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| Vol. 74, No. 9, September 2001
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Supreme Court Digest
This column summarizes all decisions of the Wisconsin Supreme Court (except
those involving lawyer or judicial discipline, which are digested elsewhere
in the magazine). Profs. Daniel D. Blinka and Thomas J. Hammer invite comments
and questions about the digests. They can be reached at Marquette University
Law School, 1103 W. Wisconsin Ave., Milwaukee, WI 53233, (414) 288-7090.
by Prof. Daniel D. Blinka &
Prof. Thomas J. Hammer
Civil Procedure
Personal Jurisdiction - Long-arm Statute - Minimum Contacts
Kopke v. A. Hartrodt S.R.L., 2001
WI 99 (filed 10 July 2001)
A truck driver was injured when a pallet loaded with paper fell out
of a ship's cargo container. The paper had been shipped to Wisconsin from
Italy. The truck driver sued the paper manufacturer, "Binda," and "L'Arciere,"
an Italian cooperative that supplied Binda with workers to help load the
cargo containers. L'Arciere moved to dismiss based upon lack of personal
jurisdiction, but the circuit court ruled that its workers' acts of stabilizing
the product for shipment were part of a processing of the product itself.
The court of appeals certified the appeal to the supreme court.
The supreme court affirmed the circuit court in a decision written by
Justice Bablitch. The first issue concerned the applicability of Wisconsin's
long-arm statute, Wis. Stat. section 801.05(4) (1997-98). The court held
that because the objective of the long-arm statute is to expand personal
jurisdiction, it was most appropriate to adopt the "broad definition"
of "process" set forth by the Seventh Circuit (¶: 17). This "broad
definition" extends beyond the act of manufacture and includes "handling"
the product and processes that prepare it for market (see ¶: 11).
The court considered and rejected a host of arguments assailing the broad
definition.
Second, the court held that the long-arm statute's application was constitutional.
The plaintiff met his burden of showing that L'Arciere had sufficient
contacts to satisfy the due process requirement of the Fourteenth Amendment.
More specifically, the court applied the "stream of commerce" theory as
propounded by Justice Brennan in Asahi Metal Indus. v. Superior Court
of Cal. (1987). Critical factors here included the contractual relationship
between Binda and L'Arciere, the identification of Appleton, Wis., in
the loading plans as the cargo's destination, and the not insignificant
volume of such business conducted between Binda and the Wisconsin company.
The court then analyzed whether L'Arciere carried its burden of demonstrating
that "fair play" and "substantial justice" negated personal jurisdiction.
Considering the plaintiff's severe injury, Wisconsin's interest in providing
justice, and the minimal burden imposed on L'Arciere to conduct its defense
here, the court declined to excuse this defendant.
Dissenting were Justices Crooks, Wilcox, and Sykes. Justice Crooks was
not persuaded that minimum contacts were present. Justice Sykes disagreed
as well with the majority's construction of the "broad definition" that
governs the long-arm statute.
Commercial
Law
Secured Creditors - UCC Remedies - Issue Preclusion
National Operating L.P. v. Mutual Life
Ins. Co. of New York, 2001 WI 87 (filed 3 July 2001)
As succinctly framed by Justice Prosser, this case "addresses the rights
of a debtor in default under Article 9 (Secured Transactions) of the Uniform
Commercial Code (UCC), both before and after a declaratory judgment obtained
by the secured party to declare its rights in relation to the debtor"
(¶: 1).
In 1978 a partnership, National Operating, borrowed $3 million from
Mutual of New York (MONY) to purchase a shopping plaza. The parties also
entered into various mortgages and security agreements. In 1990 National
Operating sold the property to Bridgeview in exchange for a "wrap-around
note" and a mortgage. The deal did not, however, alter National Operating's
original debt to MONY. In 1993 MONY and National Operating renegotiated
their original agreement in order to avoid default and foreclosure. The
renegotiated loan also involved an assignment of the Bridgeview "wrap
note" and mortgage. Following National Operating's loan default in 1996,
MONY brought a declaratory judgment action that sought confirmation of
the 1993 assignments. MONY later received a default judgment against National
Operating that tracked its complaint.
In 1998 MONY and Bridgeview negotiated an agreement that allowed Bridgeview
to satisfy its debt of $5.5 million by paying only $4 million. Since only
$2.4 million remained unpaid on National Operating's underlying note,
MONY stood to gain an additional $1.6 million. National Operating stood
to realize nothing from this deal, so it tendered full payment on the
underlying note in order to reacquire the Bridgeview wrap note and mortgage.
MONY rejected the tender and argued that National Operating's rights were
terminated by the 1996 declaratory judgment. The circuit court agreed
based upon the doctrine of claim preclusion. The court of appeals affirmed.
The supreme court, in an opinion written by Justice Prosser, reversed.
A declaratory judgment is binding only as to matters that actually were
decided in the action; thus, claim preclusion does not extend to matters
that could have been raised or decided. In this case, the 1996 declaratory
judgment did not specifically waive National Operating's right to redeem
collateral upon payment of the loan, nor did it explicitly "extinguish"
the debtor's rights under Article 9 of the UCC (Wis. Stat. chapter 409).
Summarizing debtors' protections under the UCC, the court explained that
"a secured transaction debtor in default may not waive or vary its right
to surplus equity upon the disposition of the collateral, or its right
to contest the commercial reasonableness of the disposition of its collateral.
It may waive or vary its right to redeem the collateral by tendering fulfillment
of its obligation, but only in writing, after default" (¶: 47).
In short, the 1996 default judgment merely confirmed and enforced the
earlier assignment and eliminated any doubt that Bridgeview should make
payments on the wrap note to MONY, the assignee. MONY also could sell
the property to Bridgeview, provided it did so in a commercially reasonable
manner. MONY could not, however, sell the collateral without notice to
National Operating. Nor could it behave in a commercially unreasonable
manner or keep surplus equity for itself. (¶:¶: 97-98).
Justice Crooks, joined by Justice Wilcox, dissented.
