Third-party Liability – Costs of Collection
Vande Corput v. Pekin Ins. Co., 2018 WI App 56 (filed 30 Aug. 2018) (ordered published 26 Sept. 2018)
HOLDING: In this third-party liability action, the circuit court misused its discretion when awarding attorney fees as the reasonable costs of collection.
SUMMARY: Vande Corput was injured in a car accident while working for his employer. He received more than $300,000 in worker’s compensation benefits. He and his wife then filed this third-party liability lawsuit against Pekin Insurance Co., the other driver’s insurer. The worker’s compensation carrier was named as an involuntary plaintiff; it hired a lawyer to represent its interests. The plaintiffs and the worker’s compensation carrier settled with Pekin for $750,000, subject to two conditions. First, $125,000 would be allocated for loss of consortium. The second contingency required a satisfactory division of the costs of collection.
Ultimately, the circuit court conducted a bench trial regarding the costs of collection. Rejecting the parties’ positions, the court subtracted the $125,000 from the total, allocated one-third of the remaining $625,000 to the reasonable costs of collection, and then evenly divided that amount between the lawyers for each side.
The court of appeals reversed, in an opinion authored by Judge Seidl, on grounds that the circuit court misused its discretion. Case law establishes a three-step process a court must follow when determining and apportioning the reasonable costs of collection under Wis. Stat. section 102.29(1). See Anderson v. MSI Preferred Ins. Co., 2005 WI 62, 281 Wis. 2d 66, 697 N.W.2d 73.
First, the court must determine the reasonable value of each party’s fees and costs. Second, it evaluates the total costs of collection and whether that sum is reasonable in light of the recovery. This includes the quantity and quality of legal services. Third, the court directs how the attorney fees are to be divided, absent an agreement (see ¶ 17).
Here, the circuit court did not work through the three-step process. Instead, it asserted “without explanation” that the reasonable costs of collection equaled one-third of $625,000 (¶ 18). Nor did the court follow the second step (see ¶ 19).
In the interest of “judicial economy,” the court of appeals addressed two other issues. First, even in the absence of a written contingent-fee agreement between one party and its lawyer, the circuit court could determine the reasonable value of those legal services using a quantum meruit theory, although the court of appeals stopped short of mandating this approach (see ¶ 27).
Second, the existence of an unfulfilled contingency – the “satisfactory” allocation of the costs of collection – did not preclude the court from approving the settlement. Wis. Stat. section 102.29(1)(c) “expressly states that the costs of collection shall be divided as directed by the court ‘unless otherwise agreed upon’ by the parties.” Since the parties could not agree, the court had authority to divide those costs (¶ 31).
Garnishments – Fraudulent Transfers
Beck v. BidRX LLC, 2018 WI App 61 (filed 15 Aug. 2018) (ordered published 26 Sept. 2018)
HOLDING: The court of appeals reversed judgment in a garnishment action because of insufficient evidence of a fraudulent transfer; error also occurred when the court entered a judgment against a party that was not a garnishee.
Prof. Daniel D. Blinka, U.W. 1978, is a professor of law at Marquette University Law School, Milwaukee.
Prof. Thomas J. Hammer, Marquette 1975, is a law professor and Director of Clinical Education at Marquette University Law School, Milwaukee.
SUMMARY: The Becks obtained a default judgment against BidRX for more than $100,000 on an unpaid promissory note. They then began a nonearnings garnishment action against two garnishees, Fiscal Intermediary Third Party Funds Services LLC (Fiscal) and a bank. In later pleadings (a reply), the Becks added a fraudulent transfer claim. After a bench trial that featured only documentary evidence, the court ruled in favor of the Becks on the fraudulent transfer claim on grounds that Fiscal had been an “insider” when it received more than $35,000. The circuit court also imposed a judgment against BidRX for more than $2,000.
The court of appeals reversed in an opinion authored by Judge Hagedorn. First, there was insufficient proof of a fraudulent transfer under Wis. Stat. section 242.05(2), which adopts the Uniform Fraudulent Transfer Act (UFTA) (see ¶ 11). Looking to case law from other states construing identical UFTA provisions on “preferential transfers,” the court identified the following elements: “(1) the creditor’s claim arose before the transfer, (2) the transfer was made to an insider for an antecedent debt, (3) the debtor was insolvent when the transfer was made, and (4) the insider-transferee had reasonable cause to believe the debtor was insolvent” (¶ 15).
Because the Becks failed to prove an antecedent debt, their fraudulent transfer claim failed (see ¶¶ 17, 20). Although the Becks pointed to another UFTA provision, the record showed that the trial judge “unmistakably found that the transfers were fraudulent under subsec. (2) because it was made to an insider” (¶ 18).
Finally, the circuit court erred in issuing a judgment against BidRX. This was a garnishment action, and BidRX was not named as a garnishee (see ¶ 22). The circuit court lacked authority to issue a money judgment against nongarnishees, including the debtor (see ¶ 23).
