Vol. 76, No. 11, November
2003
Court of Appeals Digest
This column summarizes selected published
opinions of the Wisconsin Court of Appeals. Prof. Daniel D. Blinka and
Prof. Thomas J. Hammer invite comments and questions about the digests.
They can be reached at the Marquette University Law School, 1103 W.
Wisconsin Ave., Milwaukee, WI 53233, (414) 288-7090.
by Prof. Daniel D. Blinka &
Prof. Thomas J. Hammer
Attorneys
Fee Agreements - Guarantors - Offers to Settle - Substitution of
Judges - Interest - Costs
DeWitt Ross & Stevens
S.C. v. Galaxy Gaming, 2003 WI App 190 (publication ordered 24
Sept. 2004)
A law firm brought suit to recover legal fees and associated costs
incurred in representing a client. The underlying litigation involved a
lawsuit against a city following the federal government's refusal to
approve a gaming casino. The law firm's titular client, a partnership,
had no assets or means of earning income without the casino, so the
retainer letter required a guaranty of payment by two other entities
with substantial interests in the partnership. The fee agreement
provided for monthly statements of services that were payable on receipt
and reserved the law firm's right to charge interest at the rate of 18
percent per year (1.5 percent per month) on all statements not paid
within 20 days after their date. Litigation activity increased in the
fall of 1996 and by November 1997 the client owed an outstanding balance
of nearly $130,000. The law firm demanded that it be paid in full by
Dec. 1, 1997, or it would assess 18 percent interest on the balance
(¶7). Although "sporadic" payments were made, the final bill in
July 2000 listed a total balance of more than $350,000, including almost
$70,000 in interest (¶9). When payment was not made, the law firm
sued under the fee agreement and the guaranty. Ultimately, the circuit
court entered judgment against the defendant client and guarantors.
Additional details appear in the discussion of the issues, below.
The court of appeals, in a decision written by Judge Lundsten,
affirmed in part and reversed in part. The first issue concerned whether
the guarantors were liable for the interest charges assessed against the
client because the guaranty itself did not mention "interest" (instead
it referred to payment for "services rendered and disbursements/expenses
incurred...") (¶15). The court held that the retainer letter and
the guaranty were to be read in tandem: "the retainer letter conditions
approval of representation on execution of the guaranty, thus requiring
that the retainer letter and guaranty be read together" (¶17). The
term "interest" was not encompassed within the terms "disbursement" or
"expense." Nonetheless, the guarantors promised "timely and full
payment," which included interest - "a measure of the time value of
money" (¶19).
Second, the law firm properly applied payments to accrued interest
and then subtracted the remainder from principal. Absent an express
agreement to the contrary, this comported with a "longstanding rule"
that partial payments may first be applied to discharge interest
(¶21). The court declined to impose a contrary rule just because
this was a fee agreement.
Third, the law firm tendered a valid settlement offer under Wis.
Stat. section 807.01(3) even though it contained a payment deadline
(¶28). As long as the offer permits the party at least 10 days to
respond, as this one did, a deadline does not vitiate the settlement
offer under the statute unless the offer itself is "unreasonable."
Although a court may consider the deadline as a factor in its
reasonableness analysis, the client and guarantors in this case simply
argued that such deadlines were per se invalid, not that the offer
itself was "unreasonable."
Fourth, the trial court properly denied the defendants' request for
substitution of judge. The client's motion for a protective order, the
law firm's motion to compel, and the hearings on these motions
constituted a "preliminary contested matter" for purposes of Wis. Stat.
section 801.58(1) (¶37). Moreover, the guarantors and the client
were sufficiently "united in interest" to be considered a single party
(¶39).
The court of appeals next turned to issues raised by the law firm in
its cross-appeal. First, the trial court erred when it "concluded that,
under the terms of the retainer letter, interest only began to accrue as
of December 1, 1997, the date by which" the law firm informed the client
"that it would invoke the retainer letter's interest provision" if it
did not receive payment in full (¶45). "It is undisputed that the
terms of the retainer letter required payment upon receipt of the
monthly statements, and specified that interest would accrue if payment
was not received within twenty days of receipt. Under the general rule
set forth in [case law], the interest due on late payments had begun to
run before December 1, 1997, because 'the creditor is entitled to
interest from the time payment was due by the terms of the contract.'
