Wisconsin Lawyer
Vol. 83, No. 4, April 2010

• Civil Procedure
• Corporations
• Criminal Law
• Criminal Procedure
• Employment Law
• Family Law
• Municipal Law
• Torts
• Zoning

Civil Procedure

Bray v. Gateway Ins. Co., 2010 WI App 22 (filed 3 Dec. 2009) (ordered published 24 Feb. 2010)

Bray was injured when he was hit by a vehicle insured by Gateway Insurance. In the complaint, Bray demanded damages for medical expenses, wage loss, and past and future suffering. When Gateway failed to answer his complaint, Bray obtained a default judgment, and the matter was scheduled for a damages hearing. Gateway stipulated to the reasonableness of Bray’s medical expenses, which topped $180,000, “absent some further development suggesting that so doing is improvident.” Information obtained during discovery raised questions about the expenses. At the damages hearing, the circuit court found that Bray’s medical expert testimony “lacked credibility.” Based on evidence of a serious pre-existing back injury, which Bray had denied, the trial judge ruled that Bray failed to show that the accident had caused his back injury, resulting medical bills, and loss of employment (see ¶ 10). Bray appealed the damages determination.

The court of appeals affirmed in an opinion authored by Judge Dykman. The court rejected Bray’s contention that Gateway had stipulated that his full injuries were caused by the accident. The record showed that Gateway had “stipulated to the reasonableness of the medical expenses, and reserved the issue of causation pending discovery and trial” (¶ 13). Put differently, Gateway’s letters did not constitute a stipulation or judicial admission as to causation (see ¶ 17). Moreover, the trial judge properly demanded proof on causation at the damages hearing. “[W]hen Gateway defaulted on the complaint, it admitted only that Bray suffered injury to his low back in the accident. However, the scope of Bray’s injuries and resulting damages was not alleged in the complaint. Because ‘the conclusiveness of a default judgment is limited to the material issuable facts which are well pleaded in the declaration or complaint,’ the default judgment in this case is not conclusive as to the extent of Bray’s injuries caused by the accident” (¶ 21). Finally, the circuit court’s factual findings on this record were not clearly erroneous and were well supported by its credibility determinations.

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Corporations

Polsky v. Virnich, 2010 WI App 20 (filed 28 Jan. 2010) (ordered published 24 Feb. 2010)

A receiver filed a lawsuit against two former corporate officers, Virnich and Moores, alleging misconduct and breach of fiduciary duty that caused the corporation’s finances to collapse. “The receiver introduced evidence that, in the period 1990-2003, Virnich and Moores used a combination of salaries, management fees, ‘loans,’ dividends, and excessive lease rates to extract more than $10 million from the corporation. Communications Products experienced cash flow problems starting in 2001, then entered a period of acute financial distress, culminating in the loan default and the receivership” (¶ 6). A jury awarded the plaintiff $6.5 million in damages. The defendants appealed.

This case raises questions about Beloit Liquidating Trust v. Grade, 2004 WI 39, 270 Wis. 2d 356, 677 N.W.2d 298, in which the Wisconsin Supreme Court “held that corporate officers and directors owe no fiduciary duty to creditors until the corporation is both insolvent and no longer a going concern” (¶ 7). The court of appeals originally certified the Polsky case to the supreme court to address problems with Beloit Liquidating that the court of appeals could not lawfully “fix,” because the court of appeals is bound by case law. Although the supreme court accepted review, the court split three to three with one justice not participating, and the case was therefore remanded to the court of appeals.

Because the court of appeals is bound by Beloit Liquidating, it reversed the judgment and remanded with directions to dismiss the receiver’s complaint. Plainly dissatisfied with Beloit Liquidating, the court of appeals could not meaningfully distinguish that case from this one. “In both cases, the underlying situation is the same: while the corporation remained a going concern, the directors took actions that impaired the corporation’s ability to pay its creditors. In both situations, so far as we can tell, the only identified harm to the corporation was its diminished ability to pay its creditors. Neither the receiver nor the amici identify any additional harm in this case. In particular, the receiver points to no evidence showing that any interests of the corporation – other than repaying its creditors – are served by the success of the receiver’s action. If the impaired ability to pay creditors ‘resulted in no injury to the corporation’ in Beloit Liquidating, we discern no reason why it is an actionable injury to the corporation in this case” (¶ 13).

