Vol. 77, No. 4, April
2004
Court of Appeals Digest
This column summarizes selected published opinions of the Wisconsin
Court of Appeals. 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.
by Prof. Daniel D. Blinka &
Prof. Thomas J. Hammer
Business Entities
LLCs - Conflict of Interest - Voting Rights
Gottsacker v.
Monnier, 2004 WI App 25 (filed 14 Jan. 2004) (ordered published
25 Feb. 2004)
Paul, Julie, and Gregory formed "New Jersey LLC" for the purpose of
investing in real estate. The three agreed to operate under the
Wisconsin Limited Liability Company Law, Wis. Stat. chapter 183, which
recognizes that limited liability companies (LLCs) share some features
with corporations but are also different (¶ 11). Gregory later
alleged that Paul and Julie "had a material conflict of interest and
derived an improper personal profit from the transfer of property,"
after they voted to transfer property from New Jersey LLC to a new LLC
(¶ 12). The trial court agreed that Paul and Julie's conflict of
interest barred the transfer.
The court of appeals, in an opinion written by Judge Snyder,
affirmed. First, "Paul and Julie did advance their private interests by
transferring the property to their new company" (¶ 14). (Both Paul
and Julie acquired larger ownership interests as a result of the
transfer.) Second, as fiduciaries of New Jersey LLC, Paul and Julie
should not have taken a position "antagonistic" to the LLC, yet they did
in fact do so. "Their transaction took the sole remaining asset from New
Jersey LLC without determining the fair market value and without notice
to the sole remaining LLC member, Gregory. Because this transaction
pitted Paul and Julie's personal interest against their fiduciary duties
to New Jersey LLC, we conclude that a conflict of interest did exist"
(¶ 15).
The next issue was whether the conflict precluded Paul and Julie from
voting to transfer the property from the old LLC to their new LLC.
"Wisconsin Stat. §183.0402 provides the standard to apply when
determining who is 'precluded from voting' under Wis. Stat.
§183.0404(3). The plain language of this subsection does not
prevent a member who has a material conflict of interest from dealing
with matters of the LLC. The statute does, however, prohibit that member
from dealing unfairly with the LLC or its members. . . . We
hold that a member with a conflict of interest must vote his or her
ownership interest fairly, considering the interests of the LLC and the
relationship with the other members" (¶ 19). The record showed that
Gregory, the only LLC member without a conflict, "was unaware of the
transfer before it occurred and did not vote on the transfer"
(¶20). Moreover, the transferred property was the only property
owned by New Jersey LLC.
In short, the facts demonstrated "unfair dealings in two respects."
First, it was not an arm's length transaction (¶ 21). Second, the
"sale" made it "impracticable for the New Jersey LLC to carry on with
its intended business" (¶ 22). "In the absence of either an
operating agreement provision on dissolution procedures, a judicial
dissolution, or dissociation of a member from the LLC, dissolution
requires the written consent of all members. Wis. Stat.
§183.0901(2). Paul and Julie's failure to obtain Gregory's consent
for the sale of the sole company asset, without which the purpose of New
Jersey LLC was compromised, further establishes unfair dealing with the
LLC and Gregory, contrary to Wis. Stat. §183.0402(1)(a)" (¶
23).
Finally, the trial court properly ordered the return of the property
to New Jersey LLC. The remedy will not inevitably lead to "deadlock,"
because "the transaction can be accomplished if fairness is demonstrated
through an arm's length transaction" (¶ 26). Nonetheless, Paul and
Julie "of course" run the risk that they will be outbid by a third party
if the property is placed on the market.
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Civil Procedure
Default Judgment - Late Answer - Excusable Neglect
Williams Corners Investors
LLC v. Areawide Cellular LLC, 2004 WI App 27 (filed 14 Jan.
2004) (ordered published 25 Feb. 2004)
Plaintiff Williams Corners Investors filed a complaint alleging that
the defendant, Alpha Communications Inc., had breached a lease or leases
and had made various misrepresentations. The plaintiff moved for a
default judgment after Alpha failed to timely answer the complaint. The
trial court granted the motion.