When [the law firm] opted to invoke the interest charge on overdue
accounts, it acted within the bounds of the retainer letter and [case
law] in seeking interest going back to January 1, 1997." (¶48)
Second, the trial court erred by not allowing the law firm to recover
the cost incurred in preparing a transcript of a videotape deposition. A
transcript was necessary for purposes of summary judgment; it was not
prepared solely for the convenience of counsel (¶54).
Third, the court addressed whether the law firm was entitled to 12
percent interest under Wis. Stat. section 807.01(4) in addition to the
18 percent it received under the retainer agreement. In rejecting this
argument, the court of appeals relied on several cases that did not
present a "stacking" claim, as here. Questions about the "legal
underpinnings" of those cases are reserved for the supreme court
(¶62).
Fourth, and related, the court considered "the question of which
interest rate should apply after the date of the settlement offer - the
contract rate of 18% or the statutory rate of 12%." Prior cases held
that "only Wis. Stat. § 807.01(4) interest would accrue after the
date of the settlement offer. Utilizing that approach in this case would
entail applying the 18% contract interest until the date of the
settlement offer and then applying 12% interest thereafter. However,
allowing § 807.01(4) interest to supplant a higher contract rate of
interest as of the date of an offer to settle would undermine the chief
purpose of the offer-of-settlement statute - the creation of proper
incentives on parties to make and to accept reasonable settlement offers
before trial. If the effect of a settlement offer were to reduce the
amount of interest to which an offeror is thereafter entitled upon a
successful outcome at trial, a potential offeror would be ill-advised to
make such an offer. And if he or she were foolish enough to make it, the
offeree would face a diminished incentive to accept it because the
offeree will have obtained a discount in the interest rate that would
otherwise apply from that point until judgment. Applying the 12% rate in
§807.01(4) over the 18% contract rate would thus present an absurd
construction of the statute. Therefore, we conclude that the 18%
contract rate should apply rather than the 12% rate in §
807.01(4)." (¶63)
The court declined, however, to apply "the 18% contract rate past the
date of judgment because when the question is whether a contract
interest rate may apply postjudgment, the 'merger doctrine' provides
that statutory interest controls over contract interest in 'the absence
of an express agreement otherwise.' Therefore, because the contract is
silent about the application of interest postjudgment, we conclude that
the 12% interest rate contained in Wis. Stat. § 815.05(8) controls
from 'the date of the entry of the judgment until it is paid.'"
(¶64)
Judge Dykman dissented and would have allowed the law firm to "stack"
the statutory interest rate under § 807.01(4) and the contract
rate.
Civil Procedure
Statute of Limitation - Statute of Repose
Wenke v. Gehl Co.,
2003 WI App 189 (publication ordered 24 Sept. 2003)
While Wenke was working on his Iowa farm in 1997, his right arm was
torn off while he was operating a hay baler manufactured by the Gehl Co.
The baler was first sold by Gehl to another Iowa resident in 1981. Wenke
sued Gehl, which moved for summary judgment on the ground that Iowa's
15-year statute of repose barred the claim. Eventually, the circuit
court granted Gehl's motion based on Wisconsin's "borrowing statute."
The primary issue on appeal concerned which of two cases controlled:
Landis v. Physicians Insurance Co., 2001 WI 86, or
Leverence v. United States Fidelity & Guaranty, 158 Wis. 2d
64 (Ct. App. 1990). In June 2002 the court of appeals had certified the
following question to the supreme court: Whether Leverence,
which distinguished between statutes of limitation and statutes of
repose, had been functionally overruled by Landis. Accepting
the certification, an equally divided supreme court nonetheless vacated
the certification and remanded the matter.