Posting or Publishing Private Depiction of a Person – Felon in Possession of a Firearm
State v. Culver, 2018 WI App 55 (filed 29 Aug. 2018) (ordered published 26 Sept. 2018)
HOLDINGS:1) The defendant failed to prove that the statute prohibiting the posting or publishing of a private depiction of a person is facially overbroad, vague, or in violation of the Commerce Clause. 2) The failure of the felon-in-possession-of-a-firearm statute to distinguish between prior violent felonies and prior nonviolent felonies does not violate the defendant’s right to bear arms.
SUMMARY: Defendant Culver posted nude photos of a person online without her permission. He admitted that he did so out of anger. Ultimately, he entered a guilty plea to one count of posting or publishing a private depiction of a person, contrary to Wis. Stat. section 942.09(3m)(a)2.; he also entered a guilty plea to one count of possession of a firearm by a felon, contrary to Wis. Stat. section 941.29(2). Thereafter he moved for postconviction relief, claiming that 1) the “post or publish” statute is unconstitutional because it is overbroad, vague, and in violation of the Commerce Clause; and 2) the felon-in-possession statute is unconstitutional as applied to him because his right to bear arms should not be denied on account of a nonviolent felony (fourth-offense operating while intoxicated). The circuit court denied the motion. In a decision authored by Chief Judge Neubauer, the court of appeals affirmed.
The post-or-publish statute provides that a person who does the following is guilty of a Class A misdemeanor: “Posts, publishes, or causes to be posted or published, a depiction of a person that he or she knows is a private representation, without the consent of the person depicted.” The statute goes on to define “post or publish,” “private representation,” and “representation”; it does not define “depiction.”
Regarding the defendant’s claim that the statute is facially overbroad, the appellate court concluded that the statute “has a specific, limited, and reasonable reach, and it does not infringe on protected expression in a substantial number of its applications in relation to its legitimate sweep” (¶ 11).
“Given the many boundaries that hem in the area of proscribed conduct, we conclude the statute is not overbroad. The statute prohibits a certain and limited category of knowing conduct that involves the unauthorized use of personal, private images of another. It encompasses only a particular type of image, which must be intended to be private, which must be captured with consent, which the publisher must know is private, and which is published without consent nonetheless. With its focused scope, we see no showing that the statute prohibits or even chills a substantial amount of free expression. The statute’s restriction on such postings or publications does not raise a realistic possibility that official suppression of ideas is afoot” (¶ 18) (citation and internal quotations omitted).
Moreover, the statute serves to protect an important state interest – individual privacy. “No one can challenge a state’s interest in protecting the privacy of personal images of one’s body that are intended to be private – and specifically, protecting individuals from the nonconsensual publication on websites accessible to the public” (¶ 19).
Regarding the defendant’s vagueness challenge, the court considered Culver’s claim that the terms “newsworthy” and “of public importance” are vague; these terms appear in a provision of the statute that exempts its application to “a person who posts or publishes a private representation that is newsworthy or of public importance.” Said the court: “Because Culver has not shown how these well-worn terms fail to adequately convey their meaning, we cannot conclude that they are vague here” (¶ 33).
The court also rejected the argument that the statute fails because it does not set forth the geographical parameters of the offense that will subject a person to Wisconsin’s assertion of criminal jurisdiction. See Wis. Stat. § 939.03. Culver argued that the statute is vague because it is unknown whether jurisdiction is determined by the citizenship or location of the depicted person, the place the image is disclosed, or the place it is viewed.
Said the court: “Culver’s argument is based on a false premise. It presumes that a criminal statute itself must identify what element or circumstance will invoke the territorial jurisdiction of a Wisconsin court. He cites no authority, and we find none, to support the presumption” (¶ 36).
The appellate court also rejected the defendant’s Commerce Clause-based challenge to the post-or-publish statute. “We reject the argument because Culver has no standing to make it. Culver does not allege that he was an out-of-state actor, was engaged in interstate commerce, or sustained an injury in fact in this regard” (¶ 36 n.17).
Culver also challenged the felon-in-possession statute, arguing it violates his constitutional right to bear arms because his prior felony (fourth-offense OWI) was nonviolent; he contended that the statute is constitutionally infirm because it does not distinguish prior violent felonies from nonviolent felonies.
The appellate court disagreed. “We have twice upheld the felon-in-possession statute against constitutional challenges” (¶ 42). “We [have] plainly concluded that the ban on both violent and nonviolent felons is constitutional…” (¶ 46).
Identity Theft – Use of Another’s Credit or Debit Card Without Authorization – “Representing” Element of the Crime
State v. Mason, 2018 WI App 57 (filed 2 Aug. 2018) (ordered published 26 Sept. 2018)
HOLDING: The defendant’s behavior of presenting a credit card and a debit card established the “representing” element of the identity theft statute.