The court of appeals, in an opinion written by Judge Anderson,
affirmed. The record demonstrated that the circuit court properly found
that excusable neglect had not been established. Alpha admitted that
service occurred on October 15, but it offered no explanation for its
untimely answer (made on December 4), other than the fact that a
knowledgeable assistant missed several days' work because of a family
death. "Alpha provides no reason as to why within the forty-five day
response period from October 15 to November 29, Alpha neither moved for
additional time to plead nor filed the answer or any other responsive
pleading. Additionally, Alpha does not tell us why no one was assigned
to fill in for the absent assistant normally charged with receiving
legal process. From the record, it appears that Alpha's failure to
answer in a timely manner amounted to nothing more than carelessness and
inattentiveness on the part of the parties involved, and thus does not
constitute excusable neglect" (¶ 16).
Nor was the court impressed by the contention that Alpha should have
been "granted leniency because it had promptly remedied its tardiness by
filing an answer only five days late" (¶ 17). Finally, the trial
court did not err by failing to consider "the interests of justice."
"The principal case on excusable neglect . . . teaches that: 'If the
motion is made after the expiration of the specified time, an order
enlarging the time for performing an act must be based on a finding of
excusable neglect; when the circuit court determines that there is
no excusable neglect, the motion must be denied'" (¶
19).
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Criminal Procedure
Postconviction Counsel - Motion to Withdraw from Representation
State ex rel. Ford v.
Holm, 2004 WI App 22 (filed 29 Jan. 2004) (ordered published 25
Feb. 2004)
This case presented a question that has surfaced with some frequency
in motion and writ practice before the court of appeals: Must an
attorney appointed to represent an indigent defendant in postconviction
proceedings move for court permission to withdraw from representation
after the attorney concludes that the defendant has agreed to have the
attorney "close the file" without filing a postconviction motion,
appeal, or no-merit report? A closely related second question is whether
appointed postconviction counsel renders ineffective assistance by
failing to obtain court permission to withdraw or otherwise seek a
judicial determination that the defendant has knowingly waived either
the right to appeal or the right to counsel.
In a decision authored by Judge Deininger, the court of appeals
answered both of these questions in the negative. Further, the court
concluded that it would be inappropriate for it to require withdrawal
motions to be filed in every case such as this, given the supreme
court's "express declination" to do so in State ex rel. Flores v.
State, 183 Wis. 2d 587, 516 N.W.2d 362 (1994).
The court's lengthy opinion includes a review of postconviction
procedures. In that segment the court observed that, "after appointed
postconviction counsel has reviewed the transcripts and record, he or
she must confer with the defendant regarding the defendant's right to
appeal, the potential merit or lack thereof in pursuing either a
postconviction motion or appeal, and if applicable, the availability of
the 'no-merit option'" (¶ 4).
If appointed counsel concludes that an appeal or a motion for
postconviction relief "would be frivolous and without any arguable
merit," the defendant must choose from among three options after counsel
has explained the section 809.32 no-merit procedure: (1) have the
attorney file a no-merit report; (2) have the attorney close the file
without an appeal; or (3) have the attorney close the file and proceed
without an attorney or with another attorney retained at the defendant's
expense. Counsel must also inform the defendant that a no-merit report
will be filed if the defendant either requests a no-merit report or does
not consent to have the attorney close the file without further
representation by the attorney.
In this case the court concluded that the defendant's postconviction
counsel did not render ineffective assistance by "closing the file"
without first either obtaining court permission to withdraw or seeking a
contemporaneous judicial determination that his client had knowingly
waived either the right to appeal or the right to counsel.
