Wisconsin Lawyer
Vol. 84, No. 8, August 2011
Administrative Law
DNR – High-capacity Well Regulations
Lake Beulah Mgmt. Dist. v. Wisconsin Dep’t of Natural Resources, 2011 WI 54 (filed 6 July 2011)
In 2003 and again in 2005, the Wisconsin Department of Natural Resources (DNR) issued permits for a municipal well near Lake Beulah. Several “conservancies” sued on grounds that the DNR had not adequately considered the well’s impact on the lake or nearby wetlands. Reviewing the administrative record, the circuit court denied the conservancies’ petition for review based on the lack of any evidence that the well would harm the lake. The court of appeals disagreed, ruling in a published decision that sufficient evidence had been presented to the DNR, which must consider the evidence on remand. See 2010 WI App 85.
The supreme court affirmed in part and reversed in part in a majority opinion authored by Justice Crooks. The court addressed the interplay among the public trust doctrine, the DNR’s responsibilities under that doctrine, and other statutes, especially Wis. Stat. chapter 281, regarding high-capacity wells. It held that the DNR has the authority and general duty to consider whether a proposed high-capacity well may affect Wisconsin waters (see ¶ 42).
This holding, however, does not “create a permit system without standards” (¶ 43). Rather, the DNR must use its expertise and its discretion in fulfilling its duties. “The DNR’s general duty certainly does not require the DNR to investigate the potential environmental harm of every high capacity well permit application or to undertake a formal environmental review for every application. Such an interpretation would be inconsistent with the legislature’s decision to mandate that level of environmental review for only certain high capacity wells” (¶ 45). “However, given its general duty, the DNR is required to consider the environmental impact of a proposed high capacity well when presented with sufficient concrete, scientific evidence of potential harm to waters of the state. Upon what evidence, and under what circumstances, that duty is triggered is a highly fact-specific matter that depends upon the information submitted by the well owner in the well permit application and any other information submitted to the DNR decision makers while they are reviewing that permit application. The DNR should use both its expertise in water resources management and its discretion to determine whether its duty as trustee of public trust resources is implicated by a proposed high capacity well permit application such that it has an obligation to consider environmental concerns”
(¶ 46).
“The limited review available to those who wish to challenge the DNR’s discretionary permitting decisions provides an additional restriction that limits when a court will hold that the DNR’s duty required it to take further action when considering a particular high capacity well permit application. As outlined in greater detail below, a legal challenge to the DNR’s decision under ch. 227 is limited to the record on review and is deferential to the DNR’s expertise in this area. Thus, citizens must present any evidence of potential harm to the agency before the decision is made or risk losing the ability to challenge the DNR’s discretionary decision based on such evidence” (¶ 47).
As applied to this case, the court held that the record on review, a technical term that is carefully explained in the opinion, did not contain any evidence that revealed an abuse of discretion by the DNR. An expert report relied on by the conservancies did raise water-impact issues, but the report had not been made part of the record on review (see ¶ 61).
Justice Ziegler concurred but wrote separately to express her “uneasiness” with the result in this case based on the parties’ failure to include the expert report in the record on review.
High-capacity Wells – Preemption
Lake Beulah Mgmt. Dist. v. Village of East Troy, 2011 WI 55 (filed 6 July 2011)
This separate action relates to the litigation over the decision of the Wisconsin Department of Natural Resources (DNR) to grant a permit for a high-capacity well near Lake Beulah. The supreme court upheld the lawfulness of the permit in its opinion at 2011 WI 54 (summarized above). In this case the supreme court confronted the validity of a municipal ordinance that purported to regulate the same permit process. Both the circuit court and the court of appeals ruled that the local ordinance was preempted by the statutory authority granted the DNR through the permit process. The court of appeals’ decision was a published opinion. See 2010 WI App 127.
The supreme court affirmed in an opinion written by Justice Crooks. The opinion sets forth the preemption analysis in light of the regulations at issue. The local ordinance “frustrates” the “comprehensive regulatory scheme” created by the legislature and administered by the DNR even though it purports only to provide additional requirements. “Where the legislature has ‘adopted a complex and comprehensive statutory structure,’ an ordinance that runs counter to that structure violates the spirit of the legislation and is preempted”
(¶¶ 18-19).
Business Associations
Partnerships – Dissolution – No Compensation to Partner During Wind-up of Partnership
Bushard v. Reisman, 2011 WI 51 (filed 30 June 2011)
Bushard and Reisman formed a partnership (PressEnter) in 1995; it was dedicated to providing dial-up internet service to subscribers in western Wisconsin. There was no written partnership agreement. In 1999, Bushard sent Reisman a document, the effect of which was to dissolve the partnership. (Under Wis. Stat. section 178.25(2), a partnership is not terminated on dissolution but continues until the winding up of the partnership affairs is completed.) Bushard thereafter withdrew from participation in PressEnter while Reisman continued to run the day-to-day operations and made attempts to sell the business. After the 1999 dissolution, both partners continued to receive distributions (partnership draws). In 2004, Reisman also started to take a salary, believing that he could compensate himself for the work he was doing in furtherance of the business; he did not inform Bushard of his intention to take a salary, and Bushard did not consent to his doing so. Bushard subsequently filed this lawsuit in which, among other things, he demanded an amount of money equal to all funds taken from the partnership without authorization, including Reisman’s salary.
