Author: Hamilton

Supreme Court Decision: Cintas Corp. v. Becker Property Services (Indemnity Contracts)

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In this case, Becker Property Services contracted with Cintas Corp. to inspect regularly a fire suppression system at a property Becker managed. The property owner, tenants, and insurers sued Cintas, and Cintas sought to tender the defense to Becker pursuant to an indemnity clause in their contract.

In a 5-2 decision, the Supreme Court disagreed with Becker’s argument that, despite a choice-of-law provision requiring Ohio as the controlling law, Wisconsin’s strict construction rule for indemnity clauses that cover damages for negligence is an important enough public policy to nullify the contract. Instead, the court held that Ohio law controlled, pursuant to the contract, and ruling otherwise would have created uncertainty and “unpredictability in contractual relations.”

 The court held that the contract’s language was clear that Becker must indemnify Cintas for any liabilities and damages, including those caused by Cintas’s own negligence. The court said that even under Ohio law the indemnity agreement is not “public policy” for the purpose of invalidating the contract.

Supreme Court Decision: John McAdams v. Marquette University (Academic Freedom in Contract)

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In a 4-2 decision, the Supreme Court did not defer to the recommendations of a Marquette University advisory committee and held that Marquette breached its contract with a professor, John McAdams, by implementing disciplinary action for activities protected under academic freedom.

 McAdams had written a blog post criticizing another instructor at the university, who then filed a complaint against McAdams. The complaint went through the disciplinary hearing process laid out in Marquette’s handbook. An advisory committee reviewed the incident and presented a report with disciplinary recommendations to the university president. The president then decided to suspend McAdams without pay but with benefits through the fall semester and required he write a letter acknowledging wrongdoing and expressing regret for his comments against the other instructor. McAdams refused to write the letter and filed a complaint in circuit court against Marquette for breach of his tenure contract with the university. McAdams argued that the contract protects him from disciplinary actions for activities considered as academic freedom.

The court held that McAdams’s contract with the university does guarantee freedom from disciplinary actions for activity protected as academic freedom or free speech, and McAdams’s blog post falls under the definition of academic freedom. The court ordered Marquette to reinstate McAdams.

The court chose not to defer to the Marquette advisory committee’s recommendations to suspend McAdams for three reasons:

  1. The contract did not prohibit litigation outside Marquette’s disciplinary process.
  2. The disciplinary process was biased and did not represent a true arbitration process.
  3. The court recently ended the practice of agency deference in Tetra Tech v. Department of Revenue.

In a concurring opinion, Justice R. Bradley engaged in a philosophical analysis of academic freedom and free speech on college campuses.

In dissent, Justice Walsh Bradley (joined by Justice Abrahamson), citing the “shared governance” procedures of allowing faculty to participate in decisions affecting the university, argued that the court should have deferred to Marquette’s advisory committee, which is better suited to solve its own disputes. The dissent said the court should have preserved the university’s institutional academic freedom to determine who may teach there.

Wisconsin To Begin Collecting Online Sales Tax

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Last month, the U.S. Supreme Court ruled in South Dakota v. Wayfair that states may collect online sales tax from sellers with no physical presence in the state. Gov. Walker’s administration has announced that the Department of Revenue (DOR) will promulgate rules for administering Wisconsin’s 5 percent sales tax online and begin collection in October.

Wisconsin’s rule will be modeled after the South Dakota law approved by the Supreme Court in Wayfair. Online sales tax collection will exclude small businesses with less than $100,000 in sales or less than 200 transactions in the state.

The Legislative Fiscal Bureau estimated that collecting online sales tax would increase sales and use tax revenue by $120 million annually. A state budget provision in 2013 provided that any additional revenue resulting from changes to federal law regarding online sales taxes must be used to offset income tax reductions. The statute requires DOR to analyze revenue from the first 12 months of sales tax collection before administering income tax reductions, so DOR could implement income tax changes as early as 2020.

The Wayfair decision overturned Quill Corp. v. North Dakota, which held that states can only collect sales and use tax from retailers with a physical presence in the state. Before Wayfair, states relied on consumers purchasing from out-of-state, online retailers to self-report use tax. Since self-reporting is difficult to enforce, it was estimated that states missed out on significant revenue from online sales. South Dakota enacted its law to collect on this missed revenue, and its case against internet retailers including Wayfair was appealed to the Supreme Court.