The opinion, written by Judge Lundsten, spells out the problems posed by Beloit Liquidating in cases involving corporate misconduct. “The problem, as we see it, is this: A business can be run as a ‘going concern,’ well after it is insolvent, thus making it a relatively simple matter for the officers and owners of a closely held corporation to strip many of the remaining assets of the ‘sinking ship’ without fear of running afoul of a duty to creditors. At oral argument before the supreme court, counsel for amicus Wisconsin Bankers Association explained that one consequence of diminished creditor protection is that creditors will make it more difficult and more expensive for many corporations to borrow money. For example, according to the Association’s counsel, more ‘personal guaranties, regular audits, periodic examinations, [and] stricter underwriting’ will be imposed on corporate borrowers. The net result seems to be an increase in the cost of doing business for closely held corporations, including those owned and run by people who act in good faith to keep their corporations running. Therefore, it appears to us that corporations as a whole would benefit if our supreme court modified the Beloit Liquidating holding to bring it into line with the majority of other jurisdictions” (¶ 15).

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Criminal Law

State v. Fortun, 2010 WI App 32 (filed 14 Jan. 2010) (ordered published 24 Feb. 2010)

The criminal complaint in this case alleged that a doctor gave the defendant, Fortun, a prescription for 60 pills of the drug Tramadol; Fortun altered the prescription so that it appeared to authorize 120 pills; and Fortun presented the altered prescription to a pharmacist and obtained 120 pills. Fortun was charged with forgery by falsely altering a writing, contrary to Wis. Stat. section 943.38(1)(a).

The defendant moved to dismiss the forgery charge, arguing that the forgery statute does not apply to altered prescriptions. The circuit court concluded that the statute is ambiguous as applied to Fortun’s conduct; it then applied the “rule of lenity,” construed the forgery statute against the state, and dismissed the charge. The state appealed to the court of appeals. In a decision authored by Judge Lundsten, the court of appeals reversed.

As applied to the defendant’s conduct, the version of the forgery statute charged has three elements: (1) the prescription “was a writing by which legal rights or obligations are created or transferred”; (2) Fortun falsely “altered” the writing to make it appear to have been made “with different terms”; and (3) Fortun altered the writing “with intent to defraud.” See Wis JI – Criminal 1491. The second and third elements were not disputed in this case. Rather, the only question was whether the prescription is a writing “by which legal rights or obligations are created or transferred” (¶ 7).

The court of appeals concluded the prescription the defendant obtained is a writing that creates “legal rights” within the meaning of the forgery statute (see ¶ 1). “[T]he prescription Fortun obtained from her doctor created a legal right for any pharmacist, presented with the prescription, to dispense 60 Tramadol pills to Fortun without violating the law. Absent the prescription, Fortun’s pharmacist had no legal right to give her any Tramadol pills” (¶ 10). It is a crime in Wisconsin to dispense a prescription drug without a prescription. See Wis. Stat. § 450.11(1)(a), (9)(b). Said the court, “The words ‘legal rights’ plainly cover the right to dispense prescription drugs without violating the law” (id.). Accordingly, the court of appeals reversed the order of the circuit court dismissing the forgery charge against Fortun, and it remanded the matter to the circuit court with directions to reinstate the charge (see ¶ 15).

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Criminal Procedure

State v. Garcia, 2010 WI App 26 (filed 13 Jan. 2010) (ordered published 24 Feb. 2010)

At the defendant’s jury trial on charges of substantial battery and criminal trespass, the defense rested its case without calling the defendant (Garcia) or any other witnesses. However, the court failed to engage in a colloquy with Garcia to determine whether the decision to rest his case, rather than testify, was knowingly, voluntarily, and intelligently made. Such a colloquy is required by State v. Weed, 2003 WI 85, 263 Wis. 2d 434, 666 N.W.2d 485. In a postconviction motion the defendant sought a new trial on the basis of this error. The circuit court held an evidentiary hearing at which the defendant and both his trial attorneys testified. At the conclusion of the hearing, the court held that the defendant made a voluntary and intelligent decision not to testify and reached that decision after discussing the matter on two occasions with two different attorneys. Accordingly, the court denied the motion. The defendant appealed. In a decision authored by Judge Snyder, the court of appeals affirmed.