The circuit court granted summary judgment to Bushard. It ruled that Reisman was not entitled to receive a salary as compensation for the services he rendered in winding up PressEnter; it further ordered that the wind-up of the partnership be completed. In an unpublished opinion, the court of appeals affirmed the circuit court’s orders requiring the equal distribution of PressEnter’s profits to both partners.
Reisman argued that the circuit court erred by failing to apply equitable considerations when it determined that the partners were entitled to share equally in the partnership’s profits and losses. In addition, he asserted that the circuit court erred by ordering summary judgment without making the threshold determination of whether the dissolution resulted in a wind-up or a continuation of the partnership.
In a majority decision authored by Justice Bradley, the supreme court affirmed the court of appeals. It held that, in the absence of an agreement to the contrary, “the distribution of PressEnter’s profits and losses is governed by Wis. Stat. § 178.15, and that Reisman’s equitable arguments are insufficient to overcome the plain language of the statute. We also determine that because there was no genuine dispute of material fact, the circuit court correctly concluded that the dissolution of PressEnter resulted in a wind-up, and it appropriately ordered summary judgment in favor of Bushard” (¶ 3).
Section 178.15 establishes the rule that no partner is entitled to remuneration for acting in the partnership business. “[T]here is only one exception to the general rule that no partner is entitled to remuneration for acting in the partnership business. Under this exception, a partner is entitled to extra compensation if he is a ‘surviving partner.’ Wisconsin courts have strictly construed the term ‘surviving partner’ to apply only to those partners who have survived another partner’s death. We have explained that the term ‘surviving partner’ does not contemplate a partner who continues to work at the business after another partner retires or withdraws from the business” (¶¶ 31-32). Although the Revised Uniform Partnership Act of 1997 provides in part that a partner may receive reasonable compensation for services rendered winding up the business of the partnership, the state of Wisconsin has not adopted the 1997 revisions. The court said that under the Wisconsin version of the Uniform Partnership Act (UPA), Reisman is not entitled to remuneration for work performed in furtherance of the partnership, and Bushard is entitled to share equally in PressEnter’s profits (see ¶ 39).
“Additionally, we conclude that the circuit court did not err when it dismissed Reisman’s counterclaim for unjust enrichment. A claim for unjust enrichment requires Reisman to show (1) he conferred a benefit on Bushard; (2) Bushard knew of the benefit; and (3) Bushard accepted or retained the benefit under circumstances that made it inequitable for him to retain the benefit. Here, where the benefit that was conferred on Bushard is mandated by the statute, no claim for unjust enrichment may lie” (¶ 41) (citation omitted). Said the court, “[i]n the absence of an agreement modifying the provisions of the UPA, a court should decline from fashioning an after-the-fact remedy in pursuit of an equitable result when that remedy contravenes the public policy choices established by the legislature” (¶ 45).
The court next turned to Reisman’s argument that the circuit court erred by ordering summary judgment in favor of Bushard without making the threshold determination of whether the dissolution resulted in a wind-up or a continuation. Reisman contended that the dissolution of PressEnter resulted in a continuation, and that Bushard had already received distributions in excess of the continuation value of his interest in the partnership. “Distinguishing in the first instance whether dissolution resulted in a wind-up or a continuation is critical because the settlement of the former partner’s account differs depending on whether it is a wind-up or a continuation. One significant difference between wind-up and continuation is the date on which each partner’s interest in the partnership is valued. When there is a continuation, the departing partner’s interest in the partnership is valued on the date of dissolution. When there is a wind-up, by contrast, the value of the partnership on the date of dissolution is less significant. The important date is the date of termination, when the winding up of the partnership’s affairs has been completed” (¶ 48).
Under the Uniform Partnership Act, a partnership is generally dissolved when a partner chooses to leave the partnership (see ¶ 50). “It is at this juncture, the point of dissolution, that the [departing] partner makes an election. The departing partner has two primary options: wind-up or continuation. Every partnership dissolution causes a wind-up rather than a continuation unless the outgoing partner consents to a continuation. This court recently explained that it is improper for a circuit court to conclude that the dissolution of a partnership resulted in a continuation simply because the partnership’s business actually continued” (¶¶ 50-51) (internal quotation & citations omitted).
In this case, the circuit court was not presented with any evidence that Bushard consented to a continuation at the time of dissolution (see
¶ 55). “Rather, the undisputed facts support the opposite inference, that Bushard did not consent to a continuation. After the dissolution, Reisman persisted in paying Bushard partnership distributions. Had Bushard consented to a continuation, he would not have been entitled to partnership distributions. Rather, his 50 percent share of PressEnter would have been fixed on the date of dissolution, and he would have received that amount as a creditor. Because there was no genuine dispute of material fact, the circuit court correctly concluded that the dissolution of PressEnter resulted in a wind-up. The court’s entry of summary judgment in favor of Bushard was appropriate” (¶¶ 57-58).
