Wisconsin Lawyer
Vol. 81, No. 9, September 2008

Supreme Court Digest

by Prof. Daniel D. Blinka & Prof. Thomas J. Hammer

Appeals

Donohoo v. Action Wis. Inc., 2008 WI 110 (filed 30 July 2008)

Earlier this term the supreme court decided the appeal in this case by a 4-3 vote; Justice Butler voted in the majority. See 2008 WI 56. The appellant brought a motion to vacate the decision on the grounds that Justice Butler: had accepted campaign contributions from the opposing party without disclosing them, contrary to a public pledge; had also appeared at the group's fundraiser; and was endorsed by one of the group's attorneys.

The court denied the motion in a per curiam decision, in which it held that "disqualification by law" was not supported by the record. No law compelled the disclosure of campaign contributions, and the facts did not support a finding that Butler had failed to abide by his pledge. His attendance at the fundraiser comported with the rules on judicial ethics. Finally, the ethics rules do not prohibit judges from soliciting and accepting endorsements (see ¶ 23).

Attorneys

Berner Cheese Corp. v. Krug, 2008 WI 95 (filed 15 July 2008)

Berner Cheese (Berner) claimed that a lawyer, Krug, violated the fiduciary duty he owed the company. The claim arose out of an underlying lawsuit that settled when Berner agreed to pay more than $1.3 million to a brokerage firm based partly on conduct that Krug had counseled. The settlement also released all claims against Krug. The law firm that represented Berner in the underlying lawsuit later sued Berner to collect its fees. Berner counterclaimed for malpractice against that law firm and also filed a third-party complaint against Krug alleging legal malpractice and breach of fiduciary duty. Essentially, Berner argued that Krug's limited role in the settlement, which released him from liability, constituted a business transaction between client and counsel. The circuit court dismissed the fiduciary claim before trial. At trial the judge refused to submit punitive damages claims to the jury, which found that Krug had committed malpractice. The damage award was, however, entirely offset by various deductions and by Berner's own contributory negligence. In an unpublished decision the court of appeals affirmed.

The supreme court affirmed, in an opinion written by Justice Roggensack. Berner first claimed that Krug had violated his fiduciary duty by exerting "undue influence" in approving the underlying settlement, that is, the alleged "business transaction." The court concluded that because Krug was not involved in Berner's decision to settle the underlying case, for which Berner had other counsel, there was no "reciprocal activity" between Berner and Krug (see ¶ 51). Moreover, Krug had no input into the settlement itself (see ¶ 52). Thus, "although the settlement document may have conferred a benefit on Krug, there is no evidence that releasing Krug came at a cost to Berner, and thereby affected the parties reciprocally. Furthermore, although it is possible that some finite value could be attributed to the release of Krug, Berner has not presented any evidence to show what that value may be" (¶ 53). Accordingly, Berner failed to show it was damaged in any way by any alleged fiduciary breach (see ¶ 59). Finally, the trial court properly withheld punitive damages questions from the jury. "[N]o credible evidence was presented to show that Krug was aware that Berner's rights would be disregarded as a result of his legal advice. To the contrary, the evidence demonstrates that Krug believed that Berner's [conduct] was lawful" (¶ 70).

Justice Bradley concurred, joined by Chief Justice Abrahamson and Justice Butler. She stressed that the majority had narrowly construed the rule governing "business transactions" between lawyers and clients in ways that might affect "future lawyer discipline cases" (¶ 75).

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Civil Procedure

Sands v. Whitnall Sch. Dist., 2008 WI 89 (filed 11 July 2008)

The plaintiff was employed to run the Whitnall School District's Gifted and Talented Education Program. After two closed session meetings the school board voted in an open session not to renew Sands's contract. Sands subsequently filed a lawsuit seeking certain benefits that she claimed to be entitled to under Wis. Stat. section 118.24 as a school district "administrator."

In the course of discovery Sands served interrogatories asking for the identities of persons who spoke during the closed session deliberations about her employment contract and for the substance of their remarks during the closed sessions. The school district declined to answer, claiming that the information was privileged under Wis. Stat. section 19.85 and under a "deliberative process privilege" (¶ 8). (Section 19.85(1)(c) allows closed sessions for the purpose of "[c]onsidering employment, promotion, compensation or performance evaluation data of any public employee over which the governmental body has jurisdiction or exercises responsibility.")

The circuit court ruled in favor of Sands, concluding that the school district was required to provide the information requested in the interrogatories (see ¶ 9). In a published decision the court of appeals reversed. See 2007 WI App 3. In a majority decision authored by Justice Butler, the supreme court reversed the court of appeals.

The supreme court held that a privilege of nondisclosure is not implicit in section 19.85. Said the court, "[W]e conclude that allowing limited exceptions to the open meetings statute does not equate to creating an implicit evidentiary privilege against discovery requests. Wisconsin Stat. § 19.85 provides only that some meetings may be closed, not that their contents are privileged against discovery requests under Wis. Stat. § 804.01. In other words, `closed meeting' is not synonymous with `a meeting that, by definition, entails a privilege exempting its contents from discovery.' Considering the general presumptions of openness and access underlying both our discovery and open meetings statutes, there is no compelling justification for denying a litigant's rights to discovery regarding the substance of closed session discussions pertaining to that litigant. Therefore, we conclude that § 19.85 does not create a privilege shielding contents of closed meetings from discovery requests" (¶ 59).

The school district alternatively referred to the privilege it sought as a "deliberative process privilege [that] prohibits the compelled disclosure of the Board's discussions" (¶ 60). The supreme court responded that no such deliberative process privilege has ever been recognized by the Wisconsin courts, and it declined the district's suggestion that it create a new privilege (see id.).

The majority concluded by noting that its decision "should not be viewed as undermining the ability of government bodies to conduct certain meetings in closed session where authorized statutorily. While discovery rights are broad and paramount to our justice system, they are not without limit. Wisconsin Stat. § 804.01(2)(a), setting forth the scope of allowable discovery, provides that subjects of discovery requests may object to requests that are not relevant to the subject matter involved in the pending action. Section 804.01(3) provides additional protections in the form of protective orders in response to annoying, embarrassing, oppressive, unduly burdensome or unduly expensive discovery requests..."

(¶ 71). "In addition to issuing protective orders, courts may consider motions to seal the record, or may conduct in camera proceedings to ensure that the information requested is necessary to the litigant and does not exceed the scope of allowable discovery" (¶ 74). Lastly, "government bodies in Wisconsin that are subject to discovery requests related to closed meeting contents may similarly request courts to increase their supervision of the discovery process to ensure the protection of sensitive information" (¶ 75).

Justice Prosser filed a dissenting opinion in which he concluded that "there is a qualified testimonial privilege inherent in Wis. Stat. § 19.85(1) that allows governmental bodies and their employees to withhold the content of pre-decisional, deliberative discussions that take place during the body's properly held closed sessions" (¶ 172).

Rao v. WMA Securities Inc., 2008 WI 73 (filed 27 June 2008)

Rao brought an action against WMA Securities, one of its employees, and three additional codefendants alleging that the employee unlawfully converted hundreds of thousands of dollars from an investment account that the plaintiff maintained with WMA. This appeal concerns only WMA (the defendant) because the action against the other defendants was otherwise resolved. The circuit court issued an order striking the defendant's pleadings and awarding judgment by default to the plaintiff as a sanction for the defendant's violation of discovery orders. The court ordered a hearing on damages but denied the defendant's request for a jury trial on this issue. It further denied the plaintiff's request for punitive damages. In an unpublished opinion the court of appeals affirmed in part and reversed in part.

