Vol. 78, No. 6, June
2005
2004 significant court decisions
In his annual feature, the author highlights what he believes are
significant Wisconsin Supreme Court and Court of Appeals decisions from
2004.
Sidebars:
by Daniel W. Hildebrand
Attorneys
In Harold Sampson Children's Trust v. Linda Gale Sampson 1979
Trust,1 the Wisconsin Supreme Court
considered whether a lawyer's voluntary production of privileged
documents in response to opposing counsel's discovery request
constitutes a waiver of the attorney-client privilege when the lawyer
does not recognize that the documents are subject to the privilege and
the documents are produced without the consent or knowledge of the
client. The Wisconsin Court of Appeals had concluded that the lawyer's
disclosure waived the attorney-client privilege.2 The supreme court reversed the court of appeals,
holding that only the client can waive the attorney-client
privilege.
Daniel W. Hildebrand is
a shareholder of DeWitt Ross & Stevens S.C., Madison. He is a former
president of the Dane County Bar Association and the State Bar of
Wisconsin. He is a member of the ABA Standing Committee on Ethics and
Professional Responsibility and the ABA Board of Governors. He also is a
member of the American Academy of Appellate Lawyers and has a
substantial appellate practice.
The rule3 governing attorney-client
privilege explicitly provides that the privilege belongs to the client
and that the client may refuse to disclose or may prevent any other
person from disclosing confidential communications. However, the rule
also provides that the attorney-client privilege is waived when the
holder of the privileged documents "voluntarily discloses or consents to
disclosure."4 In Sampson, the
attorney examined the documents, determined that the documents were not
privileged, and then disclosed them. This disclosure was voluntary, not
inadvertent, within the meaning of the rule.
The court disagreed that the lawyer's waiver in Sampson
promoted the quality of legal representation and fostered the
functioning of the judicial system by holding counsel to a reasonable
standard of care regarding the voluntary release of privileged
documents. Allowing an attorney to waive the privilege in cases like
this would place too heavy a burden on the attorney-client relationship.
The documents at issue in Sampson remain protected by the
privilege because the client did not waive the privilege. All of the
privileged documents and copies thereof must be returned and cannot be
used for the purpose of any discovery deposition or shared with
experts.
In State v. McDowell,5 the
supreme court discussed the important issue of how criminal defense
attorneys should deal with the prospect of client perjury. Specifically,
the court addressed under what circumstances counsel's knowledge of the
perjury is sufficient to trigger a requirement that a client testify in
unaided narrative rather than in the usual question and answer format.
Defense counsel may not substitute narrative testimony for the
traditional question and answer format unless counsel knows that the
client intends to testify falsely. Absent the most extraordinary
circumstances, such knowledge must be based on the client's expressed
admission to the attorney of an intent to testify untruthfully. Further,
the attorney must advise the client, opposing counsel, and the circuit
court of the change of questioning style before using the narrative
format.
The bright line rule provides that, absent the most extraordinary
circumstances, a criminal defense attorney cannot be held to know that a
client is going to testify falsely unless the client admits the intent
to do so. This rule is justified to avoid compromising the attorney's
duty to the client. Without such an approach, counsel would lack
guidance. The state's proffered "firm factual basis" standard is really
no standard at all, because it tells lawyers virtually nothing about
when they should compromise their role as an advocate. Thus, a high
standard is necessary to protect the client's Sixth Amendment right to
zealous and loyal advocacy. The court interpreted the ethical rule that
counsel may refuse to offer evidence that the lawyer reasonably believes
to be false as applying "to circumstances beyond the borders surrounding
the questions involving a criminal defendant's stated intention to
testify falsely."6 Moreover, counsel's first
duty should be to attempt to dissuade the client from testifying
falsely, for ethical, legal, moral, and practical reasons.7
Torts
In Insurance Co. of North America v. Cease Electric
Inc.,8 the supreme court held that the
economic loss doctrine does not apply to contracts for services. The
plaintiff allegedly sustained losses due to the failure of a barn
ventilation system. The defendant, a contract electrician, asserted that
it was retained to manufacture a product, but the court construed the
contract as one for services and not for a product. A particular piece
of equipment was used to create the ventilation system in the barn. All
the defendant was required to do was to properly wire the control to
ventilation fans and a power source. One reason why the economic loss
doctrine applies to products is that provisions of the Uniform
Commercial Code (UCC) allow purchasers of defective products to recover
costs and lost profits, thereby placing them in the same position as if
the product had functioned properly. The UCC also protects manufacturers
by enabling them to restrict liability by disclaiming warranties or
limiting remedies. Because the UCC does not apply to service contracts,
the economic loss doctrine will not be extended to contracts that
provide for services. In reaching this result, the court was mindful of
the ramifications that would accompany a decision to extend the economic
loss doctrine to agreements to perform services. Wisconsin courts hold
that claims for professional malpractice lie in both tort and contract
with respect to architects, attorneys, and engineers. If exceptions were
made, the court would then have to decide for each profession whether an
exception should be made.
