Vol. 77, No. 5, May 2004

Supreme Court Digest

by Prof. Daniel D. Blinka &
Prof. Thomas J. Hammer

Attorneys Civil Procedure Criminal Procedure Evidence Family Law

Corporations Natural Resources Real Property Torts

Attorneys

Practice of Law - Hospitals - Peer Review Hearing

Seitzinger v. Community Health Network, 2004 WI 28 (filed 25 March 2004)

Dr. Seitzinger, a board certified ob-gyn, had his clinical privileges indefinitely suspended by CHN, a corporation that owned the hospital. Under CHN bylaws, Seitzinger was entitled to a peer review hearing where he could defend himself against the allegations that resulted in his suspension. To assist in his defense, Seitzinger "hired" Dr. Kadar, a board certified ob-gyn and a member of the New Jersey bar. CHN objected to Kadar because he was neither a member in good standing of CHN's medical staff nor licensed to practice law in Wisconsin, as contemplated by the bylaws. Seitzinger then filed this action for declaratory relief, which sought to authorize Kadar's participation in his defense. The circuit court ruled in favor of CHN.

The court of appeals certified two issues to the supreme court. The first was whether the legal representation of a physician at a peer review hearing constitutes the practice of law. The second was whether there should be an exception to the unauthorized practice of law statute, Wis. Stat. section 757.30, to allow for such representation.

The supreme court, in an opinion written by Justice Crooks, affirmed. Although the court expressly declined to answer the first certified issue "as to all peer review hearings," it nonetheless held that, "as a matter of contract, the words 'legal counsel' as used in the contract in question are reasonably interpreted to apply only to an attorney licensed to practice law in Wisconsin. We hold that [CHN's] interpretation of the words 'legal counsel' in the [hospital bylaws] as referring to an attorney licensed to practice law in Wisconsin was a reasonable one. The general rule is that hospital bylaws can constitute a contract between a hospital and its staff members such as Seitzinger. Since the reasonable interpretation of the contract would require that a person representing Seitzinger be an attorney licensed in Wisconsin, and since the activities that it is reasonable to anticipate Kadar would be engaging in on behalf of Seitzinger would, at the very least, focus on legal issues, we conclude that the circuit court properly denied Seitzinger's motion for declaratory judgment and the petition for Kadar's admission pro hac vice" (¶ 2). The court further declined to create an exception to Wis. Stat. section 757.30 that would permit an attorney unlicensed in Wisconsin to represent a client at a peer review hearing (¶ 4).

Chief Justice Abrahamson, joined by Justices Bradley and Prosser, dissented on the ground that the contract did permit Kadar's participation. In particular, the bylaws did "not envision that the hearings will require persons knowledgeable in Wisconsin law or procedure" (¶ 81) and that "laypersons routinely perform the activities set forth in the bylaws for the peer review hearings in other contexts, such as governmental administrative hearings" (¶ 82).

Civil Procedure

Evidence - Experts - Privilege - Alt Rule

Glenn v. Plante, 2004 WI 24 (filed 24 March 2004)

In this medical malpractice action, the trial court restricted plaintiffs to one medical expert, Dr. Koh, because of a failure to comply with a scheduling order. Dr. Koh, however, refused to provide expert opinion testimony, based on the so-called expert privilege set forth in Burnett v. Alt, 223 Wis. 2d 72 (1999). The trial court nonetheless found the presence of a "compelling circumstance" (namely, the plaintiffs would be nonsuited without Koh's expert testimony) and ordered Koh to testify. A divided court of appeals affirmed.

The supreme court, in a decision authored by Justice Crooks, reversed and remanded the matter in an opinion that thoroughly evaluates and clarifies the reach of the Alt rule. First, sweeping assertions of the privilege or blanket pronouncements that a person will provide no expert testimony are improper. A proper record requires that the proponent must articulate particular questions and the opponent clearly assert the privilege in response. The court held "that Koh should not have been ordered to give expert opinion testimony in this case, since the record does not clearly reflect the question or questions to be asked of Koh, nor was Koh given the opportunity formally to invoke a privilege not to testify" (¶ 34). Put differently, "[i]t is necessary to have an exact question or questions requiring expert opinion testimony, and a clear assertion of a privilege not to provide such expert opinion testimony, before the circuit court can decide whether compelling circumstances exist" (¶ 32).