The first issue before the supreme court was whether the circuit court violated the defendant's right to trial by jury under article I, section 5 of the Wisconsin Constitution when it denied the defendant's motion for a jury trial on the issue of damages after it ordered a judgment by default against the defendant (see ¶ 4). In a majority decision authored by Chief Justice Abrahamson, the court agreed with the defendant that the article I, section 5 right of trial by jury extends to the issue of damages (see ¶ 17). The court also said, however, that the constitution specifically provides that a party may waive a trial by jury "in the manner prescribed by law." Wis. Const. art. I, § 5. The court concluded that "[a]lthough Wis. Stat. § (Rule) 806.02, governing default judgments, does not explicitly address the question whether a defendant's default constitutes a waiver of the right of trial by jury on the issue of damages, the clear implication of the rule and the case law applying the rule is that by engaging in conduct that results in a default judgment the defendant has waived its right of trial by jury in the manner prescribed by Wis. Stat. § (Rule) 806.02, a rule of pleading, practice, and procedure" (¶ 39). "The case law further demonstrates that when default judgment is rendered pursuant to Wis. Stat. § (Rule) 804.12(2)(a), governing sanctions for a violation of a circuit court's discovery order, the procedure for deciding the issue of damages lies within the discretion of the circuit court" (¶ 41). Accordingly, the circuit court did not err when it denied the defendant's motion for a jury trial on the issue of damages.

The supreme court next addressed the question whether the circuit court erred in denying the plaintiff's claim for punitive damages under Wis. Stat. section 895.043(3). The supreme court concluded that the circuit court must ordinarily make inquiry beyond the complaint to determine the merits of a punitive damages claim and the amount of punitive damages, if any, to be awarded; it must give the complaining party an opportunity to prove facts in support of the punitive damages claim in addition to those alleged in the complaint (see ¶ 65). The supreme court further held that because the circuit court erred by limiting its decision to the allegations of the complaint, failing to review the entire record, and failing to give the plaintiff an opportunity to present evidence to support his claim for punitive damages, the matter must be remanded to the circuit court to allow the latter an opportunity to exercise its discretion in determining the nature of the hearing and to determine whether punitive damages are warranted (see ¶¶ 78-79).

Justice Ziegler filed a concurring opinion. Justice Prosser filed a dissent that was joined in by Justice Roggensack.

Hefty v. Strickhouser, 2008 WI 96 (filed 15 July 2008)

The circuit court issued a scheduling order that included reference to a local court rule that required a response to a summary judgment motion by a date other than one provided by Wis. Stat. section 802.08(2). After the plaintiff failed to respond by the local rule's deadline, the court struck her response, dismissed her complaint with prejudice, and granted summary judgment in favor of the defendants. In an unpublished decision the court of appeals reversed on the ground that the circuit court's departure from section 802.08(2) was not necessary or appropriate.

The supreme court affirmed the court of appeals, albeit on different grounds, in an opinion authored by Justice Prosser. The supreme court addressed two issues: "whether the circuit court properly exercised its discretion when it: (1) issued a scheduling order with deadlines different from Wis. Stat. § 802.08(2) without expressly indicating its reasoning on the record; and (2) sanctioned Hefty for failing to comply with the scheduling order by striking her response, which ultimately resulted in the dismissal of her suit with prejudice and summary judgment to Strickhouser" (¶ 4).

The opinion addresses the circuit court's authority with respect to scheduling conferences under section 802.10 and summary judgment procedures under section 802.08. The supreme court expressly withdrew language from an earlier decision that required a circuit court to explain on the record why it had deviated from the deadlines set forth in section 802.08(2) (see ¶ 50). It also held, however, that the local rule on which the scheduling order was based was itself void (see ¶ 64). "Because the court's scheduling order attempted to apply a void rule by attaching it to the order, the scheduling order's deadline for responding to a motion for summary judgment was invalid" (¶ 65).

The supreme court stressed that the error implicated the reliance on a void local rule. The judge could have simply incorporated the same dates in the scheduling order itself, which was not done. "We have no reservations in requiring that a response time different from the response time in Wis. Stat. § 802.08(2) be specified in the scheduling order, directly below the deadline for filing a motion for summary judgment. This requirement complies with a literal reading of Wis. Stat. § 802.08(2): `Unless earlier times are specified in the scheduling order.' Placement of the response time in the text of the scheduling order gives the clearest possible notice to the non-movant so that the non-movant can seek relief from the scheduling order promptly if the time to respond is deemed inadequate. This placement avoids the necessity of the non-movant poring over an elaborate local rule to find three key words: `within 20 days.' This placement also severs the court's scheduling date from a local rule that may be invalid" (¶ 67).

The court next turned to the appropriate sanctions for violations of scheduling orders. Here the circuit court abused its discretion because the sanctions were predicated on an "improper standard of law," namely, a scheduling order based on a void local rule (¶ 77).

Justice Ziegler dissented on the ground that she found no abuse of discretion in this case.

Larry v. Harris, 2008 WI 81 (filed 9 July 2008)

The plaintiff sued several police officers for conducting an alleged unlawful search of her home. The circuit court initially granted a default judgment against one officer who did not appear or otherwise answer the complaint. In a later proceeding, the court granted summary judgment in favor of another officer. The court also found that these two officers should be treated in the same manner; for this reason, it sua sponte vacated the default judgment against the first officer and granted summary judgment in his favor as well. The court of appeals affirmed. See 2007 WI App 132.

The supreme court, in an opinion written by Justice Roggensack, reversed the court of appeals. First, the circuit court properly vacated the default judgment on equity grounds. Case law and the text of Wis. Stat. section 806.07 permit courts to act sua sponte in vacating judgments (see ¶ 24). "The interests underlying § 806.07 parallel the interests that we have held permit courts to act sua sponte. In addition, we construe the plain language of § 806.07 to permit a court to act sua sponte under its authority" (¶ 25). The record also demonstrated that the plaintiff had adequate notice and an opportunity to be heard on whether the default judgment should be vacated (see ¶ 29).

The circuit court erred, however, when it granted summary judgment "upon its own motion" (¶ 38). "Unless a scheduling order specifies otherwise, § 802.08(2) mandates that a motion for summary judgment be served at least 20 days before a hearing on that motion. In raising and granting summary judgment on its own motion, the circuit court did not provide the parties 20 days' advance notice of its motion, as required by § 802.08(2)" (¶ 40). The majority opinion stressed that this was a narrow set of circumstances and the circuit court was not "hamstrung on remand" (¶ 44). Put differently, the circuit court may grant the officer summary judgment consistent with section 802.08(2).

Chief Justice Abrahamson concurred in the mandate but wrote separately "because the majority opinion erroneously concludes that the circuit court in the instant case gave the plaintiff notice of its action and the opportunity to be heard when acting on its own motion under Wis. Stat. § (Rule) 806.07" (¶ 47). Justice Butler, concurring in part and dissenting in part, contended that the circuit court erred by sua sponte vacating the default judgment (see ¶ 53).

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Contracts

Below v. Norton, 2008 WI 77 (filed 1 July 2008)

The plaintiff bought a home only to discover later that it had a cracked sewer line. She sued the seller on a variety of claims involving misrepresentation. The circuit court dismissed the complaint, ruling that the economic loss doctrine (ELD) bars tort claims in situations in which contract law provides the remedy. The court of appeals affirmed most of the rulings but held that the ELD did not bar the "false advertising" claim brought under Wis. Stat. section 100.18. See 2007 WI App 9.

