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    Wisconsin Lawyer
    May 14, 2008

    Supreme Court Digest

    This column summarizes selected published opinions of the Wisconsin Supreme Court (except those involving lawyer or judicial discipline, which are digested elsewhere in the magazine). 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.

    Wisconsin LawyerWisconsin Lawyer
    Vol. 81, No. 5, May 2008

    Supreme Court Digest

    This column summarizes selected published opinions of the Wisconsin Supreme Court (except those involving lawyer or judicial discipline, which are digested elsewhere in the magazine). 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

    Administrative Law

    Ambiguity - Agency Interpretation

    State v. Harenda Enters., 2008 WI 16 (filed 13 March 2008)

    The Department of Natural Resources (DNR) cited a contractor, Harenda, for violating administrative rules governing asbestos abatement while renovating an old building. The circuit court found that tests of materials from the job site revealed the presence of improperly handled asbestos. The court of appeals reversed on the ground that the DNR had relied on an Environmental Protection Agency (EPA) interpretation of a rule that was inconsistent with the rule's plain language.

    The supreme court reversed the court of appeals in a decision authored by Justice Bradley. "The central issue in this case concerns the interpretation of the method used to test for asbestos-containing material (ACM) pursuant to chapter NR 447 of the Wisconsin Administrative Code" (¶ 24). First, the court held that the rule itself was ambiguous because it was poorly written, consisting of two clauses that, simply put, did not relate to one another (see ¶ 36). Second, despite the court's finding that the rule was ambiguous, the court held that the DNR's interpretation of the rule was not inconsistent with the regulation or clearly erroneous (see ¶ 48). In particular, the DNR relied on EPA interpretations of the rule. "The EPA's interpretation fulfills the purpose of the asbestos regulations, whereas the alternative interpretation Harenda proposes defeats that purpose. Moreover, the EPA's view is supported by basic principles of statutory construction. Giving deference to an agency's interpretation of its own rule, we conclude that the interpretation of § explained in the EPA's January 1994 and December 1995 clarifications is controlling" (¶ 57).

    Third, the EPA's interpretations did not constitute "legislative rules" that were improperly promulgated (see ¶ 65). Finally, the circuit court properly granted summary judgment against the contractor. The contractor argued that its own predemolition sampling and testing failed to reveal ACM, and thus an issue of fact was created for trial. The supreme court held, however, that "liability does not depend on whether an owner or operator conducts pre-demolition sampling testing in accord with the regulations" (¶¶ 71-72).

    Justice Ziegler, joined by Justices Prosser and Roggensack, dissented. They concluded, in essence, that the EPA's clarifications did not "clarify" the ambiguity, were contrary to the promulgated rules, and were themselves rules that were not properly adopted.

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    Consumer Law

    Home Improvements - Negligence - Damages - Statute of Limitation

    Stuart v. Weisflog's Showroom Gallery Inc., 2008 WI 22 (filed 28 March 2008)

    This appeal raised issues under the Home Improvement Practices Act (HIPA), as set forth in Wisconsin Administrative Code chapter ATCP 110 (Oct. 2004) and Wis. Stat. section 100.20(5). The Stuarts hired a contractor, Weisflog's Showroom Gallery (WSGI), to remodel and put an addition on their home. In 1996 they entered into a remodeling contract with WSGI, and they first became aware of substandard construction (for example, rotted flooring) in 2001. They filed suit in 2003, about two years after becoming aware of the problems and seven years after construction began. The supreme court, in an opinion written by Justice Crooks, affirmed a decision by the court of appeals, which affirmed in part and reversed in part rulings by the circuit court.