The court next considered whether the record before it was sufficient
to determine whether counsel nonetheless performed deficiently by
wrongly concluding that the defendant had knowingly and intelligently
waived the right to counsel or the right to an appeal. A knowing and
intelligent waiver of postconviction counsel requires a showing that the
defendant was aware 1) of the rights discussed in Flores("to an
appeal, to the assistance of counsel for the appeal, and to opt for a
no-merit report"), 2) of "the dangers and disadvantages of proceeding
pro se," and 3) that if appointed counsel withdraws from representation,
successor counsel would not be appointed to represent the defendant in
postconviction proceedings. See State v. Thornton, 2002 WI App
294. When the waiver of the right to appeal is at issue, a defendant
must be shown to have known of that right and of his or her options, and
"it must be apparent that the defendant 'either suggested, acquiesced in
or concurred in or with the decision'" to forego an appeal,
postconviction motion or the no-merit option. Flores, 183 Wis.
2d at 617.
In this case the record was insufficient to permit the appellate
court to determine whether the defendant knowingly waived either the
right to counsel or to an appeal. Accordingly, it remanded the case to
the circuit court for evidentiary proceedings on the question of
waiver.
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Evidence
Offer to Take Polygraph Examination - Admissibility
State v. Pfaff,
2004 WI App 31 (filed 28 Jan. 2004) (ordered published 25 Feb. 2004)
The defendant was convicted of homicide by the intoxicated use of a
vehicle. Among the issues on appeal was the defendant's claim that the
trial judge erred by excluding from evidence his offer to take a
polygraph examination.
In a decision authored by Judge Nettesheim, the court of appeals
affirmed. It began its analysis by noting that, while a polygraph test
is inadmissible in Wisconsin, an offer to take a polygraph test is
relevant to an assessment of the offeror's credibility and may be
admissible for that purpose. See State v. Hoffman, 106 Wis. 2d
185, 316 N.W.2d 143 (Ct. App. 1982). An offer to take a polygraph is
relevant to the state of mind of the person making the offer - so long
as that person believes that the test or analysis is possible, accurate,
and admissible. A defendant's offer is admissible because it may reflect
a consciousness of innocence.
The critical question in this case was whether the defendant's
agreement to submit to a polygraph test at the request of his
attorney constituted an "offer" to take the test within the meaning
of the preceding discussion. The court of appeals concluded that an
agreement to submit to a polygraph at the suggestion or request of
another is not an offer within the meaning of Hoffman. Said the
court, "We see no reason to create an exception to this rule where, as
here, the request or suggestion for the polygraph test comes from the
defendant's attorney. When the offer to take a polygraph test originates
with the defendant and is accompanied by the defendant's belief that the
test result or analysis is 'possible, accurate, and admissible,' it is
probative as 'consciousness of [the defendant's] innocence.' The
converse does not hold when the offer to take the test is the result of
an attorney's suggestion or direction. Any competent defense attorney
practicing in Wisconsin well knows that polygraph test results are
inadmissible in this state, and presumably the attorney would share that
knowledge with the client when suggesting the test" (¶ 29)
(citations omitted).
Accordingly, the court held that "when the defense attorney plants
the seed for the idea of offering to take a polygraph test, the
probative value of such an offer as 'consciousness of innocence' is
diminished to a level where it no longer assists on the question of
guilt or innocence. Instead, it takes the jury into the realm of
speculation and likely confusion" (¶ 30). The agreement to submit
to a polygraph test at the request of the defendant's attorney was not
an "offer" to take a polygraph test within the meaning of the
established case law. The trial judge thus committed no error in
excluding that evidence.
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Family Law
TPR Proceedings - Release of Juvenile Parent's Juvenile Record to
Child's Guardian ad Litem - In Camera Review Required
Courtney F. v. Ramiro
M.C., 2004 WI App 36 (filed 21 Jan. 2004) (ordered published 25
Feb. 2004)
This case involved the involuntary termination of the parental rights
of a juvenile (Ramiro M.C.) to his alleged child. The issue before the
court of appeals was whether the juvenile court erred by releasing
Ramiro's juvenile and Department of Health and Human Services records to
his child's guardian ad litem (GAL) for use in the termination of
parental rights (TPR) proceeding without first conducting an in camera
review of those records to determine their relevance.