Second, "Alt does not apply to observations made by a person's treating physician relating to the care or treatment that he or she provided to the patient, but rather applies to expert opinion testimony from such a physician as to the standard of care and treatment provided by another physician" (¶ 34).

Third, "a person who has asserted his or her privilege not to testify and offer expert opinion testimony can be required to give such expert testimony only if all of the following factors are present: (1) there are compelling circumstances present; (2) the party seeking the testimony has presented a plan for reasonable compensation of the expert; and (3) the expert will not be required to do additional preparation for the testimony" (¶ 34). The court declined, however, to equate "compelling circumstances" with an "outcome determinative" test, such as whether the action would be dismissed absent the expert's testimony. Rather, "there must be a link between a finding of compelling circumstances and the uniquely necessary or irreplaceable opinion testimony that the expert could provide" (¶ 30). On this record, there was nothing unique about Koh's testimony regarding the standard of gynecological care.

Finally, "the determination as to whether compelling circumstances exist involves a discretionary decision by the circuit court judge" (¶ 34).

Corporations

Officers - Creditors - Fiduciary Obligations

Beloit Liquidating Trust v. Grade, 2004 WI 39 (filed 6 April 2004)

The prime issue in this case concerns the liability of a corporation's officers and directors to corporate creditors. The circuit court dismissed a complaint that alleged that the corporation's officers and directors had breached a fiduciary duty. The court of appeals, however, reversed, and held that they had a fiduciary duty to corporate creditors before the entity went out of business.

The Wisconsin Supreme Court, in an opinion written by Justice Crooks, reversed the court of appeals. First, the court held that Wisconsin law applied to this action. At issue was the "internal affairs doctrine," a conflict-of-laws rule that "states that in disputes involving a corporation and its relationships with its shareholders, directors, officers, or agents, the law to be applied is the law of the state of incorporation" (¶ 14 n. 8). "Section 180.1704 puts all corporations on notice that, when transacting business in Wisconsin, they are subject to Chapter 180. Given this clear statutory language, and Wisconsin's failure to adopt the internal affairs doctrine, either by statute or through case law, we conclude that the language of §180.1704 supports the holding that Wisconsin law should be applied in determining whether the directors or offices breached their fiduciary duty to Beloit Corporation's creditors" (¶ 23). The holding garnered further support "by the choice of law principles articulated in Wisconsin's case law" (¶ 24).

In addition, Wisconsin law also governs the "fiduciary duties to creditors" at issue here (¶ 33). "[A] corporation must be both insolvent and no longer a going concern before a duty is owed to the corporation's creditors" (¶ 34). The record in this case showed that the corporation was a "going concern during the relevant time period." The court also applied the two-year statute of limitation set forth in Wis. Stat. section 893.57 "because a breach of fiduciary duty claim involves an intentional tort." (As applied to the facts, no injury occurred during the pertinent time period.)

Criminal Procedure

Truth-in-Sentencing I - Calculation of Maximum Confinement Term for Unclassified Felonies

State v. Jackson, 2004 WI 29 (filed 26 March 2004)

This case arose under the first phase of Wisconsin's truth-in-sentencing legislation (TIS-I). TIS-I applied to offenses committed on and after Dec. 31, 1999. [Note: The second phase of the state's truth-in-sentencing legislation (TIS-II) took effect on Feb. 1, 2003, and for most purposes applies to offenses committed on and after that date.]

The defendant was convicted of the unclassified felony of fleeing an officer, which at the time carried a maximum term of imprisonment of three years. Because he was a habitual offender, the defendant faced a penalty enhancement of up to six years of additional imprisonment. See Wis. Stat. § 939.62(1)(b). In this opinion the supreme court addressed how penalty enhancers are applied at sentencing in determining the maximum term of confinement in prison (that is, the first portion of a bifurcated sentence) for unclassified felonies under TIS-I.

