Photo by Richard Hurd
In the author’s view, the cases described below represent some of the most significant Wisconsin Supreme Court decisions from the 2013-14 term.
Excessive Punitive Damages
Kimble v. Land Concepts Inc.1
A jury awarded $1 million in punitive damages against a title insurance company based on a finding of bad faith and a compensatory damages award of $30,000. The supreme court, in an opinion written by Justice Ziegler, reversed both lower courts and concluded that the 33:1 punitive-to-compensatory award ratio was unconstitutionally excessive. In reaching this conclusion, the court relied heavily on U.S. Supreme Court case law, while giving less consideration to the court’s own precedent.
Mr. and Mrs. Kimble had purchased a lakefront lot in Door County and obtained a title insurance policy, face value $370,000, through First American. The deed warranted that the property was benefitted by two easements, the North and the West easements, but neither included a private road on the neighboring lot. That road actually provided highway access to the Kimbles’ lot.
Four years later, when the Kimbles listed the property for sale, the western lot owner, Land Concepts, advised that the couple did not own and could not convey any highway access rights. The Kimbles contacted First American, which responded that while the West easement appeared defective, the North easement continued to afford highway access. Thus, the title insurer declined to participate in the dispute.2 At that time, the insurer withheld some information about a defect in the document recording the North easement. The insurer later asserted that the policy did not insure a particular route of access and recommended the Kimbles have a survey performed of the North easement.
In Brief: Top 9 Recent Wisconsin Supreme Court Decisions
1. Excessive Punitive Damages
Kimble v. Land Concepts Inc.
Issue: In an action against a title insurer for breach of contract and bad faith, was a punitive damages award of $1 million excessive?
Holding: The $1 million punitive damages award could not stand because it did not bear a reasonable relationship to the compensatory damages award or to the harm the plaintiffs suffered.
2. Out-of-State Death and Damages Cap
Waranka v. Wadena Ins. Co.
Issue: Does Wisconsin’s statutory limitation on wrongful-death damages apply to suits in which the death at issue occurred outside Wisconsin?
Holding: The Wis. Stat. section 895.04 cap on wrongful-death damages applies only to wrongful-death causes of action under Wis. Stat. section 895.03, and because that section applies only to deaths occurring in Wisconsin, so too does the damages cap.
3. “Inherently Dangerous” Exception to Independent Contractor Rule
Brandenburg v. Briarwood Forestry Services LLC
Issue: Does the “inherently dangerous” standard for triggering a principal’s vicarious liability for an independent contractor’s negligence apply to persons such as homeowners who do not regularly have employees or hire independent contractors?
Holding: A principal can be liable for an independent contractor’s negligence under the inherently dangerous standard depending on the facts of the particular case.
4. Absent-Witness Instruction
Kochanski v. Speedway SuperAmerica LLC
Issue: Did the circuit court err by giving the absent-witness instruction in a situation in which the defendant did not call certain witnesses to testify concerning the plaintiff’s fall in the defendant’s parking lot?
Holding: Giving of the instruction was error because there was no evidence that the absent witnesses were material and within the defendant’s control, or that it was more natural for the defendant to have called them.
5. Preemption Under Federal Railroad Safety Act
Partenfelder v. Rohde
Issue: Did the Federal Railroad Safety Act (FRSA) preempt the plaintiffs’ claim for damages based on allegations that a train’s failure to slow down caused a collision?
Holding: The FRSA preempted the plaintiffs’ allegations because the Memorial Day parade that led to the collision did not bring the claim within the “specific, individual hazard” exception to FRSA preemption.
6. Business-Judgment Rule
Data Key Partners v. Permira Advisors LLC
Issue: Did the business-judgment rule bar the plaintiffs’ claim against corporate directors?
Holding: The plaintiffs’ claim was barred because they failed to plead sufficient facts to establish that the business-judgment rule — a substantive rule and evidentiary presumption that acts of a board of directors were taken in good faith — did not apply.
7. Equivocal Invocation of Right to Remain Silent
State v. Cummings
Issue: Were interrogations of two defendants unlawful?
Holding: The interrogations of the defendants were lawful because the defendants were equivocal in their invocation of their right to remain silent.
8. Seizure and Knock on Car Window
County of Grant v. Vogt
Issue: Did a law enforcement officer’s knocking on a car window result in a detention of the car’s driver that was unlawful for lack of reasonable cause to make a traffic stop?
Holding: The exchange between the driver and the officer was consensual and not a seizure or detention because the driver was free to leave.
9. Cell Phone Location Searches
State v. Tate
Issue: Was a search of an apartment that was made possible by the use of cell phone and cell site information reasonable?
Holding: The search was reasonable and the resulting evidence admissible because the information provided to support the warrant was sufficiently particular.
Meanwhile, the Kimbles continued to market the property, relying on First American’s assurance about access. They ultimately received a cash offer, which was contingent on resolving the access issue. The Kimbles were unable, however, to negotiate a resolution with Land Concepts and lost the sale. They then sued Land Concepts and several prior owners of their lot, seeking a declaration that the North easement was valid, a prescriptive easement for their use of the cut-off road through Land Concepts’ lot, and breach-of-contract damages from First American for failure to defend their title.
After settling with all but First American, the Kimbles negotiated and paid $40,000 for an easement with Land Concepts and assigned their claim against First American to prior owners, the Stevensons. The Stevensons cross-claimed against First American, asserting breach of contract, breach of fiduciary duty, and bad faith stemming from the insurer’s refusal to defend the title to the Kimble lot.3
The jury found that First American had breached its contract and exercised bad faith by refusing to defend. The jury awarded the Stevensons $50,000 in compensatory damages, and $1 million in punitive damages for bad faith. On motions after verdict, First American sought a reduction of the compensatory damages award, a finding of no bad faith, and dismissal of the punitive damages award. In the alternative, First American argued the punitive damages award was excessive. The circuit court reduced the compensatory damages award to $30,000, but allowed the bad-faith verdict and punitive damages award to stand. The court of appeals affirmed, including a summary affirmance of the punitive damages award, deeming First American’s argument on excessiveness to be insufficiently developed.4
Accepting review of only the punitive damages award, the supreme court first clarified the standard of review. While judges are the gatekeepers before sending the jury a question on punitive damages, once the issue is properly before the jury, the jury’s decision to award punitive damages merits deference. Nonetheless, the award amount is subject to de novo review under the Due Process Clause of the 14th Amendment. Fundamentally, punitive damages are not compensation but are meant to punish the wrongdoer and to deter other people. Under Wis. Stat. section 895.043, punitive damages may be awarded if the defendant acted maliciously toward the plaintiff or in an intentional disregard of the rights of the plaintiff.
