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    Court of Appeals Digest

    In this column, Prof. Daniel D. Blinka and Prof. Thomas J. Hammer summarize select published opinions of the Wisconsin Court of Appeals.

    Daniel D. Blinka & Thomas J. Hammer

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    Attorney Fees

    American Rule – Third-Party Exception

    Talmer Bank v. Jacobsen, 2018 WI App 15 (filed 10 Jan. 2018) (ordered published 28 Feb. 2018)

    HOLDING: The third-party litigation exception to the American Rule allows plaintiffs to recover attorney fees incurred in third-party litigation caused by a defendant’s wrongful act, which includes breaches of contract.

    SUMMARY: The Gomezes purchased property from the Jacobsens, the sellers, on a land contract. Although the Gomezes faithfully paid on the land contract, the Jacobsens failed to make 15 payments to the bank that held a mortgage on the property. The bank foreclosed on the property. Although the Gomezes eventually settled with the bank, they pursued their cross-claim for damages, including attorney fees, against the Jacobsens. Applying the American Rule, the circuit court ruled in favor of the Jacobsens.

    The court of appeals reversed in an opinion authored by Judge Hagedorn. Wisconsin follows the American Rule, which holds parties responsible for their own attorney fees. A “narrow exception” applies “when a party is ‘wrongfully drawn into litigation with a third party’” (¶ 8). The exception is not limited to “fraud, breach of fiduciary duty, or something similar” (¶ 10). Case law has “unequivocally declared that ‘a breach of contract as well as tort may be a basis for allowing [a] plaintiff to recover reasonable third-party litigation expenses’” (id.).

    The court cautioned that its holding did not extend to all breach of contract cases; rather, the holding applies “only in cases where a party’s breach of contract forced another party into litigation with a third party” (¶ 16).

    Criminal Procedure

    Guilty Plea – Plea Withdrawal – Mistaken Advice Regarding Maximum Penalty

    State v. Douglas, 2018 WI App 12 (filed 9 Jan. 2018) (ordered published 28 Feb. 2018)

    HOLDING: The defendant is entitled to withdraw his guilty plea because he was mistakenly advised about the maximum penalty he faced for the crimes with which he was charged.

    Daniel D. Blinkaedu daniel.blinka marquette Prof. Daniel D. Blinka, U.W. 1978, is a professor of law at Marquette University Law School, Milwaukee.

    Thomas J. Hammeredu thomas.hammer marquette Prof. Thomas J. Hammer, Marquette 1975, is a law professor and Director of Clinical Education at Marquette University Law School, Milwaukee.

    SUMMARY: The defendant was charged with one count of first-degree sexual assault of a child under the age of 16 years with the threat or use of force and one count of second-degree sexual assault of the same victim. Both charges arose out of the same criminal episode. After the defendant was advised by the court, his lawyer, and the prosecutor that he faced 100 years of potential punishment if convicted on both counts (including a 25-year minimum term of confinement on the first-degree sexual assault charge), the defendant agreed to enter a guilty plea to the second-degree sexual assault count. He was sentenced to 12 years of initial confinement followed by six years of extended supervision.

    In a postconviction motion he sought inter alia to withdraw his guilty plea. He contended that because second-degree sexual assault is a lesser-included offense of first-degree sexual assault, he could not have lawfully been convicted of both offenses but was mistakenly advised by his trial counsel, the state, and the court that he faced a maximum exposure of 100 years if convicted of both. The circuit court denied the motion.

    In a decision authored by Judge Kessler, the court of appeals reversed. It concluded that second-degree sexual assault of a child is a lesser-included offense of first-degree sexual assault of a child both because it is a less serious type of sexual assault and because it does not require proof of any fact in addition to those which must be proven to establish the greater offense (see ¶ 13). As for the mistaken advice about the punishment the defendant faced, case law has explained the importance of providing accurate information, before a plea, regarding a defendant’s potential exposure to a penalty so that the defendant can reasonably evaluate the benefit of the offered bargain (see ¶ 17).