Criminal
Procedure
Search Warrants - No-knock Entry
State v. Henderson, 2001 WI 97
(filed 9 July 2001)
Police executed a search warrant for evidence of drug dealing at defendant's
dwelling without knocking and announcing their presence. The trial court
denied the defendant's motion to suppress and he later pleaded guilty.
The court of appeals certified the case to the supreme court to resolve
several issues relating to no-knock entries in light of recent case law.
The supreme court, in an opinion written by Justice Sykes, affirmed.
Recent case law established the following propositions: "1) the rule of
announcement is a requirement of the Fourth Amendment's reasonableness
clause, not its warrant clause; 2) the validity of a no-knock execution
of a search warrant is subject to after-the-fact judicial review for constitutional
reasonableness, which is determined by reference to the circumstances
as they existed at the time of the entry; and 3) the manner in which a
search warrant is executed is not subject to the requirements of the warrant
clause and therefore does not require prior judicial authorization" (¶:
29).
Applying these principles, the supreme court held "that a court reviewing
the reasonableness of a no-knock execution of a search warrant is not
precluded from considering facts known to the police but not included
in the search warrant application" (¶: 30). Put differently, the cases
"establish quite clearly that as a matter of Fourth Amendment law, a no-knock
entry is subject only to an after-the-fact judicial review for reasonableness;
it does not require prior judicial authorization inasmuch as it is not
a component of the Fourth Amendment's warrant clause" (¶: 35). The
facts of record in this case supported the circuit court's conclusion
that the no-knock entry was reasonable.
Chief Justice Abrahamson, joined by Justice Bradley, dissented because
they would find that the record did not meet the standard required for
no-knock entries.
Biased Jurors - Harmless Error
State v. Lindell, 2001 WI 108
(filed 11 July 2001)
A jury convicted the defendant of assorted felonies, including murder,
burglary, and arson. In post-conviction proceedings, he alleged that reversible
error occurred because the trial judge failed to strike for cause a juror
who was biased, thus forcing the defendant to use one of his peremptory
challenges. The trial court denied the post-conviction challenge and the
court of appeals affirmed.
The supreme court, in an opinion written by Justice Prosser, also affirmed
in an opinion that canvasses Wisconsin's newly developed doctrine on juror
bias and which reverses State
v. Ramos, 211 Wis. 2d 12, 564 N.W.2d 328 (1997), which required
an automatic reversal in any situation in which the defendant used a peremptory
strike to remove a prospective juror who should have been removed for
cause, irrespective of prejudice or harmless error analysis (¶: 5).
First, the supreme court held that the juror in question should have
been stricken for cause based on "objective bias." Among a host of factors,
the prospective juror knew the murder victim, attended his funeral, and
was well aware of a long-standing business relationship between her parents
and the murder victim. The supreme court reiterated its cautionary warning
from other cases that trial judges should excuse jurors when they "reasonably
suspect" a bias exists.
Second, and most important, the court reversed the Ramos remedy, described
above. The majority decision carefully reviewed Ramos, which had "neglected
to fully describe and analyze long-standing Wisconsin law on peremptory
challenges and harmless error" (¶: 53). These earlier cases are explicated
in the opinion. Ramos also ran counter to the subsequent decision by the
Supreme Court in United States v. Martinez-Salazar, 528 U.S. 304
(2000). Finally, the majority considered the "systemic problems" induced
by the Ramos automatic reversal remedy. "The reality of Ramos is that
whenever two members of the court of appeals or four members of the supreme
court make a different call on bias than the circuit court, the automatic
result is a new trial" (¶: 103). Henceforth, the failure to excuse
a juror for bias will be analyzed according to whether the error affected
the defendant's substantial rights, according to Wis. Stat. section 805.18(2),
unless the defendant claims that the error actually deprived him of an
impartial jury in violation of the Sixth Amendment (¶: 111).
The majority stressed that its opinion changes "nothing" in the fundamental
law that guarantees an impartial jury. "Our decision requires a defendant
to make a conscious choice between exercising a peremptory challenge or
waiting for a Sixth Amendment challenge after conviction." The defense
strategy, in turn, leaves the state with three options: "1) It can join
the defendant in urging the court to remove a juror for cause; 2) it can
exercise one of its own limited peremptory strikes to remove a juror who
should have been struck for cause; or 3) it can do nothing and risk a
new trial if an appellate court finds that a biased juror sat on the panel"
(¶: 118). (The majority opinion also found that defendant had not
been denied effective assistance of counsel based on how trial counsel
impeached a state's witness.)
Justice Bradley concurred but argued that the majority opinion "erases
the deference that a reviewing court owes to a circuit court's objective
bias determination" (¶: 133). She also expressed concern that the
overruling of Ramos undercut the principle of stare decisis.
Dissenting, Chief Justice Abrahamson, joined by Justice Bablitch, argued
that the majority opinion traduced stare decisis, violated principles
of statutory construction, and leaves defendants bereft of a satisfactory
remedy.
Probation Conditions That Infringe on Constitutional Rights - Challenge
to State's Withdrawal from Plea Agreement
State v. Oakley, 2001 WI 103 (filed
10 July 2001)
The defendant has fathered nine children with four different women.
He was convicted of multiple counts of intentionally refusing to support
his children. Part of the disposition in the case was a term of probation
that imposed the following condition: while on probation, the defendant
cannot have any more children unless he demonstrates that he has the ability
to support them and that he is supporting the children he already has.
A critical issue before the supreme court was the lawfulness of this probation
condition. The defendant argued that the condition violates his constitutional
right to procreate.
In a majority decision authored by Justice Wilcox, the court concluded
that "in light of [the defendant's] ongoing victimization of his nine
children and extraordinarily troubling record manifesting his disregard
for the law, this anomalous condition - imposed on a convicted felon facing
the far more restrictive and punitive sanction of prison - is not overly
broad and is reasonably related to [the defendant's] rehabilitation. Simply
put, because [the defendant] was convicted of intentionally refusing to
pay child support - a felony in Wisconsin - and could have been imprisoned
for six years, which would have eliminated his right to procreate altogether
during those six years, this probation condition, which infringes on his
right to procreate during his term of probation, is not invalid under
these facts" (¶: 1).
