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    Vol. 79, No. 11, November 2006

    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

    * *


    Fees - Liens - Intervention

    Olivarez v. Unitrin Prop. & Cas. Ins. Co., 2006 WI App 189 (filed 30 Aug. 2006) (ordered published 27 Sept. 2006)

    While Gende was an associate at a law firm (the firm), he was assigned a personal injury file. The client signed a retainer agreement, which gave the firm a lien for one-third of her proceeds upon recovery, plus reasonable expenses. See Wis. Stat. § 757.36 (2003-04). When Gende quit the firm, the client elected to continue to have him represent her. Gende also signed a separation agreement under which he agreed to a 20/80 split on former firm files in cases such as this one. When the client's personal injury case ultimately settled, the firm sought to intervene in the action in order to enforce its lien. The circuit court denied the motion to intervene. The firm appealed.

    The court of appeals, in an opinion written by Judge Nettesheim, affirmed but emphasized that it was bound by an abuse of discretion standard of review. "Were the question one of law, or were we ruling in the first instance rather than as an appellate body, we would likely rule for [the firm]" (¶ 1). Although the parties pressed issues tied to the employment and separation "disagreements," the court was drawn to the "narrow issue" of whether the circuit court properly denied the firm's motion to intervene (see ¶ 10).

    The first issue concerned the motion's timeliness. The case law "supported late-stage intervention" depending on the facts and circumstances. It did not, however, compel reversal on these facts (see ¶ 23). The firm had filed the motion to intervene nine months after it had notified parties of its lien. It was also "interest[ing]" that the firm "itself was not confident of the propriety of intervention at that stage of the litigation" (¶ 24). Thus, the firm had not been sufficiently "prompt."

    Moreover, the circuit court properly found that such late-stage intervention would be prejudicial to the original parties. "[T]he wrangling over these fees has been contentious and persistent. The court's determination not to further involve the plaintiffs or defendants reasonably may have stemmed from a concern that the acrimony would in some manner negatively impact the underlying claim. Under all of the circumstances, we see no misuse of discretion. While we might have granted it, we conclude that denying the motion is defensible as within the court's broad discretion" (¶ 25).

    Second, the lower court also properly found that intervention was not vital to protecting the movant's interest. The firm's "grievance now . . . is with Gende, not [the former client]" (¶ 30).

    Civil Procedure

    Issue Preclusion - Traffic Cases

    City of Sheboygan v. Nytsch, 2006 WI App 191 (filed 2 Aug. 2006) (ordered published 27 Sept. 2006)

    The defendant was cited for drunk driving and notified of the state's intent to suspend his driving privileges for six months. A Department of Transportation hearing examiner heard the matter and issued a decision in which the examiner found that the statutory criteria for suspension had been met. The defendant then sought judicial review of the administrative suspension. The city presented no evidence, and the defendant's argument primarily related to family hardship brought about by the suspension. The court issued an order vacating the suspension based on the city's failure to offer proof on the issues set forth in Wis. Stat. section 343.305(8)(b). The defendant then moved to suppress the evidence in the underlying drunk driving cases based on the lack of probable cause to arrest. "Nytsch maintained that the doctrine of issue preclusion prevented litigating the issue of probable cause because probable cause had already been considered in both the administrative suspension and the judicial review hearings" (¶ 6). The circuit court granted the motion.

    The court of appeals, in an opinion authored by Judge Anderson, reversed on the ground that issue preclusion was not applicable. "[A] threshold prerequisite for application of the doctrine is that, in order to be precluded from `relitigating' an issue, a party must have `actually litigated' it previously. There are many reasons why a party may choose not to contest an assertion in a particular action. Restatement (Second) of Judgments § 27 cmt. e (1982). If preclusive effect were given to issues not litigated, the result might serve to discourage compromise, to decrease the likelihood that the issues in an action would be narrowed by stipulation, and thus to intensify litigation" (¶ 11). "The question of whether the arresting officer had probable cause to arrest Nytsch was not `actually litigated' during the judicial review hearing. The court's order vacating the administrative suspension is more akin to the Restatement's examples of nonlitigated circumstances, such as when an admission is given and evidence relating to the issue is never heard before a court and therefore a considered judgment is never made" (¶ 13).