    In this case, defendant Douglas “accepted the plea offer without knowing the actual value of the offer because he was misinformed by his counsel, the State, and the court that he faced a potential punishment of 100 years if convicted of both offenses. This misinformation constitutes an error of law because Douglas could not have been convicted of both the greater offense and the lesser-included offense. He was unaware of the direct consequences of his plea and could not make a reasoned decision about whether to proceed to trial or to enter a plea. Thus, we conclude that Douglas is entitled to withdraw his plea” (¶ 18).

    Guilty Pleas – Ineffective Assistance of Counsel – Advice Regarding Deportation Consequences – Challenges to Juvenile Waiver Proceedings

    State v. Villegas, 2018 WI App 9 (filed 31 Jan. 2018) (ordered published 28 Feb. 2018)

    HOLDINGS: The numerous holdings in this case are summarized in the numbered paragraphs below.

    SUMMARY: Defendant Villegas is an illegal immigrant who was brought to the United States from Mexico as a young child. When he was 16, he and two other individuals broke into a home while brandishing weapons, tied up the occupants, and robbed them. The state filed a delinquency petition charging him with armed robbery party to a crime (PTAC) and three other related offenses. The state also filed, and the court granted, a petition to waive Villegas into adult court.

    Villegas subsequently pleaded guilty to armed robbery PTAC. After he was sentenced, Immigration and Customs Enforcement (ICE) issued a notice of intent to issue a final administrative removal order, which provided that Villegas would be deported upon completing his sentence. Villegas then brought a postconviction motion to withdraw his plea, which the circuit court denied.

    On appeal, Villegas challenged both the juvenile and adult court proceedings. He challenged the juvenile waiver both as an erroneous exercise of discretion generally and on grounds that his counsel provided ineffective assistance. He further maintained that he should be able to withdraw his guilty plea in adult court because the plea colloquy was defective and because he received ineffective assistance of counsel there as well.

    His plea withdrawal argument was premised largely on the rationale that his lawyer failed to inform him that his plea would render him inadmissible to the United States and ineligible for deferred action for childhood arrivals (DACA) (see ¶ 2). In a decision authored by Judge Hagedorn, the court of appeals affirmed.

    1) The court first addressed the defendant’s claim that he should be permitted to withdraw his plea because his lawyer rendered ineffective assistance by failing to advise him of his ineligibility under DACA and that his plea would result in “clear, automatic, irreversible, and permanent inadmissibility” to the United States. In the court’s view, defense counsel rendered reasonably effective assistance. Counsel reviewed with the defendant the standard guilty plea questionnaire, which warned him that his plea might result in “exclusion of admission” into the country and a “denial of naturalization.” The conditional warning that he might be excluded was correct and sufficient (see ¶ 35).

    Said the court: “[Defense counsel] simply had no constitutional duty to give specific, direct advice on how pleading guilty would affect Villegas’ possibilities for readmission beyond the accurate, generalized warnings that were given. The warnings did not tell Villegas with certainty what was to come; they were conditional. But they were nevertheless correct. Deportation and its subsequent consequences depend in large part on prosecutorial discretion. The executive branch’s exercise of prosecutorial discretion in determining who will be deported when is beyond the scope of specific advice the United States and Wisconsin Constitutions require criminal attorneys to give. Just as deportation depends at least in part on prosecutorial discretion and is therefore somewhat uncertain, a fortiori the possibility of readmission based on that conviction is also uncertain – not clear or automatic as Villegas insists” (¶ 34).

    The court further held that defense counsel did not perform deficiently by failing to inform Villegas about DACA, which is discretionary executive branch policy (see ¶ 36).

    2) The appellate court also rejected the defendant’s claim that his counsel was ineffective for failing to advise him that a guilty plea would waive his ability to challenge the juvenile court’s waiver decision. Said the court: “Villegas fails to show that he was prejudiced. Villegas considered appealing the order, was counseled that such an appeal would be fruitless, and elected not to appeal and instead plead guilty. We are not convinced that there is a reasonable probability that Villegas would have proceeded differently had he known that he could not appeal a decision he already decided not to appeal” (¶ 40).

    3) Addressing the defendant’s claims that the juvenile court erroneously exercised its discretion in waiving him to adult court and that his lawyer was ineffective for failing to conduct a full inquiry into his mental health and for failing to discover that Villegas was an illegal immigrant before the waiver hearing, the court of appeals concluded that the defendant forfeited both arguments by virtue of his valid guilty plea (see ¶ 44).