In a decision authored by Judge Nettesheim, the court of appeals
concluded that a request for discovery of a juvenile record pursuant to
Wis. Stat. section 48.396(2)(a) or 938.396(2)(a) or a request for
inspection of an agency record pursuant to section 48.78(2)(a) or
938.78(2)(a) requires the juvenile court to conduct an in camera review
of the juvenile records to determine whether they are relevant to the
stated purpose of the discovery or inspection. In this case, the judge
had an important gatekeeper role to perform when confronted with the
GAL's discovery request. "That role was to determine whether any of
Ramiro's juvenile court or agency records were relevant to the GAL's
discovery requests in the TPR proceeding" (¶ 24).
Although not an issue in this case, the appellate court also
concluded that the juvenile court must furnish notice of such a
discovery request to the juvenile and provide an opportunity to be
heard.
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Insurance
UIM - "Garage Operations"
Crandall v. Society
Ins., 2004 WI App 34 (filed 27 Jan. 2004) (ordered published 25
Feb. 2004)
Crandall owned an auto body shop that was protected by underinsured
motorist (UIM) coverage that applied to autos that were "licensed or
principally garaged, or 'garage operations' conducted in Wisconsin." His
daughter was injured while a passenger in a car driven by her boyfriend.
The daughter sought additional coverage under this UIM policy, but the
insurer denied the claim. The parties agreed that the accident did not
occur in a covered auto nor "while anyone was engaged in garage
operations." Rather the Crandalls contended that the UIM coverage
attached simply because "Jack's garage operations are located in
Wisconsin" (¶ 4). The circuit court granted summary judgment in
favor of the insurer.
The court of appeals, in an opinion authored by Judge Peterson,
affirmed. The court held "that the policy language is unambiguous and
requires that the accident occur while the insured is in the course of
garage operations. We find support for our conclusion in the policy's
use of the word 'for.' The policy states that the UIM coverage is 'For
... "'garage operations'" conducted in Wisconsin.' Thus, the policy
affords coverage when an accident occurs when an insured is
participating in garage operations. [The daughter]'s accident did not
involve garage operations" (¶ 8). Moreover, the policy covered
"Crandall's business, not him as an individual" (¶ 9). Indeed, the
Crandalls' argument rendered meaningless the language regarding covered
autos. The court rejected a series of arguments that attacked the
reasonableness of the insurer's construction of the policy.
Pollution Exclusion - "Bacterial Outbreaks" - Contaminants
Landshire Fast Foods v.
Employers Mut. Cas. Co., 2004 WI App 29 (filed 28 Jan.
2004) (ordered published 25 Feb. 2004)
Landshire prepared food for sale to businesses and institutions,
including the Navy. When a naval training facility discovered dangerous
bacteria in some of Landshire's products, it returned all of the food
and refused to accept any additional products. Federal and state
agencies also began closely monitoring Landshire's production. Landshire
investigated the cause of the outbreak and submitted a "corrective
action plan." It also filed a claim for loss of income, loss of product,
and other related expenses to its commercial property insurance carrier,
Employers Mutual, which denied the claims. In a declaratory judgment
action filed by Landshire, the circuit court found that none of its
claims were compensable under the policy.
The court of appeals, in an opinion written by Judge Snyder,
affirmed. The policy contained a "pollution" exclusion, which defined
"pollutants as 'any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids, alkalis,
chemicals and waste'" (¶ 13). The "dispositive issue" was whether
the term "contaminant" was ambiguous (that is, did the term carry more
than one reasonable interpretation). The court held "that the term
'contaminants' in Employers' pollution exclusion, when given its plain
meaning, incorporates bacteria such as Listeria monocytogenes. [It]
decline[d] Landshire's request to apply the rule of ejusdem
generis or otherwise rewrite the policy because . . . the language
of Employers' insurance policy is unambiguous" (¶ 17). In
particular, Landshire's contention that "contaminant" included only
"inorganic matter" was itself unreasonable (¶ 16).