3rd District Court of Appeals Decision: Patrick Humfeld v. State Farm Fire and Casualty Co. (Recreational Immunity)

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The Court of Appeals District III held in this case that, under Wisconsin’s recreational immunity statute (Wis. Stat. § 895.52), a property owner is not liable for a hunter shot on his land.

John Marsh allowed plaintiff Patrick Humfeld – and several other individuals – to hunt on his property. Humfeld was shot by another hunter while both were hunting on Marsh’s property. Humfeld subsequently filed a lawsuit against Marsh and his insurer, State Farm, claiming negligence because Marsh did not properly monitor the hunters on his property. State Farm argued Marsh was not liable under recreational immunity.

Humfeld argued the social guest and profit exceptions made the recreational immunity inapplicable in this case. The social guest exception says that owners are liable for injuries to guests expressly invited for a specific occasion. The court held that the social guest exception did not apply here because Marsh gave Humfeld general permission to hunt on his property at any time. Marsh allowed several different people to hunt on his property, so he falls within the intent of the recreational immunity statute: to open private land to the public.

The profit exception says that owners are liable for injuries if they collect payments from those using their property for recreational activity. Although Marsh leased part of his land for hunting, the court held the profit exception did not apply in this case because Humfeld did not pay Marsh, nor was he hunting on the leased portion of the property.

Humfeld plans to appeal to the Supreme Court.

Supreme Court Upholds $750,000 Limit on Noneconomic Damages in Med Malpractice Cases

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The Wisconsin Supreme Court in a 5-2 decision (Mayo v. Wisconsin Injured Patients and Families Compensation Fund) has upheld Wisconsin’s $750,000 limit on noneconomic damages in medical malpractice cases. The Court determined that the cap is constitutional because the legislature had a rational basis in enacting the cap statute to ensure affordable and accessible health care in Wisconsin.

Notably, neither the statutes nor the Court’s decision preclude plaintiffs from being compensated for their injuries. Current law only limits the amount of noneconomic damages, i.e., pain and suffering, a plaintiff may receive at $750,000. There is no limit on the amount of damages a plaintiff can receive for his or her physical injuries.

The case arose from a septic infection resulting in the amputation of the plaintiff’s limbs. The lower court did not find negligence, but instead rested liability on improper informed consent regarding diagnosis and treatment options. The jury awarded the plaintiff $15 million in noneconomic damages, such as pain and suffering, and $1.5 million to the plaintiff’s husband for loss of society and companionship. Unaffected is the reported $8.8 million award for economic damages, which has no statutory limitation.

Ruling the cap constitutional, the Supreme Court remanded the case to circuit court to impose the $750,000 cap on the plaintiffs’ noneconomic damages.

The decision also clarified the definition and application of the “rational basis test” for courts considering reversal of legislative enactments. Courts use the rational basis test to determine the constitutionality of a statute based on whether the statute appears to have a rational basis in achieving the legislature’s objective in writing it. Since Ferdon v. Wis. Patient Comp. Fund (holding that the previous $350,000 cap was facially unconstitutional), the courts have been unclear regarding the “rational basis” test as it relates to an equal protection claim. The Mayo decision reversed new scrutiny level created by Ferdon called “rational basis with teeth.”

Supreme Court Ends Agency Deference

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The Wisconsin Supreme Court recently issued a decision (Tetra Tech v. Department of Revenue) that ends the “agency deference” doctrine. Previously, Wisconsin courts deferred to regulatory agencies when interpreting statutory provisions that ultimately define agencies’ own power and reach. Under the decision, courts will continue to give “due weight,” or respectful consideration, to agencies’ expertise but not yield to them.

The business community in Wisconsin has applauded the decision, saying it will bring more predictability and level the playing field between businesses and agencies in civil lawsuits.

In 2007, the Environmental Protection Agency required several paper companies to remediate the environmental impact of harmful chemicals into the Fox River. The collective group of paper companies formed Fox River Remediation, which hired Tetra Tech to perform the remediation. Tetra Tech subsequently hired Stuyvesant Dredging, Inc. (SDI) as a subcontractor. The Department of Revenue (DOR) audited the entities and found that Tetra Tech owed sales tax on the portion of its sale for services to Fox River Remediation on SDI’s activities, and Fox River Remediation owed use tax on the purchase of remediation services from Tetra Tech on SDI’s activities. The entities filed petitions for redetermination with DOR, then with the Tax Appeals Commission. A Wisconsin circuit court, then appeals court upheld the commission’s ruling, giving great weight deference to DOR’s interpretation of tax statutes. The case was then appealed again at the Wisconsin Supreme Court, with the Court asking parties brief the constitutionality of providing deference to agencies on questions of law.

