage to property adjoining the pavers and pedestrians' claims of personal injury. These claims do not allege any personal injury or property damage on Wausau Tile's part. Rather, these claims are an attempt by Wausau Tile to recoup the commercial costs of settling the claims of third parties that resulted from the product defect. As such, the claims allege consequential economic loss. Moreover, even if Wausau Tile's claims were sufficient to allege personal injury and/or property damage, it would not be permitted to litigate those claims because Wausau Tile would not be a real party in interest and because joinder of the real parties in interest would not be feasible. With regard to the latter, joinder of the third-party real parties in interest would be difficult if not impossible because, according to the complaint, the pavers were sold and installed in large quantities nationwide. Third parties having claims of property damage or personal injury are likely to be scattered throughout the country and there is no way of knowing how many potential plaintiffs have yet to be harmed or will come forward with their claims.

Finally, the court rejected Wausau Tile's claims for lost business and profits. These are indirect losses attributable to the inferior quality of the pavers and constitute economic loss, which is not recoverable in tort.

The supreme court also considered whether the rule of Northridge Co. v. W.R. Grace & Co., 162 Wis. 2d 918, 471 N.W.2d 179 (1991), permits Wausau Tile to maintain its tort claims in spite of the economic loss doctrine. In doing so the supreme court addressed a question certified to it by the court of appeals as to "the nature, extent, and scope of the public safety exception to the economic loss doctrine enunciated in Northridge."

Wausau Tile argued that the damaged pavers present a risk of injury to pedestrians on the walkways in which they have been installed and that this risk of injury amounts to a public safety hazard that entitles it to bring its tort claims under an exception to the economic loss doctrine contained in Northridge. The supreme court disagreed. Northridge involved a defective product that contained asbestos and, because of the health hazards posed by asbestos, most courts have permitted tort recovery for claims of property damage to buildings caused by asbestos contamination in spite of the economic loss doctrine. In Northridge the Wisconsin Supreme Court chose to align Wisconsin with those jurisdictions that permit tort recovery for asbestos damage to buildings. Northridge, however, did not create a broad "public safety exception" to the economic loss doctrine. The facts of this case do not involve asbestos or any other material that is inherently dangerous to the health and safety of humans. The Northridge exception thus does not apply to claims of the type made by Wausau Tile.

Justice Bradley did not participate in this decision.

Prof. Daniel D. Blinka and Prof. Thomas J. Hammer invite comments and questions about the digests. They can be reached at the Marquette University Law School, 1103 W. Wisconsin Ave., Milwaukee, WI 53233, (414) 288-7090.