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Municipal Law
Repairs of Town Bridges - County's Share of Costs
Town of Grand Chute v.
Outagamie County, 2004 WI App 35 (filed 13 Jan. 2004) (ordered
published 25 Feb. 2004)
When a town votes to construct or repair a bridge and has raised its
portion of the cost, it can file a bridge aid petition seeking funding
assistance from the county. The governing statute essentially obligates
the county to pay for one-half the cost of constructing or repairing the
town's bridge. "The county shall pay the cost in excess of $750
up to $1500. The town and county shall each pay one-half of the cost
of construction or repair above $1500. . . ." Wis. Stat. §
81.38(2) (emphasis added).
One issue in this case was whether the terms "cost" and "cost of
construction or repair" as used in the statute have different meanings.
In a decision authored by Judge Hoover, the court of appeals concluded
that the term "cost" is merely shorthand for "cost of construction or
repair" and that the statutory use of the word "cost" is not intended to
somehow limit the meaning of "cost of construction or repair." In this
case the county contended that engineering, permit, and easement
acquisition costs are not subject to the statutory sharing arrangement
because, in its view, these items are not costs of construction or
repair. The appellate court concluded that each of these is a cost
required for construction and thus subject to sharing.
The county also argued that all project costs must be listed with
specificity in the bridge aid application, and that the county is only
required to pay for one-half the amount listed in the petition and has
no obligation to pay additional money if the cost of a project exceeds
the estimate. The appellate court declined to hold that the town must
itemize project costs with perfect precision. It did hold that the
county is obligated to pay its half of the cost of construction or
repair of a bridge even if the final cost exceeds the amount the town
requested in the petition.
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Torts
Medical Malpractice - Monitoring Medication - Statute of
Limitation
Wiegert v.
Goldberg, 2004 WI App 28 (filed 14 Jan. 2004) (ordered
published 25 Feb. 2004)
A patient was prescribed medication. She then experienced various
"behavioral problems," which ultimately resulted in her commitment to a
medical facility until June 18, 1998. A hospital psychiatrist told her
that her bizarre behavior was probably caused by the medication. On June
14, 2001, the patient and her husband sued the prescribing doctor for
medical malpractice. The trial court granted the doctor's motion for
summary judgment and dismissed the case on the ground that the "last
negligent act" occurred on May 12, 1998, the date of the patient's
"final visit" to the doctor.
The court of appeals, in an opinion written by Judge Snyder,
affirmed. The plaintiffs argued that since the doctor prescribed 90
days' worth of a medication that had dangerous side effects, the
doctor's professional responsibility to monitor the patient continued
during that time (¶ 11). The court, however, rebuffed the attempt
to "recast" the question of duty from one of law to one of fact for a
jury. Whether the doctor had a legal duty to monitor the patient on June
18, 1998 presented a question of law (¶ 12).
The court held that the plaintiffs' arguments led to an unreasonable
result that was unsupported by case law. "If physicians have a constant
and ongoing duty to monitor patients through the end of a prescription
drug regimen, how could we determine when a breach has occurred? Must
physicians monitor patients weekly? Must they monitor daily? Will a
phone call or email message suffice, or must there be an office visit?
How will a physician's duty to monitor vary depending upon the drug
prescribed? Some prescriptions provide refills for a six-month or
one-year term. What is a physician's duty to monitor over a long-term
prescription period? We decline the [the plaintiffs'] invitation to
impose such vague and undefined duty on physicians" (¶ 20).
Governmental Immunity - State Highways - County Maintenance
Grinnell Mut. Reinsurance
Co. v. State Farm Mut. Auto. Ins. Co., 2004 WI App 32 (filed 29 Jan.
2004) (ordered published 25 Feb. 2004)
Beard was injured in an accident that occurred on a state-owned
highway, which the county maintained under a contract with the state.