    More precisely, "[f]or whatever reason, the City chose not to contest the question of probable cause to arrest other than to make the blanket statement that it opposed Nytsch's motion to vacate the administrative suspension. The court then did not have the benefit of deciding the issue in an adversarial context. Indeed, the court's comments suggest that the issues underlying the status of Nytsch's driving privileges, which would include probable cause to arrest, would be litigated at a later date: `Since there is no one here basically to oppose the request of Mr. Nytsch, the Court will find in Mr. Nytsch's favor pursuant to the request made by counsel. So he can drive for a little while.' Because the question of probable cause to arrest was not `actually litigated,' the City is not precluded from litigating that issue on the merits" (¶ 14). The court also looked at factors addressed to "fundamental fairness." (Editors' Note: Footnote 6 features an informative, even amusing discussion regarding the use, surreptitious and otherwise, of unpublished court of appeals decisions.)

    Commercial Law

    Invoices - Forum Selection

    Converting/Biophile Labs. Inc. v. Ludlow Composites Corp., 2006 WI App 187 (filed 23 Aug. 2006) (ordered published 27 Sept. 2006)

    The plaintiff (CBL), a manufacturer, sued the defendant, which had supplied it with defective foam. The circuit court dismissed CBL's complaint "because it read a forum-selection provision in [the supplier's] invoices to CBL as mandating that all claims resulting from the parties' commercial transactions be brought in Ohio" (¶ 1).

    The court of appeals, in an opinion written by Judge Nettesheim, reversed. Initially, the court addressed CBL's contention that "invoices cannot be part of any contract between the parties." The court rejected this contention by CBL and held that a Uniform Commercial Code provision, codified in Wisconsin as Wis. Stat. section 402.207, expressly envisions that invoices may alter other contracts. "Thus, Wis. Stat. § 402.207 recognizes that, in actual practice, the parties' forms may not be identical, a party might later add divergent terms, and the parties may not always read each other's forms. Nonetheless, subject to certain conditions, the statute allows for enforcement of the parties' agreement, including the additional terms. Rather than dooming the contract, the new terms are construed as proposals for addition to the contract, and become part of it unless: (1) the offer expressly limits acceptance to the original terms, (2) the additional terms represent a material alteration of the parties' agreement, or (3) the recipient of the added provision seasonably objects" (¶ 17).

    The court then turned to the forum selection clause at issue here, which provided, "in relevant part, that CBL `consents to and submits to the jurisdiction of the courts of the State of Ohio ... or the United States District Court for the Northern District of Ohio....'"

    (¶ 25). The court held that the clause was permissive and not mandatory because it said "nothing about jurisdiction and venue being exclusive to Ohio" (¶ 32). Case law from other jurisdictions supported this determination. And "[e]ven if not clearly permissive, the forum-selection clause at least is ambiguous" (¶ 33) and thus permits jurisdiction in Wisconsin.

    Personal Jurisdiction - Offsets

    Druschel v. Cloeren, 2006 WI App 190 (filed 1 Aug. 2006) (ordered published 27 Sept. 2006)

    A circuit court granted summary judgment awarding the plaintiff the entire outstanding balance on a promissory note. The court of appeals, in an opinion written by Judge Peterson, affirmed. The defendant unsuccessfully raised two issues. First, the court held that the defendant was subject to personal jurisdiction under Wis. Stat. section 801.05(1)(d), the long-arm statute. The circuit court's findings "demonstrate that Cloeren made a significant number of contacts with Wisconsin, including six to eight personal visits and frequent telephone conversations with Wisconsin residents. Additionally, personal visits are the highest quality of contact" (¶ 10). The opinion addresses several individual factors in some depth.

