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    Court of Appeals Digest

    In this column, Profs. Daniel D. Blinka and Thomas J. Hammer summarize select published opinions of the Wisconsin Court of Appeals. Full-text decisions are linked below.

    Daniel D. Blinka & Thomas J. Hammer

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    Civil Litigation

    Attorney Fees – Third-party Liability Action

    Sinkler v. American Family Mut. Ins. Co., 2019 WI App 64 (filed 22 Oct. 2019) (ordered published 20 Nov. 2019)

    HOLDING: The circuit court properly applied the applicable three-part test when determining and apportioning the reasonable costs of collection in this case.

    SUMMARY: Sinkler was injured in a motor vehicle accident. An insurer, EMCASCO Insurance Co. (hereinafter EMC), paid him more than $50,000 in worker’s compensation benefits. Represented by Habush Habush & Rottier, Sinkler brought a third-party liability claim under Wis. Stat. section 102.29 against the driver of the other vehicle and his insurer (American Family). EMC was named as a defendant in the lawsuit as well.

    About two years later, EMC retained the Ron Harmeyer Law Office to represent it in the action. Following a mediation, American Family agreed to pay $175,000 to settle the case. The parties agreed that 30 percent would be allocated to Sinkler’s wife on her claim. EMC and Sinkler could not agree, however, on the reasonable cost of collection, which is the first step in the distribution formula set forth in Wis. Stat. section 102.29(1)(b). After a hearing, the judge awarded the Habush firm $43,132 as the reasonable cost of collection; the Harmeyer firm was awarded nothing.

    The court of appeals affirmed in an opinion authored by Judge Stark. The division of the reasonable costs of collection is discretionary. The three-step process governing this division is set forth in Anderson v. MSI Preferred Insurance Co., 2005 WI 62, 281 Wis. 2d 66, 697 N.W.2d 73. The first step looks to the “reasonable value for each party’s fees and costs.” The second step evaluates the total cost of collection and its reasonableness. The third step, absent agreement among the parties, is that the court decides how to apportion fees among the lawyers.

    The court of appeals discussed each step in some detail in light of the circuit court record and the prevailing law. For example, when considering the first step, the court held that the Habush firm’s one-third contingency fee applied to the gross recovery on the third-party liability claim, not just to Sinkler’s share of the gross recovery (see ¶ 29). The trial judge acted properly in finding that the Harmeyer firm’s contingency fee agreement was unreasonable, especially as it involved only the mediation (see ¶ 31). Moreover, “much of the work” done by the Harmeyer firm duplicated legal work that had already been completed (¶ 36).

    “In summary, the circuit court concluded that the Harmeyer firm’s fee agreement was unreasonable, and it therefore could not use that agreement to determine the reasonable value of the Harmeyer firm’s attorney fees. The court then concluded that it could not calculate the reasonable value of the Harmeyer firm’s fees using either a lodestar or a quantum meruit analysis because the Harmeyer firm had failed to provide the necessary evidence.… While a determination that the reasonable value of an attorney’s fees is $0 is not a typical result, a court has discretion to make that determination, as long as it provides an adequate explanation for its decision” (¶ 43).

    The record also showed that the second and third steps were properly applied by the trial judge.

    The remainder of the opinion is devoted to EMC’s proposal that the court adopt “a per se rule in third-party liability actions that when both the employee and the worker’s compensation insurer retain attorneys on a contingency fee basis, ‘the cost of collection should be divided in proportion to the clients’ recoveries; i.e., pro rata’” (¶ 47). The court rejected the proposal, noting that it conflicted with Wis. Stat. section 102.29 and the case law, among other reasons.

    Criminal Procedure

    NGI Commitments – Revocation of Conditional Release

    State v. Olson, 2019 WI App 61 (filed 8 Oct. 2019) (ordered published 20 Nov. 2019)

    HOLDING: The 72-hour time limit within which the Department of Health Services (DHS) must file a statement of probable cause and a petition to revoke the conditional release of an individual acquitted by reason of mental disease or defect who has been taken into custody for violating terms of conditional release is a mandatory time limit.

    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: After finding the defendant Olson not guilty by reason of mental disease or defect (NGI), the circuit court committed him to the DHS for 19 years; it also ordered that he be placed on conditional release. One month later, the DHS took Olson into custody because of drug use that violated the rules of his conditional release. Eight days after that, the DHS submitted a statement of probable cause and a petition to revoke Olson’s conditional release.