The court concluded that the probation condition does not eliminate
the defendant's ability to exercise his constitutional right to procreate.
He can satisfy the condition of probation by making efforts to support
his children as required by law. Further, the probation condition will
expire at the end of the term of probation. The condition is narrowly
tailored to serve the state's compelling interest in having parents support
their children and is reasonably related to the goal of rehabilitation.
There also was an issue in this case about whether the defendant waived
his claim of error that the state was impermissibly allowed to withdraw
from an earlier plea agreement when he entered into a subsequent plea
agreement with the state. The change occurred when the state moved to
withdraw from the original plea agreement at sentencing. As part of the
second plea agreement, pursuant to which the defendant entered no contest
pleas to the multiple counts described above, he agreed that he would
not complain on appeal about the state's withdrawal from the first plea
agreement.
The supreme court concluded that it is well established that a plea
of no contest, knowingly and understandingly made, constitutes a waiver
of nonjurisdictional defects and defenses, including claimed violations
of constitutional rights. "Therefore, when a defendant pleads no contest,
he or she waives all defenses based on a denial of due process because
the prosecutor breached an earlier plea agreement" (¶: 23). In this
case, the defendant pled no contest based on the second plea agreement.
By doing so, he waived any claim of error that may have occurred when
the circuit court permitted the state to withdraw from the first plea
agreement.
Justice Bablitch filed a concurring opinion that was joined by Justices
Wilcox and Crooks. Justice Crooks filed a concurring opinion that was
joined by Justices Bablitch and Wilcox. Justice Bradley filed a dissent
that was joined by Chief Justice Abrahamson and Justice Sykes. Justice
Sykes filed a dissent that was joined by Chief Justice Abrahamson and
Justice Bradley.
Effectiveness of Counsel - Failure to Object to Six-person Misdemeanor
Juries
State v. Franklin and State v. Huck,
2001 WI 104 (filed 11 July 2001)
The defendants were convicted in separate trials on misdemeanor counts
by six-person juries at a time when the statutes allowed for a jury of
six in misdemeanor cases. Both defendants argued that they received ineffective
assistance of counsel because their trial attorneys failed to object to
the six-person juries, even though around the time of their trials the
court of appeals certified the case of State v. Hansford to the supreme
court and the supreme court accepted the certification. The certified
issue in Hansford was whether Wis. Stat. section 756.096(3)(am) (1995-96),
the statute authorizing six-person juries in misdemeanor cases, was constitutional.
Ultimately, the supreme court held the statute unconstitutional. See State
v. Hansford, 219 Wis. 226, 580 N.W.2d 171 (1998).
In a challenge to the effectiveness of counsel, a defendant must show
that his or her counsel's representation was deficient and that this deficient
performance resulted in prejudice to the defense. See Strickland v. Washington,
466 U.S. 668 (1984). With respect to the prejudice prong of the Strickland
analysis, a defendant is required to show that counsel's errors were so
serious as to deprive the defendant of a fair trial, a trial whose result
is reliable. The defendant must show that there is a reasonable probability
that, but for counsel's unprofessional errors, the result of the proceeding
would have been different. A reasonable probability is a probability sufficient
to undermine confidence in the outcome. The defendant's burden is to show
that counsel's errors actually had an adverse effect on the defense. See
¶: 14.
Applying this test, a majority of the supreme court, in a decision authored
by Justice Bablitch, concluded that the defendants failed to prove prejudice.
In particular, they did not show that, but for their attorney's failure
to object, there was a reasonable probability for a different result in
their cases. Said the court, "a six-person jury in and of itself is an
insufficient basis upon which to conclude that the defendants were deprived
of a fair trial whose result is reliable" (¶: 15). "We do not find
any reason why six-person juries would undermine the confidence of an
otherwise fair and error-free trial. Thus, beyond mere speculation, we
cannot conclude that the six-person juries had an actual adverse effect
on the defense in the defendants' cases, and therefore, the defendants
are not entitled to a reversal of their convictions" (¶: 16). The
court rejected the argument that it ought to find automatic prejudice
in six-person jury cases.
Chief Justice Abrahamson filed a dissenting opinion that was joined
by Justices Bradley and Sykes.
Fourth Amendment - Exclusionary Rule - "Good Faith" Exception Recognized
State v. Eason, 2001 WI 98 (filed
9 July 2001)
This case involved a no-knock search warrant that authorized police
officers to enter an apartment without first knocking on the door and
announcing their presence. The defendant moved to exclude evidence obtained
during the execution of the warrant, arguing that the part of the search
warrant that authorized a no-knock entry was not supported by any specific
information that anyone in the premises possessed weapons or would destroy
evidence if the officers knocked and announced their presence. The circuit
court agreed, granting the motion to suppress. The court of appeals affirmed.
In a majority decision authored by Justice Crooks, the supreme court
reversed. It agreed that the information in the affidavit submitted in
support of the search warrant was not sufficiently particularized to establish
reasonable suspicion that knocking and announcing would have been dangerous
or would have inhibited the effective investigation of the crime by allowing,
for example, for the destruction of evidence. However, the court concluded
that the evidence should not be suppressed even though the no-knock portion
of the warrant was invalid. "Although the exclusionary rule typically
operates to exclude evidence obtained from unreasonable searches and seizures
- and a search based upon an invalid search warrant is per se unreasonable
- there are exceptions. Here, because the police officers acted in objectively
reasonable reliance upon the search warrant, which had been issued by
a detached and neutral magistrate, the laudable purpose of the exclusionary
rule - deterring police from making illegal searches and seizures - would
not be furthered by applying the exclusionary rule. Accordingly, we recognize
a good faith exception to the exclusionary rule" (¶: 2).