    The decision addressed six major issues, which are succinctly described in the court's summary. "First, we hold that the Stuarts' HIPA claims and their negligence claims are not barred by the statute of limitations because their claims are governed by the discovery rule and the six-year statute of limitations set forth in Wis. Stat. § 893.93(1)(b). Second, we are satisfied that Wis. Stat. § 100.20(5) authorizes the doubling of an entire damage award, even if a HIPA violation is combined with additional wrongdoing that contributes to the loss in question. Third, based on the evidence in the record and on the facts of the present case, we hold that the circuit court erred by asking the jury to apportion damages between the Stuarts' HIPA claims and their negligence claims"

    (¶ 4). "To obtain apportionment in lawsuits that contain HIPA claims, we hold that, before a party may request apportionment, it must meet the burden of showing that the damages can be separated. The petitioners failed to do so in the present case. In cases such as the present one, where there is no clear way to apportion the Stuarts' pecuniary loss between negligence damages and HIPA damages, doubling the entire pecuniary loss serves public policy concerns by encouraging victims to become `private attorney generals' and by providing larger disincentives to unscrupulous contractors" (¶ 30). "Fourth, we are satisfied that the ELD [economic loss doctrine] is inapplicable to the Stuarts' claims, and, therefore, does not bar their claims" (¶ 4). "If we were to apply the ELD to bar the HIPA claims, we would be ignoring the public policies that are the basis for the HIPA. We are satisfied that the ELD cannot apply to statutory claims, including those under HIPA, because of such public policies. Whether or not the ELD applies to the Stuarts' non-HIPA negligence claims would be analyzed and determined using the predominant purpose test. In analyzing those claims in light of the predominant purpose test, we hold that the architectural contract, which was one for services, was the core transaction from which the contract for the remodeling and for the addition flowed. That second contract also involved services, as well as some products. Given that the core contract was one for services, and given that both contracts involved services, we are satisfied that the transactions were primarily for services and that the ELD does not apply in the present case. The appropriate application of the predominant purpose test leads us to that result" (¶ 33).

    "Fifth, we hold that a corporate employee may be held personally liable for acts, he or she takes on behalf of the corporate entity that employs him or her, that violate the HIPA" (¶ 4). "However, we note that merely being an officer, agent, employee, representative, shareholder, or director will not be enough to impose individual liability on a person in such a class in the absence of proof that he or she was personally responsible for prohibited, unfair dealings or practices" (¶ 42). "Lastly, we hold that the circuit court erred in its determination of an appropriate attorney fee award" (¶ 4). The trial judge awarded about $16,000 in fees based on a percentage of the damages. The Stuarts sought about $200,000 in fees. The supreme court ordered that on remand, the trial court was to use the "lodestar methodology" as described in other cases.

    Chief Justice Abrahamson concurred in the majority opinion except for part VI relating to the ELD. Justice Roggensack, joined by Justices Prosser and Ziegler, concurred in part and dissented in part.

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    Criminal Procedure

    Preliminary Hearings - No Defense Right to Subpoena Police Reports Before Preliminary Hearing

    State v. Schaefer, 2008 WI 25 (filed 2 April 2008)

    The district attorney charged the defendant with two counts of second-degree sexual assault of a child. Before the preliminary hearing, defense counsel served a subpoena duces tecum on the police chief of the investigating police department commanding that the following materials be produced at what the subpoena described as a "return of records" proceeding: "a complete copy of all reports, memorandums, witness interviews and any records related to the investigation and arrest of [the defendant] on suspected criminal offenses relating to the alleged sexual assault of [the victim]" (¶ 11). The state moved to quash the subpoena. A court commissioner and a circuit court judge both granted the motion to quash. The defendant was granted leave to appeal, the court of appeals certified the case to the supreme court, and the supreme court accepted certification. In a majority opinion authored by Justice Prosser, the supreme court affirmed.

    The supreme court characterized this as a "discovery" case because, the court said, the defendant "is using the subpoena duces tecum as a discovery tool" (¶ 31), and it described the defendant's appeal as one asking the court to approve use of the subpoena power to effect discovery in a criminal case before the preliminary hearing (see ¶ 18). It concluded that "a criminal defendant does not have a statutory or constitutional right to compel the production of police investigation reports and nonprivileged materials by subpoena duces tecum prior to the preliminary examination. A criminal defendant who employs the subpoena power in this manner is attempting to engage in discovery without authority in either civil or criminal procedure statutes and in conflict with criminal discovery statutes. Although a reasonable argument can be made for prosecutors to open their files to defendants at an early point in criminal prosecutions, this argument does not translate into an enforceable right to subpoena police investigation reports and nonprivileged materials before a preliminary examination" (¶ 95).