Justice Roggensack filed a dissenting opinion.
Civil Procedure
Jurisdiction – Long-arm Statute
Rasmussen v. General Motors Corp., 2011 WI 52 (filed 1 July 2011)
The plaintiffs sued several automobile companies, alleging a far-flung antitrust conspiracy. Nissan Japan moved for dismissal based on a lack of jurisdiction. The trial judge dismissed Nissan Japan, finding that it had not been active in Wisconsin and that Nissan North America was a separate corporate entity whose activities could not be attributed to Nissan Japan. In an unpublished decision, the court of appeals affirmed.
The supreme court affirmed the court of appeals in a majority opinion written by Justice Roggensack. The plaintiffs argued that the activities of Nissan North America should be attributed to Nissan Japan through an agency theory or because Nissan Japan exercised sufficient control over Nissan North America in a way that blurred their “corporate integrity” (¶ 28). The supreme court disagreed. Wisconsin cases have “never grounded general personal jurisdiction of a corporation in an alleged agency relationship with another corporation” (¶ 31). Something more than agency is required. “[E]ven if we were to assume, arguendo, that Nissan North America were the agent of Nissan Japan, we decline to expand Wisconsin law attendant to specific personal jurisdiction such that general personal jurisdiction may rest solely on an alleged agency relationship” (¶ 36).
The circuit court properly found “no factor that would weigh in favor of ignoring the separate corporate identities of Nissan Japan and Nissan North America” (¶ 39). “Control sufficient to cause a court to disregard separate corporate identities is the sine qua non of the alter-ego theory for piercing the corporate veil.... Rasmussen has provided no factual or legal predicates for disregarding the separate corporate identities of Nissan Japan and Nissan North America. Therefore, Nissan Japan is not subject to general personal jurisdiction based on the substantial and not isolated activities of Nissan North America”
(¶¶ 49-50).
Concurring, Chief Justice Abrahamson wrote separately “to put the issue of general personal jurisdiction over a parent corporation in context, to explore the complicated nature of the issue presented, and to raise concern about the majority opinion’s references to ‘agency’”(¶ 54). “Using an analysis based upon the extent of control to determine whether the parent company has sufficient contacts with the forum state (through the control of the subsidiaries actions in the state), as opposed to determining whether the corporate entities should be merged or the corporate veil pierced, moors the jurisdictional analysis to jurisdictional principles and avoids the potentially confusing interplay of using a substantive legal test for jurisdictional analyses” (¶ 68).
Criminal Law
Exposing a Child to Harmful Materials – Elements – Jury Instructions
State v. Gonzalez, 2011 WI 63 (filed 8 July 2011)
Gonzalez was convicted by a jury of exposing a child to harmful material contrary to Wis. Stat. section 948.11(2)(a) and was acquitted of intentionally causing a child to view sexually explicit conduct. These charges arose from an incident that occurred in a two-bedroom apartment while the defendant was taking care of his 3½-year-old daughter. It was undisputed that during the evening in question the defendant masturbated while watching a pornographic film in the living room of the apartment. The state contended that the defendant admitted to investigating officers that “he was aware that his daughter had entered the living room, and that the defendant, ‘caught up in the moment,’ failed to stop his activities, thereby exposing his daughter to the pornographic film and sexually explicit behavior” (¶ 8). At trial, the defendant denied any knowledge that the child was present in the living room while the video was playing. “He claimed that the child was never within his ‘eyeshot.’ His testimony suggested that if the child saw the video, the viewing was accidental and without his knowledge” (¶ 14).
Section 948.11(2)(a) defines the crime of exposing a child to harmful material as follows: “Whoever, with knowledge of the character and content of the material, sells, rents, exhibits, plays, distributes, or loans to a child any harmful material, with or without monetary consideration, is guilty of a Class I felony if any of the following applies: 1. The person knows or reasonably should know that the child has not attained the age of 18 years. 2. The person has face-to-face contact with the child before or during the sale, rental, exhibit, playing, distribution, or loan.”
When the court instructed the jury on the elements of this crime, it did not specifically state that the defendant had to knowingly (as opposed to accidentally) exhibit the pornographic material to his daughter. And, instead of instructing the jury that the state had to prove that the defendant knew or reasonably should have known that the child had not attained the age of 18 years (the option from the statute quoted above that was clearly applicable under the facts of this case), the court gave an instruction on the “face-to-face contact” option, which was not appropriate in this case (see
¶ 51); the latter is the option commonly used in cases involving internet transactions (see ¶ 52). During jury deliberations, the jury asked several questions that demonstrated its confusion about the jury instructions and whether the defendant had to know that his daughter was present in the living room during the incident. The circuit court never answered the jury’s questions; it found them moot because the jury reached a verdict while counsel were presenting their arguments to the judge about appropriate responses to the questions.