The supreme court looked to the three-part test in State Farm Mutual Auto Insurance v. Campbell5 to consider 1) the degree of egregiousness or reprehensibility of the conduct; 2) the disparity between the harm suffered and the punitive damages award; and 3) the difference between the punitive damages award and possible civil or criminal penalties imposed for the conduct. The three State Farm factors have been extrapolated into a six-factor test in Wisconsin, in Trinity Evangelical Lutheran Church & School-Freistadt v. Tower Insurance Co., but the Kimble majority confined its analysis to the Campbell factors.6
Reprehensibility is the most important indicator of reasonableness of a punitive damages award. Here the court concluded that First American’s refusal to defend the Kimbles was reprehensible, to some degree. The court noted that the insurer knew that the North easement did not provide highway access, that there was no reasonable alternative access point, and that by withholding information about the defect in the North easement, First American had caused the Kimbles to waste valuable time and resources. Factors weighing against a heavy degree of reprehensibility were that the damages suffered were economic, not physical; the Kimbles were not financially vulnerable; there was no pattern of misleading conduct; and there was no evidence of intentional malice.7
Next, the court considered the disparity or ratio between the compensatory damages award of $30,000 and the punitive damages award of $1 million. Finding the 33:1 ratio problematic under the U.S. Constitution, the court also considered the harm likely to result from First American’s conduct. The court considered the $40,000 the Kimbles paid to purchase the access to their property, which the title policy was supposed to insure. But the ratio after adding in that amount still was problematic, 14:1. Heeding the Campbell Court’s instruction that “few awards exceeding a single-digit ratio … will satisfy due process,” the court concluded that the $1 million award did not bear a reasonable relationship to either the $30,000 compensatory damages award or the potential harm faced by the Kimbles. Instead, the majority found that a 3:1 ratio was appropriate, and allowed a punitive damages award of $210,000.8
Chief Justice Abrahamson, joined by Justice Bradley, dissented, primarily because the majority had only mentioned the six Trinity Lutheran factors but failed to apply them, and because the majority’s recalculated punitive award of $210,000 was less than the First American policy amount of $370,000, which the insurer stood to lose if it had fulfilled its duty to defend the title.
Out-of-State Death and Damages Cap
Waranka v. Wadena Insurance Co.9
The supreme court accepted review to consider whether Wis. Stat. section 895.04, the Wisconsin wrongful-death damages statute, can be applied in a situation in which the death occurred outside Wisconsin, without also applying Wis. Stat. section 895.03, which creates a cause of action for wrongful death occurring within the state. The court also considered whether a conflict-of-laws analysis was required. Justice Bradley, writing for a unanimous court, held that the wrongful-death damages limitations necessarily apply to wrongful-death actions created by Wis. Stat. section 895.03, but because that statute does not apply to deaths caused outside the state, Wisconsin’s wrongful-death damages statute would not apply to a situation in which the death was caused in Michigan. Accordingly, no conflict analysis was required.
Nicholas Waranka, a Wisconsin resident, participated in a snowmobile event in Michigan in 2009. He was fatally injured during the event. His wife and his estate brought a negligence claim against several other snowmobilers and their insurers. The individual defendants were Wisconsin residents, while several of the insurer defendants had issued policies in Wisconsin. The plaintiff sought a declaration that Michigan’s wrongful-death act would apply to the damages issue in her suit and asserted that a conflict-of-laws analysis was unnecessary.
The circuit court disagreed and applied the Wisconsin $350,000 noneconomic damages cap. The court of appeals ruled that the Michigan wrongful-death liability statute applied. Then, because the Wisconsin legislature had enacted Wis. Stat. sections 895.04 and 895.03 at the same time, the court of appeals held that the damages-limitations section could not be applied independently of the wrongful-death liability section.
Affirming, the supreme court acknowledged that Wis. Stat. section 895.03 plainly does not apply to actions for deaths caused outside Wisconsin. The court then considered whether, under the language of Wis. Stat. sections 893.03 and 895.04, their history, and the in pari materia canon of construction, the damages caps of Wis. Stat. section 895.04 likewise would not apply. The court found that the two provisions are essentially sequential within the statutory framework, and their language is inextricably intertwined.
Earlier decisions have held that the threshold determination for awarding damages in a wrongful-death action is the existence of liability for the wrongful death, and that Wis. Stat. section 895.03 must not be read in isolation from Wis. Stat. section 895.04.10 The statutory history from 1857 forward, as bolstered by the in pari materia canon, also suggests that the statutes must be read together.
After concluding that the two provisions must be read together (meaning that the Wisconsin wrongful-death provisions do not apply to a death caused in Michigan), the court considered whether Michigan or Wisconsin law applied to Waranka’s damages claim. Several decades ago, the U.S. Supreme Court had explained that the Full Faith and Credit Clause required a Wisconsin court to recognize a right of action created by the Illinois wrongful-death statute.11 Looking to the first prong of a conflict-of-laws analysis, the court considers whether a genuine conflict exists between Wisconsin law and the foreign law. If there is a conflict, the court then considers whether the other state has only minimal contacts with the action.
In this case, the insurer argued that there was a conflict, because Michigan did not limit the amount of noneconomic damages a plaintiff can recover, while Wisconsin places a $350,000 limit. The insurer also argued that Michigan had limited contacts with the case. In contrast, Waranka argued that no conflict existed due to the inapplicability of Wisconsin’s wrongful-death liability statute.