    Though a claim of ineffective assistance of counsel is ordinarily treated as an exception to the guilty-plea-waiver rule, the exception is not applicable here because the defendant did not assert that his lawyer’s alleged ineffectiveness during the juvenile waiver proceedings had anything to do with his later decision to plead guilty (see ¶ 48).

    4) The appellate court also concluded that Villegas failed to show that the plea colloquy was defective. The circuit court explained everything that is required by statute and case law, including the statutory advisory about possible immigration consequences. Villegas argued that the court was under a duty to inform him that his guilty plea would waive any nonjurisdictional challenges to his conviction, including his claim that the juvenile waiver proceedings were defective. The appellate court did not address this argument because the defendant offered no legal support or meaningful development of it (see ¶ 42).

    Insurance

    Duty to Defend – Breach – Damages

    Steadfast Ins. Co. v. Greenwich Ins. Co., 2018 WI App 11 (filed 17 Jan. 2018) (ordered published 28 Feb. 2018)

    HOLDING: An insurer had primary coverage, breached its duty to defend, and was liable for defense costs and attorney fees.

    SUMMARY: Severe rains in 2008 led to a series of “rain event lawsuits” against the Milwaukee Metropolitan Sewerage District (MMSD). MMSD tendered its defense to two insurers, Steadfast Insurance Co. and Greenwich Insurance Co. Steadfast accepted the tender and Greenwich rejected it. The lawsuits settled, Steadfast paid MMSD $1.5 million, and then sued Greenwich for breaching its duty to defend. The circuit court ruled in Steadfast’s favor.

    The court of appeals affirmed in an opinion authored by Judge Dugan that addressed multiple issues. First, Greenwich provided primary, not excess coverage; the “other insurance” provisions in the policies were not triggered. Both insurers had a duty to defend (see ¶ 37). Second, MMSD met its “risk retention amount,” thereby satisfying the Greenwich policy (see ¶ 40). This entitled MMSD to recover defense costs, including attorney fees (see ¶ 43).

    Third, Steadfast’s equitable subrogation claim was timely (see ¶ 57). Fourth, Greenwich was equitably responsible for all defense costs based on its breach; allocation of defense costs was not required. Fifth, Steadfast was equitably entitled to recover its attorney fees (see ¶ 88).

    Juvenile Law

    Residential Care Centers – Strip Searches

    Milwaukee Academy v. Department of Children & Families, 2018 WI App 13 (filed 23 Jan. 2018) (ordered published 28 Feb. 2018)

    HOLDING: Pertinent statutes and administrative rules permit strip searches of children in residential care centers in specific circumstances; they are not categorically prohibited.

    SUMMARY: The Wisconsin Department of Children and Families (DCF) fined a residential care center (RCC) for conducting a strip search of one of its residents, a minor. The search sparked a brawl between the child and staff members, who thought she might have hidden a weapon in her clothing. The DCF determined that the law did not permit a strip search by an RCC under any circumstances.

    In a decision authored by Judge Brennan, the court of appeals applied a due deference standard of review to the DCF’s conclusion. Nonetheless, a “more reasonable” interpretation of the relevant administrative rules and statutes permits an RCC to conduct strip searches under specific circumstances (¶¶ 27-28). This construction comported with the drafters’ intent and avoided an absurd result. Because the record was insufficient for the appellate court to make the determination of whether the particular strip search in this case was permitted, it remanded the matter to the DCF for a hearing to determine whether, in light of the court’s opinion, this strip search was lawful.

    Probate

    Bad Faith by Personal Representative – Court’s Equitable Authority to Impose Attorney Fees

    Laatsch v. Derzon, 2018 WI App 10 (filed 9 Jan. 2018) (ordered published 28 Feb. 2018)

    HOLDINGS: The circuit court properly concluded that a personal representative’s conduct rose to the level of bad faith and properly exercised its equitable authority to order the personal representative to pay the estate’s attorney fees.

    SUMMARY: Laatsch appealed an order surcharging her based on actions she took as personal representative of the estate of Rebecca Derzon (the estate) and as the trustee of a related trust. The circuit court concluded that Laatsch acted in “extreme bad faith” in those roles and ordered her to pay more than $1.2 million in attorney fees that the estate had incurred as a result of her conduct. In a decision authored by Judge Stark, the court of appeals affirmed.

