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    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.

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

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    Vol. 82, No. 2, February 2009


    Business Law

    Contracts – Trademark Infringement – Damages

    D.L. Anderson’s Lakeside Leisure Co. v. Anderson, 2008 WI 126 (filed 2 Dec. 2008)

    Anderson built a successful business that provided marine products and services relating to piers, boatlifts, landscaping, and so on. In 2000, Anderson sold the business to the Statzes for about $900,000. The asset purchase agreement included the business’s inventory, customer lists, tradename, and good will and contained restrictions on competition. The Statzes later sued Anderson for violating the agreement. A jury found that Anderson had breached the noncompetition clause and had infringed on the tradename/trademark. It awarded compensatory damages for both claims, punitive damages, and attorney fees. The court also granted injunctive relief that extended the restrictive convenants. The court of appeals reversed the jury’s award of compensatory and punitive damages for trademark infringement.

    The supreme court affirmed in part and reversed in part in an opinion written by Justice Crooks. Many of the issues involved the sufficiency of the evidence and are therefore fact-intensive. The court held that sufficient evidence supported the jury’s findings concerning the contract breach (of the noncompetition clause) and its award of compensatory damages. The same findings supported the extension of the noncompetition clause by 678 days
    (see ¶ 34).

    The trademark infringement claim raised questions about the jury instructions, an issue that the supreme court took up despite Anderson’s waiver by failing to object (see ¶ 41). Essentially, the court upheld the instructions as given. Anderson argued that “when the Agreement’s clauses are read together, the noncompetition clause restricted the tradename rights the Statzes purchased; thus, any action against Anderson must be controlled by contract law, not tort law. The Statzes point to the language of the Agreement concerning the Purchased Assets, one of which is ‘the tradename D.L. Anderson Co.’: ‘Seller has, and Buyer is receiving, good and marketable title to the Purchased Assets, free and clear of all … covenants, reservations, restrictions or encumbrances of any nature whatsoever, except as otherwise contemplated herein. None of the Purchased Assets is subject to any restrictions with respect to the transferability thereof.’ The Statzes argue that the tradename conveyance established an absolute right to the tradename. The noncompetition clause prohibited other commercial use of Anderson’s name not covered by tradename protections” (¶ 44).Case law controlled how to analyze tradenames conveyed by contract. There was “no indication in the contract that the sale of the tradename was restricted or limited. It is not reasonable to read the noncompetition clause language as Anderson asks; to do so would mean that the expiration of the noncompetition clause after seven years would render the tradename purchase meaningless” (¶ 46). The court found the evidence sufficient to support the jury’s findings of trademark infringement based on the instructions (see ¶ 56).

    Sufficient evidence also supported the finding of compensatory damages for the trademark infringement. The law requires proof of reasonable, not absolute, certainty (see ¶ 64). The court of appeals mistakenly focused on the absence of testimony of customers holding a “negative view of the Statzes’ company resulting from confusion fatal to the claim of damages based on diminution of goodwill” (¶ 66). Instead, the damages were “readily” established by other testimony, including the Statzes’s own testimony, as owners, about the business’s value (see ¶ 67). The punitive damages findings were also supported by the record, including the trial judge’s “forceful endorsement of the jury verdict” (¶ 88).

    Finally, the supreme court held that the Statzes were entitled to attorney fees as to all their claims, not just their contract claims. Among other factors, the purchase agreement’s clause describing attorney fees stated that it was to be given “the broadest, lawful and enforceable scope permissible for the protection of the parties” (¶ 96). For example, “the tradename infringement claim is clearly in the category of ‘any action concerning this Agreement’ because the Agreement was the instrument by which ownership of the tradename in question was transferred” (¶ 99).

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    Criminal Procedure

    Searches – Car Passengers

    State v. Denk, 2008 WI 130 (filed 30 Dec. 2008)

    Denk was convicted of a drug charge after the trial court denied his motion to suppress evidence. Denk, a passenger in an automobile, claimed that a police officer unlawfully seized drug-related evidence following the arrest of the car’s driver. The court of appeals certified the case to the supreme court to determine the lawfulness of the search of “personal belongings of a passenger that are found outside a motor vehicle incident to the arrest of the driver based on the reasoning in State v. Pallone, 2000 WI 77” (¶ 1).