The court of appeals, in a decision written by Judge Snyder, affirmed
the circuit court and held that Landis functionally overrules
Leverence. In the context of a medical malpractice action, the
Landis court "held that the tolling provisions of [Wis. Stat.
section 655.44(4)] apply to both statutes of limitations and statutes of
repose, concluding that the term 'statute of repose' is largely a
judicial label for a particular type of limitations on actions"
(¶15). Closely analyzing Landis, the court of appeals
concluded that "it logically follows that the term 'statute of
limitations' includes statutes of repose and that the phrase 'foreign
period of limitation' in § 893.07 borrows from other jurisdictions
both statutes of limitations and statutes of repose. Consequently, we
must conclude under § 893.07, the fifteen-year period of repose is
borrowed from Iowa's statutes." (¶20)
Scheduling Orders - Summary Judgment - No Contest Plea
Kustelski v.
Taylor, 2003 WI App 194 (publication ordered 24 Sept. 2003)
While driving a vintage "hot rod," DK collided with RT's car. DK's
car was allegedly traveling well in excess of the posted speed limit and
RT, according to a witness, "reeked" of alcohol. DK pleaded no contest
to a felony endangering charge and was placed on probation. DK later
brought this action for negligence and abuse of process against RT. The
latter claim arose out of RT's complaint to police and prosecutors that
resulted in DK's conviction. The scheduling order required that all
dispositional motions be filed on or before May 31. RT filed her motion
for partial summary judgment on the abuse of process claim on May 30 but
did not provide mail service until June 3. Despite the late filing, the
circuit court considered and granted the motion dismissing the abuse of
process claim. At the same time, the trial judge "sua sponte" suggested
that summary disposition might also be appropriate on the negligence
claim. At a status conference two weeks later the judge dismissed that
claim as well, finding that no reasonable jury could find RT to be more
causally negligent than DK. The ruling was predicated on DK's no contest
plea in the criminal case.
The court of appeals, in an opinion authored by Judge Schudson,
affirmed in part and reversed in part. First, the circuit court properly
considered the tardy summary judgment motion. The local court rule
places such decisions squarely within the judge's discretion. In this
case, the motion was timely filed, it was received just a few days late,
and RT offered a reasonable explanation (¶16). Second, and related,
summary judgment had been properly granted on the abuse of process
claim. RT's contacts with the criminal court judge and the district
attorney were proper and fell within the purpose of the criminal justice
system (¶25). Third, the circuit court erred in its sua sponte
summary dismissal of the negligence claim based on the criminal no
contest plea. Such use of the no contest plea is flatly foreclosed by
Wis. Stat. section 904.10 (¶19).
Criminal Procedure
Sentence Modification - Penalty Changes Under New Truth-In-Sentencing
Laws Not a "New Factor" Warranting Sentencing Modification
State v. Torres,
2003 WI App 199 (publication ordered 24 Sept. 2003)
The defendant was convicted of operating a motor vehicle without the
owner's consent for an offense that was committed in 2000. When the
crime occurred this offense was a Class E felony with a maximum
imprisonment term of five years. As a result of the second wave of
Truth-In-Sentencing legislation that took effect on Feb. 1, 2003, the
crime involved in this case was reclassified as a Class I felony,
punishable by a maximum term of imprisonment of 3.5 years. In October
2002 the defendant asked the trial court for sentence modification in a
Wis. Stat. section 809.30 post-conviction motion, calling the pending
change of the crime's classification a "new factor" warranting
modification of his sentence. The trial court denied the motion.
In a decision authored by Judge Hoover, the court of appeals
affirmed. It concluded that "a change in the classification of a crime,
which would result in a shorter sentence if the defendant were convicted
under the new classification, is not a 'new factor' under our
traditional model for sentence modification. This is because as part of
2001 Wis. Act 109, the law created Wis. Stat. § 973.195, which
provides the procedure for judicial review of a sentence when the law
relating to sentencing changes" (¶ 7).
According to the court, section 973.195 reflects the legislature's
intent to create a separate and specific statutory procedure for
requesting a sentence reduction that should be used in place of section
809.30 whenever "a change in law or procedure relating to sentencing ...
effective after the inmate was sentenced that would have resulted in a
shorter term of confinement" is the basis for the modification. The
defendant's October 2002 filing of a section 809.30 motion based on the
pending February 2003 change cannot be used to defeat the purpose of
section 973.195. "If [the defendant] wanted to avail himself of the 2003
sentence change as a basis for his sentence change, he was required to
follow the § 973.195 procedure, which he could not do until
February 1 [2003]" (¶ 9).
