Consumer Law
Misleading Advertising – Restitution – Forfeitures
State v. Going Places Travel Corp., 2015 WI App 42 (filed 14 April 2015) (ordered published 27 May 2015)
HOLDING: The circuit court properly assessed restitution and forfeitures for a travel company’s misleading and false advertising.
SUMMARY: A jury found that a travel company made multiple misrepresentations and failed to disclose required information when selling travel club memberships to Wisconsin residents, in violation of two state statutes and one administrative code provision. The trial judge imposed approximately $850,000 in forfeitures and ordered restitution of nearly $4 million.
Prof. Daniel D. Blinka, U.W. 1978, is a professor of law at Marquette University Law School, Milwaukee.
Prof. Thomas J. Hammer, Marquette 1975, is a law professor and Director of Clinical Education at Marquette University Law School, Milwaukee.
The court of appeals affirmed in an opinion authored by Judge Stark. First, the restitution order was supported by the evidence (see ¶ 25). Case law only requires reasonable evidence of harm, not “precise figures” of individual loss, which would be “virtually impossible” (see ¶¶ 28-29). Federal law, observed the court, shifts the burden to the defendant to show that claimed restitution is inaccurate. And while the court declined to adopt the “federal burden-shifting approach,” it nonetheless “appears consistent with Wisconsin law” (¶ 30).
Second, the circuit court properly determined the number of violations on which its forfeiture order was based. The term “violation” in Wis. Stat. section 100.17(3)(a) covers each instance in which an individual is given faulty information. Thus, the mailing of 460,000 postcards constituted separate violations, an interpretation in keeping with the statute’s legislative purpose and case law (see ¶ 44). (The state requested forfeitures on only 2,000 violations.) The travel company also committed approximately 3,500 violations of an administrative rule when it sent material containing misrepresentations to nearly 900 people (see ¶ 47).
Finally, the travel company’s due-process rights were not denied by the forfeitures or the restitution order, because they were supported by law and evidence.
Criminal Procedure
Ineffective Assistance of Counsel – Trial Conduct
State v. Coleman, 2015 WI App 38 (filed 14 April 2015) (ordered published 27 May 2015)
HOLDING: Defense counsel’s mistakes at trial prejudiced the defendant, warranting a new trial.
SUMMARY: A jury convicted the defendant of sexually assaulting a 13-year-old girl, his cousin’s daughter. In postconviction proceedings, the circuit court denied a motion for a new trial, brought on grounds that the defendant’s trial counsel had provided ineffective assistance.
The court of appeals reversed in a majority opinion authored by Judge Kessler. The issues are necessarily fact intensive but relate to miscues by defense counsel during voir dire, opening statement, and the evidentiary phase of the trial. During jury selection, counsel told the jury about the defendant’s prior conviction and acknowledged his client was “not an angel.” In his opening statement, trial counsel asserted that the defendant would testify – he didn’t. And at trial, the lawyer failed to cross-examine the victim about several statements she had made to other people that arguably were contradicted by physical evidence. The appellate court held that these actions constituted deficient performance that prejudiced the defendant.
Judge Brennan dissented on grounds that the majority failed to be “highly deferential” to trial counsel’s decisions or to apply the “strong presumption” of reasonable professional assistance, especially in light of the contingencies and unpredictability inherent in trials. For example, trial counsel’s opening statement was an “artful way” of presenting his version of events (the victim lied) without exposing his client to impeachment, and regardless of whether the client ultimately testified (see ¶ 55).
Benefits
Early-Retirement Inducements – Remedies for Damages Sustained Because of Erroneous Representations About Tax Implications of Retirement Benefits
Cattau v. National Ins. Servs. of Wis. Inc., 2015 WI App 40 (filed 29 April 2015) (ordered published 27 May 2015)
HOLDING: The circuit court erroneously dismissed the plaintiffs’ state-law claims on federal-preemption grounds.
SUMMARY: The Neenah Joint School District offered a retirement plan to its teachers and administrators (hereinafter retirees), in part to accomplish the early retirement of long-term employees. As part of the inducement, the district represented that, if the retirees accepted the offer, they would receive 10 years of cash stipends under the 403(b) plan administered by the district. The retirees retired from the district between 2006 and 2011. The retirees relied on the district’s representations that these stipends qualified for tax advantages under 26 U.S.C. § 403(b), including that they were free of Social Security and Medicare (FICA) taxes and that income taxes would be temporarily deferred. National Insurance Services of Wisconsin Inc. and MidAmerica Administrative & Retirement Solutions Inc. made similar representations and structured and handled this retirement plan for the district.
The IRS conducted an audit of the retirement plan and concluded that the stipends did not qualify for section 403(b) tax advantages because the payment term exceeded the maximum term allowed by law. After a partial settlement of the matter with the district, the federal and state governments assessed income taxes and interest against the retirees for the four and one-half years’ worth of stipends that fell outside the section 403(b) qualifying term, and the district sought reimbursement from the retirees for amounts that it claimed it had paid to the IRS for the “employee share” of FICA taxes.
The retirees filed this action alleging breach of fiduciary duty, breach of contract, misrepresentation, violation of 42 U.S.C. § 1983, negligence, and unjust enrichment on the part of the district and breach of fiduciary duty, misrepresentation, and negligence on the part of MidAmerica. The district and MidAmerica moved to dismiss on the ground of federal preemption as well as on other grounds. The circuit court dismissed the case on the federal-preemption ground, holding that this case involved a “tax situation” and the retirees were required to file a claim for a tax refund directly with the IRS. The retirees appealed.