    The issue before the circuit court was whether Laatsch’s actions as personal representative and trustee rose to the level of bad faith for purposes of imposing a surcharge for attorney fees. The court’s written decision shows that it did not mistakenly believe prior judges had already concluded Laatsch acted in bad faith, as contended by Laatsch. Instead, it properly relied on findings set forth in predecessor judges’ decisions, which were affirmed in earlier appeals, as well as other evidence the estate presented at an evidentiary hearing. Based on those findings and evidence, the court concluded Laatsch’s actions as personal representative and trustee rose to the level of “extreme bad faith.”

    Among other things, the evidence in this case established that “while acting as personal representative and trustee, Laatsch 1) attempted to admit a will to probate that was the product of her own undue influence; 2) improperly withheld documents from other interested parties, even after she was ordered by the court to produce them; 3) improperly represented to the court that [two minor heirs] did not need a guardian ad litem; 4) continued to act as personal representative after the court suspended her powers; and 5) took $137,000 from Rebecca’s safe deposit boxes and failed to include that money in an inventory filed with the court” (¶ 45).

    Said the appellate court: “Taken together, this evidence amply demonstrates that Laatsch acted in bad faith. She did not merely mismanage the Estate and Trust. Rather, her actions demonstrate she deliberately acted in a way that was calculated to benefit herself, to the detriment of other parties claiming an interest in the Estate. This conduct is sufficient to qualify as the ‘something extra, something shocking, something of bad faith’ required by prior case law in order to surcharge Laatsch for the attorney fees the Estate incurred as a result of her conduct. We therefore reject Laatsch’s argument that the evidence was insufficient to justify the imposition of a surcharge. We instead agree with the circuit court’s assessment that, ‘[i]f ever there was a case that demands a surcharge and sanctions, this is it’” (¶¶ 45-46) (citation omitted).

    The appellate court rejected Laatsch’s argument that the circuit court denied her a full evidentiary hearing on the issue of bad faith. To the extent that the circuit court prohibited Laatsch from presenting evidence, it was simply preventing her from relitigating issues that had already been decided earlier in this litigation by other judges and already affirmed on appeal (see ¶ 40). The appellate court also concluded that Laatsch failed in her attempt to establish that the circuit court surcharged her for actions she took outside her roles as personal representative and trustee (see ¶ 3).

    Torts

    Temporary Worker – Temporary Employer’s Liability – Worker’s Compensation

    Ehr v. West Bend Mut. Ins. Co., 2018 WI App 14 (filed 9 Jan. 2018) (ordered published 28 Feb. 2018)

    HOLDING: A temporary worker injured while employed may sue his or her temporary employer, provided no worker’s compensation claim was made.

    SUMMARY: While working for a temporary employer, Rivera was killed in a car accident caused by the negligence of another employee. Rivera was employed by Alex Drywall, which in turn “provided him to work for Alpine.” Alpine paid Alex Drywall, which in turn paid Rivera. Alpine employed the negligent driver. Rivera’s estate did not file a worker’s compensation claim but it did bring a tort claim against Alpine and its insurer. The circuit court granted summary judgment in favor of Alpine.

    The court of appeals reversed in an opinion authored by Judge Stark. There was a single issue: “can an employee of a temporary help agency who has been injured in the course of his or her employment and who has not made a worker’s compensation claim bring a tort claim against his or her temporary employer?” (¶ 1). The court answered in the affirmative. Construing the worker’s compensation exclusivity provision, Wis. Stat. section 102.03(2), and the “temporary help agency” provision, Wis. Stat. section 102.24(2m), the court concluded that the estate could sue Alpine even though it was barred from suing Alex Drywall (see ¶ 12).

    Nor was the lawsuit against Alpine precluded by Wis. Stat. section 102.29(6)(b)1., which applies only when the employee of a temporary help agency files a worker’s compensation claim against an employer. No such claim was made in this case (see ¶ 14). The opinion explains its “plain meaning” construction of the applicable statutes in some detail. Finally, the “loaned employee” doctrine did not change the outcome in this case (see ¶ 30).