Under similar circumstances, the U.S. Supreme Court has recognized that
applying the exclusionary rule would not effectuate its purpose. Thus,
in United States v. Leon, 468 U.S. 897 (1984), it formulated a good faith
exception to the exclusionary rule where police officers act in objectively
reasonable reliance on a facially valid search warrant issued by a neutral
and detached magistrate that later was held to be invalid.
In this case, the Wisconsin Supreme Court held that "the good faith
exception applies where the state has shown, objectively, that the police
officers reasonably relied upon a warrant issued by an independent magistrate.
The burden is upon the state also to show that the process used in obtaining
the search warrant included a significant investigation and a review by
either a police officer trained and knowledgeable in the requirements
of probable cause and reasonable suspicion, or a knowledgeable government
attorney [see next paragraph]. We hold that this process is required by
Article I, Section 11 of the Wisconsin Constitution, in addition to those
protections afforded by the good faith exception as recognized by the
United States Supreme Court in United States v. Leon ...." (¶: 3).
In various footnotes the court fleshed out its holding. With regard
to the "government attorney" referred to in the preceding paragraph, the
court stated that this term does not refer to the magistrate or court
commissioner or judge who issues the search warrant. The court also indicated
that in the future the better practice will be that search warrant applications
should reflect not only substantial investigation, but a review by a knowledgeable
government attorney or police officer trained to be knowledgeable in such
matters. Finally, the court articulated its expectation that there will
be testimony offered at suppression hearings on questions concerning significant
investigation and review by a knowledgeable police officer or government
attorney.
Chief Justice Abrahamson filed a dissenting opinion that was joined
by Justice Bradley. Justice Prosser filed a dissent that was joined by
Justice Bradley.
Probation Conditions - Requirement That Probationer Notify Immediate
Neighbors Regarding His Sex Offender Status
State ex rel. Kaminski v. Schwarz,
2001 WI 94 (filed 9 July 2001)
The defendant was convicted of second-degree sexual assault of a child
and placed on probation. Both the court and the Department of Corrections
(DOC) placed numerous conditions on the probation. One of the DOC conditions
required the defendant to inform his immediate neighbors of his status
as a convicted sex offender.
The issue before the supreme court was whether this probation condition
was valid. In a majority decision authored by Justice Prosser, the supreme
court concluded that Wisconsin's sex offender registration laws do not
occupy the entire field in regulating the dissemination of sex offender
registration information or prohibit a probation agent from imposing a
rule requiring a convicted sex offender to notify his or her immediate
neighbors of his or her sex offender status.
The sex offender registration laws (see Wis. Stat. §§ 301.45, 301.46)
reflect a legislative intent to protect the public and assist law enforcement,
and are related to community protection. "Mindful of these legislative
intentions, we think it unlikely that the Legislature intended, by creating
secs. 301.45 and 301.46, to prohibit probation agents from requiring actively-supervised
convicted sex offenders to disclose limited information to specified persons
or narrow categories of persons such as employers, landlords, neighbors,
and new social acquaintances, whom offenders are likely to encounter,
perhaps on a daily basis" (¶: 41).
The majority also concluded that the rule requiring neighbor notification
was reasonably tailored to further the dual goals of probation, which
are to protect the public from criminal conduct and to help the probationer
become a useful member of society.
Chief Justice Abrahamson filed a dissenting opinion that was joined
by Justices Bablitch and Bradley.
Employment
Discrimination
Sexual Harassment and Gender Discrimination - Front Pay - Back Pay
- Damage Caps
Salveson v. Douglas County, 2001
WI 100 (filed 10 July 2001)
The plaintiff began work as a part-time employee with Douglas County
Ambulance Service in 1981. Over the next several years she enhanced her
credentials and in 1986 was given a full-time position. "During her employment
with the county ambulance service, [the plaintiff] was subjected to crude
sexual harassment and discrimination by her supervisor, Richard Collyard.
The long litany of epithets, insults, abuses, actions, and discrimination
which she endured eventually led to serious psychological problems affecting
[her] future employment" (¶: 7). Near the end of her employment, the
plaintiff suffered some physical injuries. In November 1995, she was granted
a disability pension due to these injuries and her employment with Douglas
County was terminated.
Two months later Gold Cross Ambulance took over the operations of the
Douglas County Ambulance Service, and Collyard began to work for Gold
Cross. His presence with the company made it impossible for the plaintiff
to seek employment with the new operation, even though the circuit court
found that she would have been hired by Gold Cross either as a paramedic
instructor or in some other limited capacity.
In 1996 the plaintiff filed suit under Title VII of the Civil Rights
Act of 1964, alleging that she had been subjected to illegal sexual harassment
and gender discrimination during virtually the entire time of her service
with the county. In 1998 a jury awarded $356,220 in damages. The circuit
court denied the county's post-trial motion to reduce the award to $200,000
pursuant to 42 U.S.C. section 1981a(b)(3), a provision that limits awards
of compensatory and punitive damages based upon the number of persons
employed by the employer. As to "equitable remedies" that were left to
the court to determine separately, the judge awarded the plaintiff back
pay, front pay, attorney fees, interest, and costs which brought the total
judgment to $555,779. The court of appeals affirmed.
In a unanimous decision authored by Justice Prosser, the supreme court
affirmed. It first considered whether the circuit judge properly exercised
his discretion in awarding back pay. Whether to award back pay in Title
VII cases is a discretionary decision for the circuit court. Once a court
finds unlawful discrimination, it is to presume that back pay should be
awarded. The appropriate amount of back pay is determined by ascertaining
the difference between actual wages earned and what would have been earned
if not for the discrimination.
The court concluded that back pay for the period between termination
by the county and the date of the verdict was equitable and appropriate
in this case because evidence in the record indicated that the plaintiff
would likely have been hired by Gold Cross had she applied. Evidence further
supported the circuit court's finding that the plaintiff was unable to
work for Gold Cross because of the psychological injury she suffered as
a result of sexual harassment and discrimination and because Collyard
was employed by Gold Cross.
Front pay is used to compensate an employee for the difference in earnings
between what the employee would have received in his or her former employment,
and what he or she can expect to receive in his or her present or future
employment. The supreme court concluded that the circuit judge properly
exercised his discretion in awarding the plaintiff one year of front pay.