    Olson moved to dismiss the petition, claiming that it was not timely submitted. He relied on Wis. Stat. section 971.17(3)(c), which provides that the DHS “shall submit” the statement of probable cause and a petition to revoke the order for conditional release “within 72 hours after the detention, excluding Saturdays, Sundays, and legal holidays.” The circuit court denied the motion. It concluded that the 72-hour time limit was directory, not mandatory.

    In a decision authored by Judge Seidl, the court of appeals reversed the decision of the circuit court. Said the court: “We conclude the seventy-two-hour time limit set forth in Wis. Stat. § 971.17(3)(e) is mandatory. Consequently, the Department’s undisputed failure to comply with the time limit in this case deprived the circuit court of competency to consider the Department’s petition to revoke Olson’s conditional release. We therefore reverse and remand with directions for the court to dismiss the Department’s petition” (¶ 2).

    Motor Vehicle Law

    OWI – Riding Lawn Mowers

    State v. Shoeder, 2019 WI App 60 (filed 1 Oct. 2019) (ordered published 20 Nov. 2019)

    HOLDING: The defendant’s riding lawn mower is a “motor vehicle” for purposes of Wisconsin’s operating while intoxicated (OWI) statute.

    SUMMARY: The defendant was arrested for fourth-offense OWI in connection with his operation of a riding lawn mower on the shoulder of a public roadway. He moved to dismiss the charge, arguing that a riding lawn mower is not a “motor vehicle” within the meaning of Wisconsin’s OWI statute. Instead, he contended that the lawn mower is an “all-terrain vehicle,” the operation of which while intoxicated is subject to a different penalty scheme. See Wis. Stat. § 23.33(4)(c), (13)(b). The circuit court denied the motion, and the defendant pleaded no contest to the OWI charge. In a decision authored by Judge Hruz, the court of appeals affirmed.

    The OWI statute uses the term “motor vehicle.” A motor vehicle is defined as any vehicle that “is self-propelled, except a vehicle operated exclusively on a rail.” Wis. Stat. § 340.01(35). A vehicle, in turn, is broadly defined to include “every device in, upon, or by which any person or property is or may be transported or drawn upon a highway, except railroad trains.” Wis. Stat. § 340.01(74).

    Applying these definitions, the appellate court concluded that the defendant’s riding lawn mower is a “motor vehicle” (¶ 1). The mower in this case is a “vehicle” because it is a device on which a person may be transported on a highway; it is a “motor vehicle” because it is self-propelled (¶ 11).

    The court further concluded that the defendant’s mower is not an all-terrain vehicle. Among other specifications, Wis. Stat. section 340.01(2g) provides that an all-terrain vehicle is a device “equipped with a seat designed to be straddled by the operator.” The defendant acknowledged that his lawn mower does not have a straddle seat.

    Municipal Law

    Counties and Towns – Shorelands Regulation

    State ex rel. Anderson v. Town of Newbold, 2019 WI App 59 (filed 29 Oct. 2019) (ordered published 20 Nov. 2019)

    HOLDING: The town of Newbold could enforce its shoreland frontage requirement under its subdivision authority even though it could not do so under its zoning authority.

    SUMMARY: Anderson owned a lot that had 358 feet of shoreland frontage. He asked permission from the town’s planning commission to divide his current lot into two separate lots with frontage of 195 feet and 163 feet respectively. The commission denied the request under the town’s subdivision ordinance. The town board adopted the commission’s recommendation, and the circuit court affirmed the town board’s action.

    The court of appeals affirmed in an opinion authored by Judge Seidl. The issue was whether the town could rely on its subdivision authority when the same shoreland frontage requirement would be unenforceable under the town’s zoning authority. By statute, counties and towns have authority to zone, but only counties may enact shoreland zoning ordinances (see ¶ 11). Nonetheless, the legislature also gave towns the authority to enact subdivision regulations. There is “significant overlap between subdivision and zoning powers” (¶ 15). The court rejected Anderson’s invitation that the court reconcile the conflicting statutes by holding that the Wisconsin Legislature revoked the town’s power to regulate shoreland through its subdivision powers (see ¶ 17). In short, there was “undeniable tension” between the two sets of statutes, and while this may be “bad policy,” it is a policy determination for the legislature – not the courts (¶ 21).

    Sexually Violent Persons

    Discharge Hearings – Expert Testimony – Sufficiency of Evidence

    State v. Stephenson, 2019 WI App 63 (filed 29 Oct. 2019) (ordered published 20 Nov. 2019)

    HOLDING: The state was not required to present expert testimony on the petitioner’s future dangerousness; the evidence was sufficient to establish his future dangerousness.