The supreme court affirmed the court of appeals in a majority opinion written by Justice Crooks. It held "that the ELD does bar common-law claims for intentional misrepresentation that occur in the context of residential, or noncommercial, real estate transactions" (¶23). Economic loss is defined as damages resulting from inadequate value because the product is inferior and does not work for the general purpose for which it is sold (see ¶ 24). (Here the cracked sewer line rendered the house inferior.) "Under the protections afforded to real estate purchasers by Wis. Stat. § 709.02, purchasers are protected by contract and, thus, by contractual remedies. Accordingly, the ELD should bar common-law claims for intentional misrepresentation that arise in the context of residential, or noncommercial, real estate transactions when, as here, the damages sought are purely economic. Clearly, purchasers have adequate contractual and statutory remedies, if needed" (¶ 38). The supreme court also held that the narrow fraud in the inducement exception to the ELD did not apply here (see ¶ 39). Nonetheless, prior case law established that the buyer may maintain her false advertising claim under Wis. Stat. section 100.18, which allows recovery for her "pecuniary loss, together with costs, including reasonable attorney fees" (¶ 43).

Justice Bradley, joined by Chief Justice Abrahamson and Justice Butler, dissented on the ground that the "majority has taken a doctrine that originally applied in a very narrow context - commercial transactions for products under warranty - and has now used it to prevent homebuyers from recovering damages in tort caused by the misrepresentations of fraudulent sellers" (¶ 47). The dissenters contended that the result amounted to "judge-made doctrine" (¶ 48).

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Criminal Law

State v. Hubbard, 2008 WI 92 (filed 15 July 2008)

As a result of a car accident in which a young girl was seriously injured, the defendant was charged with the felony of causing injury by the intoxicated use of a vehicle, contrary to Wis. Stat. section 940.25 (1)(a). The state's theory was that the defendant caused the injury while driving under the influence of prescription medication. At trial the court instructed the jury that under the influence means that the defendant's ability to operate a vehicle was materially impaired because of consumption of a prescription medication. The materially impaired standard is derived from the definition of under the influence of an intoxicant that is codified in the Criminal Code. See Wis. Stat. § 939.22(42).

During deliberations the jury sent the following note to the court: "Could the judge define `materially' impaired? Does this mean that he was impaired enough to have an effect on outcome? If not, what?" (¶ 13). Out of the presence of the jury the court heard arguments from counsel and considered whether to use language from State v. Waalen, 130 Wis. 2d 18, 386 N.W.2d 47 (1986), in responding to the jury's question. In Waalen the supreme court stated that material impairment "exists when a person is incapable of driving safely, or is without proper control of all those faculties … necessary to avoid danger to others" (¶ 14). The judge ultimately decided not to use the Waalen language to respond to the jury's question and instead instructed the jury as follows: "Please give all words not otherwise defined in the jury instructions their ordinary meaning." Among other things the judge observed that the jury's note put quotation marks around the word material - not the term materially impaired (see ¶ 15). The jury thereafter returned a guilty verdict.

In a published decision the court of appeals reversed. See 2007 WI App 240. It concluded that "`the Waalen language' defined `materially impaired' and that the circuit court erroneously exercised its discretion when it declined to instruct the jury on the Waalen definition of `materially impaired'" (¶ 20). In a majority decision authored by Justice Prosser, the supreme court reversed the court of appeals.

The supreme court concluded that "the circuit court's response to the jury's request for clarification was not error. The term `materially impaired' does not have a technical or peculiar meaning in the law beyond the time-tested explanations in standard jury instructions; therefore, the circuit court's response to the jury was not error, comported with Wis. Stat. § 990.01 [providing that words and phrases shall be construed according to common and approved usage], and did not constitute an erroneous exercise of discretion" (¶ 59). In reaching this conclusion the supreme court held that "the court of appeals erred when it determined that this court's decision in Waalen gave the statutory term `materially impaired' a `peculiar meaning in the context of criminal charges,' and that the jury should have been instructed accordingly" (¶ 58) (citations omitted). Earlier in the decision the supreme court characterized the Waalen language as providing "examples" of material impairment under section 939.22(42) (see ¶ 47).

Chief Justice Abrahamson filed a concurring opinion that was joined in by Justice Bradley and Justice Butler. Justice Butler filed a separate concurrence.

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Criminal Procedure

State v. Arias, 2008 WI 84 (filed 9 July 2008)

A police officer stopped a vehicle driven by a minor (Schillinger) after the officer saw Arias enter the vehicle carrying beer. He approached the car, explained to Schillinger why he had stopped her, and then took her driver's license back to his squad car. The officer then returned to Schillinger's vehicle, where he administered a preliminary breath test to her to determine whether she had consumed alcohol. The breath test registered "zero." The officer then asked Schillinger if there were any drugs in the car. Schillinger replied "no." He then asked Schillinger if she and Arias were "carrying around anything with [them]." She again replied "no." At this point the officer returned to his squad car and released his police dog to perform a sniff around the exterior of Schillinger's vehicle. The state conceded that the officer did not have a reasonable suspicion of drug activity before the dog sniff. The time that elapsed from the officer's question about drugs to the completion of the sniff was 78 seconds. The dog sniff concluded four minutes and 10 seconds after the officer stopped Schillinger's vehicle.

As a result of what he perceived as the dog's positive alert on the vehicle, the officer instructed Arias to exit the vehicle and performed a pat-down search of him. After searching Arias, he instructed Schillinger to exit the vehicle, and he performed a pat-down search of her. He then searched Schillinger's car and found cocaine and a switchblade knife, both of which belonged to Arias.

In the prosecution that followed, Arias moved to suppress the drugs and weapon. The circuit court granted the motion. The state appealed the suppression order, and the court of appeals certified two questions to the supreme court: 1) "whether, under the Wisconsin Constitution, a dog sniff of a stopped vehicle is a `search'"; and 2) "whether the vehicle stop was unreasonably prolonged in duration by the officer's controlled substance investigation." In its certification, the court of appeals explained: "Here, the period of time to consider is the time consumed by the officer asking drug questions and preparing to release the dog, and then by the dog sniff itself. As we set forth above, the videotape shows that this period was approximately one minute and eighteen seconds" (¶ 2).

In a majority decision authored by Justice Roggensack, the supreme court reversed the circuit court decision suppressing the evidence. Responding to the first certified issue, the Wisconsin Supreme Court began by noting that the U.S. Supreme Court has determined that a dog sniff of the exterior of a vehicle is not a search within the meaning of the Fourth Amendment. See Illinois v. Caballes, 543 U.S. 405, 410 (2005); see also United States v. Place, 462 U.S. 696, 707 (1983). The Wisconsin court then went on to conclude that "because of the limited intrusion resulting from a dog sniff for narcotics and the personal interests that Article I, Section 11 were meant to protect, we conclude that a dog sniff around the outside perimeter of a vehicle located in a public place is not a search under the Wisconsin Constitution" (¶ 25).

As for the second certified question, relating to the prolongation of the stop, the court concluded that the amount of time by which the stop was extended to conduct the dog sniff was 78 seconds. It is true that, following the sniff, the defendant was detained for another 38 minutes before being arrested. "The 38 minutes that Schillinger and Arias were detained following the dog sniff was occupied by [the officer's] search of the vehicle, his pat-down searches of Arias and Schillinger and the activities flowing from the vehicle search. It was those activities, not the dog sniff, that extended the detention by `approximately 38 minutes'" (¶ 27).