Under Wisconsin's approach to truth-in-sentencing, a sentence to prison must be bifurcated into two segments: an initial term of confinement in prison, followed by a term of extended supervision in the community. The combined confinement and extended supervision terms equal the term of imprisonment.

In a majority opinion authored by Justice Bradley, the court began its analysis by agreeing with an earlier decision of the court of appeals that penalty enhancers do not increase the maximum extended supervision term the defendant faces; rather, penalty enhancers increase the maximum term of confinement and by the same amount the overall term of imprisonment. See State v. Volk, 2002 WI App 274, 258 Wis. 2d 584, 654 N.W.2d 24.

Next, the supreme court turned to the issue before it regarding the impact of penalty enhancers on the maximum term of confinement for unclassified felonies. Wis. Stat. section 973.01(2)(b)6 provides that for unclassified felonies the term of confinement in prison may not exceed 75 percent of the total length of the bifurcated sentence. To apply this statute in the context of this case, the court determined that the first step is to calculate the total length of the bifurcated sentence that the defendant faced. In this instance the maximum term of imprisonment for the unclassified fleeing offense was 36 months. To this the six-year (72-month) increase for habitual criminality must be added for a maximum possible bifurcated sentence of 108 months. The 75 percent rule from the statute quoted above is then applied to the 108 months to reach the conclusion that the maximum term of confinement for fleeing enhanced by habitual criminality is 81 months (108 months x 75 percent).

In a footnote, the court observed that under TIS-II only a few unclassified felonies remain (all others being classified in the new Class A through Class I system adopted as part of the TIS-II legislation). Therefore, said the court, the 75 percent rule discussed in the preceding paragraph has limited application for future cases. See ¶ 37 n. 8.

Within this opinion the court also addressed the defendant's argument that another charge of which he was convicted, a Class E felony, became an unclassified offense when a penalty enhancer was tacked onto it. The court rejected this argument as being "without authority" (¶ 29).

Justice Wilcox filed a concurring opinion.

Evidence - Experts - Character

State v. Walters, 2004 WI 18 (filed 9 March 2004)

The defendant was charged with three counts of sexually assaulting a child. As part of his defense, he proffered so-called Richard A.P. evidence, which compares the defendant's personality characteristics with those of known sex offenders for the purpose of showing he does not fit the "type." The court of appeals reversed and arguably held that that the admission of Richard A.P. evidence was compelled by State v. Davis, 2002 WI 75.

The supreme court, in a decision authored by Justice Bradley, reversed the court of appeals and clarified that Davis does not compel the introduction of Richard A.P. evidence, which is entrusted to the trial court's discretion. "Richard A.P. evidence, like other expert evidence, is subject to the requirements of the rules governing the admissibility of evidence. These include not only the rules governing character evidence and expert testimony, but also Wis. Stat. § 904.03, the rule governing the exclusion of otherwise relevant evidence" (¶ 25).

Moreover, the record in this case demonstrated that the trial court had exercised proper discretion. The supreme court concluded that in light of the nature of the proffered expert testimony, the scope of the testing, and the length and complexity that such testimony would add to the case (defense counsel estimated that it would add three days to a one-day trial), the evidence had "low probative value" and it was "reasonable for the circuit court to conclude that these dangers substantially outweighed the probative value of the expert testimony here" (¶ 41).

Chief Justice Abrahamson dissented. Although she agreed with the majority's construction of Davis and the discretion entrusted to trial courts in admitting Richard A.P. evidence, the Chief Justice concluded that such discretion had been abused in this case and she would have affirmed the court of appeals.

Evidence

Impeachment - Prior Criminal Convictions - Waiver

State v. Gary M.B., 2004 WI 33 (filed 26 March 2004)

A jury convicted Gary B. of three counts of first-degree sexual assault. The court of appeals affirmed. The supreme court, in an opinion written by Justice Wilcox, also affirmed. The main issues involved the admissibility of three of Gary B.'s five prior convictions for purposes of impeachment.

First, the court addressed the issue of "strategic waiver," specifically, whether Gary B. waived his right to challenge the admissibility of the prior conviction by introducing the evidence himself after the court overruled his objection to the same proof. Addressing a conflict in the case law, the court held that "under Wisconsin law, a defendant does not commit strategic waiver when he unsuccessfully objects to the introduction of evidence and preemptively introduces the evidence in an attempt to mitigate its prejudicial effect" (¶ 18).