The supreme court found no conflict, because Wis. Stat. section 895.04, the damages-cap provision, does not apply independently of Wis. Stat. section 895.03, the liability provision, and the latter does not apply to deaths caused outside Wisconsin.
“Inherently Dangerous” Exception to Independent Contractor Rule
Brandenburg v. Briarwood Forestry Services LLC12
The court was asked to determine whether the “inherently dangerous” standard for triggering a principal’s vicarious liability for an independent contractor’s negligence applies to persons such as homeowners who do not regularly have employees or hire independent contractors. The court traced iterations of the standard for more than a century of case law, some of it conflicting, and along the way distinguished the inherently dangerous exception from the “ultrahazardous” strict-liability standard.
The defendant’s contractor sprayed herbicide on his property to rid it of prickly ash. There was no written contract, and the homeowner set no time restrictions for the spraying. A few days after application, two neighbors with property uphill from that of the defendant noticed that their trees were losing leaves. Ultimately they sued the homeowner as well as the contractor, alleging that the contractor was negligent for failing to take precautions to prevent the herbicide from drifting onto their trees, although not alleging that any conduct of the homeowner was causal. The circuit court ruled that the spraying was neither abnormally dangerous nor ultrahazardous and granted summary judgment to the homeowner. The court of appeals reversed, identifying the proper standard as whether the conduct was inherently dangerous.
Writing for the supreme court, Justice Crooks noted that the inherently dangerous exception is derived from two inquiries: does the activity pose a naturally expected risk of harm, and if so, is it possible to reduce the risk to a reasonable level by taking precautions? The court ultimately concluded the exception was widely accepted and rooted in good policy, because it imposes liability on the parties best positioned to take precautions to avoid harm to others.13
Tracing the history of the exception, the supreme court noted progression from a general rule of liability for one hiring an independent contractor to the current, general rule of nonliability. The independent-contractor exception arose in the mid-19th century and occasionally has blurred with other exceptions. Wisconsin has rejected a strict-liability approach to the inherently dangerous exception.
Instead, the court looked to the Restatement (2d) of Torts, sections 413, 416, and 427, for a framework of imposing liability on an employer for the actions of the independent contractor in a situation in which 1) there exists a naturally expected risk of harm, 2) there exists an opportunity to take precautions against the harm, and 3) the employer knows or has reason to know that the activity poses a risk and requires precautions.14 At the point in litigation when this case came to the supreme court, there had been no determination of what the defendant homeowner knew or had reason to know about the danger inherent in the pesticide treatment.
The homeowner argued that the exception should not be recognized or at least not applied to homeowners. The supreme court disagreed, relying on clear articulation of the rule in the Restatement despite a dearth of directly applicable Wisconsin case law. The Restatement acknowledged the policy reasons for allowing an employer to be held liable along with his or her independent contractor, with emphasis on the risk and the need for special and unusual care, characterized as a “non-delegable duty.”
When the homeowner presented public policy factors to preclude his liability, including that the injury was too remote from the negligence, the injury was wildly out of proportion to his culpability, recovery would impose an unreasonable burden on him, and there would be no sensible or just stopping point,15 the supreme court distinguished the authorities offered, pointing out that the inherently dangerous exception already encompassed public policy determinations, and that here the injury flowed directly from the negligence.
The court also declined to excuse the homeowner’s liability by deeming the activity “extrahazardous,” under Restatement (2nd) of Torts section 520. Assessing the strict liability factors for an extrahazardous activity and their application in non-Wisconsin case law, the court observed that strict liability is seldom imposed on a person who has hired an independent contractor. Rather, it is imposed directly on the actor. In contrast, liability for a person who has retained an independent contractor is described in Restatement sections 416 and 427.16
The homeowner also argued, relying on a comment to Restatement section 413, that he lacked knowledge of the peculiar risks involved, special precautions needed to mitigate them, or any reason to foresee the contractor would ignore safety precautions. On a closer read of that section and related provisions, the court concluded that the Restatement does not condition liability on actual knowledge but instead on the inherent dangers a principal should recognize, have reason to know of, or have reason to contemplate. Thus, the question is whether the homeowner failed to use ordinary care. In this case, there was undisputed testimony about the risk of drift of the herbicide onto neighboring properties and also of various means to reduce that risk. Having established the contractor’s work as inherently dangerous, the questions for remand were whether the homeowner failed to use ordinary care concerning any danger in the spraying of which he was or should have been aware and whether any harm that occurred was caused by the spraying.17
Chief Justice Abrahamson, joined by Justice Bradley and Justice Prosser, dissented in part and concurred in part. They viewed the question of a principal’s vicarious liability for an independent contractor’s negligence to be well settled and regarded the majority, by remanding for consideration of the homeowner’s knowledge of the dangerous activity in a case in which no homeowner negligence was pleaded, to have confused the doctrine. The dissent also urged clarification of Wisconsin Jury Instruction-Civil 1022.6.18
Absent Witness Instruction
Kochanski v. Speedway SuperAmerica LLC19
The supreme court held the circuit court erred by giving the absent-witness instruction, Wisconsin Jury Instruction-Civil 410, under circumstances in which the plaintiff’s fall in a gas station parking lot was captured on video, but there was no evidence that the absent witnesses (former Speedway employees) were material and within the control of defendant Speedway, or that it was more natural for Speedway to have called them. The supreme court, in an opinion written by Justice Roggensack, also ruled that Speedway’s decision not to call these witnesses did not reasonably lead to the conclusion that Speedway was unwilling to allow the jury to have “the full truth,” and that giving the instruction was prejudicial.