    The court concluded that no subpoena statute authorizes the defendant's action (see ¶ 45). It further noted that the criminal discovery statute (Wis. Stat. § 971.23(1)) requires a district attorney to disclose discovery material "within a reasonable time before trial." "Requiring the state to disclose discovery material before the preliminary examination - before the court has even authorized a trial - is plainly at odds with the statutory scheme. This conclusion about timing is reinforced by the language in Wis. Stat. § 971.31(5)(b) that discovery motions `shall not be made at a preliminary examination and not until an information has been filed'" (¶ 57).

    Responding to the defendant's constitutional arguments, the court concluded that "[t]here is no compulsory process right to subpoena police investigation reports and nonprivileged materials before the preliminary examination" (¶ 70), and it declined to expand a defendant's compulsory process rights to encompass a right to subpoena these kinds of materials for examination and copying in anticipation of a preliminary hearing (see ¶ 75). It further held that the defendant "has no Sixth Amendment right, based on effective assistance of counsel, to subpoena police reports and other non-privileged materials prior to his preliminary examination" (¶ 94).

    Chief Justice Abrahamson filed a concurring opinion that was joined by Justices Bradley and Butler.

    Discovery - State's Failure to Disclose Discoverable Materials - Remedy

    State v. Harris, 2008 WI 15 (filed 6 March 2008)

    The defendant was convicted of possessing more than 40 grams of cocaine or cocaine base. He sought postconviction relief in the circuit court and alleged numerous violations of the discovery statutes by the state. The circuit court denied the motion for a new trial, and the court of appeals affirmed in an unpublished opinion. In a unanimous decision authored by Chief Justice Abrahamson, the supreme court affirmed the court of appeals.

    One of the defendant's complaints involved the failure of the prosecutor to turn over certain reports of police witnesses until the day of trial despite the fact that the defendant had previously filed a discovery demand. The court agreed that the prosecutor had a duty to turn over these reports because they contained written statements of a witness whom the district attorney intended to call at trial and further because they contained exculpatory evidence. See Wis. Stat. § 971.23(1)(e), (h).

    The court rejected the state's argument that disclosure was timely because the reports were turned over as soon as the prosecutor found them. Said the court, "It is of no moment under the criminal discovery statute that the State was unaware until the day before the trial or during the trial that it possessed the reports in question when the information was in the district attorney's files and could have been located before trial had the files been examined with reasonable diligence. The prosecutor's belated discovery of the evidence in his possession did not absolve the prosecutor of his duty under Wis. Stat. § 971.23(1) to reveal the evidence within a reasonable time before trial. The prosecutor's duty is to seek to know of the existence of reports that should be disclosed. The test of whether evidence `should be disclosed is not whether in fact the prosecutor knows of its existence but, rather, whether by the exercise of due diligence the prosecutor should have discovered it.' ... The court of appeals was correct in concluding, and we emphasize, that `the report should have been maintained [in the district attorney's office] in such a fashion as to be included in the State's response to [the defendant's] pretrial discovery requests'" (¶¶ 39-40) (citations omitted). Nonetheless, the court concluded that in the overall context of this case, the failure to disclose these reports was harmless error. It further rejected the defendant's claim that he is entitled to a new trial because the nondisclosure violated his right to due process. See Brady v. Maryland, 373 U.S. 83 (1963).

    The discovery statutes grant the circuit court discretion to advise the jury about the state's misconduct as a sanction for violating those statutes. See Wis. Stat. § 971.23(7m)(b). In this case the supreme court concluded that, although the circuit court apologized to the jury for the delay (which was occasioned by the discovery violation) and explained defense counsel's obligation to make objections, it "erroneously exercised its discretion in failing to advise the jury that the State had failed to make timely disclosure of the reports to the defendant under the criminal discovery statute" (¶ 106). Said the court, "Although the effect of the State's failure to adhere to the criminal discovery statute on the defendant's trial strategy was not great and the admission of the evidence was not prejudicial, defense counsel was caught by surprise. A defendant should not be surprised by two unproduced reports that were requested, were subject to discovery, and were in the prosecutor's possession. Under the circumstances of the present case, we agree with the defendant that the circuit court should have exercised its discretion to mitigate the effect, if any, of the State's failure to fulfill its statutory discovery obligations by advising the jury pursuant to § 971.23(7m)(b)" (¶ 105). Nonetheless, the supreme court concluded that the trial judge's failure to so advise the jury was harmless error.

