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Wisconsin Supreme Court Accepts New Cases

Posted on by Hamilton

The Wisconsin Supreme Court recently accepted several new cases. Cases of note include:

 

Chris Hinrichs v. DOW Chemical Company (2017AP2361) – Fraudulent Misrepresentation

In this case, Hinrichs’s company used a malfunctioning DOW Chemical adhesive, which negatively affected the company’s sales. Hinrichs filed misrepresentation claims, which the court of appeals dismissed on the basis of the economic loss doctrine. The economic loss doctrine provides that plaintiffs cannot sue to recover solely economic losses from the nonperformance of a contract. The appeals court declined to determine whether the plaintiffs might be considered “the public” for the purposes of bringing forth a fraudulent representation claim under Wis. Stat. § 100.18.

The Supreme Court will determine whether the “particular relationship test” used in previous cases to determine whether plaintiffs are members of the public is consistent with the statutes and review whether the plaintiffs in this case should be considered “the public” despite their commercial relationship to DOW. Furthermore, the court will review whether the economic loss doctrine claim can apply to the plaintiffs’ § 100.18 claims.

More about the case.

 

Roger Choinsky v. Germantown School District Board of Education (2018AP116) – Duty to Defend

In this case, a group of retired teachers filed a lawsuit against their school district for breach of contract following the enactment of 2011 Act 10. The district tendered its defense to its insurers, Employers Insurance Company of Wausau and Wausau Business Insurance Company. The circuit court agreed to bifurcate the coverage and merits issues of the case but denied the motion to stay the merits case, citing the need for urgency in resolving the underlying employee benefits issue. The insurers agreed to meanwhile provide defense to the district on the merits case – including retroactive fees – until the court decided the coverage issue. The school district sought attorney fees for the coverage issue under Elliot v. Donahue because the insurers did not immediately accept its defense.

The Supreme Court will review the court of appeals decision holding that the insurers did not breach their duty to defend when they did not immediately accept the defense of the insured.

More about the case.

 

Pinter v. Village of Stetsonville (Governmental Immunity)

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In Pinter v. Village of Stetsonville (2019 WI 74), a 4-3 Wisconsin Supreme Court held that a village’s oral policy related to wastewater processes did not create a ministerial duty exempting it from governmental immunity protections. Furthermore, expert testimony was required for the plaintiff to proceed with a public nuisance claim against the village.

 

Facts

The underlying claim in the case arose when the Village of Stetsonville failed to abide by its oral policy to bypass typical wastewater treatment processes during heavy rains. As a result, waste and sewage leaked into Alan Pinter’s basement. Pinter filed the instant lawsuit, claiming negligence and private nuisance. The village argued it was protected under governmental immunity (Wis. Stat. § 891.80(4)). Pinter argued that by not following the village’s oral policy, the village failed to perform a ministerial duty, exempting it from governmental immunity.

 

Decision

The Supreme Court ruled that the oral policy to bypass wastewater treatment processes when excess water reached a certain point did not constitute a ministerial duty. Instead, it was a discretionary “rule of thumb.” Department of Natural Resources rules related to bypassing wastewater treatment underscore the discretionary nature of the decision whether or not to bypass, as they require village employees to determine whether damage would be “unavoidable” and whether there are “feasible alternatives” to bypassing typical processes. Because the decision whether or not to bypass was discretionary, the ministerial duty exception did not apply and governmental immunity blocked Pinter’s negligence claim.

On Pinter’s private nuisance claim, the court determined that expert testimony was required for Pinter to prove that the village’s failure to maintain its wastewater disposal system caused the damages to his basement. In private nuisance cases, the burden is on the plaintiff to prove causation, and without expert testimony on this complex subject, Pinter failed to raise a genuine issue of material fact as to causation. Therefore, the court upheld summary judgment in favor of the village.

 

Dissent

In a dissent, Justice Dallet (joined by Justices R. Bradley and Kelly) advocated that the court should return to the plain text of the governmental immunity statute and afford governmental immunity only to employees acting “in the exercise of legislative, quasi-legislative, judicial, or quasi-judicial functions” (Wis. Stat. § 891.80(4)). In this case, the village employees reacting to the wastewater emergency were not engaging in these functions, especially since the village had not legislatively formalized the “rule of thumb” bypass policy. Therefore, the dissent would not have afforded governmental immunity to the village. These justices authored a similar dissent in Engelhardt v. City of New Berlin earlier this year.

On the private nuisance claim, the dissent takes issue with the court’s decision requiring expert testimony in all cases related to negligent maintenance of wastewater systems. The dissent argues the need for expert testimony should be decided according to the facts on a case-by-case basis. In this case, inferences from the record were sufficient to establish a genuine issue of material fact without expert testimony.