Second, the court upheld the admission of the prior convictions for impeachment purposes as a proper exercise of discretion even though the ruling comprised just four sentences in the record. Wisconsin law has long held that "all prior convictions are relevant to a witness's character for truthfulness," regardless of their nature (¶ 23). Moreover, the frequency and timing of the convictions (1973, 1975, 1977, and two in 1991) supported an inference that the defendant's character had not changed since 1973.

Justice Crooks concurred but concluded that the trial court should have been affirmed on harmless error grounds.

Chief Justice Abrahamson, joined by Justice Bradley, dissented on grounds that "the majority opinion eviscerates the notion that a circuit court's exercise of discretion requires a meaningful process of reasoning demonstrated on the record and drastically expands the scope of the independent appellate review doctrine beyond what had been previously recognized in this state" (¶ 46).

Justice Sykes also dissented on the ground that "[t]here is no record of any exercise of discretion at all, only the summary invocation of the statutory presumption of admissibility" (¶ 86).

Family Law

Modification of Maintenance - Support and Fairness Objectives

Rohde-Giovanni v. Baumgart, 2004 WI 27 (filed 25 March 2004)

The parties to this divorce action were married in 1973. During their marriage they had four children. The wife worked inside the home and was primarily responsible for the care of the children, while her husband was employed outside the home. They were granted a judgment of divorce in 1992. While many of the issues in the divorce were resolved by stipulation, the issue of maintenance for the wife was contested.

At the time of the divorce proceedings, the wife was taking classes at a local college and grossing approximately $8,800 per year as a group counselor. She expected to receive her degree in two years. Her goal was to teach special needs children, and she anticipated that she could earn between $22,000 and $28,000 per year. She expected that the maximum amount of income she could earn would be $40,000 per year, approximately 15 years after entering the work force. When considering the appropriate amount of maintenance to award, the judge also considered the fact that the wife suffered from a variety of physical ailments: depression, poor health, chronic back pain, a prediabetic condition, arthritis in her hands, tendonitis in her feet, and basic fatigue. At the time of the divorce, the husband had an M.B.A., which he had obtained during the early part of the parties' marriage, and was earning $93,000 per year. The circuit court concluded that the circumstances were appropriate for an award of indefinite term maintenance in the amount of $950 per month.

In 2001 the husband brought a motion to terminate maintenance. The circuit court concluded that a substantial change in circumstances was present such that terminating maintenance after two more years was appropriate. The court found inter alia that the wife had completed her educational objectives, was earning more than her anticipated maximum salary (her gross income from employment was about $57,000), and was now able to closely approximate the marital standard of living without maintenance, provided that she was willing to tighten up her expenditures with respect to her adult children. In 2001 the husband was earning approximately $106,000 per year.

The wife appealed, arguing that the circuit court erred in terminating maintenance. Among her specific complaints was that the judge erroneously concluded that she could live at the marital standard of living without maintenance, failed to factor in the financial support she was providing to her adult child for education expenses, and failed to properly apply the fairness objective of maintenance. The court of appeals affirmed the circuit court.

In a majority decision authored by Justice Crooks, the supreme court affirmed. It concluded that "there was sufficient evidence from which the circuit court could reasonably find a substantial change in the parties' circumstances, and from which the court could conclude that such circumstances justified the termination of maintenance after two more years. The test for whether there is a substantial change in circumstances is the same, regardless of whether or not the issue of maintenance was stipulated to or contested during the divorce proceedings. The objectives of support and fairness must both be considered on the issue of modification of a maintenance award as well, whether there was a stipulation or a contest in the original proceedings" (¶ 2) (emphasis supplied).

While a change in circumstances regarding the support objective of maintenance frequently gives rise to motions for modification, "it is important to note that a court reviewing a previous award of maintenance must not solely limit its inquiry to the support objective. The objective of fairness also must be considered, even in postdivorce proceedings. Fairness must be considered with respect to the situations of both parties in determining whether maintenance should be continued indefinitely, continued for a limited amount of time, reduced, or terminated" (¶ 31).