SUMMARY: Defendant Mason was convicted of multiple counts of identity theft based on his use of another person’s credit and debit cards without authorization, contrary to Wis. Stat. section 943.201. As relevant here, that statute provides that whoever, with the purpose to obtain credit, money, goods, services, employment, or any other thing of value or benefit, “intentionally uses … any personal identifying information or personal identification document of an individual …, without the authorization or consent of the individual and by representing that he or she is the individual … is guilty of a Class H felony” (emphasis added).
In this case Mason used a debit card to obtain gasoline at one location and used a credit card to obtain food at another location, both times without the cardholder’s consent. There was no evidence that Mason did anything more than present the cards as payment for the gas and food. In other words, Mason did not state that he was the cardholder or, beyond presenting the card for payment, otherwise affirmatively represent that he was the cardholder.
This appeal focuses on the “representing” language of the statute quoted above. The defendant argued that the “representing” element of identity theft must mean something more than the mere presentation of a document because, if it means no more than this, the “representing” element adds nothing to that crime’s use-of-the-document element and, thus, renders the “representing” element surplusage. It follows, according to Mason, that, because the trial evidence showed only that he presented a credit card and a debit card for payment, the state failed to present sufficient evidence of the “representing” element (see ¶ 3). In an opinion authored by Judge Lundsten, the court of appeals affirmed the defendant’s convictions.
The court concluded that its decision in State v. Stewart, 2018 WI App 41, controls here. Stewart held that merely presenting a document can satisfy the “representing” element of Wisconsin’s other identity theft statute, Wis. Stat. section 943.203, in circumstances when the act of presenting a document implied that the presenter had the entity’s authorization to use that information (see ¶ 16).
The court went on to indicate that it would reject Mason’s surplusage argument even if Stewart did not control here (see ¶ 4). “[T]he presentation of someone else’s document will generally carry with it the representation of permission to use that document, absent some reason to think otherwise…. In the words of the statute, Mason was effectively ‘representing that he … is the individual [who owns the cards or] that he … is acting with the authorization or consent of the individual [who owns the cards]’” (¶ 23). The court thus concluded that Mason’s presentation-of-the-cards behavior fits the plain meaning of the “representing” element (see ¶ 24).
Writ of Coram Nobis – Burden of Proof – Perjury
State v. Hadaway, 2018 WI App 59 (filed 14 Aug. 2018) (ordered published 26 Sept. 2018)
HOLDINGS: 1) The circuit court applied an incorrect burden of proof to evaluate the petitioner’s petition for a writ of coram nobis. 2) The circuit court erred in its application of case law regarding perjury as precluding coram nobis relief.
SUMMARY: The case concerns a petition for a writ of coram nobis. “The writ of coram nobis is a common law remedy, which empowers the trial court to correct its own record of an error of fact not appearing on the record and which error would not have been committed by the court if the matter had been brought to the attention of the trial court” (¶ 1 n.1) (internal quotations and citation omitted).
The person seeking the writ must establish that no other remedy is available, for example, he or she must not be in custody because in that case Wis. Stat. section 974.06 would provide a remedy. Second, the petitioner must establish that an error of fact existed that was unknown at the time of, in this case, the petitioner’s guilty plea and is of such a nature that knowledge of its existence at the time would have prevented the entry of judgment (see ¶¶ 21-22). See State ex rel. Patel v. State, 2012 WI App 117, 344 Wis. 2d 405, 824 N.W.2d 862.
In this case the court of appeals addressed two legal issues: 1) whether the circuit court applied an incorrect burden of proof in evaluating petitioner Hadaway’s petition, and 2) whether the circuit court erred in applying case law regarding perjury as a basis for precluding coram nobis relief. In a decision authored by Judge Dugan, the appellate court concluded that the circuit court erred when it required the petitioner to provide “conclusive” proof of the errors of fact alleged in his petition (see ¶ 36).
The appellate court did not decide whether the correct burden on the petitioner was clear and convincing evidence or a preponderance of the evidence. “[R]egardless of the burden required – clear and convincing evidence or a preponderance of the evidence – Hadaway has presented sufficient evidence to support the issuance of a writ of coram nobis” (¶ 41).
The appellate court also concluded that the circuit court erred in its application of case law regarding perjury as precluding coram nobis relief. A claim of perjured testimony by a witness in an action cannot be the basis for a writ of coram nobis in that action because the earlier determination by the fact finder that the testimony was credible is conclusive (see ¶ 39).
However, Hadaway’s claim does not involve any perjury by anyone involved in his case; rather, Hadaway claimed that he gave perjured testimony in another defendant’s trial that was related to the prosecution against Hadaway. “Because there has been no claim of perjury by Hadaway or anyone else involved in the proceeding against [Hadaway], the postconviction court erred as a matter of law in holding that perjury in another case barred the issuance of a writ for coram nobis in this case” (¶ 40).