The defendant appealed his conviction. In a published decision, the court of appeals affirmed. See 2010 WI App 104. The supreme court reversed the decision of the court of appeals. Although all the justices agreed that the conviction should be reversed, the supreme court did not produce a majority opinion. Chief Justice Abrahamson authored the lead opinion that was joined by Justice Crooks and Justice Bradley.
The lead opinion concluded that “the jury was not instructed explicitly or implicitly that it had to determine whether the defendant had knowingly exhibited the harmful material to the child, as distinguished from accidentally or unknowingly exhibiting harmful material to the child. The jury instruction did not sufficiently define the first element of the crime, namely, that the State must prove beyond a reasonable doubt that the defendant knowingly exhibited the harmful material to the child. Accordingly, we are satisfied that the jury instruction misled the jury into believing that the State did not have the burden of proving beyond a reasonable doubt that the defendant knowingly exhibited the harmful material to the child. Viewing the jury instruction in light of the proceedings as a whole, we further conclude that the defendant has established a reasonable likelihood that the jury applied the instruction in a way that relieved the State of its burden of proving every element of the crime beyond a reasonable doubt and therefore applied the potentially confusing instruction in an unconstitutional manner” (¶ 3).
Justice Ziegler filed a concurring opinion that was joined by Justice Roggensack. Like the lead opinion, Justice Ziegler concluded that “in light of these proceedings as a whole, defendant Gonzalez has met his burden of demonstrating a reasonable likelihood that the jury applied the instruction on Count 1 in a manner that violates the constitution. In particular, Gonzalez has met his burden of demonstrating that the instruction was ambiguous and that there is a reasonable likelihood that the jury applied the instruction in a way that relieved the State of having to prove beyond a reasonable doubt that Gonzalez exhibited or played harmful material to three-year-old A.G. I wish to clarify, however, that the jury instruction on Count 1 was a legally correct statement of the law. I concur to highlight that the lead opinion should not be read as now requiring that the word ‘knowingly’ be added to the first element of the jury instruction on Wis. Stat. §
948.11(2)(a). Indeed, both the pattern jury instruction and the instruction given in this case track the exact language of § 948.11(2)(a). In a different case, under a different set of facts, this identical jury instruction might not pose any constitutional concerns” (¶ 116).
Justice Prosser also filed a concurring opinion; he was joined in that concurrence by Justice Gableman. These justices would grant a new trial “solely on the misleading fourth element employed by the circuit court” (¶ 114). This refers to that part of the jury instructions described above in which the court gave the “face-to-face contact” instruction rather than the instruction about the defendant being required to know that the child was under the age of 18 years.
Criminal Procedure
Search and Seizure – Consent Searches – Consent by Tenant When Nearby Cotenant Objects to Search
State v. St. Martin, 2011 WI 44 (filed 22 June 2011)
This case involved a search in a cotenancy context. The defendant and his girlfriend shared an apartment. The girlfriend went to the police department to complain that the defendant had battered her. She also informed the police about her suspicions that the defendant was selling cocaine and that he hid the drugs in the apartment attic. The police then accompanied the girlfriend back to the apartment. Once there, the girlfriend used her key to gain access to the premises for herself and the officers. The defendant was standing near the door but said nothing in objection to the officers’ entry. The defendant was then escorted to a police van and was placed under arrest for battering his girlfriend. After the defendant was taken outside, the officers asked the girlfriend for her consent to search the attic, where, she had said, drugs might be hidden. She consented to the search of the attic. Officers then went outside to the police vehicle and asked the defendant for his consent for them to search the residence. He refused. The police nonetheless searched the attic and found cocaine and currency. A search warrant was subsequently obtained, and additional evidence was recovered as a result of its execution.
In the subsequent criminal prosecution, the circuit court denied the defendant’s motion to suppress the evidence recovered in these searches, and the defendant then pleaded guilty. He appealed the conviction to the court of appeals, which certified the case to the supreme court. The certified question was as follows: “Whether the rule regarding consent to search a shared dwelling in Georgia v. Randolph, 547 U.S. 103 (2006), which states that a warrantless search cannot be justified when a physically present resident expressly refuses consent, applies where the physically present resident is taken forcibly from his residence by law enforcement officers but remains in close physical proximity to the residence such that the refusal is made directly to law enforcement on the scene?” (¶ 2) The supreme court granted certification and, in a majority decision authored by Justice Crooks, answered this question in the negative.
To reach this conclusion, the court looked to two leading U.S. Supreme Court decisions relating to consent searches in the shared-dwelling context. In the first case, United States v. Matlock, 415 U.S. 164 (1974), the Supreme Court upheld a warrantless search in a situation in which only one resident had given consent. It held that “the consent of one who possesses common authority over premises or effects is valid as against the absent, nonconsenting person with whom that authority is shared.” Matlock, 415 U.S. at 170. Matlock had been arrested in the yard in front of the home where he lived, and a woman who also lived there gave consent to police to search the house while the defendant was detained “in a squad car a distance from the home” (¶ 3). Police never asked Matlock for his consent for the search.