 

Rural Mutual Insurance Co. v. Lester Buildings, LLC (Subrogation Waiver)

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In Rural Mutual Insurance Co. v. Lester Buildings, LLC (2019 WI 70), the Wisconsin Supreme Court determined that a subrogation waiver did not violate Wis. Stat. § 895.447, which provides that any provision to limit tort liability in a construction contract is against public policy and void.

Jim Herman, Inc. and Lester Building entered into a contract to build a barn. The contract contained a subrogation waiver requiring both parties to waive all rights against each other and their subcontractors. Lester then contracted with a concrete provider in the building process. When a storm caused half of the barn to collapse due to improper installation of the concrete, Herman’s insurer Rural Mutual alleged breach of contract and negligence against Lester and its contractors. Lester argued the claims were barred because of the subrogation wavier.

In this case, the Supreme Court found that the subrogation waiver’s provision to “waive all rights against each other…for the recovery of any damages…to the extent covered by property insurance” did not eliminate tort liability in violation of Wis. Stat. § 895.447. Instead, the waiver left the parties to the contract liable beyond whatever damages were covered by property insurance policies like the Rural Mutual policy.

Furthermore, the court determined that the waiver was not an unenforceable exculpatory contract contrary to public policy. An exculpatory contract is one which relieves a party from liability for its own negligence. In this case, the subrogation waiver did not relieve Lester’s liability but instead shifted the payment of damages for Lester’s liability to the insurer. Beyond the insurance policy, Lester would be liable for its own damages.

For these reasons, the court affirmed the court of appeals decision preventing Rural Mutual from recovering from Lester and its contractors. Justice Dallet, Chief Justice Roggensack, and Justice R. Bradley made up the majority in this 3-2 decision.

In a dissent, Justice Kelly (joined by Justice Walsh Bradley) argued that the court conflated wholeness in recovery of damages with full tort liability. Rural Mutual was Herman’s casualty insurer and did not contract to cover Herman’s tort liability, so using Rural Mutual’s payments for property damage as a stand-in for some of the tort liability owed by Lester and its contractors did limit their liability in violation of Wis. Stat. § 895.447.

Justices Abrahamson and Ziegler did not participate in the case.

David Paynter v. ProAssurance Wisconsin Insurance Co. (Borrowing Statute in Medical Malpractice)

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In David Paynter v. ProAssurance Wisconsin Insurance Co. (2019 WI 65), the Wisconsin Supreme Court held that in medical malpractice cases where a misdiagnosis causes latent, continuous injury, the plaintiff’s first injury determines whether the action is a “foreign cause of action” under Wisconsin’s statute applying foreign statutes of limitation (Wis. Stat. § 893.07), also known as the “borrowing statute.” The court determines the jurisdiction of the injury based on where it is first felt by the patient.

 

Facts

The underlying claim in the case arose when Dr. James Hamp, who operates offices in both Wisconsin and Michigan, misdiagnosed a growth on patient David Paynter, a Michigan resident. Paynter first saw Dr. Hamp in his Michigan office, but Dr. Hamp called Paynter with the misdiagnosis from his Wisconsin office. Paynter was residing in Michigan at the time of the call and for the next four years before he found out his growth was cancerous. Paynter sued Dr. Hamp and both his Michigan and Wisconsin malpractice insurance policies, claiming both negligence and violation of the patient’s right to informed consent.

 

Decision

The issue before the Supreme Court was whether Paynter’s injury was a “foreign cause of action” under Wis. Stat. § 893.07, thus barring the claim under Michigan’s statute of limitations. The court held that in medical malpractice cases like Paynter’s where a misdiagnosis causes latent, continuous injury, the plaintiff’s first injury determines whether the action is a “foreign cause of action” under the borrowing statute. The court based the determination on previous case law holding that an actionable injury in medical malpractice cases occurs when the misdiagnosis causes a greater harm than previously existed.

On Paynter’s negligence claim, the court could not identify when and where the Paynter’s greater harm first occurred. When the plaintiff’s place of injury is unknowable, the borrowing statute does not apply. Therefore, Wisconsin’s longer medical malpractice statute of limitations applied to Paynter’s negligence claim, allowing this claim to proceed.

On Paynter’s informed consent claim, the court determined that Paynter’s injury occurred in Michigan because Paynter was in Michigan when Dr. Hamp called him with the misdiagnosis. Previous case law states that “the injury occurs where it is felt rather than where it originates.” Therefore, Paynter’s injury was a “foreign cause of action” under the borrowing statute, so Michigan’s shorter medical malpractice statute of limitations barred his informed consent claim.

The Supreme Court declined to adopt Paynter’s argument that at least some of his injuries occurred in Wisconsin since he spent time in Wisconsin during the four year period after the misdiagnosis. The court said Paynter’s proposed analysis would allow almost any misdiagnosis case to proceed as non-foreign and encourage venue-shopping in Wisconsin courts.