The defendant argued on appeal that he is entitled to a new trial and that the court’s failure to conduct the colloquy mandated by Weed should always result in a new trial. The state countered that the proper procedural response to a Weed violation is an evidentiary hearing to determine whether the defendant knowingly, voluntarily, and intelligently waived the right to testify. The court of appeals agreed with the state.

In other contexts involving a failure to conduct a mandated colloquy with the defendant when he or she waives constitutional rights (for example, waiver of right to jury trial, waiver of right to counsel, and so on), the state carries the burden to show that the defendant’s waiver was knowing and voluntary. If the state makes its showing by clear and convincing evidence, the conviction will stand; however, if the state does not, the defendant is entitled to a new trial. The appellate court held that “this procedure is appropriate when a defendant waives the right to testify at trial” (¶ 9).

Turning to the facts of this case, the court of appeals affirmed the decision of the circuit court denying the defendant’s request for a new trial. “Having reviewed the trial transcript along with the postconviction evidentiary hearing transcript, we are convinced that Garcia’s waiver of the right to testify was knowing, intelligent and voluntary. Garcia was fully aware of his right to testify, he had ample opportunity to discuss with counsel the risks and benefits of testifying, and he made the decision not to testify” (¶ 13).

State v. Jeffrey A.W., 2010 WI App 29 (filed 13 Jan. 2010) (ordered published 24 Feb. 2010)

The defendant, Jeffrey, was convicted of sexually assaulting his then three-year-old daughter in 1994. The alleged crime came to light in 2006 when the daughter discovered she had herpes. The state’s theory was that Jeffrey had transmitted the virus during a sexual assault. At trial Jeffrey denied the charges but offered no expert evidence that he did not have herpes. The jury convicted him. After trial Jeffrey produced expert medical evidence showing, to a 99.8 percent certainty, that he did not have herpes, and he appealed to the court of appeals.

The court of appeals reversed his conviction and remanded for a new trial in an opinion written by Chief Judge Brown. First, the court found that Jeffrey’s trial counsel had not been constitutionally ineffective. She had diligently researched the issue of medical testing for herpes but had come to the erroneous conclusion that Jeffrey could not be accurately tested, a false assumption shared by Jeffrey’s own physician. The court ordered a new trial, however, because postconviction evidence showed, to a high degree of certainty, that Jeffrey was herpes-free.

“We are not comfortable with having to reverse and remand but we feel compelled to do so. Here, [the daughter’s] testimony centered around the fact that she had herpes and the assertion that she would not have contracted it but for her father’s assaults on her, the only person with whom she had sexual contact. Therefore, whether Jeffrey did or did not have herpes was of utmost importance in determining the credibility of the parties. We simply do not have confidence that justice has prevailed especially since the State – as part of its strategy – assailed Jeffrey’s credibility by pointing out the lack of a test corroborating his assertion of being herpes-free. We thus reverse and remand for a new trial where Jeffrey will be free to present the test results. It may well be that a new jury will be convinced, beyond a reasonable doubt, that Jeffrey sexually assaulted his daughter. But that will be after the jury has heard evidence on a critical issue in the case” (¶ 22).

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Employment Law

Frank D. Gillitzer Elec. Co. v. Andersen, 2010 WI App 31 (filed 20 Jan. 2010) (ordered published 24 Feb. 2010)

Gillitzer Electric Co. sued several former employees seeking repayment of educational costs incurred while they worked for Gillitzer. Essentially, Gillitzer paid its employees to attend a five-year apprenticeship program for licensed electricians in exchange for their agreement to abide by a noncompetition provision and to repay the education expenses under certain circumstances. The former employees either withdrew from the program or failed to meet its requirements while continuing to work for Gillitzer. Eventually all resigned voluntarily, and Gillitzer sought repayment for their training expenses. In this lawsuit to collect those expenses, Gillitzer conceded that the noncompetition provision was overly broad. The circuit court ruled that the training reimbursement provision was also unenforceable.