In Georgia v. Randolph, a warrantless search was conducted pursuant to the consent of one resident even though the second resident was present on the threshold and objected. In Randolph, the U.S. Supreme Court held that the warrantless search violated constitutional protections on the grounds that “the cooperative occupant’s invitation adds nothing to the government’s side to counter the force of an objecting individual’s claim to security against the government’s intrusion into his dwelling place.” 547 U.S. at 115.
In this case, the Wisconsin Supreme Court concluded that the import of the Matlock and Randolph cases is that “a non-consenting tenant, but only one who is present for the ‘threshold colloquy,’ [has] the power to negate a co-tenant’s consent for a shared-dwelling search” (¶ 4). “The Randolph Court noted it was drawing a fine line between the Matlock and Randolph fact patterns such that ‘if a potential defendant with self-interest in objecting is in fact at the door and objects, the co-tenant’s permission does not suffice for a reasonable search, whereas the potential objector, nearby but not invited to take part in the threshold colloquy, loses out’” (id.) (citation omitted).
The majority concluded that the rule stated in Randolph does not apply to this case because the defendant was not physically present at what the U.S. Supreme Court called the “threshold colloquy.” Said the court,
“[t]his case closely resembles the facts presented in the Matlock case. The consent given by [the defendant’s] co-tenant was valid, and as in the Matlock case, that consent rendered the search constitutionally permissible because it cannot be trumped by an objection from an absent tenant. The cocaine and currency seized in the initial search of the attic is therefore admissible evidence” (¶ 31). During its analysis, the court noted that “there is no allegation or evidence that the removal of [the defendant] from the apartment was pretextual” (¶ 7).
Justice Bradley, joined by Chief Justice Abrahamson, dissented. Said Justice Bradley, “[c]ontrary to the majority, I conclude that this case falls squarely within the rule enunciated in Randolph. Because I determine that [the defendant] was physically present when he refused to consent to the search, I respectfully dissent” (¶ 35).
Searches – Vehicles – Plain View
State v. Buchanan, 2011 WI 49 (filed 29 June 2011)
The defendant was pulled over after allegedly committing a traffic violation. A protective “frisk” of his car revealed suspected drug-related materials. The police officers then searched the car more extensively and discovered additional marijuana. The circuit court denied the defendant’s motion to suppress the marijuana as the product of an unlawful search. He was convicted of possessing marijuana with intent to deliver. The court of appeals affirmed in an unpublished opinion.
The supreme court affirmed in a unanimous opinion authored by Justice Crooks. “The threshold question is whether the initial protective search of Buchanan and his vehicle was valid; if it was valid, we must also address whether the piece of marijuana plant that the Wisconsin State Trooper discovered on the car floor during the protective search was in plain view and whether there was probable cause to justify seizing it” (¶ 1).
Reasonable suspicion justified the trooper’s protective search of the defendant and his car. “First, the trooper had seen the driver make a movement that could reasonably be understood to indicate that the driver was putting an item out of sight beneath the driver’s seat, and as the driver did so, the car had weaved in the lane before pulling off to the side of the road” (¶ 11). “Second, the trooper had observed in his initial contact with Buchanan that Buchanan was visibly shaking and ‘very nervous’” (¶ 12). “The third piece of information the trooper had to consider at that point was the information he had obtained via computer concerning Buchanan’s arrest record, which included arrests for drug delivery, murder, armed robbery and false imprisonment” (¶ 13). “A holding that reasonable suspicion can be established under circumstances that include a furtive movement, unusual nervousness, and a troubling arrest record for violent crimes and drug trafficking is consistent with this court’s precedent. It is significant under a totality of the circumstances analysis that all of these factors were included here” (¶ 19).
Next, the court held that the seizure of “a piece of plant material” in the car fell within the plain-view doctrine. The trooper’s uncontradicted testimony was that he saw the plant stem as soon as he looked down and into the car. Nothing was moved. Moreover, he was lawfully entitled to “frisk” the car’s interior. The trooper’s experience enabled him to identify the plant stem as contraband.
Sentencing – Sentence Credit – Consecutive Sentences
State v. Lamar, 2011 WI 50 (filed 29 June 2011)
This case presented a complex sentence-credit question. The facts essential to understanding the issue are described in the paragraphs below.
The defendant pleaded guilty to both count I of the information (aggravated battery as a habitual offender) and count II (misdemeanor bail jumping as a habitual offender). The court sentenced him to 17 years (12 years of initial confinement plus 5 years of extended supervision) on count I; it imposed a concurrent term of 2 years (1 year of initial confinement and 1 year of extended supervision) on count II. The defendant began serving the confinement portions of these sentences on Sept. 15, 2006. As part of the negotiation that resulted in the guilty pleas, the state dismissed count III (another misdemeanor bail jumping as a habitual offender).
Given the presentence credit that had been awarded him, the defendant completed the confinement portion of his count II sentence on March 23, 2007 but remained in custody serving the much longer but concurrent portion of his confinement term on count I.