    The court further found that the state violated the discovery statute by failing to disclose a certain statement made by the defendant. It also found that the circuit court erred in failing to strike a certain reference to the defendant's criminal history that was contained in paperwork found during the execution of a search warrant and was used to link the defendant to the cocaine found on the premises that were searched. However, neither of these errors was found to be prejudicial. The court also concluded that the various errors described above, when viewed cumulatively, were not prejudicial errors requiring a new trial (see ¶ 114).

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    Motor Vehicle Law

    OWI - Implied Consent - Elements of a Refusal Hearing - Probable Cause for Arrest - Informing the Accused - Oversupply of Information Before Refusal

    Washburn County v. Smith, 2008 WI 23 (filed 28 March 2008)

    After being arrested for operating a motor vehicle while under the influence of an intoxicant (OWI), the defendant refused to submit to chemical testing. In an implied consent refusal hearing the circuit court concluded that the defendant unlawfully refused to submit to a chemical test, and it revoked his operating privilege. In an unpublished opinion, the court of appeals affirmed. In a unanimous decision authored by Chief Justice Abrahamson, the supreme court affirmed the court of appeals.

    The first question considered by the supreme court was whether the circuit court erred in determining at the refusal hearing that the law enforcement officer had probable cause to arrest the defendant for OWI. The supreme court held that the circuit court did not err because, under the circumstances in this case, the arresting officer's knowledge at the time of the arrest would lead a reasonable law enforcement officer to believe that the defendant was operating a motor vehicle while under the influence of an intoxicant.

    "At the time of the arrest, the Deputy knew that the defendant had been driving well in excess of the speed limit (21 m.p.h. over the limit) late at night on a two-lane highway; that the defendant delayed [for .3 miles] pulling over after the Deputy activated his emergency lights; that the defendant had twice driven across the centerline before pulling over; that the defendant had an odor of alcohol on his breath; that the defendant had admitted to consuming alcohol over a period of more than ten hours ending just prior to his encounter with the Deputy; and that the defendant had supplied inconsistent and equivocal information regarding the amount of alcohol that he had consumed during that period of time. The state has met its burden of presenting evidence sufficient to establish that the Deputy had probable cause to believe that the defendant was operating a motor vehicle while under the influence of an intoxicant and had probable cause to arrest him for this offense" (¶ 36).

    No evidence of a field sobriety test was admitted at the refusal hearing because the officer failed to comply with a subpoena duces tecum directing him to bring his training manuals to the hearing. The defendant argued that State v. Swanson, 164 Wis. 2d 437, 475 N.W.2d 148 (1991), requires that a field sobriety test be performed in order for the state to establish probable cause for an OWI arrest. The court said, "Swanson did not announce a general rule requiring field sobriety tests in all cases as a prerequisite for establishing probable cause to arrest a driver for operating a motor vehicle while under the influence of an intoxicant" (¶ 33).

    The second issue before the court was whether the circuit court erred in determining at the refusal hearing that the defendant unlawfully refused to submit to chemical testing. At the heart of this issue was the defendant's contention that his refusal was not improper for two reasons. First, the deputy failed to explain to the defendant that the penalties for a refusal under Wisconsin law might be different from the penalties for a refusal under Louisiana law (the defendant has a Louisiana driver's license). Second, the deputy mistakenly told the defendant that he would have a hearing on a refusal to submit to a breath test within 10 days (when in fact the 10-day period referenced in the implied consent law relates to the time within which a request for a hearing must be made).

    Before tackling the defendant's complaints, the court helpfully clarified the application of several prior appellate decisions that deal with 1) an officer's failure to inform the arrestee of statutorily mandated information about the implied consent law (the "Informing the Accused" protocol) and 2) an officer's erroneous oversupply of information about the implied consent law. The supreme court held that if an officer has failed to provide statutorily mandated information, the circuit court should order that no action be taken against the operating privilege for the implied consent refusal. See State v. Wilke, 152 Wis. 2d 243, 448 N.W.2d 13 (Ct. App. 1989). However, in situations in which the officer has imparted information beyond what is required by the implied consent law, the circuit court must determine whether that information was erroneous and, if so, whether the erroneous additional information in fact caused the defendant to refuse to submit to chemical testing. See State v. Ludwigson, 212 Wis. 2d 871, 569 N.W.2d 762 (Ct. App. 1997); County of Ozaukee v. Quelle, 198 Wis. 2d 269, 542 N.W.2d 196 (Ct. App. 1995).