The court of appeals reversed in an opinion written by Judge Brennan that construed both Streiff v. American Family Mutual Insurance Co., 118 Wis. 2d 602, 348 N.W.2d 505 (1984), and Star Direct Inc. v. Dal Pra, 2009 WI 76, 319 Wis. 2d 274, 767 N.W.2d 898. “Gillitzer does not dispute that the non-compete provision in the Agreement is invalid and unreasonable. The former employees do not dispute that the training reimbursement provision by itself is reasonable. ... Then, the narrow issue here, cast in the language of Wis. Stat. § 103.465, is whether the unreasonable, unenforceable non-compete provision renders the reasonable training reimbursement provision unenforceable. ...We conclude that it does not, under either Streiff or Star Direct” (¶ 9).

“The training reimbursement and non-compete provisions are not intertwined or dependent on each other for their meanings. The two provisions here are ‘distinct, mutually exclusive, [and] independent.’ ... Although they do share a common backdrop, in that they both are requirements of accepting the apprenticeship money, they impose separate requirements. Further, as Gillitzer points out in its brief, if either provision is stricken, the other is still independently understood; they are not ‘intertwine[ed] or inextricable.’ ... Additionally, unlike the provisions in Streiff, the two provisions in the Agreement do not share identical factual triggers. ... Here the repayment requirement is triggered by any one of three things, two of which trigger repayment even if the employee stays employed at Gillitzer – quitting the program and receiving a failing grade. The third trigger is leaving the company before four years after completing the program. In the event of any of those three triggers, the employee is responsible to repay the program costs. On the other hand, the non-compete provision is triggered by the passage of four years after completion of the apprenticeship program or after the employee leaves the company. Accordingly, the factual triggers for the two provisions are not identical” (¶¶ 16-17).

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Family Law

Rick v. Opichka, 2010 WI App 23 (filed 13 Jan. 2010) (ordered published 24 Feb. 2010)

The Opichkas had two children, who were born in 2002 and 2003. The mother died in 2006. Her parents, the Ricks, had regular contact with their grandchildren, but the amount of contact lessened after their daughter’s death. The Ricks petitioned for visitation. The family court granted the Ricks visitation rights, which included one weekend per month and a week during the summer. The children’s father appealed.

The court of appeals affirmed in part and reversed in part in an opinion authored by Chief Judge Brown. At issue was the application of the grandparent-visitation statute (Wis. Stat. § 54.56(2)) and the rebuttable presumption that “fit parents act in the best interests of their children”
(¶ 4). The court first dispatched several “less substantial” (¶ 5) issues posed by the father relating to the circuit court’s rulings and whether they contravened the presumption. It then turned to the two “more substantial issues.” The first concerned whether the grant of overnight stays trespassed across the line separating visitation from physical placement, “thus putting the grandparents on equal footing with a divorced parent who does not have primary placement of the children. Even if his argument fails on that score, [the father] also contends that the order granted too much parental authority to the grandparents because the family court allegedly gave the grandparents ‘the responsibility of making the decisions in caring for the children’” (¶ 11).

As to the first issue, the court held “that when children visit their grandparents and stay with them as a guest, the grandparents have the responsibility to make routine daily decisions regarding the child’s care but may not make any decisions inconsistent with the major decisions made by a person having legal custody. The same is true of a parent who does not have joint legal custody, but does have a right to physical placement. In both instances, the same rules apply: routine daily decisions may be made, but nothing greater.... Therefore, the amount of time spent on the visit, whether for a few hours or an overnight is still a visit. The proper amount of that time is a decision made by the family court in the best interests of the children. In sum the quantity of time ordered does not depend on whether it is a visitation order or a physical placement order” (¶ 13).

The court conceded that visitation and physical placement are qualitatively different but not necessarily quantitatively different. “As our statutory history indicates, whenever a court orders sole or joint legal custody to parents, the court is required to allocate periods of physical placement between parents unless it finds that such allocation is not in the best interest of the child.... In other words, the presumption is that the spouse without primary placement shall have periods of physical placement. On the other hand, ... the grandparents are afforded no such presumption. In fact, the presumption is the opposite – grandparents get what the natural parent gives them unless they can show that [it is in] the children’s best interests … for the court to order otherwise” (¶ 14). On this issue, the court remanded the case to the family court “to clarify whether the grandparents have authority to make only the routine daily decisions and, if so, what those routine daily decisions may be” (¶ 17). 