A judge who reviews a request to modify a maintenance award should adhere to the findings of fact made by the circuit court that handled the parties' divorce case. "Where there is a substantial change in circumstances, the circuit judge reviewing the request for modification must adhere to this ... principle and recognize the facts as they were at the time of the divorce. More specifically, the circuit court deciding the modification motion may not modify a maintenance award based solely on the fact that, had the parties been before it for their divorce action, that court would have decided the matter differently. The findings of fact made by the original divorce court properly may be reviewed by the modification judge in the light of substantial changes in the parties' circumstances, and we anticipate that the modification judge will need to consider additional facts that were not before the original divorce court because of the substantial changes that have occurred" (¶ 34).

The court also concluded that educational expenses a party incurs on behalf of an adult child may, but do not have to be, considered when examining the party's budget. "This is a decision left to the sound discretion of the circuit court. While we do not anticipate frequent consideration of such educational expenses, we recognize that unusual or extraordinary circumstances could justify such consideration" (¶ 2).

Chief Justice Abrahamson filed a dissenting opinion that was joined by Justice Bradley. Justice Roggensack did not participate in this case.

Natural Resources

Mourning Doves - Authority of DNR to Set Open Season for Mourning Doves

Wisconsin Citizens Concerned for Cranes & Doves v. Department of Natural Resources, 2004 WI 40 (filed 6 April 2004)

In 2001 the Department of Natural Resources (DNR) adopted Wis. Admin. Code section NR 10.01(1)(h), which establishes an open season for mourning doves in Wisconsin from Sept. 1 through Oct. 30 and sets daily bag and possession limits. The issue before the supreme court in this case was whether the legislature has granted the DNR authority to set an open season for mourning doves. The court also asked the parties to address what impact, if any, the recently adopted "Right to Hunt" amendment to the Wisconsin Constitution (Wis. Const. art. I, sec. 26) has on the outcome of this case.

In a unanimous decision authored by Justice Wilcox, the court concluded that "the DNR has express authority under [Wis. Stat.] § 29.014(1) to adopt § NR 10.01(1)(h) because the legislature has granted broad authority to the DNR to set open and closed seasons for 'game' under § 29.014(1) and mourning doves fall within the unambiguous definition of 'game' contained therein" (¶ 48).

With regard to the constitutional question noted above, the court began its analysis by turning to the language of Wis. Const. art. I, section 26, which provides that "[t]he people have the right to fish, hunt, trap, and take game subject only to reasonable restrictions as prescribed by law." "The 2003 amendment does not impose any limitation upon the power of the state or DNR to regulate hunting, other than that any restrictions on hunting must be reasonable. However, the [plaintiffs have] not alleged that § NR 10.01(1)(h) is unreasonable. Therefore, the 2003 constitutional amendment does not affect our analysis of the DNR's authority in this case" (¶ 46).

Real Property

Area Zoning - Variances Granted for Unnecessary Hardship

State ex rel. Ziervogel v. Washington County Bd. of Adjustment, 2004 WI 23 (filed 19 March 2004)

This case involved the legal standard by which zoning boards of adjustment measure "unnecessary hardship" when determining whether to grant variances to area zoning. Area zoning regulates lot area, density, height, frontage, setbacks, and so on, in order to promote uniformity of development, and lot and building size. It may be contrasted with use zoning, which regulates how property may be used, in order to promote uniformity of land use within neighborhoods or regions.

Prior to State v. Kenosha County Bd. of Adjustment, 218 Wis. 2d 396, 577 N.W.2d 813 (1998), cases construing the controlling statute on variances for "unnecessary hardship" (Wis. Stat. section 59.694(7)) used distinct legal standards for determining hardship in area and use variance cases. However, in Kenosha County, the supreme court merged the distinct standards into a single "no reasonable use of the property" standard for unnecessary hardship in all variance applications.