The court declined to address the issue of insurance coverage related to this case.

 

Dissents

In a partial dissent, Justice Walsh Bradley disagreed with the court’s determination on Paynter’s informed consent claim. Instead of finding that the injury occurs where it is felt (i.e. where the patient receives the misdiagnosis call), the court should have used the test from International Shoe Co. v. Washington, which requires a defendant to have minimum contacts in Wisconsin in order to apply Wisconsin’s statute of limitations. In this case, Dr. Hamp had enough contacts in Wisconsin to pass the International Shoe test, so the Wisconsin statute of limitations would have applied, allowing the plaintiff’s claims to proceed. The dissent notes complications could occur using the test adopted by the court because patients could be anywhere when they receive a misdiagnosis call.

In another partial dissent, Justice R. Bradley (joined by Justice Kelly) noted similar concerns regarding the impracticalities of the court’s place-of-injury test and “where the injury was felt” test in determining whether the borrowing statute applies in misdiagnosis cases. The dissent would also have remanded the case to lower court to determine whether Paynter actually stated an informed consent claim for which relief may be granted. Furthermore, the dissent agreed with the court’s decision not to rule on coverage, but rejected the court’s criticism of how Dr. Hamp’s insurer ProAssurance Wisconsin Insurance Co. handled its briefing on the subject.

Schroeder v. Zurich American Insurance Co. (Governmental Immunity)

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In Schroeder v. Zurich American Insurance Co. (2018AP1737), the Court of Appeals District IV dismissed a personal injury case against a government contractor on the grounds of governmental immunity.

Keith Schroeder was injured when he rode his motorcycle over loose gravel on a road Fahrner Asphalt Sealers had been repairing for the Town of Fulton. Schroeder sued Fahrner for negligence. Fahrner argued it was an “agent” of the town entitled to governmental immunity under Wis. Stat. § 893.80(4).

The appeals court determined that Fahrner was a government “agent” entitled to immunity because

  1. The town had approved precise specifications in the contract for the road work.
  2. Fahrner conformed to those specifications.
  3. There were no dangers related to the work about which Fahrner knew and failed to warn the town.

Finally, the court determined Fahrner was implementing the town’s “legislative or quasi-legislative acts” in performing the road work.

Since these elements for establishing agency for the purpose of governmental immunity applied, the court held that Fahrner was immune from liability and dismissed Schroeder’s personal injury claim.

Stop the Ongoing Mine Permit v. Town of Ashford Board of Appeals (Sand Mine Permit)

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In Stop the Ongoing Mine Permit v. Town of Ashford Board of Appeals (2018AP1843), the Court of Appeals District II upheld a conditional use permit for a sand mine in the Town of Ashford.

The Town of Ashford issued a conditional use permit for Batzler Trucking, Inc. to operate a sand mine in the town. Stop the Ongoing Mine Permit (STOMP), a group of nearby property owners opposed to the sand mine, challenged the permit, arguing the mine violates an Ashford zoning ordinance requiring conditional use permits 1) will not be detrimental to the enjoyment of adjacent properties and 2) are compatible with adjacent existing uses.

The appeals court held that there was sufficient evidence to support the town’s decision to issue the permit. The town issued the permit with several conditions mitigating detrimental effects to residential neighbors of the mine, such as limiting the time frame for operation of the mine, not allowing blasting at the site, and requiring trucks to exit the pit in a direction away from residents. Furthermore, operation of the sand mine is compatible with use of adjacent land for farming, and the conditions of the permit require the land to ultimately be returned to agricultural use. Because STOMP did not meet its burden to overcome the presumption that the town’s decision to issue the permit was correct, the court allowed sand mine operations to proceed.

Moore v. Zurich American Insurance Co. (Duty to Defend & Indemnify)

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In Moore v. Zurich American Insurance Co. (2017AP781), the Court of Appeals District I, interpreting Ohio law, held that one corporation had no duty to defend and indemnify another corporation under their contract.

Konecranes, Inc. and Badger Alloys, Inc. entered into a contract for Konecranes to perform heavy equipment lifting for sand foundry Badger. A Konecranes employee was injured during the course of the work and filed an action against Konecranes. Konecranes tendered the claim to Badger under their contract. Badger refused to indemnify.

Due to the contract’s choice of law provision, the appeals court interpreted Ohio law and ruled in favor of Badger. The court determined that the duty to defend must be express and is not implied in an indemnification provision. Since the contract between Badger and Konecranes did not contain an express duty to defend in the indemnification provision, Badger had no duty to defend.