In a unanimous decision with three concurring opinions, the court again upheld the Commission’s ruling on the tax issue. The court also decided to end the practice of agency deference, and the three concurring opinions disagreed on this aspect of the decision.

Wisconsin Civil Justice Council Applauds Wisconsin Supreme Court’s Decision Upholding Limits on Noneconomic Damages

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Today, the Wisconsin Supreme Court in a 5-2 decision (Mayo v. Wisconsin Injured Patients and Families Compensation Fund) upheld Wisconsin’s limit on noneconomic damages in medical malpractice cases. Importantly, the Court reversed its 2005 decision, Ferdon v. Wisconsin Patients Compensation Fund, which held unconstitutional Wisconsin’s previous limit on noneconomic damages.

“The Court’s decision is a victory for the rule of law and reconfirms that the legislature, not the judiciary, is the proper branch of government to determine public policy,” said Bill G. Smith, president of the Wisconsin Civil Justice Council and Wisconsin Director for the National Federation of Independent Business.

“The importance of this decision cannot be overemphasized. Gone are the days of the Supreme Court of Wisconsin setting public policy and overriding laws enacted by the legislative branch,” added Smith. “We applaud the Court for correcting its erroneous decision in Ferdon and upholding the law.”

It is also important to note that neither the statutes nor the Court’s decision preclude plaintiffs from being compensated for their injuries. Current law only limits the amount of noneconomic damages, i.e., pain and suffering, a plaintiff may receive at $750,000. There is no limit on the amount of damages a plaintiff can receive for his or her physical injuries.

The Wisconsin Civil Justice Council consists of representatives from Wisconsin’s leading business and professional organizations whose mission is to promote fairness and equity in Wisconsin’s civil justice system, with the ultimate goal of making Wisconsin a better place to work and live.

Supreme Court Decision: Winebow v. Capitol-Husting (“Dealership” Definition)

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In a 4-3 decision crossing ideological lines, the Supreme Court ruled that wine grantor-dealer relationships are not considered “dealerships” under Wisconsin’s Fair Dealership Law.

The decision answers a certified question from a U.S. Court of Appeals that will ultimately decide whether Winebow violated the Fair Dealership Law in unilaterally terminating its relationships with distributors Capitol Husting and L’Eft Bank Wine Co.

The Fair Dealership Law defines “dealership” in Wis. Stat. § 135.02(3)(b) as an agreement by which a “wholesaler” is granted the right sell, distribute, or use a commercial symbol related to “intoxicating liquor.”

Writing for the majority, Justice Gableman (joined by fellow conservatives Justice Ziegler and Chief Justice Roggensack and liberal Justice Walsh Bradley) argued wine grantor-dealer relationships do not fall under the definition of “dealership” because a definition of “intoxicating liquor” later in Ch. 135 explicitly excludes wine. The majority backs its position with an examination of the legislative history and intent of the statute, pointing to Gov. Tommy Thompson’s partial veto that deleted cross-references to the definition of “intoxicating liquor” that does include wine. Furthermore, the majority states that the definition that excludes wine is the only definition of “intoxicating liquor” present in Ch. 135, and courts should aim to use a uniform definition of a single term throughout a chapter.

In the dissent, conservative Justice R. Bradley (joined by conservative Justice Kelly and liberal Justice Abrahamson) sides with the distributors in that wine grantor-dealer relationships should be included in the definition of “dealership” under the Fair Dealership Law. The dissent states that the phrase “In this chapter” in Wis. Stat. § 135.02 is evidence the definition of “dealership” in § 135.02(3)(b) governs the entire chapter. Instead of focusing on the definition of “intoxicating liquor” later in Ch. 135 that excludes wine, the dissent focuses on the definition of “wholesaler” in § 135.02(3)(b) that, when cross-referenced, does include wine. The dissent criticizes the majority for focusing on legislative intent rather than the explicit statutory language.

 

Supreme Court Decision: Voters with Facts v. City of Eau Claire (TIDs)

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In a 5-2 decision, the Supreme Court upheld the dismissal of plaintiffs’ claims for declaratory judgement in a case protesting the formation of two tax incremental districts (TIDs) in the city of Eau Claire. The case sets a precedent for other TID and tax credits such as Foxconn to proceed.