Second, the court rejected the father’s argument that section 54.56 violates “the equal protection clause in that it unfairly treats a class of parents known as parents with a deceased spouse differently from a class of parents known as parents in an ‘intact’ family” (¶ 18). “We agree with the Ricks that these two classes of parents are different: a widowed parent has suffered the loss of his or her spouse, and therefore, the surviving parent’s family, after the loss of a spouse, is no longer a traditional intact family. The death of a parent is the triggering event that creates a compelling state interest to protect a child’s best interest.... And we conclude that this is what grandparent visitation addresses. Visitation allows grandparents, who have previously had a meaningful relationship with the child, to contribute to the child’s well-being by providing a sense of continuity. That is why court-ordered visitation focuses on the best interests of the child, which may include visitation when the family functions as an extended family, with grandparents who have had a significant, continuing and predictable relationship with the child before the parent’s death. Further, the best interests of the child standard with a rebuttable presumption in favor of the parent’s decision regarding visitation ensures that the visitation orders are closely tailored to achieve the purpose of continuity in a child’s life” (¶ 22).

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Municipal Law

Dawson v. Town of Jackson, 2010 WI App 24 (filed 6 Jan. 2010) (ordered published 24 Feb. 2010)

The Dawsons sought to discontinue a portion of a town highway, shared by the town of Cedarburg and the town of Jackson, along which the Dawsons own property. A joint meeting of the two town boards was held. Each town has a five-member board. All five Jackson board members attended the meeting, but only three members of Cedarburg’s board were present. At the conclusion of the meeting, the Jackson board voted five-to-zero to vacate the relevant portion of the road; the Cedarburg board voted three-to-zero not to vacate.

The Dawsons thereafter commenced a declaratory action seeking a determination that a portion of the road in question had been discontinued. Cedarburg responded by arguing that declaratory relief was an inappropriate vehicle for the Dawsons to employ in this context and contending that they should have instead pursued certiorari review under Wis. Stat. section 82.15. Cedarburg also argued that the votes of both town boards at the joint hearing should not have been counted as a whole, with five in favor and three against. Cedarburg said that the result should instead be considered unanimous support from Jackson but unanimous rejection by Cedarburg, and the application should have been denied (see ¶ 4).

The circuit court determined that declaratory relief was an appropriate vehicle for the Dawsons to pursue relief, and it further held that, under Wis. Stat. section 82.21(2), the votes at the joint hearing were properly counted in the aggregate (see id.). In a decision authored by Judge Snyder, the court of appeals affirmed.

The appellate court concluded that the Dawsons appropriately sought declaratory relief in this case. “We agree with the Dawsons that the question here is not one that could have been adequately addressed by certiorari review. Wisconsin Stat. § 806.04(1), the uniform declaratory judgments act, provides that a court has the ‘power to declare rights, status, and other legal relations.’ The purpose of § 806.04 is remedial, intended to ‘settle and to afford relief from uncertainty and insecurity’ and it is to be ‘liberally construed and administered.’ Sec. 806.04(12). Here, the Dawsons sought a determination of whether Wis. Stat. § 82.21(2) required the votes of both the Cedarburg board and the Jackson board to be counted together. This question is appropriately raised in a declaratory judgment action” (¶ 10).

The court of appeals further held that “the correct procedure when towns act together under Wis. Stat. § 82.21(2) is to count all of the votes of all town board members present and, from all votes cast, determine whether an application is approved or denied” (¶ 19). “In this case Jackson participated in the town highway determination by sending five board members to the joint hearing. Cedarburg participated by sending three of its five board members to the meeting. Under the … approach [articulated in State ex rel. Madison v. Walsh, 247 Wis. 317, 19 N.W.2d 299 (1945)], which rests on the vote of the majority who attend a joint meeting, the Dawsons’ application was approved by a five-to-three majority in favor of discontinuing a portion of Wausaukee Road” (¶ 23).

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Torts

Ladd v. Uecker, 2010 WI App 28 (filed 27 Jan. 2010) (ordered published 24 Feb. 2010)

In 2006, radio announcer Bob Uecker obtained an injunction against Ladd, who allegedly had harassed Uecker for years. In 2008, Ladd filed a “sprawling pro se complaint” against Uecker and the Milwaukee Brewers baseball team for defamation and “false light invasion of privacy.” The trial judge dismissed her complaint, and Ladd appealed.