    The court also rebuffed a due process objection to personal jurisdiction. The court said that Wisconsin has not adopted the "fiduciary shield doctrine," and "[t]hus, Cloeren's contacts are considered regardless whether those contacts were made on behalf of a business" (¶ 15). Moreover, Wisconsin had "specific jurisdiction" based on Cloeren's contacts here and the plaintiff's claim.

    Second, the court of appeals held that the circuit court properly refused to offset the amount owed on the promissory note against "Druschel's alleged breaches of the employment contract and non-compete agreement" (¶ 21). The pertinent sections of the stock purchase agreement did not include such breaches among its representations, warranties, or covenants. Moreover, the stock purchase agreement contained an integration clause, "providing that it encompasses the entire agreement of the parties. Thus, the unambiguous language of the stock purchase agreement does not include breaches of either the employment contract or non-compete agreement as indemnified losses and, therefore, Cloeren is not entitled to offset damages for the alleged breaches from the amount due under the promissory notes" (¶ 25).

    Criminal Law

    Child Abuse - Mistake

    State v. Hemphill, 2006 WI App 184 (filed 15 Aug. 2006) (ordered published 27 Sept. 2006)

    Hemphill was convicted of physical abuse of a child by recklessly causing great bodily harm. In an opinion authored by Judge Curley, the court of appeals affirmed. Hemphill argued that he was entitled to the "mistake" instruction. See Wis JI - Criminal 770. The court observed that the general definition of "reckless" in Wis. Stat. section 939.24 requires the "conscious disregard" of a risk, which supported Hemphill's contention, but that the child abuse statute under which Hemphill was convicted (Wis. Stat. § 948.03) "sets out its own unique definition of `recklessly'" that is simply "different" (¶ 11).

    "[H]ere no criminal intent needed to be proven to meet the elements of the charge brought against Hemphill; it is an objective test having no subjective state of mind element. Hemphill need not have intended to harm Terrence or have been aware of the risk his conduct posed to Terrence's well being in order to be found guilty. It was his conduct, not his intent, which brought the charge. The State's proof - that Hemphill laid across the chest of an eight and one-half-year-old boy in a hot, unairconditioned room, for up to two hours - was conduct that created an unreasonable risk of harm to Terrence and demonstrated a conscious disregard for his safety, and was sufficient to satisfy all the elements of the crime. Hemphill's apparent belief that Terrence was not medicated was not a defense to the charge" (¶ 15).

    Criminal Procedure

    Plea Negotiations - "Package Plea Agreements" - Voluntariness

    State v. Goyette, 2006 WI App 178 (filed 31 Aug. 2006) (ordered published 27 Sept. 2006)

    This case deals with a "package plea agreement." This arrangement is "a plea agreement that is contingent on two or more codefendants all entering pleas according to the terms of the agreement. If one defendant does not enter a plea according to the agreement, the State is not bound by the agreement with respect to any of the defendants" (¶ 1).

    The defendant entered a guilty plea pursuant to a package plea agreement involving himself and two other defendants. At the guilty plea hearing, the court made the usual inquiry as to whether the defendant had been pressured or coerced in any way to enter the plea, to which inquiry the defendant responded in the negative. After the defendant was sentenced, he moved to withdraw his plea, contending that it was not voluntarily entered. He asserted that he felt coerced "by the fact that if [he] did not enter the plea, [his] codefendants would not be able to reach plea agreements" (¶ 11). The circuit court denied the motion and the court of appeals, in a decision authored by Judge Lundsten, affirmed.