    The supreme court affirmed in an opinion written by Justice Bradley. The driver of the car was lawfully arrested for possession of drugs and paraphernalia (see ¶ 34). The officer then approached the passenger side of the car, where Denk was standing. On the ground near Denk was a hard-shelled eyeglasses case, which the officer opened and found to contain drug-related paraphernalia. “In State v. Pallone, we determined that under some situations, an officer may conduct a warrantless search of passenger belongings even when the officer does not have probable cause to arrest the passenger” (¶ 47). “We determine that the warrantless search here was incident to the arrest and was supported by both of the historical rationales at the heart of that exception, namely the safety of the arresting officer and the need to discover and preserve evidence. In this situation, Officer Hahn was outnumbered at a late night arrest involving two men and knew that narcotics were present. The proximity of the eyeglass case to the car, to Denk, and to Pickering, as well as its unexplained location at Denk’s feet, raised questions about the danger Denk posed acting alone or in concert with Pickering. Thus, we conclude that based on the reasoning in State v. Pallone, the search of the eyeglass case was a permissible search incident to the arrest of the driver of the vehicle” (¶ 61).

    The court underscored that searches of passengers based on a driver’s arrest are exceptions that must be justified by the circumstances. “Lest our discussion be misconstrued, we reiterate the bright-line rule that unarrested passengers cannot themselves be searched based solely on the arrest of the driver. In order to search the body of a passenger, the arresting officer must have individualized cause to justify the search” (¶ 62).

    The court also rejected Denk’s contention that he should be permitted to withdraw his guilty plea. Denk’s prime argument was that there was insufficient evidence to support some of the charges he faced, but the supreme court emphasized that those charges were dismissed as part of the deal. “Unlike the cases upon which Denk relies, this was not a plea based on an illusory promise, but rather it was a plea where the promise was realized. At sentencing, Denk received the benefits of his bargain. He avoided exposure to a substantial period of incarceration. As agreed, the State dismissed the three charges and argued for a withheld sentence, three years probation, and six months in jail” (¶ 78). Hence, there was no manifest injustice that entitled Denk to withdraw the plea.

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    Employee Benefits

    Retirement Benefits – Determination of Applicable Health Insurance Plan

    Loth v. City of Milwaukee, 2008 WI 129 (filed 30 Dec. 2008)

    The city of Milwaukee hired Loth as an accountant in 1984. Loth was a management employee and was not covered by any collective bargaining agreement. Loth completed 15 years of service with the city in 1999, turned age 60 in 2005, and retired in 2005. The issue in this case was which of the following health insurance plans covers Loth in retirement: “(1) the pre-2004 City health insurance plan, which provided for no-premium-cost health insurance for City employees between ages 60 and 65 with 15 years of service who retired from City service; or (2) the post-2004 City health insurance plan (enacted [by City resolution] in 2002 to take effect in 2004), which provides for shared-premium-cost health insurance for City employees between ages 60 and 65 with 15 years of service who retire from City employment after January 1, 2004” (¶ 2).

    Loth argued that he was entitled to the pre-2004 no-premium-cost health insurance on retirement because the pre-2004 no-premium-cost provision was in effect when he completed 15 years of service with the city in 1999. His position was that a management employee is entitled to the no-premium-cost provision under the health insurance benefit in effect when he or she completes 15 years of service, even if the management employee, at that time, has not attained the specified retirement age and has not retired (see ¶ 3). The city argued that Loth is entitled to the post-2004 shared-premium-cost health insurance because he did not attain age 60 and did not retire until 2005, when the post-2004 resolution was in effect for persons who retired after Jan. 1, 2004 (see ¶ 4). The circuit court granted summary judgment to the city and dismissed Loth’s complaint. In a published decision the court of appeals reversed the circuit court. See 2008 WI App 12, 307 Wis. 2d 412, 745 N.W.2d 693.

    In a unanimous decision authored by Chief Justice Abrahamson, the supreme court reversed the court of appeals. Said the court, “The pre-2004 City health insurance plan does not govern Loth’s health insurance on his retirement in 2005. The pre-2004 City health insurance plan clearly provided health insurance to management employees who met three qualifications: The management employee had to retire; had to be between the ages of 60 and 65; and had to have 15 or more years of city service. Before 2004, Loth had met only one of the pre-2004 qualifications for no-premium-cost health insurance: he had 15 years of employment with the City. Loth had neither attained the age of 60 nor retired when the pre-2004 health insurance plan was in effect. Thus Loth had not satisfied all three requirements under the pre-2004 health insurance plan before the health insurance plan was amended to take effect in 2004” (¶ 6).  

    Accordingly, the court concluded that Loth’s health insurance plan is governed by the post-2004 city resolution that was in effect when Loth turned 60, retired, and had more than 15 years of service with the city
    (see ¶ 7).

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