In a majority decision authored by Judge Reilly, the court of appeals reversed the circuit court. It concluded that “this action is not directed at any aspect of whether the federal government has erroneously or illegally assessed or collected a tax;rather, it is an action alleging a failure to exercise ordinary care in the administration of a 403(b) plan that, if proven, may entitle the Retirees to relief in state court” (¶ 2) (internal quotations and citations omitted).
“Simply stated, the District’s and MidAmerica’s alleged mistakes in administering the retirement plan with a payment period that was not in compliance with the maximum period allowed for a 403(b) plan by the IRS caused damages to the Retirees. Accepting the allegations as true, the Retirees have incurred costs, interest expenses, and other damages (including state taxes) above and beyond the taxes they owe to the IRS as a result of the District’s and MidAmerica’s involvement with the retirement plan. The damages sustained by the Retirees as a result of the District’s and MidAmerica’s failure to properly abide by IRS regulations are damages between the District, MidAmerica, and the Retirees. The District and MidAmerica may not insulate their alleged wrongful conduct by unilaterally imputing their mistakes to the federal government” (¶ 11).
Judge Neubauer filed a concurring opinion.
Lemon Law
Elements of Claim – Defenses
Porter v. Ford Motor Co., 2015 WI App 39 (filed 21 April 2015) (ordered published 27 May 2015)
HOLDING: Ford Motor Co. did not assert inconsistent defenses when it defended against both elements of the plaintiffs’ lemon law claim.
SUMMARY: The plaintiffs (the Porters) appealed an order denying their motions after verdict regarding their Wis. Stat. section 218.0171 lemon law claim against Ford. A jury found that their 2010 Ford Escape was a “lemon” but that Ford did not violate the lemon law because it provided the Porters with a comparable replacement vehicle.
On appeal, the Porters argued that they should have been granted judgment notwithstanding the verdict on their lemon law claim because Ford should not have been allowed to present “inconsistent” defenses: that the 2010 Ford Escape that the Porters purchased was not a “lemon,” and, even if it were a “lemon,” Ford provided a “comparable” replacement. The Porters also contended that they should be granted judgment notwithstanding the verdict because question 4 of the special verdict, which asked the jury whether Ford provided the Porters “with a comparable new motor vehicle as a replacement for the” 2010 Escape, was not required for recovery under the lemon law and should have been stricken.
In a decision authored by Judge Curley, the court of appeals affirmed. It disagreed with the Porters’ contention that Ford asserted inconsistent defenses when it contested the two elements of a lemon law claim.
“As the trial court explained in its ruling, Ford’s defenses ‘directly correspond[ed] to the two elements that the [Porters] were required to prove in order to recover under the Lemon Law, namely, that (1) their car was a lemon and, (2), Ford failed to provide a comparable replacement vehicle within 30 days after receiving the [Porters’] demand.’ It was not inconsistent for Ford to defend both elements of the Porters’ Lemon Law claim” (¶ 19).
Further, the appellate court concluded that question 4 of the verdict quoted above “concerned a necessary element of the Porters’ Lemon Law claim” (¶ 26) and that the circuit court did not err in denying the Porters’ motion to strike the answer or grant judgment notwithstanding the verdict.
Probate
Sale of Estate Property to Personal Representative – Circuit Court Approval
Piette v. Horn, 2015 WI App 41 (filed 14 April 2015) (ordered published 27 May 2015)
HOLDING: The circuit court properly exercised its discretion in approving the sale of real property owned by an estate to a personal representative of the estate.
SUMMARY: This case concerned the sale of real property owned by the estate of George Stevens to Lynda Horn, one of the estate’s personal representatives, and to her son. Horn and her son had made an offer to purchase the property. However, because all interested persons did not give written consent to the purchase and because the decedent’s will did not specifically authorize the sale, court approval of the sale to the personal representative was required. See Wis. Stat. § 860.13. Horn petitioned the circuit court to authorize the sale of the property to her and, following an evidentiary hearing, the circuit court granted the petition. In a decision authored by Judge Stark, the court of appeals affirmed.
The first issue before the appellate court involved the standard of review that applies to a circuit court’s decision to approve a sale of estate property to a personal representative. The appellate court concluded that the circuit court’s decision should be reviewed for an erroneous exercise of discretion (see ¶ 13).
Applying this standard, the appellate court concluded that the circuit court properly exercised its discretion by approving the sale of the property to the personal representative. It appropriately considered 1) the likelihood that a higher sale price could be obtained if the property were offered for public sale, balanced against the delay and increased holding costs that would result from publicly listing the property; 2) the interests of Horn (25 percent under the will) and her son (12.5 percent) in the proceeds of the sale vis-à-vis the interest of the principal objector to the sale (8 percent); 3) the property’s highest and best use; 4) the property’s physical characteristics and improvements; 5) the various appraisals and the expertise and credibility of the appraisers; and 6) the lack of evidence of any self-dealing by Horn (see ¶ 21).
In sum, “[w]e conclude the circuit court properly exercised its discretion by approval the sale of the … property. The court provided a reasoned analysis in support of its decision” (¶ 15).