    The court first rejected the defendant's claims that the voluntariness of his plea was affected by his youth, insufficient time to meet with his attorney and to consider the plea agreement, and pressure to accept the agreement from his attorney and a co-defendant's attorney. The court then turned to the defendant's argument that his plea was involuntary "because he felt pressure to go along with the package agreement so that his codefendants could obtain the benefit of that agreement" and because he was "caught between loyalty to his friends and his own future" (¶ 29). The circuit court had rejected this argument, explaining that, even if the defendant felt pressure in the sense that he "felt a psychological need to try to help [his] co-defendants to get this deal," pressure of this type does not render a plea involuntary (see id.). The appellate court agreed.

    Earlier cases decided by the Wisconsin Supreme Court reject the proposition that a plea is constitutionally involuntary if it is motivated by a desire to obtain a benefit for another. None of these cases involved a package plea agreement, but the defendant suggested no reason why their reasoning should not apply here. "We agree with [the defendant] that package plea agreements carry with them the risk that one of the defendants will be improperly pressured into entering a plea. But the pressure [the defendant] describes is not improper pressure....Therefore, we agree with the State that, even if the package plea agreement's offer of reduced charges, carrying with it limited exposure to imprisonment, had no effect on [the defendant's] decision to plead guilty and that [he] only entered his pleas to help his friends, such facts would not establish that [his] pleas were involuntary" (¶¶ 31-32).

    In a footnote the court indicated that it was not addressing "the [defendant's] undeveloped requests for broad holdings that `package plea agreements are by their very nature improper' or, in the alternative, that package plea hearings be held individually for each defendant. That latter alternative, in particular, raises practical questions as to how defendants pleading later in time could be held to abide by the agreement" (¶ 24 n.13).

    Truth-in-Sentencing - Sentencing Guidelines - Court's Failure to Consider Guidelines Not Reviewable on Appeal

    State v. Grady, 2006 WI App 188 (filed 24 Aug. 2006) (ordered published 27 Sept. 2006)

    The defendant pleaded guilty to two counts of armed robbery. The parties agreed that sentencing guidelines for armed robbery were applicable to the defendant at the time of his sentencing and that, under Wis. Stat. section 973.017(2)(a), the court was required to "consider" the guidelines when sentencing him. The circuit court imposed consecutive terms totaling 20 years of initial confinement and 10 years of extended supervision.

    The defendant filed a postconviction motion for resentencing in which he argued that the circuit court erred by not considering the guidelines. According to the motion, neither the prosecutor nor the defense attorney made reference to the guidelines at sentencing, and the court did not refer to them when imposing sentence. Also, according to the motion, the court's file did not contain a sentencing guidelines worksheet. The circuit court denied the motion (see ¶ 3).

    In a decision authored by Judge Lundsten, the court of appeals affirmed. The court concluded that it was unnecessary for it to determine whether the circuit court complied with its statutory obligation to "consider" the guidelines because "§ 973.017(10) precludes appellate review of the circuit court's alleged noncompliance" (¶ 4.) This statute provides that "there is no right to appeal a court's sentencing decision based on the court's decision to depart in any way from any guideline." Said the appellate court, "case law and statutory history compel the conclusion that § 973.017(10) precludes appellate review of a sentencing court's failure to consider sentencing guidelines"(¶ 1).

    Judge Dykman filed a concurring opinion.

    Conflicts of Interest - Waiver - Effective Assistance

    State v. Demmerly, 2006 WI App 183 (filed 10 Aug. 2006) (ordered published 27 Sept. 2006)

    Two brothers, Dion and Douglas, were charged with murder. Lawyers from the same firm represented both men. Douglas was granted immunity and testified against Dion, who was convicted. The same firm represented Dion in unsuccessful postconviction litigation that raised various issues, but not the conflict of interest question. Eventually Dion secured different counsel, who argued that the prior representation was an impermissible conflict and that Dion received ineffective assistance of counsel. The circuit court denied the motion.