Focusing on the 78-second period attributable to the dog sniff, the court concluded as follows: "In sum, we observe that neither the Fourth Amendment nor Article I, Section 11 of the Wisconsin Constitution prohibit all seizures. Only unreasonable seizures are violative of constitutional rights. In examining the reasonableness of Arias's seizure, we balance the public's interest in preventing the distribution of illegal drugs, the furtherance of that interest by the continued seizure of Schillinger's vehicle and the effect on Arias's liberty interest under the Fourth Amendment and Article I, Section 11 of the Wisconsin Constitution. The incremental extension of time expended in this stop that was occasioned by the dog sniff was a brief 78 seconds. It was only the 78 seconds of the dog sniff that added to [the officer's] efficient efforts to confirm or allay his suspicions that led to the initial stop. This incremental liberty intrusion does not outweigh the public interest served by it; therefore, the incremental intrusion occasioned by the dog sniff satisfies our test for reasonableness. Accordingly, the `controlled substance investigation' comported with the strictures of the Fourth Amendment of the United States Constitution and Article I, Section 11 of the Wisconsin Constitution" (¶ 47).

Justice Bradley filed a dissenting opinion that was joined in by Chief Justice Abrahamson and Justice Butler.

State v. Sumner, 2008 WI 94 (filed 15 July 2008)

Sheriff's deputies on patrol in Milwaukee observed Sumner commit a traffic violation by driving into a lane for oncoming traffic and forcing cars in that lane to pull over to avoid a collision. The deputies activated their squad car's emergency lights and stopped Sumner (the defendant). As the defendant was pulling over, one of the deputies observed the defendant reaching toward the passenger side of the vehicle. Once stopped, the defendant told the deputies his name and date of birth but was unable to provide a street address; he also said that he could not provide a driver's license or identification card to the officers.

The deputies had the defendant remain in his vehicle while a computer check was conducted on his license status. That check revealed that the defendant's operating privilege was suspended, and one of the deputies began writing a ticket. After about 15 minutes, the deputies had the defendant exit his vehicle so that they could get a fingerprint for identification purposes. One of the deputies testified that the defendant "was sweating," "appeared very nervous," and "kept going in his pockets" despite the deputy's instructions "to keep his hands out" (¶¶ 9-10). After the defendant reached into his pockets a second or third time, the deputy decided to do a pat-down search "for my safety" (¶ 10). The frisk procedure resulted in the discovery of heroin.

In the subsequent criminal prosecution the defendant moved to suppress the evidence discovered during the protective frisk, which motion was denied by the circuit court. After pleading guilty, the defendant appealed and the court of appeals reversed the circuit court, concluding that the deputy who frisked the defendant did not have the requisite reasonable suspicion that the defendant was armed and dangerous (see ¶ 2). In a unanimous decision authored by Justice Prosser, the supreme court reversed the court of appeals.

The court began its analysis by recounting that "[d]uring an investigative stop, an officer is authorized to conduct a [protective] search of the outer clothing of a person to determine whether the person is armed if the officer is able to point to specific and articulable facts which, taken together with rational inferences from those facts, reasonably warrant that intrusion" (¶ 21). "Our protective search or `frisk' jurisprudence has consistently emphasized that the totality of all circumstances present and known to the officer must be taken into account to assess the legality of the procedure. Naturally, some factors will be of greater import than others in the reasonable suspicion calculus in a particular case. Our cases … have first broken down the reasonable suspicion issue into an analysis of each primary factor present and then concluded by viewing these primary factors in the totality of circumstances" (¶ 23).

Following this methodology, the court analyzed the particular significance of the defendant's unexplained reaching gesture while stopping his vehicle, his nervous demeanor, his placing of his hands into his pockets repeatedly despite the officer's admonitions to the contrary, and the officer's subjective fear for his own safety. It then viewed these primary factors in the totality of the circumstances. Said the court, "We conclude on these facts that an officer in [Deputy] Johnson's position would possess the objectively reasonable suspicion that Sumner was both armed and dangerous. The time of night [9 p.m.], Sumner's initial reaching gestures, the clutter in the vehicle [which could have been hiding a weapon], Sumner's lack of identification and suspended driver's license, Sumner's nervous demeanor, visible perspiration, and other erratic behavior, and the fact that Sumner repeatedly reached into his pockets after being instructed not to do so, all validate [Deputy] Johnson's reasonable suspicion that Sumner was both armed and dangerous under the totality of circumstances" (¶ 55).

The court rejected the contention that Deputy Johnson's reasonable suspicion was obviated by the fact that 15 minutes passed between the time of the stop, when Johnson viewed Sumner's reaching gestures, and Johnson's protective search of Sumner (see ¶ 56). "An officer can be as much in danger at the end of a traffic stop as at the beginning. Under the circumstances present, Johnson's reasonable belief that he was in danger grew as time passed" (¶ 35). Nor did the court fault the deputies for choosing not to order Sumner from the vehicle immediately upon speaking with him. "Police officers should be given the discretion to use their professional judgment and experience to determine when it is appropriate to order a suspect from a vehicle to diffuse a potential safety threat. The fact that the deputies chose not to do so immediately should not discount the other factors indicative of [Deputy] Johnson's reasonable suspicion to frisk Sumner" (¶ 59).

State v. Sanders, 2008 WI 85 (filed 9 July 2008)

The defendant pleaded guilty to a drug offense after the circuit court denied his motion to suppress evidence and statements as fruits of an illegal search. The court of appeals reversed. See 2007 WI App 174.

The supreme court affirmed the court of appeals, albeit on different grounds, in an opinion written by Chief Justice Abrahamson. Police officers chased the defendant into his home after he broke away despite their effort to "detain" him in his backyard during an animal cruelty investigation. The officers tracked him to his bedroom, where they took him into custody. One officer testified that he performed a brief protective sweep of the bedroom where the defendant had hidden. The officers removed the defendant from the house. A short time later, an officer returned to the bedroom and discovered under a bed a beef jerky container, which was found to contain drugs. The court held that the container's seizure and search was not justified by either the protective sweep doctrine (see ¶ 35) or as a search incident to a lawful arrest (see ¶ 52).

Justice Prosser, joined by Justice Roggensack and Justice Ziegler, concurred, in a lengthy opinion that examines the application of the "hot pursuit" doctrine to the home's entry by police, an issue that the majority declined to engage on this record. Justice Butler also concurred but took issue with Justice Prosser's construction of the hot pursuit doctrine.

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Evidence

State v. Doss, 2008 WI 93 (filed 15 July 2008)

A jury convicted Doss of theft by a trustee for unlawfully retaining funds from her father's estate. The court of appeals reversed because the state introduced crucial bank records through affidavits by a records custodian. See 2007 WI App 208.

The supreme court reversed the court of appeals in a unanimous decision written by Justice Butler. The primary issues concerned the admissibility of bank records via affidavits pursuant to Wis. Stat. section 891.24. First, the court held that section 891.24 does not require pretrial notice of an intent to rely on the statute. In this case, the state's three-day pretrial notice of an intent to introduce Georgia bank records provided a reasonable opportunity to inspect such records, especially because the defendant had been given copies seven months earlier and they were of her own accounts. Second, the records' introduction via affidavit did not violate the state or federal confrontation right. Case law establishes that these "business records" themselves were nontestimonial hearsay, so the unresolved issues involved the status of the foundational affidavits. The court held that "affidavits verifying nontestimonial bank records in compliance with Wis. Stat. § 891.24 are also nontestimonial. Such affidavits are generally of a different nature than inculpatory testimony against an accused criminal defendant" (¶ 46). The holding is in accord with federal case law (see ¶ 55).

