In Hickethier v. Janesville Kia (2018AP2276), the Court of Appeals District IV held that plaintiffs failed to sufficiently allege that their car dealership knowingly misrepresented defects in the vehicle they purchased or that the dealership engaged in unconscionable practices.

Dawn Livingston-Hickethier and Chris Hickethier purchased a used Buick from Janesville KIA. When the Hickethiers got the vehicle’s oil changed for the third time, a mechanic found that the vehicle had an excessive oil consumption issue. The Hickethiers later obtained a vehicle history report showing that there had also been a recall for seat wiring in the vehicle. As a result, the Hickethiers filed this lawsuit alleging that Janesville KIA had engaged in fraudulent conduct and unconscionable practices in violation of auto dealer statutes in Wis. Stat. Ch. 218.

The court found that the Hickenthiers failed to sufficiently allege the Ch. 218 claims. The court determined that, for their fraud claims to succeed, the Hickenthiers must have established that Janesville KIA made a knowing misrepresentation. The Hickethiers failed to allege that Janesville KIA made such a knowing misrepresentation. The court could not infer that Janesville KIA had known about the excessive oil consumption issue, especially since it had taken three trips to mechanics before the Hickenthiers discovered the issue. Regarding the seat wiring recall, Janesville KIA was not obligated to find and disclose recalls for Buick, for which it did not hold a franchise (see Wis. Admin. Code § Trans 139.04(9)). Finally, the court held that Janesville KIA did not engage in unconscionable practices because the dealership did not inflate the price and the vehicle was not unsafe to drive at the time of purchase.

Because the Hickenthiers’ claims failed to meet the required pleading standards, the court dismissed the case.

In Paustian Medical & Surgical Center, S.C. v. IMT Insurance Co. (2019AP141), the Court of Appeals District IV held that the insurer had no duty to defend because an impaired property exclusion applied.

Paustian contracted with RC Heating & Cooling so RC could design and install an HVAC system in the build-out of Paustian’s medical facility. After RC completed the project, Paustian sued RC and RC’s insurer IMT for breach of contract and negligence. Paustian alleged it lost income because it couldn’t use the build-out area for procedures and it incurred expenses for repairing RC’s work.

IMT argued and the court agreed that it had no duty to defend under its policy with RC. The policy excluded coverage for 1) property damage to property that has not been physically injured and 2) loss of use of property arising out of RC’s failure to perform a contract. This “impaired property” exclusion applied here because Paustian did not allege the HVAC system had been physically injured or caused physical injury to the Paustian facility – the HVAC system just had some deficiencies that required repair. The exclusion also applied because Paustian alleged its damages arose from RC’s breach of the contract for installation of the HVAC. Because the exclusion applied, IMT had no duty to defend.

*This case is recommended for publication.

 

In Zignego v. Wisconsin Elections Commission (2019AP2397/2020AP112), the Court of Appeals District IV overturned a circuit court order mandating the Wisconsin Elections Commission deactivate the registrations of Wisconsin voters who had recently moved and failed to timely apply for continuation of registration.

 

Background

Wis. Stat. § 6.50(3) provides that, if a municipal clerk or “board of election commissioners” receives information that voters have moved, it must notify the voters. If a notified voter fails to respond to the notice within 30 days, the municipal clerk or “board of election commissioners” is required to change the voter registration status to ineligible. At issue in this case was whether “board of election commissioners” refers to the Wisconsin Elections Commission.

The Wisconsin Elections Commission in 2017 received from a third-party data corporation a report on voters who may have moved. Based on that data, the Commission sent notices to those voters stating that they had 30 days to respond or their registration status would switch to ineligible. The Commission subsequently deregistered those individuals who did not respond to the notice.

After receiving another report on voters who may have moved in 2019, the Commission, citing worries about inaccurate data from the 2017 report, sent out a notice to those voters but declined to state the Commission would deregister voters who did not respond.

Subsequently the plaintiffs filed this lawsuit alleging that the Commission violated § 6.50(3) by not deregistering the voters who had not responded to the notice. The Commission argued § 6.50(3) did not apply, as the Commission is not a “board of election commissioners.”

The circuit court ruled in favor of the plaintiffs and issued a writ of mandamus ordering the Commission to deactivate the voters. When the Commission did not deactivate the voters, the court found the Commission in contempt of court. The Commission sought a petition to bypass the Court of Appeals, but the Supreme Court rejected the petition. The next day, the Court of Appeals granted the Commission’s appeal and issued a stay of the circuit court’s writ of mandamus and contempt order.

 

Court of Appeals Decision

 The Court of Appeals agreed with the Commission that the term “board of election commissioners” in § 6.50(3) does not refer to the Commission. Wisconsin’s election statutes consistently refer to the Elections Commission as the “commission” (§ 5.025). At other places in statute, “board of election commissioners” refers to a body in Milwaukee that fills the duties of a municipal election clerk. The court found no reason to hold that “board of election commissioners” would mean something else in § 6.50(3). Even within § 6.50, the statutes use both terms: “commission” and “board of election commissioners.” Thus, assigning “board of election commissioners” to mean the Elections Commission in just one instance in these statutes would render one of the terms superfluous.