Plaintiff Kochanski brought negligence and safe-place claims after he fell on a snowy curb while trying to enter a Speedway store. He offered his own testimony, a video from the store surveillance camera, and Speedway’s discovery responses naming five former employees who were on duty at the time of the accident. Speedway’s defense relied on the video and its inability to locate the manager on duty at the time. At the plaintiff’s request, the circuit court gave the absent-witness instruction, an instruction that has a “significant potential for inaccuracy and unfairness”:20
“If a party fails to call a material witness within [its] control, or whom it would be more natural for that party to call than the opposing party, and the party fails to give a satisfactory explanation for not calling the witness, [the jury] may infer that the evidence which the witness would give would be unfavorable to the party who failed to call the witness.”
The circuit court reasoned that the jury had a right to know about Speedway’s snow-removal methods, and because the defense did not call employees who would have known those methods and the video did not show whether the curb was salted before the accident, giving the instruction was proper. The plaintiff’s counsel argued on closing that “if there is a witness that would have been natural for [SuperAmerica] to call to explain what was done on this day, you can infer that had they called the witness [SuperAmerica] would have gotten some unfavorable testimony.”21 The jury returned a verdict in favor of Kochanski.
On appeal, Speedway argued that the missing witnesses were not material, their testimony would have been cumulative to the video evidence, and it is not more natural for the employer to call former employees. The court of appeals agreed that the record did not support giving the absent-witness instruction and reversed.
The absent-witness rule is based on the somewhat circular logic that a failure to bring forth some evidence that would elucidate the facts creates the inference that the party is afraid to put on that evidence, and that fear itself is some evidence that the absent fact or witness would have negatively affected that party. The supreme court cautioned that the rule creates only a permissible inference, not a presumption. Facts – and not mere assumptions or speculation – necessary to support giving the instruction include absence of a material witness, that the witness was in the noncalling party’s control, and that the absence was not explained satisfactorily.22
The record must show that the absent witness could supply testimony with strong probative value, not merely cumulative evidence. As to the control element, courts cannot assume the witness was more available to one party than the other, and the instruction is improper if the witness was equally available to both parties. As to the explanation of absence, the instruction is proper only if failure to call a witness leads to the conclusion that “the party is unwilling to allow the jury to have the full truth.”23
Assessing whether the three necessary factors were established to justify giving the instruction, the supreme court found no showing that the former employees had information of strong probative value. Although the circuit court reasoned that current employees could testify about Speedway’s snow-removal procedures, there was no record evidence to support that reasoning and Kochanski never argued the point. Nor did the plaintiff establish that the former employees were peculiarly under Speedway’s control; again, the circuit court merely speculated that former employees retained pension or other relationships with Speedway, and Kochanski acknowledged having their contact information before trial. Last, Speedway offered the explanation that the video supported its defense, the manager on duty could not be located (even by his parents), and nothing called into question the truth of Speedway’s explanation.24
The court then considered the issue of prejudice. The special verdict question was problematic because it blended the two claims of negligence and a safe-place statutory violation. The latter imposes a higher standard of care and includes a constructive-notice component, usually tied to a hazard that has existed for some time. To find in the plaintiff’s favor, the jury had to find that Speedway had notice of the allegedly unsafe condition.
But Kochanski presented no evidence that Speedway did not have satisfactory snow-removal processes or that it did not follow them. The surveillance video showed a yellow curb visible through a light snow. From this, the supreme court reasoned that the jury must have coupled the video with the negative inference from the absent-witness instruction. Explaining that a party cannot rely on an inference to satisfy a necessary element of proof, the court concluded that the jury would not have found that Kochanski satisfied the notice element of his claim but for the negative inference from Speedway’s decision not to call former employees about its snow-removal methods.25
Justice Bradley and Chief Justice Abrahamson dissented, as did Justice Prosser. The first writers focused on the importance of the full surveillance video in providing notice of the unsafe condition and considered the majority to have usurped the circuit court’s discretion in determining whether record evidence supported the absent-witness instruction. This dissent also criticized the majority for omitting any discussion of the “plain view” rule under safe-place jurisprudence.26 Justice Prosser questioned the majority’s failure to discuss the current employees whom Speedway failed to call and the total lack of evidence of Speedway’s policy on salting or snow removal.27
Preemption under Federal Railroad Safety Act
Partenfelder v. Rohde28
This case resulted from a traffic accident. A woman was driving her van through Elm Grove during the annual Memorial Day parade. The van became stuck on railroad tracks while a train was approaching. A police officer pulled the driver out of the van, and the driver’s husband, who had been in another car, reached into the van to unbuckle their child. Although the train crew had applied the emergency brakes, a collision occurred and the driver’s husband and the police officer were injured. The child was not hurt.
Some weeks before the parade, the Elm Grove Police Department had given the railroad written notice of the parade and advised that parade-related activities might increase pedestrian traffic around the tracks. The police department did not request that trains’ speed be reduced. A railroad employee, Rohde, sent a memo asking that train crews be notified and that the train bell be sounded continuously. At the time of the collision, the train was travelling at a speed of 42.5 miles per hour, below the 50 miles-per-hour speed limit.
The primary issue was whether the Federal Railroad Safety Act (FRSA) expressly preempts a state-law negligence and safe-place claim based on train speed or whether the particular claim fell within the “specific individual hazard” exception to FRSA preemption. In a unanimous opinion written by Justice Prosser, the supreme court reversed the court of appeals and held that the Memorial Day parade was not a “specific, individual hazard” because the parade created only a generally dangerous traffic condition. The court also affirmed denial of summary judgment for claims regarding the train crew’s reaction to the van once it became visible to the crew.29
A key, although not the sole, factor in considering whether a claim can avoid preemption is whether the particular condition or event is susceptible of federal regulation. The supreme court explained that preemption is appropriate when 1) Congress expressly sets forth a law’s preemptive effect, 2) there is a reasonable inference that the subject of the law in question is in a field that Congress intends to occupy, and 3) state law conflicts with federal law. The FRSA was created “to promote safety in every area of railroad operations and reduce railroad-related accidents and incidents,” and as such the FRSA requires numerous federal safety regulations, including maximum train speeds.30 This preemption applies to state common law claims as well as statutory claims, but under CSX Transportation Inc. v. Easterwood, exempts from preemption a failure to slow or stop a train in response to “a specific, individual hazard.”31 Because it was undisputed the train was travelling below maximum allowed speed, the plaintiffs’ claim that Soo Line should have slowed its train in response to the parade traffic would not be preempted if the parade was deemed a specific, individual hazard.