Shortly before the accident, a county road crew had applied an
"anti-icing agent" to the highway. Beard and her insurer alleged that
the county had negligently applied the anti-icing agent and thus had
caused the accident. The circuit court refused to grant the county's
motion for summary judgment, which asserted
that the county's act was a discretionary one for which it was immune
from suit under Wis. Stat. section 893.80(4). The opposing parties
contended that Wis. Stat. section 81.15 provided an exception to
immunity. The court ruled that there was a "jury question whether
the condition of the highway as a
result of the anti-icing agent was an 'insufficiency' within the meaning
of
§ 81.15" (¶ 5).
The court of appeals, in an opinion authored by Judge Vergeront,
reversed. "The parties agree[d] there are no factual disputes on the
question whether Wis. Stat. § 81.15 applies to a county that
maintains the state highway where the accident occurred under a contract
with the state" (¶ 8). The primary question was the county's
liability in the wake of Morris v. Juneau County, 219 Wis. 2d
543 (1998). The court of appeals "acknowledge[d]" that certain passages
in Morris "are ambiguous when read in isolation," but the court
said that it was "satisfied that [the passages] do not constitute an
implicit decision that a county may be liable under Wis. Stat. §
81.15 even if its obligation to maintain a highway derives from a
contract with the state rather than with the municipalities specifically
listed in the statute" (¶ 14).
In deciding for itself whether section 81.15 applies to a county
under contract with the state to maintain a state highway, the court
found its answer in a 1957 case, which held that "a county's agreement
with the state to maintain a state highway did not constitute being
bound 'by law' within the meaning of Wis. Stat. § 81.15"
(¶ 16). Neither case law nor statutory changes since 1957
undermined this determination. Thus, "because we conclude that Dane
County is neither 'by law' nor 'by agreement with any town, city or
village' bound to repair State Highway 12, Dane County has immunity
under Wis. Stat. § 893.80(4) for the acts alleged in the
complaint"
(¶ 23).
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Worker's Compensation
Law Enforcement Officers Responding to Request for Assistance From
Another Jurisdiction - Liability of Requesting Jurisdiction
Milwaukee County v. Juneau
County, 2004 WI App 23 (filed 22 Jan. 2004) (ordered published
25 Feb. 2004)
Law enforcement officers pursued a murder suspect from Sauk County
into Juneau County. Juneau County officers established a command post to
coordinate search efforts by law enforcement personnel from multiple
jurisdictions. At the request of Juneau County officers, the Sauk County
sheriff used his agency to contact Milwaukee County officials and
request the use of a helicopter to assist in the search. A helicopter
staffed by two Milwaukee County deputies was sent to Juneau County and
participated in the search. During its return trip to Milwaukee County,
the helicopter crashed, killing both Milwaukee County deputies
aboard.
Milwaukee County made worker's compensation payments to the families
of the deceased officers and then sought reimbursement from Sauk and
Juneau counties. The circuit court concluded that Juneau County, not
Sauk County, was required to reimburse Milwaukee County. It also held
that Juneau County's worker's compensation insurance policy did not
provide coverage.
In a decision authored by Judge Lundsten, the court of appeals
affirmed in part and reversed in part. The court concluded that the
circuit judge properly dismissed Sauk County from the lawsuit and
properly entered judgment in favor of Milwaukee County against Juneau
County.
Wis. Stat. section 66.0513 sets forth a worker's compensation scheme
for law enforcement personnel who are called upon to perform duties
outside of the territorial limits of the municipality where they are
regularly employed. Applying this statute, the appellate court concluded
that Juneau County was obligated to reimburse Milwaukee County because
it was Juneau County that requested the assistance from Milwaukee
County, even though that request was relayed through the Sauk County
sheriff. The court further concluded that, although the statute speaks
in terms of one agency "commanding" the services of another, the term
"commanded" encompasses services that are ordered as well as those that
are requested.
Finally, on the coverage issue, the court examined whether Juneau
County's liability falls within the scope of its worker's compensation
policy and held that it did.
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