    In a decision authored by Judge Dykman, the court of appeals affirmed. Dion waived his right to conflict-free representation on three occasions. Simply put, case law holds that a court may use its discretion to disqualify an attorney, but none of the cases Dion cited mandate that courts reject a "voluntary waiver of the right to conflict-free representation.... Requiring a court to disqualify an attorney because of a conflict of interest would infringe upon the defendant's right to retain counsel of his choice and could leave the accused with the impression that the legal system had conspired against him or her" (¶ 13). Dion did not contest the adequacy of any of his three waiver colloquies with the circuit court.

    The court next rejected the contention that the conflict amounted to ineffective assistance of counsel. Although no Wisconsin cases governed this issue, the court adopted "the rule established by the Seventh Circuit that a defendant who validly waives his right to conflict-free representation also waives the right to claim ineffective assistance of counsel based on the conflict" (¶ 16).

    The court qualified this sweeping rule with a "small door" (¶ 17) left open for consideration in a future case. The court's hypothetical scenario involved a situation in which "evidence seriously harms the defendant with no significant corresponding chance of helping the co-defendant[.] That is to say, what if counsel's decision is not a reasonable strategic decision, even considering counsel's conflict of interest? Should a valid waiver defeat all ineffective assistance claims, even when counsel's choice is objectively unreasonable, taking into account the conflict? We have no occasion to answer this question today" (¶ 18).

    The court stated, however, that when evidence has the potential to harm one defendant but help the co-defendant, "[t]his is exactly the sort of risk the defendant accepted when choosing to be represented by an attorney who was also obligated to represent the interests of the co-defendant. Thus, defendant's waiver defeats his ineffective assistance claim if counsel's action was reasonable in light of the choice created by dual representation" (id.). The court then examined trial counsel's cross-examination of Douglas and agreed that it was effective when viewed as a "mine-run" (¶ 19) question of ineffective assistance of counsel (see ¶ 25).


    CGL - Misrepresentations - Exclusion

    Stuart v. Weisflog's Showroom Gallery Inc., 2006 WI App 186 (filed 23 Aug. 2006) (ordered published 27 Sept. 2006)

    The Stuarts hired Weisflog to design and build a home addition. Weisflog had misrepresented both his competence and his credentials. The work was found to be substandard and a jury later awarded nearly $100,000 in damages. An earlier appeal upheld the award against various attacks (e.g., the economic loss doctrine). See 2006 WI App 109.

    In this appeal the court of appeals, in an opinion written by Judge Brown, affirmed the ruling that Weisflog's commercial general liability (CGL) carrier, American Family Insurance, had coverage for the damages. American Family argued that coverage was precluded by both a "your product" exclusion and a "your work" exclusion. The court of appeals held that the "your product" exclusion was patently inapplicable. The court said that the warranties and representations contemplated by the "your product" exclusion include only those "made at any time with respect to the fitness, quality, durability, performance or use of `any goods or products, other than real property, manufactured, sold, handled, distributed, or disposed of by [you]" (¶ 20). The court said that it was clear that "the `driving force' behind the whole series of transactions was not a warranty about these sorts of goods or products but rather a warranty about the design of the remodeling, i.e., that the design would be provided by someone experienced in architecture and that it would comply with the applicable building codes" (id.).

    The "your work" exclusion was a bit more involved because "at first blush" it appeared that the exclusion covered "representations about work," namely the designs at issue here. The Stuarts' misrepresentation claim was, however, based on chapter ATCP 110 of the Wisconsin Administrative Code and therefore was distinct from a common law misrepresentation claim. "We presume that the insurance industry would be familiar with this legislative intent. Thus, we assume that if an insurer wished to lump this special form of misrepresentation in with the more familiar common-law misrepresentations, it would have specifically mentioned the latter. Because it does not, we can assume that the insurer did not intend its exclusion to apply to code misrepresentation" (¶ 22).