In a footnote the court observed that when there are other grounds
for requesting modification or when there are other new factors separate
from the section 973.195 grounds, a defendant is not precluded from
filing a section 809.30 motion in addition to a section 973.195
petition. See ¶ 9 n. 2.
The court also concluded that, under State v. Hegwood, 113
Wis. 2d 544, 335 N.W.2d 399 (1983), a reduction in the maximum penalty
for the crime of conviction does not constitute a new factor and is
therefore not a proper basis for modifying a sentence.
Lastly, the appellate court observed that the trial court assumed for
argument's sake that the change in penalty was, in fact, a new factor
but still decided not to modify the sentence because the defendant
presented no evidence that would change the court's mind on the sentence
that was previously imposed. The appellate court concluded that the
trial court did not erroneously exercise its discretion in so
finding.
Plea Negotiations - Alleged Breach of Plea Agreement by Prosecutor -
Absence of Defendant at Resentencing
State v. Stenseth,
2003 WI App 198 (publication ordered 24 Sept. 2003)
In this case the state entered into a plea negotiation according to
which it agreed to recommend confinement and extended supervision terms
of specified lengths. The defendant pleaded guilty pursuant to the
negotiation and the court ordered a presentence investigation report.
The report recommended a confinement term that was substantially longer
than that which the state agreed to recommend.
At the sentencing hearing the defense presented two witnesses. The
state did not call any. Instead, the prosecutor referred to information
in the presentence report to support the recommendation that the
defendant be sentenced to prison rather than straight probation. When
defense counsel objected that the state's comments were an endorsement
of the report's sentence recommendation, the court inquired of the state
if it was adhering to the plea agreement's sentence recommendation. The
prosecutor stated that it was. Ultimately, the court imposed a
confinement term that was greater than that recommended by the
prosecutor.
In a decision authored by Judge Peterson, the court of appeals
concluded that the state did not breach the plea agreement. At no time
did the state argue for anything other than the agreed-upon sentence.
Nor did it mention that the presentence report recommended a longer
sentence. The state properly used the presentence report in support of
the plea agreement's sentence recommendation.
Another issue in this case concerned resentencing. The court
originally imposed a seven-year initial term of confinement. However,
the maximum period of initial confinement for the crime of conviction
was five years. The court conducted a telephone conference with the
attorneys, agreed that the original sentence was illegal, and then
amended the sentence to the maximum allowed by law. The defendant argued
that the modification amounted to a resentencing and that he had a right
to be present.
The state conceded that the modification amounted to a resentencing
and that the defendant had a right to be present. However, it argued
that this was harmless error, and the court of appeals agreed. The
defendant had already had a full sentencing hearing, he had had the
opportunity to present witnesses and to exercise his right of
allocution, and his attorney had made a sentencing argument on his
behalf. With regard to the resentencing, the defendant did not indicate
any additional witnesses he would have called, any new information he
would have presented, or any further arguments he would have made. In
short, said the court, "[the defendant] did not suggest any contribution
he would have made at the resentencing or any way in which he was
prejudiced" (¶ 20). Accordingly, the error in conducting the
proceeding without the defendant present was harmless.
Ineffective Assistance - Jury Waivers - "Guilty Appearance"
State v. Silva,
2003 WI App 191 (publication ordered 24 Sept. 2003)
Following a bench trial, the defendant was found guilty of the
first-degree sexual assault of a family member. The court of appeals, in
a decision written by Judge Curley, affirmed. The opinion addresses a
string of alleged errors.
First, the court agreed that defendant's trial counsel was
"deficient" because he had no knowledge of the so-called
Wallerman rule, which permitted defendants to block the
prosecution's use of "other act" evidence by stipulating to the
pertinent issue. Despite trial counsel's deficiency, the error was not
prejudicial. Later case law had substantially overruled
Wallerman and it was exceedingly unlikely that the prosecutor
would have stipulated to the intent element. The court also refused to
find trial counsel deficient because in a brief closing argument he had
"commented favorably" on the victim's credibility (¶15) and had
conceded that defendant was "technically guilty" (¶19). This
"strategy emphasized the idea that the matter was overcharged"
(¶19).