Furthermore, the court found that the Elections Commission is an independent agency, not a “board,” so “board of elections commissioners” could not refer to the Elections Commission. The court also dismissed plaintiffs’ arguments that the Legislature intended § 6.50(3) to require removal of moved voters and that the Commission itself at one point believed it had authority to deregister voters under § 6.50(3).

Thus, the Court of Appeals ordered the plaintiffs’ causes of action dismissed and reversed the circuit court’s writ of mandamus and contempt order against the Commission.

Plaintiffs, represented by Wisconsin Institute for Law & Liberty, have filed a petition for review by the Wisconsin Supreme Court.

*This case is recommended for publication.

 

In Applegate-Bader Farm, LLC v. DOR (2018AP1239), the Court of Appeals District IV held that the Wisconsin Department of Revenue (DOR) complied with rulemaking procedures in Wis. Stat. Ch. 227 when it promulgated new rules regarding property tax classification.

 

Background

Wisconsin law provides certain incentives for property owners to participate in state and federal easement programs to achieve agricultural and/or environmental benefits. One incentive for landowners participating in easement programs is property tax classification as “agricultural use,” which is typically a lower tax rate. DOR proposed rules making changes to how and which properties participating in easements qualified for agricultural use classification for property tax purposes.

DOR’s initial draft of the rule listed certain criteria for determining if a property enrolled in an easement program met the definition of agricultural use. Plaintiff Applegate-Bader Farm, which was enrolled in a federal easement program, would have qualified for agricultural use classification under the initial draft.

After holding a public hearing, DOR made substantial changes to the draft rule that changed which properties would be eligible for agricultural use classification. The governor and legislature subsequently approved the rule in accordance with Ch. 227, and DOR promulgated the rule.

 

Plaintiff’s Claims

Applegate-Bader Farm filed this lawsuit seeking to invalidate the rule because DOR allegedly violated Ch. 227 rulemaking procedures by not revising the scope statement, revising the economic impact analysis, or holding another public hearing on the rule after the department made changes to the initial draft rule. Additionally, Applegate-Bader Farm argued that DOR did not sufficiently investigate the need for an environmental impact statement according to the Wisconsin Environmental Protection Act (WEPA).

 

Ch. 227

 First, Applegate-Bader Farm argued that DOR violated § 227.135(2), which prohibits agency employees from working on drafting a rule before a scope statement is approved. Before scope statement approval, agency employees are limited to working only on preparing the scope statement. The court found that Applegate-Bader Farm did not adequately identify DOR communications constituting work on drafting the rule rather than communications related to preparing the scope statement.

Next, Applegate-Bader Farm argued that DOR violated § 227.135(4) requirements that agencies prepare a revised scope statement when “meaningful or measurable” changes are made. Applegate-Bader Farm proposed that any “meaningful or measurable” changes to the draft rules are “meaningful or measurable” changes requiring a revised scope statement. In this case, according to Applegate-Bader Farm, the changes DOR made to its initial rule draft were “meaningful and measurable” and therefore required DOR to issue a revised scope statement. The court agreed with DOR that a revised scope statement is required only when changes to draft rules “meaningfully and measurably” change the scope of the rules. In this case, DOR’s changes to the initial draft rules would not change the substance of the scope statement, so DOR was not obligated to issue a revised scope statement. The court found it would be unreasonable for agencies to have to re-scope draft rules every time they make changes to the draft rules.

Applegate-Bader Farm also argued that DOR should have held another public hearing after changing the initial draft rule. Previous case law Brown County v. DHSS (1981) held that agencies are required to hold an additional public hearing if changes to draft rules significantly differ from initial drafts. In this case, the court found that interested parties had adequate opportunity for input and influence at the first DOR hearing on the proposed rules, so another hearing was not required after DOR made the changes based on input from the first hearing.

Finally, Applegate-Bader Farm argued that DOR violated § 227.137(4) by failing to revise its economic impact analysis after changing the initial draft rules. The court found that Applegate-Bader Farm failed to establish that there would be “significant” changes to the economic impact due to the changes in the draft rule.

 

WEPA

Applegate-Bader Farm claimed that DOR’s decision not to prepare an environmental impact statement on the rule violated WEPA (Wis. Stat. § 1.11(2)). The court dismissed the WEPA claim, finding Applegate-Bader Farm’s argument that the proposed rule would have only “indirect effects” on the environment was insufficient. Previous case law holds that even significant indirect effects do not require agencies to prepare environmental impact statements. Since the plaintiff here alleged only indirect and no direct environmental effects, the court dismissed the WEPA violation claim.

 

 

For more on rulemaking procedures and statutory changes to Wisconsin rulemaking in the past few years, visit: https://www.hamilton-consulting.com/hcg-guide-to-the-wisconsin-administrative-rules-process/.