The county did not establish that the plaintiff could have found a position
comparable to the one she held as a paramedic for Douglas County. Nothing
in the record indicated that the plaintiff could have mitigated her damages
by obtaining employment comparable to her position as a paramedic, other
than by working for Gold Cross (which she could not reasonably be expected
to have done).
The court next considered whether the amount of back pay and front pay
awarded to the plaintiff should have been offset by disability payments
she received. Under the federal collateral source rule, it is within the
circuit court's discretion to determine whether benefits received from
a source collateral to employment should offset an award of back pay or
front pay. The rule operates not to prevent the plaintiff from being overcompensated,
but rather to prevent the tortfeasor from paying twice. The court concluded
that the plaintiff's awards of back pay and front pay should not be offset
by benefits she received for her disability because she and other paramedics
paid for those benefits by foregoing pay increases and other benefits
in conjunction with the paramedic union's collective bargaining. "Douglas
County should not benefit simply because [the plaintiff] also received
collateral disability benefits. The county will not pay twice" (¶:
61).
The next issue was whether the circuit court erred in determining that
the award of front pay is not subject to the damages cap imposed by 42
U.S.C. section 1981a(b)(3), which limits compensatory and punitive damages.
The supreme court concluded that the circuit court correctly determined
that front pay does not fall under compensatory or punitive damages and
therefore is not subject to the damages cap.
Finally, the court considered the question of whether the size of an
employer for purposes of the statutory damages cap should be measured
at the time of the discrimination or at the time the award is made. [Note:
The cap varies according to the size of the employer]. The supreme court
concluded that the circuit judge properly measured the number of employees
at the time the discrimination occurred.
Family Law
Termination of Parental Rights - Abandonment - Default Judgment
Evelyn C.R. v. Tykila S., 2001
WI 110 (filed 12 July 2001)
In this termination of parental rights case, the mother violated a court
order to appear in person at the fact-finding hearing intended to determine
whether she had abandoned her son. The circuit court entered a default
judgment against the mother on the issue of abandonment without first
taking any evidence on the matter. At the subsequent dispositional hearing,
the circuit court accepted testimony supporting the termination of the
mother's parental rights and, based on this testimony, reaffirmed the
default judgment against the mother and entered an order terminating her
parental rights to her son. The court of appeals affirmed. In a majority
decision authored by Justice Wilcox, the supreme court affirmed the court
of appeals.
The supreme court first considered whether the circuit court erred in
entering a default judgment on the issue of abandonment without first
taking evidence sufficient to support a finding of abandonment by clear
and convincing evidence. The supreme court concluded that by entering
a default judgment against the mother on the issue of abandonment without
first taking evidence sufficient to support such a finding, the circuit
court failed to comply with the constitutional and statutory requirements
for termination of parental rights. Accordingly, the circuit court erroneously
exercised its discretion in entering a default judgment.
Nevertheless, upon review of the entire record in this case, the supreme
court held that the circuit court remedied the error described above at
the dispositional hearing when, prior to reaffirming the default judgment
and entering the order terminating parental rights, the court took sufficient
evidence to support by clear and convincing evidence a finding that the
mother had abandoned her son. As such, the error was harmless.
Chief Justice Abrahamson filed a concurring opinion. Justice Crooks
filed a concurrence that was joined by Justice Wilcox.
Incompetents
Protective Placements - Continuation - Hearings - Factual Findings
County of Dunn v. Goldie H., 2001
WI 102 (filed 10 July 2001)
The supreme court, in an opinion written by Justice Prosser, affirmed
lower court orders that continued an elderly woman's, Goldie H.'s, protective
placement even though she was not given even a summary hearing and the
circuit court had made no factual findings. The issues in this case were:
"1) whether Goldie H. had a right to a hearing before her protective placement
was continued; and 2) whether the circuit court had a duty to make findings
of fact to supports its continuation order" (¶: 3).
The supreme court held that "a person is entitled to a hearing on the
record before his or her protective placement is continued, and that the
circuit court must make factual findings to support the need for continuation,
as required by Wis. Stat. § 55.06(1) (1999-2000)" (¶: 6). Such hearings,
however brief, promote accountability and permit more informed fact finding.
The court explained that such hearings need not be extensive nor need
they take on an "evidentiary" character (¶: 35). Although the court
in this case failed to conduct even a summary hearing, its determination
was "undoubtedly correct" and a remand for a second hearing was unnecessary.
Insurance
Notice of Accident - Timeliness - Prejudice - Presumption
Neff v. Pierzina, 2001 WI 95 (filed
9 July 2001)
Plaintiffs were ascending an elevator in a chicken coop when the elevator's
cable snapped and plunged them from the second to the first floor. The
accident occurred in July 1996 and plaintiffs commenced this action one
year later in July 1997. American Family had issued a renter's policy
to the wife of one of the defendants, but the insurer did not receive
notice that its insured was involved until a second amended complaint
was filed in June 1998, nearly two years after the fall. The circuit court
held a coverage trial which found that the insured had breached his duty
to provide American Family with timely notice and had prejudiced the insurer
by his omission. The court of appeals affirmed.
The supreme court, in an opinion written by Justice Prosser, affirmed
in an opinion that clarified the standard of review governing the timeliness
and prejudice issues. The timeliness issue raises a question of fact that
is subject to the clearly erroneous standard of review. The insurer bears
the burden of establishing that its insured failed to provide notice within
the notice requirements of the policy, although the insured may claim
that he did not have reasonable grounds to believe that he "participated"
in an accident or that notice was not reasonably possible within the prescribed
time. Prejudice to the insurer also raises a question of fact that is
subject to a clearly erroneous standard (¶: 47).
Applying these standards to the record before it, the court found no
clear error in the trial court's determination that the notice was untimely.