    Because the exclusions were not applicable, the next issue was whether the CGL policy encompassed Weisflog's liability. The insurer first argued that violations of the administrative code were not an "occurrence" within the policy's meaning. The court agreed, however, with the Stuarts that section ATCP 110.2(11) was "intent-neutral with respect to the false or misleading propensities of a representation. Because we construe the statute to be intent-neutral, we hold that Wis. Admin. Code ch. ATCP 110 violations are not inherently inconsistent with the concept of an `occurrence'" (¶ 31).

    The court also rebuffed American Family's contention that somehow Weisflog's conduct did not result in "property damages." "Presumably, American Family is [arguing] that Weisflog's negligence caused the damage and not the misrepresentation. We rejected that assertion above and concluded that a causal connection does exist between the Wis. Admin. Code ch. ATCP 110 violations and the Stuarts' damages because the parties would not have contracted for the remodeling had the Stuarts known Weisflog had no architectural credentials and was unfamiliar with the building codes. If there had not been any property damage, the court would not have awarded the Stuarts damages for the ch. ATCP 110 violations. But for Weisflog's liability on the ch. ATCP 110 claim, in turn, Weisflog also would not have incurred responsibility for double damages or the attorney fees that flowed from them. Thus, all of these awards were premised on `property damage,' per the policy language" (¶ 36).

    Labor Law

    Sheriffs - Demotion of Sergeant Before Disciplinary Hearing - Power of Board Performing Civil Service Commission Functions to Sue to Enforce Its Orders

    State ex rel. Milwaukee County Personnel Review Bd. v. Clarke, 2006 WI App 186 (filed 15 Aug. 2006) (ordered published 27 Sept. 2006)

    The Milwaukee County Sheriff filed disciplinary charges against a sergeant with the Milwaukee County Personnel Review Board (the PRB), the entity in Milwaukee County that performs civil service commission functions pertaining to discipline and discharge of employees. On the same day that the charges were filed, the sheriff issued an order that relieved the sergeant of his sergeant's duties and indicated that the sergeant would be reassigned pending a hearing before the PRB. Though the sergeant's pay remained the same, he was ordered to remove the sergeant stripes from his uniform and to turn in his sergeant's badge.

    The sergeant and his union filed a motion with the PRB asking it to direct the sheriff to return him to the rank of sergeant pending a PRB ruling on the charges. The PRB concluded that the sergeant had been "effectively demoted" before being given a hearing on the charges against him, and that this violated Wis. Stat. sections 59.52(8)(b), 63.10, and 63.12. The PRB ordered that the officer "be reinstated to a position of Deputy Sheriff Sergeant and not relieved of his duties, uniform and insignia as a [Deputy Sheriff] Sergeant until such time as an evidentiary hearing on the material facts of his case is conducted and a decision rendered by the [PRB] on the charges for his demotion"(¶ 10).

    The sheriff did not comply with the PRB's order. Nor did he seek judicial review of the order by certiorari to the circuit court, even though certiorari "has long been recognized as the appropriate vehicle for review of decisions by administrative entities that are not covered by Wis. Stat. ch. 227" (¶ 11 n.2). The PRB then filed a petition for an alternative writ of mandamus, asking the circuit court to order the sheriff to comply with the PRB's order. The sheriff moved to quash the writ. The circuit court granted the writ, and the sheriff appealed. In a majority decision authored by Judge Kessler, the court of appeals affirmed.

    Responding to the sheriff's contention that the PRB lacked standing to seek the writ, the appellate court concluded that the PRB did indeed have such standing. The PRB issued an order that was ignored by the sheriff. "[F]or the PRB to enforce the power it is charged to exercise, it is `necessary to afford' the PRB `the right to maintain the action in its own name for the benefit of the citizens of the state'" (¶ 38) (citations omitted).