The defendant subsequently was permitted to withdraw his guilty plea to count I and, because the state was therefore no longer bound by the original plea agreement, the court reinstated count III.
Pursuant to a new plea agreement, the defendant pleaded guilty to amended count I (aggravated battery without the habitual-offender enhancement) and to amended count III (bail jumping without the habitual-offender enhancement). The court sentenced him to 15 years (10 years of initial confinement and 5 years of extended supervision) on amended count I; it sentenced him to a concurrent term of 9 months’ incarceration on amended count III. However, the court ordered that these two concurrent sentences be served consecutively to the sentence originally imposed on count II.
The defendant then sought credit against his amended count I and amended count III sentences for the time he spent in custody between the date he began serving his sentence on count II (Sept. 15, 2006) and the date he completed the initial confinement portion of his count II sentence (March 23, 2007). He argued that he was entitled to this credit under Wis. Stat. section 973.04, which provides that “[w]hen a sentence is vacated and a new sentence is imposed upon the defendant for the same crime, the department shall credit the defendant with confinement previously served.” The circuit court denied the credit. In a published decision, the court of appeals affirmed. See 321 Wis. 2d 334. In a majority decision authored by Justice Gableman, the supreme court affirmed the court of appeals.
The supreme court rejected the defendant’s interpretation of section 973.04 and concluded that “under State v. Boettcher, 144 Wis. 2d 86, 423 N.W.2d 533 (1988), [the defendant] is not entitled to additional sentence credit. We hold that an offender is not entitled to additional sentence credit pursuant to § 973.04 when (1) the vacated sentence was originally imposed concurrent to a separate sentence, (2) the separate sentence is not vacated, (3) the vacated sentence is reimposed consecutively to the non-vacated sentence, and (4) the time that the defendant requested was served in satisfaction of the sentence that was not vacated. Additionally, we conclude that [the defendant] is not entitled to additional sentence credit by virtue of the constitutional protection against double jeopardy” (¶ 4).
Chief Justice Abrahamson filed a dissenting opinion that was joined in by Justice Bradley.
Family Law
Divorce – Marital Settlement Agreements – Disability Pensions
Topolski v. Topolski, 2011 WI 59 (filed 8 July 2011)
The parties in this case were divorced in 1995 after a 24-year marriage. At the time of divorce the husband was in good health and was employed as an electrician. The divorce judgment incorporated a marital settlement agreement (the agreement) setting forth the division of the parties’ property. Both parties permanently waived maintenance. The agreement awarded to the husband “all [of his] retirement, pension, and deferred benefit accounts” if and when received by him, minus the sum of $912.88 per month, which he was to pay to the wife.
In 1998 and 2000, the husband suffered a series of strokes, which left him unable to work as an electrician. In 2001 (at age 53) he began to receive “disability pension” payments under the Electrical Construction Industry Pension Plan. The issue before the supreme court was whether the husband was required pursuant to the agreement to make the $912.88 monthly payments to his ex-wife at the time he began receiving his disability pension.
In a majority decision authored by Chief Justice Abrahamson, the supreme court began its analysis by observing that nothing in the agreement refers to the disability of either party or to disability payments (see ¶ 35), and that disability benefits are ordinarily viewed as distinct from a retirement, pension, or deferred benefit account. “Disability benefits are generally considered wage replacement, that is, compensation for lost future wages because a physical or mental condition prevents the person from being gainfully employed” (¶ 45).
Having determined that nothing in the agreement addresses disability benefits (see ¶ 49), the court next concluded that the agreement does not require the husband to pay to the wife any portion of his disability pension that he received before reaching age 62. “The husband’s disability pension under the Pension Plan, beginning when he was 53 years old and continuing until he attains the age of 62, replaces lost wages and therefore does not constitute a retirement, pension or deferred benefit account under the Marital Settlement Agreement” (¶ 74).
When the husband reaches age 62, under the pension plan he will be eligible to receive an unreduced “early pension,” which is the same amount as his “normal pension” would be at age 65, which in turn is the same amount as his disability pension has been. “Thus, the husband’s disability pension under the Pension Plan when he reaches the age of 62 constitutes a retirement, pension, or deferred benefit account under the Marital Settlement Agreement. And so, pursuant to the Marital Settlement Agreement, when the husband reaches age 62, the husband must pay the wife $912.88 per month if and when the husband receives the disability pension under the Pension Plan” (¶ 74).
“This holding places the husband and wife in the same position they would have been in had the husband not become disabled. This holding gives both the husband and wife exactly what they bargained for in the Marital Settlement Agreement: The husband retains, as the parties agreed, full right to earnings from his employment (here the disability payments are a substitute for earnings from employment); the wife is not entitled, under the Marital Settlement Agreement, to any part of the husband’s earnings. The husband’s retirement benefits under the Pension Plan are not reduced or otherwise affected by the disability payments made to the husband. ‘If and when’ the husband ‘receives’ his retirement benefits under the Pension Plan, the wife is to be paid $912.88 per month under the Marital Settlement Agreement. The husband is eligible to receive full retirement benefits at age 62 under the Pension Plan and ‘if and when’ the husband receives retirement benefits at age 62 the husband pays the wife the monthly sum upon which they agreed in the Marital Settlement Agreement” (¶ 7).