The same held for prejudice. Moreover, the insured's "failure to provide
timely notice within one year of the accident created a presumption that
American Family was prejudiced by the lack of notice" (¶: 58). Although
another insurance company had conducted an "investigation" shortly after
the elevator accident, the record raised substantial questions about its
thoroughness and its germaneness to American Family's very different coverage
concerns.
UIM Coverage - "Illusory" Coverage - Frivolous Claim
Brunson v. Ward, 2001 WI 89 (filed
6 July 2001)
The court of appeals certified the following question to the supreme
court: "Does the remedy in Meyer v. Classified Ins. Co., 192 Wis.
2d 463, 531 N.W.2d 416 (Ct. App. 1995), prohibiting illusory insurance
coverage, still hold where an insurer fails to update its underinsured
motorist (UIM) insurance coverage pursuant to Wis. Stat. § 632.32(4m)
(1995-96), but has included a provision stating that the policy shall
conform to the Wisconsin Statutes?" The supreme court, in an opinion authored
by Justice Sykes, answered no to this question. The alleged tortfeasor
had insurance coverage of $100,000. By operation of Wis. Stat. section
632.32(4m)(d), the law required UIM coverage of at least $50,000 even
though the plaintiff's policy carried facial UIM limits of $25,000. Clearly,
the $25,000 would have been illusory except that the law "read in" the
$50,000 minimum mandatory limit, which was not an "illusory" amount (¶:
24). In any event, the required $50,000 was still less than the tortfeasor's
$100,000; thus, the plaintiff was not underinsured.
The supreme court reversed the circuit court's determination that plaintiff's
motion to reconsider its ruling was frivolous. Noting the "delicacy" of
such determinations, the court pointed to the unsettled law on this point
and its own decision to accept this case on certification. Although the
plaintiff lost the appeal, his arguments were reasonable.
Justice Bradley dissented, joined by Chief Justice Abrahamson. The dissenters
contend that the majority ignored the plain meaning of Wis. Stat. section
631.15(3m), which is designed to protect the insured, not to shield noncomplying
insurers whose policies violate state law.
Bad Faith - Implied Covenant and UIM - Time of Breach
Danner v. Auto-Owners Ins., 2001
WI 90 (filed 6 July 2001)
Following an accident in 1990 with an underinsured motorist and her
increasing frustration with her own insurer, the plaintiff brought this
bad faith action in 1995. A jury found that the insurer acted in bad faith
by denying her claim. It awarded her $125,000 in attorney fees for the
bad faith claim but no damages (including attorney fees) for the underlying
claim. At post-verdict proceedings, the trial judge increased the bad
faith attorney fee award to $142,000 and also changed the verdict to reflect
an award of $81,000 in attorney fees on the underlying claim. The court
of appeals affirmed.
The supreme court, in an opinion written by Justice Crooks, affirmed.
(Justice Bradley did not participate.) The first issue before the court
was whether an insurer who provides underinsured motorist (UIM) coverage
had a duty to act in good faith at all times with its insured. The insurer
argued that UIM claims are "fundamentally different" from other first-party
bad faith claims and that no bad faith action arises until liability is
first established by verdict or arbitration. The court rejected the argument.
Wisconsin case law firmly establishes that every insurance contract carries
an "implied covenant" of good faith and fair dealing, the breach of which
are torts apart from any contract damages. The "special duty of good faith
and fair dealing runs throughout the contract relationship between the
insurer and the insured" (¶: 49). The court held that "every insurance
contract from its inception has an implied covenant of good faith and
fair dealing between the insured and the insurer" (¶: 54), a principle
that applies to the "investigation, evaluation and processing" of UIM
claims (¶: 57).
The court also affirmed the sufficiency of the verdict finding bad faith
and upheld the circuit court judge's changes to the verdict after trial.
These issues are record-intensive and raise no novel issues of law.
UIM - Settlements - Liability Limits - "Exhaustion"
Danbeck v. American Family Mut. Ins. Co.,
2001 WI 91 (filed 6 July 2001)
The plaintiff, who had underinsured motorist (UIM) coverage of $100,000,
was injured by a driver who carried only $50,000 in liability coverage.
While settling with the other driver for $48,000, the plaintiff advised
his insurer, American Family, of his UIM claim. American Family refused
to pay the UIM claim because the plaintiff had settled for less than the
other driver's liability limits, and thus had not "exhausted" the limit
within the meaning of the UIM coverage. The circuit court ruled in the
plaintiff's favor and concluded that UIM coverage must be reduced by the
difference between the settlement amount and the tortfeasor's liability
limits. The court of appeals reversed.
The supreme court, in an opinion written by Justice Sykes, affirmed
the court of appeals. The "narrow issue" before the court was "whether
a UIM insurer's obligation to pay UIM benefits to its insured is triggered
when the insured settles with the tortfeasor's liability insurer for less
than full liability limits and then credits the UIM carrier for the difference"
(¶: 11). The policy language governing the "exhaustion" of the underlying
liability limits was clear and unambiguous. Although the "practical effect"
of the "settlement plus credit" approach was identical to payment of full
policy limits, the practice nonetheless violated the policy language.
Its merits from a public policy position did not permit the court to ignore
the "clear language of the contract" (¶: 22).
Justice Bradley, joined by Chief Justice Abrahamson, dissented on the
ground that case law had long established the ambiguity of the UIM exhaustion
language at issue in this case.
UIM Coverage - "Illusory" Coverage
Taylor v. Greatway Ins. Co., 2001
WI 93 (filed 6 July 2001)
In 1993 the plaintiff's husband was killed in a car accident. The other
driver carried liability limits of $50,000. Plaintiff settled with the
liability insurer for the limits and filed underinsured motorist (UIM)
claims against American Family based on her two automobile insurance policies,
each of which provided $50,000 UIM coverage. American Family denied coverage.
The circuit court, however, agreed with plaintiff's argument that the
net effect of the policy's reducing clause and statutes that require at
least $25,000 in liability coverage rendered the $50,000 UIM coverage
illusory. The court of appeals reversed. It found that the other driver's
vehicle was not "underinsured" as defined by the policy; it did not reach
the "illusory coverage" issue.