Furthermore, Badger had no duty to indemnify Konecranes because Konecranes’s own negligence caused the injury. While Konecranes argued Badger had a duty to indemnify based on initial allegations in the employee’s complaint, the court determined that the duty to indemnify is contingent on the actual allocation of liability. Because a jury determined that Konecranes, not Badger, was negligent in the accident, Badger had no duty to indemnify.

Wisconsin Supreme Court Reinstates Extraordinary Session Laws in SEIU Case

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On June 11, the Wisconsin Supreme Court granted a stay on the temporary injunction in the extraordinary session challenge SEIU v. Vos, reinstating provisions of the legislation that had been blocked by a Dane County Circuit Court. Additionally, the Supreme Court stayed proceedings on the case in the lower court, cancelling the trial on guidance document provisions of Act 369 set to begin in Dane County on June 12.

In this case, the plaintiffs allege that the extraordinary session laws are an unconstitutional violation of the separation of powers doctrine. The defendant legislature argues that the Wisconsin Constitution explicitly allows the legislature to prescribe the powers of the attorney general. Furthermore, Wisconsin case law has interpreted the Constitution as a fluid rather than rigid political design of separate branches of government. A Dane County circuit court issued an injunction on certain provisions of the extraordinary session laws earlier this year.

The Supreme Court’s June 11 order states that the circuit court made errors of law in analyzing the factors for granting a stay pending appeal, as requested by the Legislature. In their analysis, the Supreme Court noted that presumption of constitutionality applies in this case, making it likely the defendants will succeed upon appeal. Furthermore, the defendant Legislature and the public suffer irreparable harm when duly enacted laws are declared unenforceable without appellate review. For example, if the Legislature is denied the opportunity to review an attorney general settlement, as provided in Act 369, there is no appropriate remedy to undo the settlement if Act 369 is eventually upheld by the Supreme Court.

However, the Supreme Court left in place the injunction on Act 369 provisions that would have rescinded improperly promulgated guidance documents on July 1, 2019. The court determined that agencies would not have enough time to meet the July 1 deadline for holding notice and comment periods for existing guidance documents. Guidance documents created after the circuit court injunction would still be subject to the July 1 deadline.

In a dissent, Justice Dallet (joined by Justices Abrahamson and Walsh Bradley) disagreed with the court’s order to reinstate certain provisions of Act 369. The dissent argued the circuit court did not err in denying the stay of the temporary injunction because the defendants had not shown specific harms would occur if the injunction remained in place. Furthermore, harm to the attorney general and governor without the injunction would outweigh harm to the defendants with the injunction in place.

The dissent agreed that the injunction of the guidance document deadline should remain in place. The dissent also agreed with the court’s decision to reinstate the provision of Act 369 allowing the Joint Committee on Administrative Rules to suspend administrative rules multiple times.

Justices Dallet, Abrahamson, and Walsh Bradley also dissented from the court’s decision to stay the trial in Dane County Circuit Court.

Read about other extraordinary session litigation.

DOJ Restructuring to Focus on Environmental Enforcement

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On May 23, Attorney General Josh Kaul announced a restructuring at the Department of Justice (DOJ) that will allow for more environmental enforcement. The restructuring merges DOJ’s Environmental Protection Unit and Consumer Protection Unit under a single Public Protection Unit. Kaul said the new unit is “a step toward revitalizing the enforcement of our consumer protection and environmental laws.”

The new Public Protection Unit will have a single director, allowing DOJ to shift the open position of a second unit director to a new environmental attorney. Under the restructuring, there will be a total of six attorneys assigned to environmental cases, plus a combined staff available to work on both environmental and consumer protection cases.

2020 Wisconsin Supreme Court Candidates Taking Shape

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Three candidates have announced they will run for the Wisconsin Supreme Court in the April 2020 election. Conservative Justice Daniel Kelly announced on May 28 that he will run to keep his seat. Challenging him so far are liberal candidates Dane County Judge Jill Karofsky and Marquette University Law School Professor Ed Fallone. A primary to narrow the race down to two candidates will be held in February 2020.

Kelly was appointed to the Supreme Court by Gov. Scott Walker in 2016. Kelly’s previous experience includes working in private practice, as vice president and general counsel for the Kern Family Foundation, and as a law clerk at the Wisconsin Court of Appeals. Kelly is a former president of the Milwaukee chapter of the Federalist Society.

Dane County Judge Jill Karofsky announced her campaign on May 23. Karofsky is a former deputy district attorney for Dane County and was previously the executive director of the state Department of Justice Office of Crime Services. She was elected to the Dane County Circuit Court in 2017.

Also running for Supreme Court in 2020 is Marquette University Law School Professor Ed Fallone, who announced his campaign in March. Fallone previously ran and lost to Chief Justice Roggensack in 2013.

With conservative Judge Brian Hagedorn joining the court this fall, the court will have a 5-2 conservative majority come the 2020 election.