In a unanimous opinion authored by Justice Sykes, the supreme court concluded that "the distinctions in purpose and effect of use and area zoning make the perpetuation of a single, highly-restrictive 'no reasonable use of the property' standard for all variances unworkable and unfair" (¶ 4). "Restricting the availability of variances to those property owners who would have 'no reasonable use' of their property without a variance may be justifiable in use variance cases, given the purpose of use zoning and the substantial effect of use variances on neighborhood character. But applying the same strict 'no reasonable use' standard to area variance applications is unjustifiable. The 'no reasonable use' standard is largely disconnected from the purpose of area zoning, fails to consider the lesser effect of area variances on neighborhood character, and operates to virtually eliminate the statutory discretion of local boards of adjustment to do justice in individual cases" (¶ 5). Accordingly, the court held that, henceforth, area variance applicants need not meet the "no reasonable use of the property" standard that is applicable to use variance applications.

The court returned to and reaffirmed the pre-Kenosha County standard for unnecessary hardship in area variance cases that had been articulated in Snyder v. Waukesha County Zoning Bd. of Adjustment, 74 Wis. 2d 468, 247 N.W.2d 98 (1976): "[w]hen considering an area variance, the question of whether unnecessary hardship ... exists is best explained as '[w]hether compliance with the strict letter of the restrictions governing area, set backs, frontage, height, bulk or density would unreasonably prevent the owner from using the property for a permitted purpose or would render conformity with such restrictions unnecessarily burdensome.' Whether this standard is met in individual cases depends upon a consideration of the purpose of the zoning restriction in question, its effect on the property, and the effect of a variance on the neighborhood and the larger public interest. The long-standing requirements that the hardship be unique to the property and not self-created are maintained. The burden of proving unnecessary hardship remains on the property owner" (¶ 7) (citations omitted).

Chief Justice Abrahamson and Justice Bradley did not participate in this case.

Torts

Fraud - Deceptive Trade Practices

Tietsworth v. Harley-Davidson Inc., 2004 WI 32 (filed 26 March 2004)

Plaintiffs alleged that their motorcycles' engines contained a defect, although they did not allege any personal injury or property damages caused by such defect. Nor did they allege that the motorcycles had failed or malfunctioned. The circuit court dismissed their original claims for negligence, strict products liability, fraud, and deceptive trade practices under Wisconsin statutes. The plaintiffs appealed only the dismissal of their common-law fraud and statutory deceptive trade practices claims. The court of appeals reinstated both claims.

The supreme court, in an opinion written by Justice Sykes, reversed the court of appeals. First, "[a]n allegation that a product is diminished in value because the product line has demonstrated a propensity for premature failure such that the product might or will at some point in the future fail prematurely is too uncertain and speculative to constitute a legally cognizable tort injury and is therefore insufficient to state damages in a tort claim for fraud" (¶ 3). The court's conclusion was consistent with "many federal and state court decisions" (¶ 21).

Although one allegation in the complaint was "arguably sufficient to state a more particularized injury" (¶ 22), it was nonetheless barred by the economic loss doctrine. The majority opinion carefully analyzed prior case law but found no "authoritative recognition of an element-specific fraud-in-the-inducement tort cause of action as an exception to the economic loss doctrine" (¶ 34). The plaintiffs thus were left to their contract remedies (¶ 37).

Second, "[t]he plaintiffs have also failed to state a claim for deceptive trade practices in violation of Wis. Stat. § 100.18. The statute provides a private cause of action for pecuniary loss resulting from an advertisement to the public that contains an 'assertion, representation or statement of fact which is untrue, deceptive or misleading.' Wis. Stat. § 100.18(1), (11)(b). The plaintiffs' claim is based primarily on the allegation that Harley-Davidson ('Harley') failed to disclose the engine defect prior to the plaintiffs' motorcycle purchases. A nondisclosure does not constitute an 'assertion, representation or statement of fact' under Wis. Stat. § 100.18(1). The plaintiffs also allege that Harley's advertising material described the motorcycle engine as 'premium' quality, 'a masterpiece,' and '[e]ighty-eight cubic inches filled to the brim with torque and ready to take you thundering down the road.' This is classic advertising puffery, nonactionable at common law and under the statute" (¶ 4).

Justice Bradley did not participate.

Chief Justice Abrahamson dissented because "the majority opinion has gone too far in expanding the scope of the economic loss rule and the puffery doctrine" (¶ 47).

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