Justice Roggensack filed a dissenting opinion that was joined in by Justice Prosser.
Insurance
Bad Faith – Breach of Contract
Brethorst v. Allstate Property & Casualty Ins. Co., 2011 WI 41 (filed 14 June 2011)
An intoxicated, uninsured driver injured Brethorst, who filed a claim with her uninsured motorist (UM) insurer. With her medical bills near $10,000, she tried to settle but her insurer, Allstate, offered her only about $1,800 in addition to the $5,000 it had already paid in medical expenses. The insurer expressed doubts about the severity of Brethorst’s injury despite her medical bills and a doctor’s letter. Brethorst sued Allstate for bad faith in failing to investigate, not having her claim reviewed by someone with medical training, and ignoring her medical proof (see ¶ 15). Allstate moved to bifurcate the bad-faith claims from the contract claims and for a stay of all proceedings until the contract claims were determined. The circuit court denied Allstate’s motions.
On certification from the court of appeals, the supreme court affirmed in a majority opinion written by Justice Prosser. The majority summarized the holding as follows: “We conclude the following: (A) Some breach of contract is a fundamental prerequisite for a first-party bad faith claim against an insurer. (B) Breach of contract and first-party bad faith are separate claims. (C) An insured may file a bad faith claim without also filing a breach of contract claim. The policies articulated in Dahmen v. American Family Mutual Insurance Co., 2001 WI App 198, 247 Wis. 2d 541, 635 N.W.2d 1, which require bifurcation when both bad faith and breach of contract claims are brought together, are only partially applicable when a party has chosen to plead only a bad faith claim. (D) The insured may not proceed with discovery on a first-party bad faith claim until she has: (1) pleaded a breach of contract by the insurer as part of a separate bad faith claim, and (2) satisfied the court that she has established such a breach or will be able to prove such a breach in the future. (E) In this case, Brethorst has supplied the insurer and the court with sufficient evidence of a breach of contract by the insurer that she may proceed with discovery on her bad faith claim. On the facts before us, Brethorst has shown uncontradicted evidence that she incurred $9,789 in medical expense for treatment from injuries she suffered in an automobile accident caused by an uninsured motorist. The insurer’s failure to pay all these expenses without submitting any reasonable basis in law or fact (as opposed to theory) for its failure to do so justifies Brethorst going forward with discovery on her bad faith claim” (¶ 5).
The majority opinion reviews the development of first-party bad faith in Wisconsin case law before addressing Allstate’s request for bifurcation. “The present case is the first to come before this court in which the insured has initiated a bad faith claim without filing any accompanying claim for breach of contract. Thus, this case is not covered by our longstanding law, and it requires additional analysis” (¶ 51). The court’s assessment of the cases “substantiates the need to establish a wrongful denial of some contracted-for benefit before permitting discovery for a bad faith claim. The fact that a first-party bad faith claim is a separate tort and may be brought without also bringing a breach of contract claim, does not change the fact that first-party bad faith cannot exist without some wrongful denial of benefit under the insurance contract” (¶ 56).
“Our principal concern in this case involves what prerequisites, if any, are required for a plaintiff to proceed to discovery on a bad faith claim. May the circuit court authorize discovery on a bad faith claim without any showing by the plaintiff that the insurer has wrongfully denied benefits under the insurance contract?” (¶ 59) The court concluded “that some breach of contract by an insurer is a fundamental prerequisite for a first-party bad faith claim against the insurer by the insured” (¶ 65). Discovery may not proceed until the plaintiff has pleaded a breach of contract by the insurer as part of a separate bad-faith claim and satisfied the court that the insured has established such a breach or will be able to prove such breach in the future (see ¶ 76).
In a concurring opinion joined by Chief Justice Abrahamson, Justice Bradley agreed “that Brethorst’s freestanding claim for bad faith can proceed. In my view, however, the majority obscures what should be a straightforward analysis. Because it needlessly alters the well-established law and creates out of whole cloth new pleading requirements and uncertain procedures that are unnecessary and confusing, I respectfully concur”
(¶ 87).
ERISA – Subrogation – “Made-Whole” Doctrine
Steffens v. BlueCross BlueShield, 2011 WI 60 (filed 8 July 2011)
Steffens was injured in a car accident in 2005. He underwent various treatments, including back surgery, for which his ERISA carrier, BlueCross, paid more than $60,000. Steffens sued the other driver and his insurer and also named BlueCross as a subrogated party. In his pleadings, he alleged that his pain and back injury were caused by the collision. Steffens eventually settled for $100,000 with the other driver’s insurer. When BlueCross asserted its subrogated right, which was not subject to the “made-whole” doctrine, Steffens then alleged that his back injuries were not caused by the accident (and hence not subject to subrogation). The circuit court ordered Steffens to reimburse BlueCross for more than $60,000, ruling that Steffens was bound by his earlier assertions that his back injury was caused by the accident. The court of appeals reversed in an unpublished opinion and remanded for a factual determination of whether the back injury was related to the accident.