Local Government Law
Counties – Respective Powers of Milwaukee County Board of Supervisors and Milwaukee County Executive
Lipscomb v. Abele, 2018 WI App 58 (filed 2 Aug. 2018) (ordered published 26 Sept. 2018)
HOLDINGS: The numerous holdings in this case are catalogued below in the synopsis of this decision.
SUMMARY: This case involves disagreements between the Milwaukee County Board of Supervisors (Board) and the Milwaukee County Executive (Executive) regarding their relative powers. The disputes fall into two categories: 1) compensation-related issues, namely, whether the Executive or the Board has authority to take certain actions relating to the compensation of “unclassified” (non-civil-service) county employees; and 2) meeting-attendance issues, namely, whether the Board or Board committees can require county employees and officers, including the Executive himself, to appear at Board meetings or Board committee meetings, to provide information and answer questions.
Resolution of the compensation-related issues involves harmonizing the two statutes. One statute empowers the Board, by giving it authority to “[p]rovide, fix, or change the salary or compensation” of unclassified county employees. See Wis. Stat. § 59.22(2)(c)1.a. The other statute, which applies only to Milwaukee County, empowers the Executive, by giving him or her exclusive authority to “exercise day-to-day control” of county departments and their subunits. See Wis. Stat. § 59.794(3)(a).
In a decision authored by Judge Lundsten, the court of appeals reached numerous conclusions, including the following: “In favor of the Board, we conclude that the Executive’s ‘day-to-day control’ power does not eliminate the Board’s compensation-fixing power, and that the Board’s compensation-fixing power applies to the salary or compensation of all unclassified county employees and officers. In favor of the Executive, we conclude that the Executive’s ‘day-to-day control’ power prevents the Board from taking actions that effectively direct what duties may or must be accomplished by employees or officers or how they may or must perform those duties, even when a Board action may result in a compensation change” (¶ 4).
With respect to meeting-attendance issues, the appellate court primarily interpreted Wis. Stat. section 59.794(3)(b) (a statute applicable only to Milwaukee County), which permits “[a] board” to “require, as necessary, the attendance of any county employee or officer at a board meeting to provide information and answer questions.”
Said the court: “We reach conclusions that include the following. In favor of the Board, we conclude that the Executive is included in the definition of ‘any … officer’ whose appearance the Board may require. In favor of the Executive, we conclude that the ‘board’ that may require an appearance means the Board as a whole, not any committee or other subset of Board supervisors” (¶ 5).
Anticipated Private Nuisance – Failure to State a Claim – Affidavits
Krueger v. AllEnergy Hixton LLC, 2018 WI App 60 (filed 9 Aug. 2018) (ordered published 26 Sept. 2018)
HOLDING: Although the law recognizes an action for an “anticipated private nuisance,” the landowners fighting a frac sand mine failed to state a valid claim in their complaint.
SUMMARY: Landowners sought to stop the construction and operation of a frac sand mine by AllEnergy on land contiguous to theirs. The circuit court granted AllEnergy’s motion to dismiss the landowners’ complaint.
The court of appeals affirmed in a majority opinion authored by Judge Lundsten. First, the court declined to consider affidavits filed after AllEnergy moved to dismiss the landowners’ complaint. The landowners argued that AllEnergy’s motion should be treated as one for summary judgment, thus permitting consideration of the affidavits. Yet the first step of summary-judgment methodology is to determine whether the complaint states a claim (see ¶ 8). “The landowners did not file an amended complaint or seek leave to amend their complaint” (¶ 10). Thus, only the complaint would be scrutinized.
Second, the court held that Wisconsin law does recognize a claim for an “anticipated private nuisance.” Although the supporting case law is older, the court discerned no “conflict” with recent cases that signaled a change in the controlling law (see ¶ 13). The cases were closely considered, as was the argument by the dissent.
Third, the landowners’ complaint failed to state a claim for an anticipated private nuisance. The court discussed the elements of the claim, closely parsed the landowners’ complaint, and explained how it fell short. “That is, the landowners fail to allege ‘inevitable and undoubted’ specific harms to their specific properties from this specific mine, once in operation. Rather, the landowners rely primarily on a general and vague allegation as to what frac sand mines in general are ‘known to’ do” (¶ 37).
Judge Fitzpatrick dissented. Among a number of points, he concluded that Wisconsin law does not recognize a claim for an “anticipated private nuisance”; rather, it recognizes only private and public nuisances (see ¶ 43). The majority’s opinion, he asserted, ignored decades of case law by focusing on language in a 95-year-old case (see ¶ 67). He also found that the landowners’ complaint alleged a private nuisance, thus stating a valid claim (see ¶ 47).