The court also rejected several other alleged errors, which, in summary, involved the sufficiency of evidence (termed "abundant" by the court (¶ 63)), the introduction of evidence involving a civil complaint, the state's alleged comment on Doss's failure to testify, and whether a new trial should be granted in the interest of justice.

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Insurance

J.G. v. Wangard, 2008 WI 99 (filed 16 July 2008)

The plaintiffs, a minor (J.G.) and her mother (R.G.), alleged that Steven Wangard sexually assaulted J.G. (then age 5) in Wangard's home in 2002 and 2003. Wangard was later convicted of sexual assault. The plaintiffs' complaint alleged that Wangard's wife, Deborah, had negligently failed to prevent her husband from sexually abusing the child. Two different insurers provided homeowner's coverage for each residence; the policies are identical for purposes of this litigation (see ¶10). The circuit court dismissed the insurers on the ground that the policies' intentional acts exclusion precluded coverage for Deborah's alleged negligence. In an unpublished opinion the court of appeals affirmed.

The supreme court affirmed in an opinion authored by Justice Prosser. "The express language of the two homeowner's policies in question broadly excludes from coverage `any damages arising out of an act intended by any covered person to cause personal injury or property damage.' (Emphasis added.) Without considering whether Deborah's negligent conduct was itself `intentional,' as Jessica M.F. [209 Wis. 2d 42 (Ct. App. 1997)] might imply, it is clear that J.G.'s and R.G.'s alleged damages arose out of Steven's intentional wrongful conduct. For this reason, the exclusion plainly bars coverage as to Steven and to Deborah if, as is undisputed, J.G. and R.G.'s personal injury damages arose out of Steven's intentional sexual contact with J.G" (¶ 46). The supreme court also followed the reasoning of a court of appeals decision that held "that the existence of a severability clause does not change this analysis" (¶ 47). Deborah failed to persuade the court that its construction of the intentional acts exclusion undercut her reasonable expectations (see ¶ 56).

In sum, "The intentional acts exclusion in the Wangards' homeowner's policies excludes coverage for damages `arising out of an act intended by any covered person to cause personal injury.' Steven is a `covered person' under the Wangards' policies, and J.G.'s and R.G.'s injuries allegedly arose out of his intentional acts. Deborah has no reasonable expectation of coverage for damages arising out of Steven's intentional sexual contact with J.G.; therefore, the intentional acts exclusion in the Wangards' homeowner's policies applies and excludes coverage for the alleged negligence of Deborah" (¶ 59).

Justice Bradley, joined by Chief Justice Abrahamson and Justice Butler, dissented in an opinion that emphasized the holding's limitation to sexual assault cases and the dissenters' disagreement with the majority's construction of the severability clause. Justice Butler filed a separate dissenting opinion (also joined in by the Chief Justice and Justice Bradley) that centered on the policy's ambiguity relative to Deborah's separate negligent acts.

Sustache v. American Family Mut. Ins. Co., 2008 WI 87 (filed 10 July 2008)

Sustache died during a drinking party after another person punched him in the face, causing Sustache to fall and strike his head. Sustache's family sued various persons including the party's host, the person who struck him, and American Family, which had issued homeowner's policies to two defendants. The circuit court eventually granted summary judgment in favor of American Family, ruling that it had no duty to defend because coverage was excluded as an intentional act. The court of appeals affirmed. See 2007 WI App 144.

In an opinion written by Justice Prosser, the supreme court affirmed the lower courts. American Family had opted to provide a defense while reserving its rights until the coverage issue was resolved. Specifically, it had moved to stay proceedings on liability, moved for a hearing on coverage, and then sought summary judgment (see ¶ 25). "The four-corners rule is normally stated as a rule in which the insurer's duty to defend is determined `without resort to extrinsic facts or evidence.'" The rule did not, however, govern this situation. "Where the insurer has provided a defense to its insured, a party has provided extrinsic evidence to the court, and the court has focused in a coverage hearing on whether the insured's policy provides coverage for the plaintiff's claim, it cannot be said that the proceedings are governed by the four-corners rule. The insurer's duty to continue to defend is contingent upon the court's determination that the insured has coverage if the plaintiff proves his case" (¶ 29).

The court held that the insurance policy did not cover the alleged damages in this case. "We conclude that no reasonable person would regard the alleged intentional battery perpetrated by Jeffrey against Sustache as an `unexpected ... event,' or an `unforeseen incident ... characterized by a lack of intention,' or `an event ... occurring by chance or arising from unknown or remote causes.' Striking the words `without provocation' from the complaint would not alter the essence of the complaint: that Jeffrey intentionally caused bodily harm to Sustache. Accordingly, we hold that the Mathewses' policy does not cover the plaintiffs' claims because Jeffrey's actions were not accidental and, thus, did not give rise to an `occurrence'" (¶ 56). Since the defendants' actions were not covered by the policy, the court did not reach the issues concerning the policy's intentional injury exclusion.

Justice Bradley concurred. She agreed with the majority that this case did not present the issue of whether there are exceptions to the four-corners rule, but emphasized that "in determining whether there is an accident, the focus should be on the injury or damages, not on whether the action that caused the damages was intended" (¶ 69).

Liebovich v. Minnesota Ins. Co., 2008 WI 75 (filed 1 July 2008)

When Liebovich built his lake home in violation of a setback restriction, his neighbors sued him. When his insurer, AIG, refused to defend him, Liebovich sued AIG for indemnification and breach of its duty to defend under a private-client-group (PCG) homeowner's policy it had issued. The circuit court granted summary judgment in AIG's favor. The court of appeals, however, reversed in part, on the ground that AIG had a facial duty to defend and should have sought a judicial determination of its responsibilities rather than unilaterally denying coverage and thereby flouting well-established procedures. See 2007 WI App 28.

The supreme court affirmed (with modifications) the court of appeals in an opinion written by Justice Butler. The court's discussion primarily focused on AIG's duty to defend the claim. First, the neighbors' complaint alleged a covered injury within the meaning of the PCG policy, which provides "significantly broader coverage" than comparable provisions in commercial general liability (CGL) policies (¶ 23). The opinion analyzes the meaning of both personal injury and occurrence within such policies. Second, the court rejected AIG's contention that the neighbors' complaint sought "general equitable relief, not monetary damages." The complaint's ad damnum clause specifically asked for unspecified damages. "The complaint specifically alleges that the Halls were aggrieved by Liebovich's violation of the setback restriction, and that the violation interfered with the Halls' interests in and to their neighboring real property. Because we have concluded that the Halls' complaint sufficiently alleges injuries, indicates that they suffered actual damage or loss, and specifically requests a damage award to compensate them for such injuries and loss, we reject AIG's argument that the complaint does not allege damages for purposes of insurance coverage" (¶ 47). Finally, the PCG policy's intentional acts exclusion did not clearly foreclose coverage. The court distinguished between Liebovich's intent to build his house where he did, which would not trigger the exclusion, and an intent to harm his neighbors, which was not alleged in the neighbors' complaint (see ¶ 54).