    The court also concluded that the criteria for issuance of a writ of mandamus were satisfied in this case. First, the PRB and the employee (who had intervened in the suit) had a clear right to relief. The PRB issued an order and the sheriff ignored it. If the sheriff disagreed with the order, his recourse was to seek review of the order via a writ of certiorari (see ¶¶ 45-46). Second, the sheriff had a positive and plain legal duty to follow the PRB's order. "The law is, and has been for at least eighty-five years, that a sheriff does not have the power to ignore an order by a civil service commission" (¶ 47). "No one, including a department head, may choose to ignore a direct order of an entity with apparent authority to make the order even if he or she believes the order is wrong. Judicial review [which the sheriff did not pursue] is the avenue for resolution of disputes regarding the lawful reach of an entity's authority"(¶ 48).

    Third, the PRB and the employee (and by extension the employee's union, which seeks to protect the rights of its members) would have suffered substantial damage if the sheriff were allowed to continue to ignore the PRB's order (see ¶ 50). Fourth, there was not another adequate remedy at law available to either the PRB or the sergeant (see ¶ 53).

    Lastly, the court held that the issues raised in this appeal were not moot, even though the sergeant had received his PRB disciplinary hearing before the circuit court issued its ruling on the writ of mandamus (see ¶¶ 27-32).

    Judge Fine filed a dissenting opinion.


    >Home Sale - False Advertising

    Malzewski v. Rapkin, 2006 WI App 183 (filed 8 Aug. 2006) (ordered published 27 Sept. 2006)

    The plaintiff buyers purchased a home in 2003. The defendant sellers disclosed "defects in the basement or foundation," further explaining that there may be "seepage" during "heavy rainstorms." The buyers exercised their right to "do a walk-through" but waived their right to conduct a home inspection despite advice to the contrary. In 2004 the buyers discovered substantial "pre-existing cracks" in the basement walls that had been caulked and painted over. An engineer opined that foundation repairs would exceed $25,000. The buyers sued the sellers under multiple claims that were dismissed by the circuit court.

    The court of appeals, in a majority opinion authored by Judge Fine, reversed as to a false advertising claim but affirmed the dismissal of all other claims. The court of appeals held that the breach of contract and warranty claims were properly dismissed because the buyers had waived their right to a home inspection. "The [sellers] disclosed in the Real Estate Condition Report that `there might be a little seepage in the walls/floors' of the basement. Despite this information, the [buyers] waived the home inspection; they thus waived their right to legal remedies to which they might have been entitled if they had to rely wholly on disclosures in the Real Estate Condition Report without the right to have the home inspected. Stated another way, by closing the transaction without exercising their right to a home inspection even though they were aware of, at the very least, potential `defects,' the [buyers] waived their right to pursue a contractual warranty claim based on representations in the Real Estate Condition Report" (¶ 16).

    The buyers' claim for intentional misrepresentation, which requires "justifiable" reliance, also failed because of their waiver of the home inspection. The same was true for claims brought under theories of strict-responsibility misrepresentation, negligent misrepresentation, and even theft by fraud.

    The court of appeals also held, however, that the buyers did state a valid claim for false advertising under Wis. Stat. section 100.18, which embraces the following elements: "(1) the defendant made to the public an `advertisement, announcement, statement or representation' relating to the purchase of merchandise; (2) the `advertisement, announcement, statement or representation' was `untrue, deceptive or misleading'; and (3) the plaintiff sustained a pecuniary loss because of the `advertisement, announcement, statement or representation'" (¶ 24). Reasonable reliance is not an element of false advertising, but may be considered by the trier of fact. "The [sellers] admit that they knew that the basement walls had twelve-foot long, three-eighths-inch wide cracks, which they caulked and painted over. A reasonable jury could find that those cracks and the attempted efforts at remediation should have been disclosed, and that failure to do so violated Wis. Stat. § 100.18 even though the [buyers] waived their right to have the property inspected" (¶ 25).

    Judge Kessler dissented and would have found that the false advertising claim too was barred because the buyers' reliance was unreasonable in light of their waiver of a home inspection.

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