The supreme court reversed the court of appeals in a majority decision authored by Justice Roggensack. The opinion reviews ERISA plans, the role of a “plan administrator,” the discretion that may be accorded the plan administrator’s decisions, and the ability of ERISA plans to bargain out of the made-whole doctrine (see ¶ 52). In this case, the “subrogation clause in the Plan unambiguously disavows the make-whole doctrine and asserts BlueCross’s right of first priority” (¶ 53). The plan also accords the “Plan administrator discretion to make subrogation decisions” (¶ 54). “Under the facts and circumstances presented, we conclude that the Plan administrator’s determination was not arbitrary and capricious” (¶ 56).
Those “facts and circumstances” included Steffens’ many statements (for example, in the complaint, in interrogatory responses, and to the court) that his injuries were caused by the accident. “In sum, given Steffens’ consistent averments prior to settlement that the surgery-necessitating injuries arose out of the accident, we cannot say that the Plan administrator’s determination that the surgery-necessitating injuries arose out of the accident was arbitrary and capricious. Stated another way, because Steffens himself averred both before and after BlueCross’s counterclaim for reimbursement under the Plan that the surgery-necessitating injuries arose out of the accident, it is reasonable for the Plan administrator to have reached the same conclusion” (¶ 66). The supreme court found it unnecessary to address whether the doctrine of judicial estoppel also bound Steffens.
Chief Justice Abrahamson, joined by Justice Bradley, dissented. “The majority opinion assumes the plan administrator interpreted the Plan but does not tell us who the plan administrator is, when the administrator made a decision about subrogation, or how and why the plan administrator made the decision about subrogation” (¶ 74).
Municpal Law
Highways – Right of Way – Determining Width of Highways
Affeldt v. Green Lake County, 2011 WI 56 (filed 6 July 2011)
The plaintiffs objected to Green Lake County’s removal of trees and fences along their farm property on County Highway B in the township of Green Lake. This highway has been in existence since the late 1800s. The plaintiffs sought a judgment declaring that the trees and fences are not within the county’s right-of-way and enjoining their removal. The county moved for summary judgment, and the circuit court granted the county’s motion. The circuit court determined that the plaintiffs failed to set forth sufficient evidence to rebut the presumption under Wis. Stat. section 82.31(2)(a) that Highway B is 66 feet (four rods) wide. (The width of the highway was the critical issue in this case: if Highway B is a full four rods wide, then the county was within its authority to remove the trees and fences along the plaintiff’s property.)
In an unpublished decision, the court of appeals affirmed the circuit court. In a majority decision authored by Justice Ziegler, the supreme court reversed the court of appeals. It concluded that the county was not entitled to summary judgment because the plaintiffs set forth sufficient evidence to raise a genuine issue of material fact concerning the width of Highway B (see ¶ 33).
Section 82.31 sets forth the presumptive width of existing highways; the presumptions contained therein, however, are rebuttable (see ¶ 45). The substance of the statute can be gleaned from the analytical framework the court employed to determine whether issues of material fact exist with respect to the highway’s width.
“[I]n applying Wis. Stat. § 82.31 to Highway B, the analysis proceeds as follows: (1) Is Highway B a ‘recorded highway that has been laid out’? (2) Is Highway B a ‘laid out highway’ but not ‘fully and sufficiently described or recorded’ or the records for which ‘have been lost or destroyed’? If so, Highway B is presumed to be four rods wide. (3) Is Highway B an ‘unrecorded highway that has been worked as a public highway for 10 years’? If so, Highway B is presumed to be four rods wide” (¶ 38) (citations omitted).
The majority concluded that the circuit court improperly granted summary judgment to the county because the Affeldts set forth sufficient evidence to raise a genuine issue of material fact concerning the width of Highway B. “Specifically, the Affeldts have set forth specific facts showing that there is a genuine issue as to whether Highway B is a recorded highway that has been laid out. Moreover, assuming Highway B has been laid out but not recorded, the Affeldts have set forth specific facts that, if proven, are sufficient to rebut the presumption that Highway B was laid out four rods wide. Finally, assuming Highway B has not been laid out and instead was created by user, the Affeldts have set forth specific facts that, if proven, are sufficient to rebut the presumption that Highway B is four rods wide” (¶ 69). Although too lengthy to detail here, the opinion identifies issues of material fact with regard to whether the Green Lake County Board resolution adopted in 1939 and purporting to lay out Highway B was an “order” laying out Highway B within the meaning of the relevant statutes at that time (see ¶ 64). The court also analyzed how evidence of ancient fences affects the presumptions codified in section 82.31 (see
¶¶ 46-56).
Chief Justice Abrahamson filed a dissenting opinion concluding that Highway B “is a recorded, laid out highway and as a matter of law ‘shall’ be four rods wide” (¶ 71). Justice Bradley joined this dissent.
Wisconsin Lawyer