The supreme court, in an opinion written by Justice Crooks, affirmed.
The court held that this appeal was governed by Smith v. Atlantic Mut.
Ins. Co., 155 Wis. 2d 808, 456 N.W.2d 597 (1990). As in Smith, plaintiff's
policy defined an underinsured vehicle as one whose liability limits are
"less than" UIM limits. Thus, her policy clearly and unambiguously excluded
UIM coverage where the tortfeasor's liability coverage is equal to the
UIM limits.
Based on this reasoning, the supreme court declined to address whether
American Family's reducing clause created illusory coverage. The majority
went on, however, to explain why the cases on illusory coverage cited
by plaintiff did not govern the result of this case. It also rejected
an argument advanced in WATL's amicus brief that the UIM policy language
combined with the reducing clause contravened Dowhower v. West Bend Mut.
Ins. Co., 2001 WI 73.
Justice Bradley, joined by Chief Justice Abrahamson and Justice Bablitch,
dissented. They argue that the policy's language is inconsistent with
the stated purpose of UIM coverage and defeats an insured's reasonable
expectations. The dissent observes that there are two competing definitions
of UIM coverage: the "limits of coverage approach," which the dissenters
find flawed, and one that compares the "at-fault driver's liability limits
with the damages sustained by the insured (limits of damages)," a definition
that does accord with insureds' reasonable expectations (¶: 34).
Coverage Disputes - Attorney Fees
Reid v. Benz, 2001 WI 106 (filed
11 July 2001)
Reid sued Benz for injuries incurred when he fell on her driveway. Benz
tendered her defense to American Family, which had issued a homeowner's
policy to her. American Family assigned counsel to Benz, reserved its
rights, and later moved to bifurcate coverage and liability issues. American
Family alleged that the "business pursuits" exclusion eliminated coverage
for Reid's injuries. In the coverage proceeding, the judge ruled that
an exception to the business pursuits exclusion applied; thus, American
Family was obligated to defend and indemnify Benz. The trial court also
awarded Benz attorney fees with respect to the coverage litigation. The
court of appeals certified the issue of attorney fees to the supreme court.
The supreme court, in an opinion written by Justice Crooks, reversed
the award of attorney fees in an opinion that clarifies the reach and
rationale of Elliott v. Donahue, 169 Wis. 2d 310, 485 N.W.2d 403 (1992).
The award of attorney fees in Elliott was predicated upon the insurer's
failure to follow the coverage dispute procedures set forth in Mowry v.
Badger State Mut. Cas. Co., 129 Wis. 2d 496, 385 N.W.2d 171 (1986) (insurers
should bifurcate coverage and liability issues, staying the latter until
the former is resolved). The award of attorney fees "should not be the
usual result" (¶: 27), and the court refused to apply Elliott to the
situation in this case. Benz presented no authority to support her argument
that incurring attorney fees to establish coverage denies her benefits
under the policy (¶: 33). The court also rebuffed Benz's contention,
supported by WATL as amicus, that insurance companies should pay the insured's
attorney fees whenever the insurer fails to prevail. Nonetheless, insurers
may escape attorney fees only where coverage is "fairly debatable" (¶:
37).
Justice Bablitch, joined by Chief Justice Abrahamson, dissented on grounds
that the majority opinion is "bad law," "anti-consumer," and permits insurers
to "win" under any scenario.
Renter's Policy - Business Pursuits Exclusion - Exception
Vandenberg v. Continental Ins. Co.,
2001 WI 85 (filed 3 July 2001)
Riehl provided paid day care services for three children, including
Justin V., while also caring for her own three children. The day care
services took place in her rented home, which was covered by renter's
insurance. While Riehl was caring for the other children, her own son,
age five, accidentally smothered and killed eight-month-old Justin V.
Justin's mother (the plaintiff) sued Riehl, alleging she had negligently
supervised both Justin and Riehl's own son. The plaintiff also named Riehl's
renter's insurance carrier as a defendant. The insurer contended that
the incident was excluded by the policy's business pursuits exclusion.
The plaintiff argued that her claim against Riehl for the negligent treatment
of Riehl's own son fell within the "usual to nonbusiness pursuits" exception
to the business pursuits exclusion. The circuit court ruled in the insurer's
favor.
On certification from the court of appeals, the supreme court, in an
opinion written by Chief Justice Abrahamson, reversed the circuit court.
Under the policy, the home day care business clearly constituted a "business
pursuit" that fell within the exclusion. The issue, however, was whether
Riehl's care for her own son while operating the day care business was
an activity that is "usual to nonbusiness pursuits" and thus within an
exception to the exclusion (¶: 16). In resolving the issue, the supreme
court analyzed three somewhat conflicting court of appeals decisions,
that also involved different policy language, and five different approaches
taken by other jurisdictions. The supreme court elected to follow precedent
that construed similar policy language as ambiguous and applied a rule
of narrow construction "in which the ambiguity exists as an exception
to liability." Put differently, "[r]easonable persons in the position
of the plaintiff in the present case could reasonably believe that they
had coverage under this exception for the supervision and control of their
own child" (¶: 42). The court also rejected arguments that the exception,
so construed, would swallow the rule.
Finally, the court addressed whether the contract should be reformed
to provide coverage on the claim that Riehl had negligently supervised
Justin V. On this issue the circuit court had also granted summary judgment
in the insurer's favor. The supreme court reversed on this point as well,
finding that an issue of fact was raised concerning a "mutual mistake"
based on the "Riehls' belief that the policy provided coverage and the
mistake or neglect of the agent in failing to provide the intended coverage"
(¶: 57).
Justice Wilcox, joined by Justices Prosser and Crooks, dissented on
points concerning the policy's ambiguity and the problem of unlicensed
day care facilities.
Municipal
Law
Property Taxes - Limited Judicial Review in Populous Counties - Wis.