    This case involved an oversupply of information after the deputy correctly advised the defendant of statutorily mandated information about the implied consent law. Thus the court resolved the defendant's complaints by applying the Quelle and Ludwigson cases. It rejected the argument that the officer stated incorrect penalties for an implied consent violation because he did not differentiate between Wisconsin and Louisiana sanctions. "The Deputy accurately stated the Wisconsin law. Regardless of whether the Deputy accurately stated the law of Louisiana, neither the deputy nor the defendant believed that the Deputy was stating the law of Louisiana" (¶ 81). With respect to the erroneous information about the 10-day period as described above, the court concluded that the defendant failed to make a prima facie showing that the error contributed to his refusal to submit to chemical testing (see ¶ 86). Accordingly, the court held that the defendant's refusal to submit to a breath test was unlawful.

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    Underage Drinking - Social Hosts

    Nichols v. Progressive N. Ins. Co., 2008 WI 20 (filed 25 March 2008)

    The Nichols' vehicle was struck by a vehicle driven by a minor, Carr, who had consumed alcohol at an underage drinking party held on the Niesens' property. The Nicholses sued the Niesens for their alleged negligence in failing to supervise and monitor the party. The circuit court dismissed the complaint for failure to state a claim. The court of appeals reversed on the ground that the complaint stated a claim for common-law negligence.

    In an opinion authored by Justice Crooks, the supreme court reversed the court of appeals. The court held that public policy factors precluded a claim for common-law negligence. It specifically observed that the "Nichols do not allege that the Niesens provided alcohol to Carr, that the Niesens were aware that Carr (specifically) was consuming alcoholic beverages, that the Niesens knew or should have known that Carr was intoxicated, or that the Niesens knew or should have known that Carr was not able to drive her motor vehicle safely at the time of the accident. We note that there also is no allegation by the Nichols that the Niesens aided, agreed to assist, or attempted to aid Carr or any other person in the procurement or consumption of alcohol on premises under their control. There also are no allegations that the Niesens knew in advance that any underage individuals would be drinking" (¶ 20).

    The court found "most significant" the following public policy factor: Recovery against a negligent tortfeasor may be denied when "allowing recovery would have no sensible or just stopping point" (¶ 27). "Liability for injuries that are caused by an underage, intoxicated individual has always been premised upon the affirmative acts of a defendant, such as procuring, furnishing, or dispensing alcohol for that underage individual. Liability has never been premised on the conduct that the Nichols alleged" (¶ 30). "If the Nichols' claim were allowed to proceed, the expansion of liability might also include liability for parents who allegedly should have known that drinking would occur on their property while they were absent, based on the proclivities of teenagers in a given area to consume alcohol. Imposing such liability would be only a short step away from imposing strict liability upon property owners for any underage drinking that occurs on property under their control" (¶ 31). No prior Wisconsin case "has held a social host liable for the results of a guest's intoxication when that social host did not provide alcohol…. We conclude that a claim for common-law negligence cannot be maintained against social hosts who allegedly were aware that minors on their property were consuming alcohol, but who did not provide the alcohol, when an underage guest later was involved in an alcohol-related car accident" (id.).

    The court also addressed concerns that the court, in Hoida Inc. v. M&I Midstate Bank, 2006 WI 69, had somehow "overruled" several decisions that are discussed in some detail in the opinion. The court said that Hoida did not change Wisconsin negligence law; public policy factors continue to determine when liability is limited (see ¶ 47). To hold otherwise would be a "significant extension" of liability, said the court, and the court reserved this task to the legislature (see ¶ 49).

    Chief Justice Abrahamson concurred in the mandate. She criticized the majority opinion for relying on "legislative policy" and not "judicial public policy grounds." The Chief Justice agreed with the reasoning of the circuit court, which found that liability was foreclosed by Wis. Stat. section 125.07 (see ¶ 50).

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