The supreme court closed by reminding insurers of "the preferred process for insureds to resolve duty­-to-defend disputes. As we have explained, it is well established that an insurer may request a bifurcated trial on the issue of coverage while moving to stay proceedings on the merits of the liability action until the issue of coverage is resolved. Newhouse, 176 Wis. 2d at 836 (citing Elliott, 169 Wis. 2d at 318). `When this procedure is followed,' we explained, `the insurance company runs no risk of breaching its duty to defend.' Newhouse, 176 Wis. 2d at 836. In addition to the Elliott/Newhouse procedure, insurers may raise the coverage issue in other ways, such as seeking a declaratory ruling or agreeing to provide a defense under a reservation of rights. See Baumann, 286 Wis. 2d 667, ¶ 8. While these procedures are not absolute requirements, we strongly encourage insurers wishing to contest liability coverage to avail themselves of one of these procedures rather than unilaterally refuse to defend. A unilateral refusal to defend without first attempting to seek judicial support for that refusal can result in otherwise avoidable expenses and efforts to litigants and courts, deprive insureds of their contracted-for protections, and estop insurers from being able to further challenge coverage" (¶ 55).

Estate of Otto v. Physicians Ins. Co. of Wis., 2008 WI 78 (filed 3 July 2008)

The plaintiffs brought a medical malpractice action against certain health care providers and their insurers, including defendant Physicians Insurance Company of Wisconsin (PIC). When it was learned that PIC had failed to answer the complaint in a timely manner, the plaintiffs moved for a default judgment, which the circuit court granted because PIC had failed to show excusable neglect. The circuit court also ordered PIC to pay the plaintiffs' damages. The court of appeals affirmed. See 2007 WI App 192.

The supreme court, in an opinion written by Chief Justice Abrahamson, affirmed. Whether PIC defaulted was not an issue (see ¶ 3). Instead, the prime issue concerned the ramifications of PIC's default, namely the following: "Did the answer served timely by PIC's codefendant insureds denying the liability of all defendants inure to PIC's benefit so as to preclude, as a matter of law, a judgment by default against PIC for the plaintiff's damages, notwithstanding PIC's acknowledged default?" (¶ 11). PIC asserted that it was entitled to a trial on the issue of its insured's causal negligence and PIC's corresponding liability. "In other words, PIC argues that the effect of PIC's default is to admit only its unconditional coverage for the codefendant insureds" (¶ 12).

The court rejected PIC's contention based first on the court's construction of the direct action statute (Wis. Stat. § 632.24). "The text of the direct action statute contradicts PIC's assertion that PIC's liability is `completely dependent on [its insureds'] liability.' The statute expressly states that an insurer may be liable `irrespective of whether the liability is presently established or is contingent and to become fixed or certain by final judgment against the insured'" (¶ 34). Case law "further establishes that liability may be imposed `upon the insurer irrespective of whether there is a final judgment against the insured.' Indeed, under certain circumstances, the insurer may be subject to a judgment against it even when recovery against the insured is precluded by law" (¶ 36). Nor could PIC avoid liability through default by pointing to its insureds' own denial of negligence. This argument was foreclosed by the default judgment provisions of Wis. Stat. section 806.02 and the rules governing pleadings. Finally, the court was unpersuaded that any permutations of the "common defense" doctrine or public policy considerations permitted PIC to circumvent the implications of default.

Justice Roggensack dissented, joined by Justice Prosser and Justice Ziegler. The dissent closely examined the history of the direct action statute and argued it imposes liability on insurance carriers only when it is shown that the insured's negligent conduct was the cause of the claimant's damages (see ¶ 145).

Stuart v. Weisflog's Showroom Gallery Inc., 2008 WI 86 (filed 10 July 2008)

The plaintiffs sued a home remodeler (WSGI) for damages incurred in the design and construction of their house. Earlier this term the supreme court decided other related issues in this litigation, ruling that "the circuit court should not have required the jury to apportion damages between misrepresentation and negligence, that the attorney fees calculation erroneously failed to apply the correct rule of law, that neither the economic loss doctrine nor any statutes of limitations bars the negligence claims in this case, and that there remain unresolved issues regarding the personal liability of Ronald Weisflog" (¶17). Stuart I, 2008 WI 22. This case involves a separate appeal by the insurer, American Family, which contested coverage under a commercial general liability (CGL) policy. In sum, the court held "the damages caused by Weisflog and WSGI in this case are not covered by the insurance policy because their misrepresentations were not accidental `occurrences' within the meaning of the policy, and because property damage arising out of their work is excluded from coverage" (¶ 4). Justice Butler wrote the court's lead opinion.

The court held that alleged "misrepresentation violations under Wis. Admin. Code § ATCP 110.02" do not constitute "accidents" that trigger coverage under a CGL policy (¶ 23). This result followed from the volitional nature of such ATCP misrepresentations (see ¶ 28). American Family, however, raised additional issues. First, the court examined whether the damages in this case were "economic" rather than "property" because the plaintiffs contended that the "rule of concurrent risks" "compel[ed] coverage due to the negligence claims in this case" regardless of the ATCP infractions (¶ 47). More precisely, "Because the occurrence in this case could be described either solely in terms of misrepresentations, or more broadly, to include WSGI's negligence in the relevant chain of events, we assume that the rule of concurrent risks might enable coverage due to the existence of negligence, notwithstanding the fact that the misrepresentations viewed in isolation were not covered. Because the rule of concurrent risks and the continuing presence of negligence in this case may re-open the door of potential coverage, we assume that coverage could exist, or be excluded, on other grounds" (¶ 51).

The court agreed with the plaintiffs that the jury's award of $95,000 represented the property damage to their home (see ¶ 53). It also rejected American Family's contention that the "your product" business risk exclusion precluded coverage, a position not supported by case law. Nonetheless, coverage was precluded by the CGL policy's "your work" exclusions, which included representations about the quality of the work done (¶ 66).

Justice Bradley, joined by Chief Justice Abrahamson, concurred but wrote separately to address the meaning of "volitional misrepresentations" as explained in the majority's opinion and to respond to the other concurrence by Justice Roggensack, who was joined by Justice Ziegler. Their concurrence joined only the majority's "ultimate conclusion" that excluded coverage for any damages found by the jury (see ¶ 83).

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Local Government

Town of Madison v. County of Dane, 2008 WI 83 (filed 9 July 2008)

A town filed a petition with a county to help finance a bridge as provided by Wis. Stat. section 81.38. The county denied funding because the bridge was not, when constructed, on a "highway maintainable by the town," which the statute required. Here the bridge was built first and only later connected to a nearby highway. A circuit court granted summary judgment in favor of the town in the resulting litigation. The court of appeals affirmed. See 2007 WI App 177.

The supreme court reversed in a decision written by Justice Butler. The issue centered on the statutory phrase, "on a highway maintainable by the town" (¶ 20). More precisely, it focused on a "temporal restriction," namely, whether the bridge must be connected to the highway when built (¶ 22). Applying principles of statutory construction, the court looked to the "highway-focused" purpose that animates the statute. In short, bridges must be on existing highways in order to qualify for county funding (see ¶ 37). "Whereas, under the Town's approach, counties might be required to fund bridges even if their eventual connection to highways will not transpire for years, or may not ever occur, a strict interpretation limiting funding requirements to bridges built upon existing highways provides the clearer guidance required for ensuring predictability and certainty in future cases. Reading the language `on a highway maintainable by the town' literally is in accord with our reading of Wisconsin's bridge aid statutes" (¶ 35).