Second, the defendant validly waived his right to trial by jury
despite his lawyer's ignorance of Wallerman. He elected a bench
trial based on concerns that a jury might sympathize with the young
victim, "and not because of his concern over the admission of evidence
regarding his prior conduct" (¶25). Indeed, the state did not file
a motion seeking the use of the other act evidence until after the
waiver. Third, the trial court properly admitted the other act evidence
under the three-part Sullivan test (all the acts involved
assaults on other young girls, including other family members).
Fourth, the court upheld the use of a unique form of proof: evidence
of the defendant's "guilty" demeanor at a prayer service. In particular,
the defendant's own brother testified without objection that the
defendant "turned dirty yellow to me and nervous" when confronted with
the victim's accusations (¶29). Later, the same brother testified
that at a "prayer service" that addressed "sinning again," the defendant
sat down during a discussion while others remained standing. The court
held that "[t]his behavior is consistent with the conduct of a person
who has recently committed a crime and is admissible as such"
(¶30).
Judge Fine concurred and wrote to respond to Judge Schudson's
dissent.
Employment Law
Unemployment Compensation - Termination of Municipal Employee for
Failure to Comply with Residency Requirement of Collective Bargaining
Agreement
Klatt v. Labor &
Industry Review Comm'n, 2003 WI App 197 (publication ordered 24
Sept. 2003)
Klatt was employed by the city of Waukesha Police Department. The
collective bargaining agreement between the city and Klatt's union
contained a residency requirement. During the course of her employment
Klatt became engaged to a Racine County deputy sheriff whose department
also had a residency requirement. Due to the conflicting residency
requirements of Racine County and the city of Waukesha, Klatt and her
future husband would not be able to comply with each agency's residency
requirement and live together as a married couple in one household. The
husband's request for an exemption from his employer's residency
requirement was denied.
Klatt sought an exemption from the Waukesha residency requirement,
which was denied. When Klatt subsequently moved out of Waukesha County
to a residence in Racine County, she was terminated from employment. She
thereafter sought unemployment compensation and the Labor and Industry
Review Commission (LIRC) concluded that, because she voluntarily
terminated her employment without good cause attributable to her
employer, she was not eligible for unemployment compensation. The
circuit court affirmed the LIRC.
In a decision authored by Judge Brown, the court of appeals affirmed
the circuit court. It held that Klatt's conduct of moving to Racine
County in violation of the residency requirements of the collective
bargaining agreement between her employer and her union was inconsistent
with the continuation of the employer-employee relationship and that she
voluntarily terminated her employment. The general rule is that an
employee who voluntarily terminates his or her employment with an
employing unit is ineligible for unemployment compensation benefits.
Klatt's failure to adhere to the terms of the residency requirement
amounted to conduct inconsistent with the continuation of her employment
relationship.
One exception to the general rule stated above is that an employee
may receive benefits if he or she voluntarily terminates employment with
good cause attributable to the employing unit. This has been interpreted
as meaning some act or omission by the employer justifying the
employee's quitting; it involves some fault on the part of the employer
and must be both real and substantial. In this case the court failed to
see how Klatt's termination was due to an act or omission on the part of
the city that could be characterized as "fault." Instead, the city was
simply seeking to enforce a provision of the collective bargaining
agreement that the union had agreed to in the bargaining process.
Lastly, the court rejected Klatt's alternative argument that she has
a "meritorious justification" for failing to comply with the residency
requirement, that being her constitutional right to marriage and family.
The court concluded that this amounted to a constitutional attack on the
residency requirement itself, at least as it has been applied to her.
However, the law is that state or local regulations are not
unconstitutional deprivations of the right of family association unless
they regulate the family directly. The collateral consequences of
regulations not directed at the family do not bring the constitutional
rights of family into play. Here, the residency requirement did not
directly interfere with Klatt's right to marry nor did it dictate whom
she may marry. Said the court, "the fact that Klatt may not live with an
individual who has a conflicting residency requirement is an incidental
and unintended consequence of a requirement contained in a negotiated
collective bargaining agreement" (¶ 23).