The plaintiffs claimed that:

  1. The city did not establish a lawful purpose for the TIDs under Wis. Stat. § 66.1105(4)(gm)4.a because it did not give evidence for its findings of blight in the TID area.
  2. The city’s joint review board did not reasonably conclude that development would not occur without the TID (Wis. Stat. § 66.1105(4m)(b)2).
  3. The city unlawfully allowed developers to use cash grants from the TID to destroy historic properties (Wis. Stat. § 66.1105(2)(f)1.a) because the development agreement did not explicitly prohibit them from using the grants for this purpose.
  4. The city violated the Uniformity Clause of the Wisconsin Constitution (Art. 8 § 1) because the cash grants effectively reimbursed developers for their property taxes, thus taxing the developers at a more favorable rate than identically assessed properties.

The Court decided the plaintiffs did not present claims upon which relief could be granted because:

  1. The statutory language does not require the city to provide evidence for findings of blight. Other closely related sections near the TID statutes explicitly state when there must be itemized evidence for findings of blight, but the TID section does not. Overall, the Court held that findings of blight are legislative determinations and not justiciable issues of fact or law.
  2. The statutory language does not require the joint review board’s assertion that development would not occur without the TIDs to be backed by itemized evidence. Again, the Court held that the joint review board’s conclusions are legislative determinations and not justiciable issues of fact or law.
  3. The historic buildings were already demolished, and the complaint failed to present facts showing the developer used tax incremental financing (TIF) funds to reimburse demolition costs.
  4. The list of costs that may be covered by cash grants in Wis. Stat. § 66.1105(2)(f)1.a-n does not include property taxes, and the plaintiffs’ complaint did not establish the grants were used or were intended to be used to reimburse property tax payments. Since constitutional challenges must be demonstrated “beyond a reasonable doubt,” the plaintiffs did not provide enough facts to present a claim for relief to be granted.

On the first two claims, the Supreme Court remanded the case to the circuit court for certiorari review, since there is no statutory appeal process for reviewing TID formation.

In their dissent, Justices R. Bradley and Kelly parted with the majority on each of the four claims.

On the plaintiffs’ first and second claims, the dissent said the majority mistakenly characterizes the city’s finding of blight and joint review board’s approval as legislative determinations. The dissent agreed that the city’s authority to create TIDs is a legislative determination, but the preconditions of that authority (e.g. finding of blight) are not, and taxpayers must have a judicial avenue to challenge the accuracy of the city’s findings.

On the third and fourth claims, the dissent disagreed with the majority by arguing that the plaintiffs’ complaints are sufficient under Wisconsin’s notice pleading law (Wis. Stat. § 802.02(1)(a)). However, the dissent noted that TIF cash grants do not act as tax rebates and thus do not violate the Uniformity Clause.

Supreme Court Decision: Golden Sands Dairy v. Town of Saratoga (Building Permit Rule)

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The Supreme Court issued a 5-2 decision in Golden Sands Dairy v. Town of Saratoga holding that the Building Permit Rule applies not only to building structures but to all land “specifically identified” in a building permit application.

Wisconsin’s Building Permit Rule states that, upon submitting a complete building permit application, owners have a right to build in accordance with the permit and current zoning regulations but are not subject to rezoning ordinances enacted after the permit application.

In this case, Golden Sands Dairy filed a permit application with Saratoga to build seven structures on 92 acres of land for a dairy farm. Shortly after the permit was filed, Saratoga implemented a new zoning ordinance that would have excluded Golden Sands’s land for agricultural use. The Building Permit Rule allowed Golden Sands to continue constructing the seven structures.

At issue was whether the Building Permit Rule applied to the 92 acres of land intended for agricultural use. Saratoga argued that the rule does not extend to use of land. However, the Court sided with Golden Sands in extending the Building Permit Rule so that owners have the right to use all land that is specifically identified in a building permit application without being subject to future rezoning.

The opinion, written by Justice Gableman, argues that the purpose of the Building Permit Rule is to provide predictability for developers and to avoid lengthy litigation. Separating the structures from the associated land would lead to further litigation regarding how much land is necessary for their construction and how much could be rezoned. Furthermore, the land is necessary for carrying out the agricultural use of the structures, so making the land subject to future rezoning would thereby also make the structures vulnerable to a local ordinance blocking their use. This unpredictability is exactly what the Building Permit Rule aims to avoid, so, according to the majority, the rule must extend to the land use, as well as physical structures.

Justice Abrahamson’s dissent claims the court’s ruling actually increases unpredictability because it fails to require how owners should “specifically identify” land in building permit applications and how detailed they should be in disclosing the intended use of the land.