The court of appeals affirmed in an opinion written by Judge Snyder. Much of the opinion is fact-intensive but several points are of more general interest. First, the court took up the problem of how the statute of limitation governing defamation relates to publication on the Internet. Ladd argued that information is “republished each time someone visits that website.” Although “Wisconsin has not yet addressed the multiple- or single-publication rule head-on,” the court of appeals rejected Ladd’s contention (¶ 11).

“Some courts have applied the single-publication rule specifically to publication on the Internet. [citation omitted] We do so here. We hold that ‘republishing’ the allegedly defamatory information about Ladd on the Internet is not actionable. Accepting as we must on this review that Uecker or the Brewers were responsible for the initial publication to thesmokinggun.com on June 2, 2006, that act is outside the statute of limitations. Uecker and the Brewers have no control over other websites’ use or dissemination of the same information on the World Wide Web. We reject the notion that each ‘hit’ or viewing of the information should be considered a new publication that retriggers the statute of limitations” (¶ 13).

Some alleged defamatory statements were absolutely privileged because they were made in judicial proceedings (see ¶ 15), and other statements made to police to enforce the injunction were subject to a conditional privilege (see ¶ 16). As to an alleged defamatory statement published in the Brewers’ online news archive, Ladd failed to give the written notice required by Wis. Stat. section 895.05(2), which was also subject to a “wire service” privilege (see ¶¶ 17, 18).

Finally, Ladd conceded that Wisconsin recognizes no claim for “false light invasion of privacy” but argued nonetheless that the defendants invaded her privacy. “Ladd alleges that the Brewers took photographs of her in the stands at baseball parks and disseminated her ‘mug shot’ and information about the injunction and the spring training incident. None of these involved private places, using her likeness for advertising or trade, or depictions of nudity. Further, they are matters of public record. She did not plead facts that satisfy an invasion of privacy claim” (¶ 20).

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Zoning

Propp v. Sauk County Bd. of Adjustment, 2010 WI App 25 (filed 7 Jan. 2010) (ordered published 24 Feb. 2010)

The plaintiff owns a house on Lake Wisconsin. The Sauk County Board of Adjustment denied her application for a special land-use permit under Wis. Stat. section 59.692(1v) and under the county’s shoreland-protection ordinance. The application relates to the construction of a deck, a portion of which is within the shoreland-setback area. The statute provides that a county shall grant special zoning permission for the construction or placement of a structure on property in a shoreland-setback area if, among other things, “[t]he total floor area of all of the structures in the shoreland setback area of the property will not exceed 200 square feet.” The county’s shoreland-protection ordinance has a similar provision. As proposed, the deck in question would have 200 square feet of deck floor in the setback area; however, a portion of the deck support system would also encroach on the setback area, thus bringing the total encroachment (deck floor plus deck support system) to a square footage in excess of 200 square feet. The circuit court reversed the board of adjustment’s decision to deny the special permit and the court of appeals, in a decision authored by Judge Bridge, affirmed the circuit court.

Among the issues on appeal was the meaning of the term floor area as used in the statute and shoreland-protection ordinance. The court of appeals concluded that “the term ‘floor area’ encompasses only the portion of [the plaintiff’s] deck upon which a person is able to stand and does not include the area of the deck’s support system” (¶ 22).

The board of adjustment argued that ignoring the structure and counting only the floor area would lead to absurd results because parties may build structures as large as they want in protected setback areas, so long as they restrict the areas covered in flooring to 200 square feet. The court of appeals disagreed, at least with the proposition that its interpretation will prompt people to build support systems that are larger than needed to support flooring (see ¶ 19). Said the court, “[T]he Board does not suggest why anyone would want to build a structure substantially larger than the floor it supports. We acknowledge that in some situations, terrain and ground conditions might be such that it would be cheaper or more structurally sound to place support system footings beyond the perimeter of the deck. But this possibility does not render our construction absurd. As the circuit court noted, it is unlikely that anyone would want to build a structure to support 200 square feet of flooring that is substantially larger than the area covered by that flooring” (¶ 20).

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