The supreme court reviewed case law applying the exception, gleaning that such a hazard must be a unique danger as opposed to a generally dangerous condition, pose an imminent collision risk, and not be susceptible to a national standard. All factors must be met. Here, the parade was more a traffic condition than an event, and the parade itself did not risk imminent collision.
In an analogous federal case, Baker v. Canadian National, plaintiffs asserted that because the railroad knew construction workers would be working near and frequently crossing the tracks, the railroad should have issued a slow-down order. But the Baker court explained that a specific, individual hazard is limited to transient conditions that could lead to an imminent collision. In light of this authority, the Wisconsin Supreme Court held that the Memorial Day parade did not constitute a specific, individual hazard, and the claim based on failure to slow the train was preempted. Remand was appropriate to consider the second claim: that the train crew was negligent in responding to the van, once the crew saw that it was stuck on the tracks. Soo Line conceded, and the court agreed, that this latter scenario was a specific, individual hazard.32
Data Key Partners v. Permira Advisers LLC33
Among the questions presented here was an interpretation of the business-judgment rule, codified in Wis. Stat. section 180.0828. The supreme court considered whether a shareholder alleging breach of fiduciary duty by a corporation’s directors had pleaded facts that, if true, would satisfy the conditions for director liability under the business-judgment rule and the director-immunity statute. The business-judgment rule is both a matter of substantive law and a procedural device to allocate burdens of proof. In this case, the U.S. Supreme Court’s analysis in Bell Atlantic Corp. v. Twombly guided the Wisconsin Supreme Court’s review of sufficiency of the pleadings.34
Plaintiffs Data Key Partners and several individuals (collectively Data Key) were minority owners of Renaissance Learning Inc. The defendants included the founders of Renaissance, the Pauls, who controlled 69 percent of the Renaissance shares, and other Renaissance directors. Permira Advisers and others made several offers to purchase Renaissance. Permira’s final offer, which included a $13 million penalty if the sale was cancelled, was $15 per share to the Pauls and $16.60 per share to the minority shareholders, an offer the Renaissance board of directors approved and shareholders accepted.
Before the sale was completed, however, another company, Plato, started a bidding war by offering $16.90 per share for all interests. Before the Renaissance board rejected that offer, Data Key filed suit to stop the sale to Permira.35 Data Key alleged that the Renaissance directors had breached their fiduciary duty to minority shareholders by putting their personal interest in selling to Permira ahead of the interests of the company and thus were not entitled to any protection of Wis. Stat. section 180.0828.
The Pauls sought to dismiss Data Key’s complaint, asserting that the Plato offer had many contingencies that might not be fulfilled before the sale to Permira was set to close, and the defendants wanted to avoid the $13 million penalty. Through the sale to Permira, the minority shareholders received a 40 percent premium on their share value, worth approximately $10 million. The circuit court granted dismissal, finding the Pauls were protected by the business-judgment rule and had violated no legal duty by selling to Permira. The court of appeals reversed in part, concluding that the complaint alleged sufficient facts to show breach of fiduciary duty and that Wis. Stat. section 180.0828 could not be used to dismiss a complaint.36
The supreme court began by describing the legal standards for review of a motion to dismiss. The court also discussed Twombly, which clarified the notice-pleading requirements under the federal rules. Those standards require more than labels and conclusions, or a formulaic recitation of the elements of a cause of action. A complaint should not “stop short of the line between possibility and plausibility of entitlement to relief.”37 Twombly makes clear that the sufficiency of a complaint depends on the substantive law that underlies the claim asserted, because the substantive law drives what facts must be pleaded. The court deemed the business-judgment rule a substantive law because board action taken in good faith and honest belief that the board’s decisions were in the best interest of the company cannot form the basis for a legal claim against the directors.
Procedurally, the business-judgment rule creates an evidentiary presumption that acts of a board were taken in good faith and precludes courts from second-guessing business decisions. The rule means that a director is not liable unless the facts pleaded constitute “(1) a willful failure to deal fairly with a shareholder in a matter in which the director has a material conflict of interest; (2) acts from which the director derived an improper personal profit, or (3) willful misconduct. [Wis. Stat. section] 180.0828(1)(a), (c) and (d).” In short, to survive a motion to dismiss, plaintiffs need not specifically identify the business-judgment rule but must plead facts that plausibly show any of the three elements.38
Applying the rule to the facts here, the supreme court discounted the allegation or inference that a desire to continue on as director was a material conflict of interest.39 The court identified three reasons that the statement that the Pauls would not support the Plato offer did not sufficiently allege a breach of fiduciary duty: 1) a controlling interest does not deprive directors of a presumption of independence, 2) no breach is alleged when the challenged directors are not alleged to be beholden to anyone interested in the transaction, and 3) pleadings are insufficient when they do not show the actions were not the product of business judgment.
Given the uncertainties and last-minute nature of the Plato offer, the court deemed not improper some directors’ reasoning that “a bird in the hand was worth two in the bush.” Moreover, allegations concerning director-indemnification provisions in the Permira offer were insufficient to avoid dismissal, because the risk of litigation is present whenever a board decides to sell a company, the complaint did not allege that indemnification rights came only with the Permira offer, and most important, Wis. Stat. section 180.0851 generally requires mandatory indemnification for corporate directors sued for actions taken as a director. For these reasons, the supreme court concluded that the allegations concerning directors’ actions must be dismissed.