Chief Justice Abrahamson concurred in the mandate, underscoring that the town failed to comply with the literal statutory text and suggesting that the law revision committee reconsider the statute. Justice Roggensack dissented, joined by Justice Prosser and Justice Ziegler. The dissenters viewed the statutory phrase as affecting only the type of bridge and not affecting the timing of the bridge's connection to a highway.

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Open Meetings Law/Public Records Law

State v. Beaver Dam Area Dev. Corp., 2008 WI 90 (filed 11 July 2008)

The Beaver Dam Area Development Corporation (BDADC) is a nonprofit corporation that was organized under Wisconsin law in 1997. It was not created by any constitution, statute, or ordinance, and the city of Beaver Dam did not through any of its officers incorporate BDADC. The bylaws of BDADC state that its exclusive purpose is to engage in economic development and business retention within the corporate limits and lands that could become part of the corporate limits of the city (see ¶ 15). The question before the supreme court in this case was whether the BDADC is a quasi-governmental corporation that is subject to Wisconsin's Open Meetings and Public Records laws.

The Wisconsin Open Meetings and Public Records laws specifically apply to "quasi-governmental corporations" but neither defines the term. In a majority decision authored by Justice Bradley, the supreme court concluded that "quasi-governmental corporations are not limited to corporations created by acts of the government. Rather, a quasi-governmental corporation is a corporation that resembles a governmental corporation" (¶ 44). In determining the question of resemblance, a number of factors are important in assessing whether an entity is subject to the Open Meetings and Public Records laws. "First among these is finances. In determining whether entities are subject to freedom of information laws a `key factor in bringing such bodies within the coverage of a state [freedom of information] law nearly always is state funding of the entity.' This view is echoed in many jurisdictions. Additional factors include whether it serves a public function, whether it appears to the public to be a government entity, whether the entity is subject to government control, and the degree of access that government bodies have to the entity's records" (¶ 62) (citation omitted). "[A]n entity is a quasi-governmental corporation if, based on the totality of the circumstances, it resembles a governmental corporation in function, effect, or status" (¶ 63).

Applying these principles, the court concluded that BDADC does resemble a governmental corporation (see id.). "A primary consideration in reaching our conclusion is that BDADC is funded exclusively by public tax dollars or interest on those tax dollars. Additionally, we consider that at the time the complaint was filed, its office was located in the City of Beaver Dam ... municipal building and it was listed on the City website [with its own web address] ... The City provided BDADC with clerical support and all of its office supplies, including paper, pencils, and postage. Under the terms of an agreement, all of BDADC's assets revert to the City if it ceased to exist. It is obligated to open its books for City inspection and it has to submit its annual management plan to the City. The mayor and another City official serve on its board of directors. BDADC has no clients other than the City. Its exclusive function is to promote economic development in and around the City, a function that prior to its creation had been performed by the City" (¶¶ 10-11).

The determination that BDADC is a quasi-governmental corporation does not mean that all its meetings are automatically open or that all its records are immediately disclosed to the public. Said the court, "There are several ways in which economically important information could be protected from disclosure for the purposes of open meetings and public records laws" (¶ 80). The opinion catalogues multiple examples of those ways (see ¶¶ 81-90).

This case arose because the state filed a complaint alleging that the BDADC violated the Open Meetings Law. With respect to the application of this decision to those meetings, the court gave its decision prospective effect only "such that the defendants in the present case are not subject to forfeitures for past violations of the open meetings laws and we decline to void any actions taken at past meetings not open to the public" (¶ 12). "Because we today announce a new test, applying that test to past violations would be inequitable and unduly unsettling" (¶ 100).

Justice Prosser filed a dissenting opinion that was joined in by Justice Roggensack.

Justice Ziegler did not participate in this case.

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Public Records Law

Watton v. Hegerty, 2008 WI 74 (filed 1 July 2008)

Attorney Watton is counsel for the family and estate of a shooting victim. Sidney Kente Gray was charged in a criminal case related to the shooting. In this action Watton petitioned for a writ of mandamus to compel the production of emergency detention statements kept by the Milwaukee Police Department (MPD) relating to instances before the shooting in which the police put Gray in emergency detention pursuant to Wis. Stat. chapter 51 (the Mental Health Act). The circuit court denied the writ. In a published decision the court of appeals reversed the circuit court. See 2007 WI App 267. In a majority decision authored by Justice Roggensack, the supreme court reversed the court of appeals.

The issue presented on appeal was whether, upon an open records request to the MPD, provisions of the Mental Health Act preclude disclosure of duplicate copies of statements of emergency detention that are in the possession of the police department, absent written informed consent or a court order. (A police officer may take a person into custody if the officer has reason to believe the person is mentally ill, and it is substantially probable that the person will cause physical harm. See Wis. Stat. § 51.15(1). When an officer takes a person into custody under such circumstances, the officer fills out and signs a statement of emergency detention related to the individual and to the circumstances the officer witnessed that justify taking the person into custody. See Wis. Stat. § 51.15(4).)

The court's analysis of chapter 51 concluded that "statements of emergency detention are `treatment records.' The Mental Health Act specifically exempts such records from disclosure, designating them as `confidential and ... privileged to the subject individual.' Wis. Stat. § 51.30(4)" (¶ 27). Nonetheless, Watton argued that the records he seeks are not "treatment records" because they are not being "maintained" by a "treatment facility" or a "department" of the type listed in Wis. Stat. section 51.30(1)(b). Watton asserted that these records are maintained by the MPD. He conceded that chapter 51 precludes him from obtaining the statements of emergency detention that are physically in the possession of a treatment facility. However, he contended that chapter 51 does not preclude him from obtaining statements of emergency detention in the physical possession of the police department. He reasoned that, although the copies of statements of emergency detention kept within the police department are duplicate copies of the statements maintained by the treatment facility, the original and its duplicate do not warrant the same treatment under the statutes (see ¶ 21).

The supreme court disagreed. Said the court, "The plain language of ch. 51 coupled with our obligation to construe statutes to avoid absurd results causes us to conclude that copies of statements of emergency detention in the possession of the police department do not lose their classification as records `maintained' by a treatment facility. Accordingly, the copies of the statements of emergency detention in the possession of the police department continue to be `treatment records' exempt from disclosure" (¶ 22).

Chief Justice Abrahamson filed a concurring opinion that was joined in by Justice Bradley.

WIREdata Inc. v. Village of Sussex, 2008 WI 69 (filed 25 June 2008)

WIREdata Inc. is a wholly owned subsidiary of Multiple Listing Service Inc. It sought to obtain data regarding specific properties in various municipalities for purposes of making the information available to real estate brokers. The municipalities had contracted with private, independent contractor assessors to complete their property assessments. Under authority of the open records law WIREdata made requests of the municipalities and, except as to one of them, asked that the data be provided in an "electronic/digital" format. Later it directly asked the independent contractor assessors to provide the records to the company in the format that was created and maintained by those independent contractor assessors in a computerized database (the "enhanced" requests). Although the data was not provided in the format requested in WIREdata's enhanced requests, the municipalities gave WIREdata access to the requested data using the PDF format, which complied with WIREdata's "initial" requests for the data either in no specified format or in an electronic/digital format (see ¶ 8). WIREdata was not satisfied with the provision of the relevant data using the PDF format. This mandamus action against the municipalities under the open records law followed.