Stat. Section 74.37(6) Held Unconstitutional
Nankin v. Village of Shorewood,
2001 WI 92 (filed 6 July 2001)
A property owner who disagrees with the assessment of his or her property
may file a formal objection with the local board of review. After the
board renders its decision, the statutes provide for multiple avenues
of appeal as follows:
1) An owner can appeal from the board's determination by an action for
certiorari to the circuit court under Wis. Stat. section 70.47(13).
2) Pursuant to section 70.85, a property owner may submit a written
complaint with the Department of Revenue requesting that the department
revalue the property. The department's decision may then be appealed through
an action for certiorari in the county in which the property is located.
3) The property owner may proceed under section 74.37 with a claim for
an excessive assessment against the taxing entity after first paying the
tax on the assessment. If this claim is denied, the aggrieved property
owner may then commence an action in the circuit court using ordinary
civil procedure and practice to recover the amount of the claim not allowed.
Except in Milwaukee County, property owners may use any of these three
mechanisms to appeal the decision of the board of review. However, in
Milwaukee County, section 74.37(6) limits property owners to the first
two mechanisms (involving review by certiorari) but prohibits the full
trial "de novo" in the circuit court under the third option.
A property owner in a village located within Milwaukee County challenged
this statutory scheme, contending that section 74.37(6) is unconstitutional
because it violates the constitutional guarantee of equal protection of
the law, that is, it treats owners of property located in Milwaukee County
differently than owners of property located in other counties without
a rational basis.
In a majority decision authored by Justice Bablitch, the supreme court
agreed. The court concluded that, in enacting section 74.37(6), the Legislature
created a distinct classification of citizens, that is, owners of property
located in counties with a population of 500,000 or more. Secondly, this
legislation treats the class of people in Milwaukee County significantly
different than all others who are similarly situated inasmuch as a property
owner who is able to pursue a circuit court "de novo" action is placed
at a significant advantage when compared to those who are limited to certiorari
review. Finally, the court concluded that the property owner met his burden
of proving beyond a reasonable doubt that there is no rational basis for
the classification under section 74.37(6): the Legislature did not articulate
any rationale for the classification and the court was unable to construct
a rationale for the classification.
The court also concluded that section 74.37(6) is severable from the
remainder of the statute.
Justice Crooks filed a dissenting opinion that was joined by Justice
Wilcox. Justice Sykes did not participate in this case.
Prisoner
Litigation
Prisoner Litigation Reform Act - Exhaustion of Administrative Remedies
Required
State ex rel. Hensley v. Endicott,
2001 WI 105 (filed 11 July 2001)
The plaintiff, who was incarcerated in a state correctional institution,
filed a complaint for declaratory judgment against the Department of Corrections
(DOC) challenging the validity of an administrative regulation prohibiting
prisoners from having pornographic materials, and another prohibiting
prisoners from having cassette tapes and tape players. His challenges
were premised on First Amendment and Equal Protection grounds.
DOC responded with a motion to dismiss because the plaintiff failed
to plead exhaustion of administrative remedies pursuant to the Prisoner
Litigation Reform Act (PLRA). Although the circuit court found that the
plaintiff stated a claim, it concluded that he was required by the PLRA
to exhaust his administrative remedies before filing suit and, because
he did not, it dismissed his complaint.
The court of appeals reversed. It concluded that the constitutional
questions raised by the plaintiff are unsuited to resolution by the prison's
inmate complaint review committees and appeal personnel (the administrative
remedies available to the prisoner). The appellate court also found that
Wis. Stat. section 806.04, which sets forth the general rules governing
declaratory relief, and section 227.40(1), which deals with contesting
the validity of administrative rules through declaratory judgment proceedings,
trumped the PLRA's exhaustion requirement.
In a majority decision authored by Justice Wilcox, the supreme court
concluded that the PLRA is clear on its face in requiring prisoners to
exhaust their administrative remedies prior to bringing an action in circuit
court. Accordingly, there is no common law futility exception to the PLRA,
as urged by the plaintiff. The court also concluded that because the PLRA
is more specific and was passed later in time than section 227.40, it
should have been applied to require the prisoner to exhaust his administrative
remedies.
[Note: Before reaching these conclusions, the court determined that
it would address the issues described above even though the underlying
dispute in this case may have been rendered moot by the implementation
of an emergency administrative rule which temporarily supplanted the particular
prison regulations challenged by the plaintiff.]
Justice Bradley filed a dissenting opinion that was joined by Chief
Justice Abrahamson.
Property
Depositing Fill on Lands Sometimes Submerged by Navigable Water -
Wis. Stat. Section 30.12(1)(a)
State v. Kelley, 2001 WI 84 (filed
3 July 2001)
The Town of Little Rice completed construction of a town dam on the
Little Rice River in 1961, creating Lake Killarney. The defendants own
property bordering the lake. The western edge of their property includes
a parcel of land which, during certain periods of high water, is inaccessible
because the old logging roads leading to it are submerged. In 1988 the
defendants deposited fill on a section of their land that was at times
submerged. No Department of Natural Resources (DNR) permit was applied
for or issued to deposit the fill.
This action arose as a civil proceeding in which the state sought an
injunction ordering the defendants to remove the fill and pay a forfeiture
and penalties. The state proceeded under Wis. Stat. sections 30.12(1)(a),
30.15(1)(a), and 30.15(1)(d). The circuit court granted summary judgment
in favor of the state holding that the defendants violated these statutes
by depositing fill on a section of land submerged at times by Lake Killarney,
a navigable water, without a permit. The court of appeals affirmed.
The first issue before the supreme court was whether a property owner
is required to obtain a permit before depositing fill on land submerged
below navigable water regardless of whether the land is above or below
the ordinary high water mark. "This issue presents a complex question
that affects not only the parties to the present lawsuit but the people
of the State of Wisconsin. Because this issue has not been sufficiently
explored in the briefs or at oral argument to enable us to decide it,
this case provides an inappropriate vehicle for resolving the issue the
case presents. Nevertheless, because the issue seems to be of statewide
importance, we take the unusual step of remanding the matter to the circuit
court where the parties can develop the facts and legal analysis to enable
the circuit court to address the legal issue presented" (¶: 7).
The defendants also raised c
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