Turning to the claim against the Pauls as majority shareholders, the court looked to common law. Majority shareholders hold a very limited fiduciary duty to minority shareholders, namely that they avoid using their voting power to require corporate action that grants majority shareholders an improper material benefit at the expense of the minority shareholders. Even though the complaint alleged that the Pauls received a nonexclusive license to use Renaissance’s software for their family’s use, this was not an “improper personal profit” compared to the $10 million bonus the minority shareholders received.40
Chief Justice Abrahamson, joined by Justice Bradley and Justice Crooks, dissented. They disagreed with the need to plead specific facts, pointed to Twombly and its successor, Ashcroft v. Iqbal, as creating confusion over pleading requirements, and criticized the majority here for relying on Twombly when no party had briefed the effect of that case.41
Equivocal Invocation of Right to Remain Silent
State v. Cummings42
In this consolidated opinion, the supreme court considered whether two different defendants were sufficiently equivocal in their invocation of the right to remain silent such that the police officers could proceed with interrogation and the interrogations were not subject to suppression.
In Cummings, James Glodowski was shot by Linda Dietze in a park where they had arranged to meet. Stevens Point police officers interviewed Cummings as part of their investigation, and Cummings denied knowledge of the shooting, although he admitted he was friendly with Dietze and with Glodowski’s wife, Carla. A later interview with Dietze implicated Cummings further, so police returned to his home. After officers assured Cummings he was not in custody, he agreed to go to the police station for further questioning.
After some preliminary questions, Cummings was advised of his Miranda rights and agreed to waive them and speak with officers. He asked an officer what Dietze and Carla had been telling him, and when the officer declined to discuss this, Cummings said, “take me to my cell. Why waste your time? ... If you got enough to … charge me, well then, do it and I will say what I have to say, to whomever, when I plead innocent….”43
He was not taken to his cell, and Cummings eventually admitted he had driven Dietze to a spot near the park, and when Dietze returned to the car, she said she had shot someone. The police placed Cummings on a probation hold. The next day, the police searched his home and found in the garage a pistol, which, they determined, had been used to shoot Glodowski. Cummings was arraigned for attempted first-degree intentional homicide with a dangerous weapon, as party to a crime, and other charges. Cummings later moved to suppress all statements he made before Miranda rights were read to him, and all statements he made after he said, “[w]ell, then, take me to my cell. Why waste your time?” The state argued that the earlier statements were not made while Cummings was in custody, and that the “take me to my cell” statement was not an unequivocal invocation of Cummings’ right to remain silent.44
The circuit court suppressed the earlier statements, but found that the “take me to my cell” statement was not unequivocal and denied the suppression request. The court of appeals affirmed, finding the statement not unambiguous under State v. Markwardt,45 and that a more compelling interpretation was that Cummings was merely attempting to learn more about what his co-conspirators had been saying.
In Smith, a police officer interviewed Adrean Smith about a series of violent armed robberies that were committed by someone using a stolen van. The officer gave Smith a Miranda warning at the start, and he agreed to waive his rights and speak with the officer. At one point in the interrogation, Smith declared, “see, I don’t want to talk about, I don’t want to talk about this. I don’t know nothing about this. …. I don’t know nothing… I’m talking about this van. I don’t know nothing about no robbery….”
After Smith said he did not know anything about the robbery, the detective resumed questioning him about the stolen van. The detective persisted, and Smith ultimately admitted his involvement in the armed robberies. After arraignment on multiple armed robbery and weapons charges, Smith pleaded not guilty to all counts, and later moved to suppress the statements regarding the robberies that he made to the detective, asserting he had unequivocally invoked his right to remain silent. The circuit court found ambiguity in Smith’s “I don’t want to talk about this” statements and denied the motion. The court of appeals ruled that Smith was not attempting to terminate the interview when he made his statements but was just objecting to one line of questions.46
On review, the supreme court, in a decision written by Justice Ziegler, explained that after a person has been taken into custody, given Miranda warnings, and waived his or her Miranda rights, the person retains a “right to cut off questioning” during a custodial interrogation. But to invoke that right to remain (or become) silent, the person must unequivocally assert that right. Courts employ an objective test to determine if the right has been asserted. If, however, the individual’s statement yields reasonable competing inferences, then the person has not adequately invoked the right to remain silent. And, in the face of an equivocal or ambiguous statement, the police are not required to end the interrogation or clarify the person’s intent.47
Considering Cummings’ appeal, the court pointed to the ongoing nature of Cummings’ conversation with the officers, and viewed the statements “take me to my cell. Why waste your time?” as equivocal and susceptible of multiple meanings. Cummings did not also state that he did not wish to speak with police, and the court characterized him as verbally sparring with police.48
Turning to Smith’s appeal, the court found the question to be a closer one. The court acknowledged that Smith had stated “I don’t want to talk” three times in rapid succession. But looking to the fuller context, the court decided the statement was unclear as to whether Smith did not want to talk about the robberies, the minivan, or anything at all. His assertions of innocence did not equate to a desire to cut off all questioning. The court noted that while a defendant can selectively waive his or her Miranda rights, such selective refusals do not equate to an overall right to remain silent. In short, the court held that neither defendant was unequivocal in his statements and the statements were subject to reasonable competing inferences, thus supporting a denial of the suppression motions.
Justice Prosser, joined by Justice Bradley, would have found that Smith had preserved his right to remain silent. Chief Justice Abrahamson dissented in both cases, focusing on how a reasonable police officer would have understood the suspects’ statements and faulting the majority for not clarifying language about subjective intent in State v. Ross,as both Cummings and the state had requested.49
Seizure and Knock on a Car Window
County of Grant v. Vogt50
In this case, the supreme court sought to locate the line between an officer’s reasonable effort to have a consensual conversation and a more consequential attempt to detain or “seize” an individual. Under the totality of the circumstances, and deeming it a close case, the court held that a knock on a car window, by itself, did not show authority sufficient to give rise to a belief in a reasonable person (the car’s driver) that the person was not free to leave.
A sheriff’s deputy saw a car pull into the parking lot of a closed park and boat landing on the Mississippi River, around 1 a.m. on Christmas. The deputy parked his squad car, with headlights on, behind the car. The deputy, wearing full uniform and with a holstered pistol, walked to the driver’s side window. He saw two people in the car and rapped on the window, motioning the driver to lower the window. The driver, Vogt, did so and when the deputy asked what he was doing, Vogt’s response sounded slurred and the smell of intoxicants came from the car. The deputy asked for Vogt’s driver’s license and moved the squad car so that he could videotape the interaction.