    SUMMARY: Based on Stephenson’s “long history of committing sexual assaults,” in 2011 he was committed under Wis. Stat. chapter 980 as a sexually violent person (¶ 10). He filed this petition for discharge in 2017. After an evidentiary hearing, the court denied the discharge petition but granted Stephenson supervised release. Nonetheless, he filed a postcommitment motion, which the court denied.

    The court of appeals affirmed the denial of Stephenson’s discharge petition in an opinion authored by Judge Stark. The appeal raised two issues. First, the court addressed whether the state was required to present expert testimony on Stephenson’s future dangerousness (see ¶ 41). Although expert testimony is required to establish the “mental disorder element” required by Wis. Stat. chapter 980, the separate issue of a petitioner’s future dangerousness does not require expert testimony.

    Succinctly put: “It is within the realm of lay comprehension to determine the likelihood that the person will act on his or her predisposition based on factors such as the person’s criminal history, his or her performance on supervision, the person’s progress in treatment, and an expert’s general testimony about the nature of the person’s mental disorder and any applicable risk factors that may be predictive of recidivism” (¶ 46).

    Second, sufficient evidence supported the denial of Stephenson’s discharge petition. The court applied the criminal standard of review to the record (see ¶ 50). The state offered “compelling evidence that Stephenson was more likely than not to commit a future act of sexual violence” (¶ 52). The facts are set forth in the opinion.


    Franchise Tax – Royalties From Software Licensing

    Wisconsin Dep’t of Revenue v. Microsoft Corp., 2019 WI App 62 (filed 31 Oct. 2019) (ordered published 20 Nov. 2019)

    HOLDING: Royalties that Microsoft Corp. received from licensing its software to original equipment manufacturers (OEMs) that are not located in Wisconsin, but whose products are used in Wisconsin, should not be considered in calculating Microsoft’s franchise tax liability to the Wisconsin for the tax years 2006-09 under Wis. Stat. section 71.25(9)(d) (2005-06).

    SUMMARY: During the tax years in question (2006-09), Microsoft Corp. entered into software copyright-license agreements with OEMs that were not based in Wisconsin. The OEMs paid royalties to Microsoft in exchange for which the OEMs were granted the right to install Microsoft software on computers and to distribute that installed software and grant sublicenses for the end users (the consumers) to use the software.

    The Wisconsin Tax Appeals Commission concluded that the royalties Microsoft received from licensing its software to OEMs not located in Wisconsin, but whose products are used in Wisconsin, should not be considered in calculating Microsoft’s franchise tax liability to Wisconsin for the tax years in question under Wis. Stat. section 971.25(9)(d) (2005-06). That statute concerns the franchise taxation of sales of intangibles if the income-producing activity occurs in Wisconsin. The circuit court affirmed the commission’s decision.

    On appeal the Wisconsin Department of Revenue (DOR) argued that the commission erred by failing to apply a statutory exception to Wis. Stat. section 71.25(9)(d), under which franchise taxation of computer software occurs if a “licensee” uses the software in Wisconsin. According to the DOR, this exception requires that the royalties Microsoft received from the OEMs not located in Wisconsin must be considered in calculating Microsoft’s franchise tax liability because the Wisconsin end users of OEM’s products were, in effect, Microsoft’s “licensees.”

    In an opinion authored by Judge Fitzpatrick, the court of appeals affirmed the commission’s decision and concluded that the end users were not “licensees” of Microsoft. It reached this conclusion based on “the pertinent statutory framework; the Commission’s findings of fact regarding the Microsoft and OEM transactions and the OEM and end-user transactions; and the terms of the end-user agreements” (¶ 29).

    The DOR’s argument failed “because both the findings of the Commission, and the terms of the end-user agreements, foreclose the assertion of the DOR that end-users were licensees of Microsoft” (¶ 31). There was no license between Microsoft and the end users because the end users did not purchase anything, including a license, from Microsoft (see ¶ 32). The court also rejected the DOR’s argument that the OEMs acted as agents of Microsoft for the limited purpose of granting sublicenses of Microsoft’s software to the end users and that therefore the licenses were, in effect, between Microsoft and the end users (see ¶ 45).

    In a footnote, the court said the following: “The versions of the statutes in effect at the time of the tax assessments in this case were versions 2003-04, 2005-06, and 2007-08. During the 2006 to 2009 tax years, the legislature made changes to the statutory sections at issue in this case. See, e.g., 2005 Wis. Act 25, § 1349 (creating Wis. Stat. § 71.25(9)(df) effective July 27, 2005); 2009 Wis. Act 2, § 126 (repealing § 71.25(9)(d) effective March 6, 2009). However, the parties treat the relevant statutory language as having been identical for all pertinent tax years, and we do the same” (¶ 1 n.1).

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