The Wisconsin Supreme Court today issued a couple of notable decisions. The first was a highly anticipated case deciding the constitutionality of the Wisconsin Legislature’s transfer of $200 million from the Injured Patients and Families Compensation Fund. The second case involved an important negligence case deciding whether a principal employer is liable in tort for the injuries sustained by an independent contractor’s employee while he or she is performing the contracted work. Below is a summary of both cases.

Wisconsin Medical Society, Inc., et al., v. Morgan, 2010 WI 94

This case involved a $200 million transfer from the Injured Patients and Families Compensation Fund (Fund) to the Medical Assistance Trust Fund. The provision was inserted into the 2007 biennial budget bill as a way to help balance the state budget.

The Wisconsin Medical Society (Medical Society) sued the Wisconsin Secretary of Administration, Michael Morgan, claiming that the transfer was an unconstitutional taking of private property without just compensation. The trial court dismissed the lawsuit ruling that the Medical Society lacked a property interest in the Fund. The case was appealed to the Wisconsin Supreme Court. The Court granted review to address two issues:

• Whether the Medical Society (health care providers) had a protectable property interest in the Injured Patients and Families Compensation Fund.
• Whether the statute retroactively repudiating the government’s contractual obligation is unconstitutional?

In a 5-2 opinion authored by Justice Prosser (joined by Justices Roggensack, Crooks, Ziegler and Gableman), the Court ruled that that health care providers have a protectable property interest in the Fund. The Court ruled that because health care providers are specifically named as beneficiaries of the trust, they have equitable title to the assets of the Fund. Specifically, the Court ruled that:

• Health care providers have a right to the security and integrity of the Fund;
• Health care providers have a right to realize the Fund’s investment earnings to moderate, and even lower, their assessments; and
• Health care providers and proper claimants have rights to have excess judgments paid to the proper claimants.

Therefore, because the health care providers have protected property interests in the Fund, the 2007 budget bill (Wis. Act. 20) provision transferring $200 million from the Fund was unconstitutional.

The dissenting opinion, authored by Chief Justice Abrahamson (joined by Justice Bradley), argued that health care providers do not have a protected property interest in the Fund. Instead, according the dissenting opinion, the “Fund is a government trust account in the sense that the Fund’s governing entity is required to manage the monies in a particular way, but future legislatures may change the applicable statutes.” The dissent therefore claimed that the $200 million transfer did not amount to an unconstitutional taking.

Tatera v. FMC Corp., et al., 2010 WI 90

This case involved a lawsuit filed by Vicki Tatera and the Estate of Walter Tatera, her late husband. Walter Tatera died in 2004 from malignant mesothelioma, a rare form of cancer. Tatera worked for a company, B&M, that machined asbestos-containing friction disks to achieve a desired size and shape. B&M performed this work for FMC Corp., which owned a Milwaukee-based company (Stearns Electric Company) that manufactured industrial electric brakes. Stearns Electric Company (owned by FMC Corp.) did not instruct B&M on how to machine the friction disks, but instead provided B&M a drawing illustrating the desired result. The facts were also undisputed that Stearns purchased the friction disks from several different manufacturers.

After Tatera’s death, a lawsuit was filed against FMC Corp. and several defendants alleging negligence and strict liability. As to the negligence claim, the lawsuit alleged that FMC Corp.: 1) had a duty to exercise reasonable care for the safety of Walter and those who worked with or were exposed to the asbestos-containing products, or 2) should have known that exposure would cause disease or death.

The trial court granted summary judgment to FMC Corp. on both the negligence and strict liability claims. The court of appeals upheld the lower court’s decision regarding the strict liability claim, but reversed the portion of the decision dismissing the negligence claim against FMC Corp.

In a 4-3 decision authored by Justice Ziegler (joined by Justices Prosser, Roggensack and Gableman), the Wisconsin Supreme Court reversed the court of appeals’ decision regarding the negligence claim and ruled that FMC Corp. was not liable in tort. The Court ruled that under Wagner v. Continental Casualty Co., a principal employer is not liable in tort for injuries sustained by an independent contractor’s employee while he or she is performing the contracted work.

The Supreme Court noted that there are two exceptions to this rule. The first exception requires a comprehensive analysis determining whether the principal employer committed an affirmative act of negligence. In this case, the Court was to determine whether FMC Corp., the principal employer, negligently:

• Failed to warn Walter and his employer of the health hazards associated with asbestos;
• Failed to warn them of the danger and harm of asbestos after the products were supplied;
• Failed to investigate or test for the health effects of asbestos prior to supplying the products;
• Failed to instruct Walter and his employer in the use of precautionary measures relating to asbestos-containing products; or
• Supplied unsafe asbestos-containing products.

After analyzing the facts of this case, the Court ruled that FMC Corp. was not negligent with respect to any of the foregoing, and therefore the first exception did not apply.

The Court further found that the second exception, which required the Court to determine whether the activity of machining an asbestos-containing friction disk is extrahazardous, did not apply in this case. In reaching its decision, the Court ruled that machining an asbestos-containing friction disk does not qualify as an extrahazardous activity because steps may be taken to minimize the risk of injury.

The Court upheld the court of appeals’ decision finding that FMC Corp. was not strictly liable.

The dissenting opinion authored by Chief Justice Abrahamson (joined by Justice Crooks and Justice Bradley) argued that “at a minimum [the plaintiffs] established their right to a trial on their claim for negligence based on an affirmative act of the defendant, FMC, in which it supplied Walter Tatera’s employer with asbestos-containing friction disks for grinding without warning the employer of the disks’ dangerous content.”