Franchises
In Central Corp. v. Research Products Corp.,9 the supreme court reversed the decisions of the
circuit court and court of appeals granting summary judgment to the
grantor of a franchise in a case brought under the Wisconsin Fair
Dealership Law (WFDL).10 The WFDL defines a
dealership as consisting of 1) a contract or agreement, 2) which grants
the right to sell or distribute goods or services or which grants the
right to use a trade name or logo, and 3) a community of interest in the
business of offering or selling or distributing goods or
services.11 The most vexing element is the
"community of interest," as the court's discussion in Ziegler
illustrates.12 In Ziegler, the
supreme court rejected a rigid test that would exclusively rely on
percentages of sales or profits to determine whether a community of
interest exists and instead set forth two guideposts that, if satisfied,
would lead to the conclusion that the parties shared a community of
interest. Those guideposts are 1) whether the parties share a continuing
financial interest, and 2) whether the parties share an interdependence
concerning the degree to which the dealer and the grantor cooperate,
coordinate their activities, and share common goals in their business
relationship. When construed together, these guideposts must reveal an
interest in a business relationship great enough to threaten the
dealer's financial health if the grantor exercised its power to
terminate. These requirements are intended to distinguish the typical
vendor-vendee relationship from a dealership under the WFDL.
In Central, genuine issues of material fact resulted in
disputed or competing inferences in regard to Central's contention that
the parties shared a community of interest. These included the 20-year
business relationship, the extent of the financial investment in a
warehouse, disputes over the extent of the sales territory, the
requirement that spare parts be on hand to serve the customers, and the
fact that Research's products did not comprise a large percentage of
Central's gross revenues or profits. These facts are not alone
dispositive. When there are genuine issues of material fact or
reasonable alternative inferences drawn from undisputed material facts,
the determination of whether there is a community of interest must be
made by a trier of fact based on an examination of all of the facets of
the business relationship.
Procedure
In Village of Trempealeau v. Mikrut,13 the supreme court, citing the Wisconsin
Constitution,14 held that circuit courts
have subject matter jurisdiction over "all matters civil and criminal,"
and, accordingly, a circuit court is never without subject matter
jurisdiction. The court also stated that a circuit court's ability to
exercise subject matter jurisdiction in a specific case may be affected
by noncompliance with statutory requirements pertaining to the
invocation of that jurisdiction. The failure to comply with these
statutory conditions does not negate subject matter jurisdiction but
may, under certain circumstances, affect the circuit court's competency
to proceed to judgment in the particular case. A judgment rendered under
these circumstances may be erroneous or invalid because of the circuit
court's loss of competency but is not void for lack of subject matter
jurisdiction.
The issue in Mikrut was whether a challenge to the circuit
court's competency may be waived if the challenge is not first raised in
the original court of jurisdiction. The court noted that Wisconsin case
law has not been consistent on whether and under what circumstances the
issue of competency may be deemed waived. The court held that because
competency does not equate to subject matter jurisdiction, a challenge
to the circuit court's competency is waived if not raised in the circuit
court. The waiver rule is a rule of judicial administration, and
therefore, a reviewing court has inherent authority to disregard a
waiver and address the merits of an unpreserved argument. In addition,
under extraordinary circumstances, appellate review may be allowed, and
there may be an avenue for obtaining collateral relief from judgment on
a waived argument if adequate grounds for relief can be established.
Mikrut concerned citations for violations of village
ordinances. After the case was tried and appealed, Mikrut moved to
vacate the judgment, arguing for the first time that the village did not
follow statutory mandates in issuing some of the citations. Mikrut
contended that the citations were illegal because the village did not
adopt a bond schedule for the particular ordinances, the citations were
for ordinance violations that had a direct statutory counterpart, and
the village lacked authority to issue uniform traffic citations for
ordinances of the type charged against Mikrut. The circuit court denied
the motion to vacate, concluding that Mikrut had waived raising the
issue of the court's competency. The supreme court also concluded that a
statutory provision allowing the court to vacate a judgment "for any
other reasons justifying relief"15 allows
relief in an extraordinary case but that this statute should be used
sparingly because finality is important.
Endnotes
12004 WI 57, 271 Wis. 2d 610, 679
N.W.2d 794.
2Harold Sampson
Children's Trust v. Linda Gale Sampson 1979 Trust, 2003 WI App
141, 265 Wis. 2d 803, 667 N.W.2d 831.
3Wis. Stat. § (Rule)
905.03(2).
4Wis. Stat. § (Rule)
905.11.
52004 WI 70, 272 Wis. 2d 488, 681
N.W.2d 500.
6 Id. ¶ 44;
see SCR 20:3.3(c).
7Nix v. Whiteside, 475
U.S. 157 (1986).
82004 WI 139, 276 Wis. 2d 361, 688
N.W.2d 462.
92004 WI 76, 272 Wis. 2d 561, 681
N.W.2d 178.
10Wis. Stat. ch. 135.
11Wis. Stat. §
135.02(3)(a).
12Ziegler Co. v.
Rexnord, 139 Wis. 2d 593, 407 N.W.2d 873 (1987).
132004 WI 79, 273 Wis. 2d 76, 681
N.W.2d 190.
14Wis. Const. art. VII, §
8.
15Wis. Stat. §
806.07(1)(h).
Wisconsin Lawyer