Juvenile Law
Delinquency - Stay of Sex Offender Registration Requirement Not
Authorized
State v. Daniel T., 2003 WI App 200 (publication
ordered 24 Sept. 2003)
A delinquency petition was filed against the juvenile alleging that
he had engaged in one count of sexual intercourse with a person under
age 13 and one count of burglary. He eventually admitted the sexual
assault and the burglary charge was dismissed. At the dispositional
hearing the court ordered the juvenile placed in the Northwest Child and
Adolescent Center for one year. As a condition of the placement, the
juvenile was to register with the state as a sex offender pursuant to
Wis. Stat. section 301.45. However, the trial court stayed the
registration for 90 days, pending determination of the registration
statute's applicability. When the latter issue was resolved contrary to
the juvenile, the court lifted the stay on registration. In so doing, it
rejected the juvenile's request that the stay be continued.
The juvenile appealed, contending that the trial court erred when it
concluded that it had no authority to stay sex offender registration. In
a decision authored by Judge Hoover, the court of appeals held that
trial courts lack the authority to stay sex offender registration under
section 301.45. In so holding, the appellate court rejected the
defendant's argument that the lower court could continue the stay based
upon section 938.34(16), which allows for a stay of a dispositional
order. The mandatory registration statute is more specific and no part
of it allows registration to be superceded by a judicial stay.
The court also spoke briefly to the more general issue of whether a
judge may stay a condition of a dispositional order. In a footnote the
court stated its disagreement with the proposition that a part or single
condition of a dispositional order can be stayed. Wis. Stat. section
938.34(16) allows a stay of "the execution of the dispositional
order...." It does not say that a stay of a section of the dispositional
order or that a stay of conditions of the order is allowed. See
¶ 10 n. 4. In this case, if a stay were issued, the most it could
do would be to stay the juvenile's placement at Northwest Child and
Adolescent Center. Even then, the juvenile would have to fulfill the
registration condition to keep the full disposition in abeyance.
Torts
Products Liability - Sophisticated User Defense - Restatements
Haase v. Badger Mining
Corp., 2003 WI App 192
(publication ordered 24 Sept. 2003)
Plaintiff Haase developed silicosis when exposed to harmful silica
sand particles while working at a Neenah foundry. She brought this
action against the supplier of the silica sand, alleging that the
supplier failed to provide the foundry and workers with adequate
information about the risks of exposure. The case went to trial and at
the close of the plaintiff's case-in-chief, the trial court granted
judgment in favor of the defendant because there was no credible
evidence that supported the plaintiff's claims.
The court of appeals, in a decision written by Judge Brown, affirmed
in an opinion that adopts and applies the rationale of Bergfeld v.
Unimin Corp., 319 F.3d 350 (8th Cir. 2003), a case that "mirrors"
this one. First, addressing the negligence claim, the court held that
Bergfeld and the sophisticated user defense are "good law" in
Wisconsin. Adopted from the Restatement (Second) of Torts, the
"sophisticated user doctrine" imposes "no duty to warn if the user knows
or should know of the potential danger, especially when the user is a
professional who should be aware of the characteristics of the product"
(¶19).
Sound policy supported the sophisticated user defense. "First, it
places the duty to warn on the party arguably in the best position to
ensure workplace safety, the purchaser-employer. Second, the burden
falls upon the party in the best position to know of the product's
potential uses - thereby enabling that party to communicate safety
information to the ultimate user based upon the specific use to which
the product will be put. For the foregoing reasons, we adopt
Bergfeld and its discussion of the sophisticated user defense."
(¶21) Moreover, the record amply supported the finding that the
foundry in question was a sophisticated user (¶24).
The court then turned to the strict product liability claim and found
that the trial court properly applied Restatement (Third) of Torts
§ 5 (1998). Section 5 recognizes in essence "that a raw material
such as sand is inherently safe in its design and is not an unreasonably
dangerous product" (¶29). The court of appeals refused to interpret
Green v. Smith & Nephew, 2001 WI 109, as an "outright
rejection" of the Restatement (Third) of Torts simply because
Green held that § 2(b)'s "foreseeability" element
conflicted with Wisconsin law (¶30).
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