Vogt failed a field sobriety test, and the deputy arrested him and took him to the jail. A breath test there showed that Vogt’s alcohol concentration was more than twice the legal limit. Vogt later moved to suppress all evidence obtained during the allegedly unlawful detention and arrest, for lack of reasonable suspicion to conduct a traffic stop.
Calling it a close case, the circuit court denied the motion, concluding the stop was not a seizure. At the suppression hearing, the deputy testified that if Vogt had not complied and rolled down the window, he would have let him drive away. Evidence at trial suggested that the tone of the deputy’s voice may have been close to a command, and the rap on the window authoritative, but the circuit court denied a renewed suppression motion and found Vogt guilty of an operating while intoxicated (OWI) violation. The court of appeals reversed, ruling that a reasonable driver would not feel free to ignore an officer who, in full uniform and at night, approaches the driver’s car and directs the driver to roll down the window.
On review, the supreme court observed that not all personal interactions between law enforcement officers and other people constitute a seizure. Citing long-standing U.S. Supreme Court precedent, the court explained that a person has been seized only if, in light of all the surrounding circumstances, a reasonable person would have believed he or she was not free to leave. From the beginning, that standard has been recognized to be a close question. Circumstances such as the presence of several officers, display of an officer’s weapon, some physical contact, or the use of a certain tone or language could indicate that compliance might be compelled. The test is objective and calls for consistent application from one police encounter to the next.
The court distinguished parameters of a Terry stop, in which the officer must have reasonable suspicion in light of his or her experience that criminal activity may be afoot, and an arrest, which requires the officer to have probable cause to believe the person arrested has committed a crime. Here there was no basis for either type of seizure before Vogt rolled down his window.51
Some of the difficulty in applying this objective test arises from human nature – some people tend to defer to a symbol of authority like a badge however manifested. But, the court noted, social or ethical pressures will not render a person’s consent less valid; otherwise any innocuous question would lead to a Fourth Amendment violation. The Wisconsin Supreme Court previously has explained that not every display of police authority rises to a show of authority constituting a seizure, and other jurisdictions have concluded that knocking on a car window is not necessarily a seizure. Those courts consider circumstances such as whether, at the time of the knock, the driver could have pulled his or her car away and left the scene or whether the officer’s squad car had emergency lights on.52
Here, Vogt argued that he was seized when the deputy “rapped loudly” on the window and “commanded” him to roll down the window, as supported by the location of the deputy’s squad car and Vogt’s contention that he couldn’t “simply drive away.” The supreme court disagreed, concluding that despite the obstacles near the vehicle, Vogt could have left. The circuit court had concluded that the deputy’s request to roll down the window might not have been subtle but that it was not a command constituting a seizure. The court then downplayed the loudness of the knock, given its subjectivity and the frequent presence of other noise-making devices in a car.
In short, the supreme court agreed with the circuit court’s assessment – the deputy saw something he thought was suspicious and decided to take a closer look. It was reasonable for the officer to try to learn more about the situation by engaging Vogt in a consensual conversation, but the circumstances would not have made a reasonable person think he or she was not free to leave.53
Justice Ziegler concurred, and would have reversed under the community-caretaker exception even if the circumstances constituted a seizure. She was joined by Justice Roggensack and Justice Gableman. Chief Justice Abrahamson , joined by Justice Bradley, dissented and criticized the “free to leave” concept and also addressed the community-caretaker function, noting that nothing in the record suggested that the car’s occupants might have been in need of assistance.
Cell Phone Location Searches
State v. Tate54
In a decision authored by Justice Roggensack, the supreme court assumed without deciding that obtaining a suspect’s cell phone’s location constituted a search and that a warrant – but not specific statutory authorization – was required to use tracking devices to locate the suspect. Given the particularity of the information provided to support the warrant, the court concluded that the search was reasonable.
Two persons were shot, one fatally, outside a Milwaukee store. Witnesses described the alleged shooter to police, and surveillance video showed a man meeting that description purchasing a prepaid cell phone in the store, then exiting and shooting the victims. The clerk told police the man identified himself as “Bobby” and said he had just been released from prison. The clerk provided the telephone number assigned to the cell phone, and the police confirmed the service provider. A prosecutor applied for an order approving installation and use of a trap and trace device, installation of a pen register device, and the release of subscriber information, including cell tower activity and global positioning system (GPS) data.
Officers used the cell tower data to triangulate the location of the cell phone, and affixed the pen register device, or “stingray,” to a squad car, which was driven through the triangulated area to narrow the search. Officers eventually stopped at an apartment building and, after searching several apartments, knocked on an apartment’s door and asked the woman who answered (Cobb) if Bobby was home. She said yes, and pointed to a bedroom where a man fitting the suspect’s description was sleeping. Also in the room was a shoe that appeared to have blood on it and a cell phone. The officers arrested Bobby Tate.
Tate moved to suppress the evidence seized pursuant to the phone tracking order, arguing that a search warrant was required. The circuit court ruled that the tracking order was sufficient, and that Cobb had consented to the apartment search. The court of appeals affirmed. On review, the supreme court clarified that review of a warrant-
issuing court’s determination on probable cause is given great deference.55
Because the state conceded that tracking through cell site information and a stingray is a search, the court noted only that technological advances have reshaped the expectations-of-privacy inquiry. It remains unclear as to how the purchase of goods that can be traced in real time affects the inquiry. And, because cell phones may be located in places where the expectation of privacy is great, or, in contrast, almost nonexistent, law enforcement officers seldom can anticipate where the tracking will lead.56
Tate argued that the search was illegal when it used cell site information and a stingray; he also asserted that the judge lacked statutory authority to authorize the tracking in real time. A constitutional warrant must be based on probable cause and be reasonable in its issuance and its execution. The court held, however, that the warrant was adequately based on the investigating detective’s affidavit, which was tied to a particular offense and a particular apprehension. According to the court, the order did not have to specify a particular location where the evidence would be found, as confirmed by state and federal opinions upholding searches using tracking devices. The court also likened placing a tracking device on a suspect’s property to identifying a cell phone by its electronic serial number, thus satisfying the particularity requirement.57
Section 968.10 of the Wisconsin Statutes authorizes searches pursuant to a valid warrant, and Wis. Stat. section 968.12(1) requires probable cause for issuance of a warrant. The court concluded that the order for the warrant was supported by probable cause, and that use of the stingray to locate Tate’s phone was reasonable.
A deeper analysis was required to assess the use of cell site information, because additional statutory provisions affect cell site information and storage of that data. Section 968.13(1)(c) of the Wisconsin Statutes prohibits the seizure of documents unless they are under the control of someone reasonably suspected to be concerned with commission of that crime. The cellular service provider did not fall within that category. The supreme court analogized obtaining those provider records to instances in which a law enforcement agency subpoenas a third party’s documents under Wis. Stat. section 968.135. In this case, while the circuit court judge did not cite section 968.135, he complied with its spirit. The district attorney had requested the order, and the court determined that probable cause was shown.
Chief Justice Abrahamson, joined by Justice Bradley, wrote a lengthy dissent highlighting the risks to personal privacy posed by the increasing presence of electronic devices and tackling head on whether tracking a cell phone is a search. The dissent addressed the majority decision in Tate as well as the lead opinion in State v. Subdiaz-Osorio, a companion case.58
1 2014 WI 21, 345 Wis. 2d 60, 823 N.W.2d 839.
2 Id. ¶¶5-11.
3 Id. ¶¶ 14-19.
4 Id. ¶¶ 27-34.
5 538 U.S. 408 (2003).
6 Kimble, 2014 WI 21, ¶¶ 38-47, 345 Wis. 2d 60 (citing Trinity Evangelical Lutheran Church & Sch.-Freistadt v. Tower Ins. Co., 2003 WI 46, ¶ 53, 261 Wis. 2d 333, 661 N.W.2d 789).
7 Id. ¶¶ 48-54.
8 Id. ¶¶ 55-67, 70-71.
9 2014 WI 28, 348 Wis. 2d 20, 832 N.W.2d 133.
10 Id. ¶¶ 15-21.
11 Id. ¶¶ 29-30 (citing Hughes v. Fetter, 341 U.S. 609 (1951)).
12 2014 WI 37, 348 Wis. 2d 265, 831 N.W.2d 825.
13 Id. ¶¶ 1-5, 34 n.17.
14 Id. ¶¶ 25-27, 33-39.
15 Id. ¶¶ 32-34, 42-44 (quotations omitted).
16 Id. ¶¶ 48-49.
17 Id. ¶¶ 50-58.
18 Id. ¶¶ 65-71, 105-124 (Abrahamson, C.J., dissenting).
19 2014 WI 72, 344 Wis. 2d 519, 822 N.W.2d 736.
20 Id. ¶ 20 (quoting Wis. J.I.-Civil 410).
21 Id. ¶¶ 6-7.
22 Id. ¶¶ 11-13, 22, 40.
23 Id. ¶¶ 14-19.
24 Id. ¶¶ 23-29.
25 Id. ¶¶ 30-44.
26 Id. ¶¶ 50-54, 90-97.
27 Id. ¶¶ 124-137.
28 2014 WI 80, 347 Wis. 2d 385, 830 N.W.2d 115.
29 Id. ¶¶ 2-7.
30 Id. ¶¶ 26-27.
31 Id. ¶ 28 & n. 11 (citing CSX Transp. Inc. v. Easterwood, 507 U.S. 658, 675 & n.15 (1993)).
32 Id. ¶¶ 33-41, 44-45, 52-53 (citing Baker v. Canadian Nat’l, 397 F. Supp. 2d 803, 814 (S.D. Miss. 2005)).
33 2014 WI 86, 350 Wis. 2d 347, 837 N.W.2d 624.
34 Id. ¶¶ 1-2; see also Bell Atlantic v. Twombly, 550 U.S. 544 (2007).
35 Data Key Partners, 2014 WI 86, ¶¶ 4-8, 350 Wis. 2d 347.
36 Id. ¶¶ 12-14.
37 Id. ¶¶ 17-26.
38 Id. ¶ 33 (citing Reget v. Paige, 2001 WI App 73, 242 Wis. 2d 278, 626 N.W.2d 302), ¶ 39.
39 Id. ¶¶ 45-46.
40 Id. ¶¶ 47-51, 59 (citations omitted).
41 Id. ¶¶ 67-173 (Abrahamson, C.J., dissenting) (citing Ashcroft v. Iqbal, 556 U.S. 662 (2009)).
42 2014 WI 88, ___ Wis. 2d ___, 850 N.W.2d 915.
43 Id. ¶¶ 10-11.
44 Id. ¶¶ 12-18.
45 2007 WI App 242, 306 Wis. 2d 420, 742 N.W.2d 546.
46 Cummings, 2014 WI 88, ¶¶ 30-41, ___ Wis. 2d ___.
47 Id. ¶¶ 47-52.
48 Id. ¶¶ 53-59.
49 Id. ¶¶ 79, 89 (Prosser, J., dissenting), ¶¶ 90-110 (Abrahamson, C.J., dissenting (citing State v. Ross,203 Wis. 2d 666, 552 N.W.2d 428 (Ct. App. 1996))).
50 2014 WI 76, 346 Wis. 2d 551, 830 N.W.2d 723.
51 Id. ¶¶ 19-29.
52 Id. ¶¶ 30-38.
53 Id. ¶¶ 40-54.
54 2014 WI 89, ___ Wis. 2d ___, 849 N.W.2d 798.
55 Id. ¶ 14.
56 Id. ¶¶ 20-26.
57 Id. ¶¶ 33-41.
58 Id. ¶¶ 52-166 (citing State v. Subdiaz-Osorio, 2014 WI 87, ___ Wis. 2d ___, 849 N.W.2d 748).