The supreme court affirmed in part and reversed in part a published decision of the court of appeals. See 2007 WI App 22. In a lengthy opinion authored by Justice Crooks, the supreme court confronted multiple issues raised by the parties. The first issue was whether WIREdata properly commenced the mandamus actions against the municipalities under the open records law, pursuant to Wis. Stat. section 19.37(1), given that the municipalities had not denied WIREdata's requests for the records before WIREdata filed the mandamus actions (see ¶ 3). The court was "satisfied that the municipalities, as the authorities under the open records law, acted reasonably in the present case. The open records law, specifically Wis. Stat. § 19.35(4)(a), requires an authority to either comply with or deny a request `as soon as practicable.' Here, WIREdata filed the mandamus actions without first giving the municipalities an appropriate amount of time to comply with its requests, especially given all of the complex copyright and licensing issues, and given the large volume of data requested. Here, WIREdata threatened [two of the municipalities] with mandamus actions only four days after the company's `initial' requests. Furthermore, WIREdata filed the mandamus actions shortly thereafter and despite the communications WIREdata had received from the municipalities that they were attempting to work through the complex issues to provide the requested data. Additionally, the record reflects that the municipalities offered to provide WIREdata with paper copies of the requested information, which WIREdata turned down. As a result of the foregoing discussion, we are satisfied that the mandamus actions in the present case were filed prematurely" (¶ 58).

Another issue was whether a municipality's independent contractor assessor is an authority under the Public Records Law, so that such an assessor is a proper recipient of a public records request. The court concluded that "a municipality's independent contractor assessor is not an authority under the open records law, so that such an assessor is not a proper recipient of an open records request" (¶ 73). Said the court, "We are satisfied that this statute clearly envisions a public or governmental entity, not an independent contractor hired by the public or governmental entity, as being the `authority' for purposes of the open records law" (¶ 75).

A third issue was whether a municipality may avoid liability under the Public Records Law by contracting with an independent contractor assessor for the collection, maintenance, and custody of its property assessment records and by then directing any requester of those records to contact such an assessor. The court held that "the municipalities here may not avoid liability under the open records law by contracting with independent contractor assessors for the collection, maintenance, and custody of property assessment records, and by then directing any requester of those records to the independent contractor assessors. As we noted previously, the municipalities here are the authorities for purposes of the open records law" (¶ 82).

The next issue was whether the municipalities complied with WIREdata's initial public records requests, once they produced PDFs with the requested information and gave those files to WIREdata. On this issue the court concluded that "despite the fact that the PDF files did not have all of the characteristics that WIREdata wished (that is, WIREdata could not easily manipulate the data), the PDF files did fulfill WIREdata's initial requests as worded. In addition, the records requested were offered to WIREdata, by all three municipalities, in written form shortly after its requests were made, demonstrating good faith efforts to satisfy such requests quickly" (¶ 96). The court did not address whether the municipalities' responses satisfied WIREdata's enhanced requests because WIREdata made those requests to the independent contractor assessors - not to the municipalities (as required by one of the earlier holdings in this case) (see ¶ 93). The supreme court disagreed with the court of appeals' statement in this case that requesters must be given access to an authority's electronic databases to examine, extract information from, or copy them (see ¶ 97).

Yet another issue was whether the fees charged to WIREdata were fees that complied with the Public Records Law. The court held that, "because no fees were actually charged to WIREdata for the information provided in the PDF format, the municipalities did not violate the open records law" (¶ 102). The court continued, "Because we do not have a sufficient record before us to determine what an appropriate fee would have been for the provision of `enhanced' data for all three municipalities, we will not address that issue further, except to note that nothing in this opinion should be viewed as changing or modifying our prior case law that an authority may charge fees only as provided under Wis. Stat. § 19.35(3)(a), fees that reflect the actual, necessary, and direct costs of providing the information. However, we agree with the comment in the amicus brief of the [Department of Justice] that an authority may charge a requester for the authority's actual costs in complying with the request, such as any computer programming expenses or any other related expenses. We reiterate that an authority may not make a profit, but an authority may recoup all of its actual costs" (¶ 107).

Lastly, the court held that "WIREdata's initial written requests were not insufficient as a matter of law as to time and subject matter" (¶ 109).

Chief Justice Abrahamson filed a concurring opinion. Justice Butler did not participate in this case.

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Taxation

Walgreen Co. v. City of Madison, 2008 WI 80 (filed 8 July 2008)

The Walgreen Co. (Walgreens) challenged the property tax assessments on two of its stores in the city of Madison. Both the circuit court and the court of appeals (2007 WI App 153) upheld the city's assessments, and the supreme court granted Walgreens' petition for review. The appeal required the court to determine the correct methodology for assessing leased retail property for purposes of municipal taxation when the leases for such property contain monthly payments significantly above the market rental rate in part as a result of certain unique business and financing terms being incorporated into the contractual lease terms (see ¶ 18).

Both parties relied on the income approach to property assessment. "The Property Assessment Manual explains that in leased property scenarios, the income approach is often the most reliable approach for property valuation, describing the income approach as estimating and then capitalizing the net rent a property subject could generate" (¶ 24). The parties differed in their calculations, however, because the city used the above-market rents being paid by Walgreens in its appraisals whereas Walgreens' appraisals used market rents.

In a decision authored by Justice Butler, the supreme court concluded that "this case is governed by the clear language of Wis. Stat. § 70.32(1) requiring that real property `shall be valued by the assessor in the manner specified in the Wisconsin property assessment manual,' and by the similarly clear provisions of the Manual which, in turn, require that `the assessor must use the market rent, not the contract rent,' and provide that `[a]ll of the information needed for the income approach is either obtained or verified by what the assessor finds in the marketplace'" (¶ 82) (citations omitted). Said the court, "The City Assessor in this case improperly failed to apply the provisions of the Property Assessment Manual requiring that income approach assessments of the fair market value of a fee simple interest must be based on market rate rents rather than contract rents, absent the existence of an encumbrance bringing the leased fee value below actual market rates. The circuit court and court of appeals similarly erred in failing to apply these well-established rules of property assessment, and in affirming the City's flawed assessment" (¶ 85).

Chief Justice Abrahamson filed a concurring opinion.

Department of Revenue v. Menasha Corp., 2008 WI 88 (filed 11 July 2008)

Menasha Corp. (Menasha) is a Wisconsin corporation with headquarters in Neenah. It has more than 5,700 employees and maintains 63 business locations in 20 states and eight countries. In 1993, Menasha, in an effort to address shortcomings in its systems, hired an independent accounting firm to evaluate its business and accounting software systems. Menasha sought an application software system that would accommodate its special processing needs. It ultimately purchased the "R/3 System" from SAP.

In a dispute between Menasha and the Wisconsin Department of Revenue (DOR), the Wisconsin Tax Appeals Commission (commission) concluded that the R/3 System was a custom computer program under Wis. Admin. Code section Tax 11.71(1)(e) and thus was exempt from sales and use tax. See Wis. Stat. § 77.51(20) (2003-04). The DOR appealed that decision to the Dane County Circuit Court. The circuit court reversed the commission's decision and concluded that the R/3 System was a noncustom software program and thus was taxable as tangible property. Menasha then appealed that decision to the court of appeals. The court of appeals reversed the circuit court's decision and affirmed the commission's initial decision that the R/3 System was custom and thus exempt from sales and use tax. See 2007 WI App 20. In a decision authored by Justice Ziegler, the supreme court affirmed the court of appeals.

This case posed the following significant question for the court: What is the proper level of deference that the supreme court should give to commission decisions? The court concluded that "the Commission's statutory interpretation of Wis. Stat. § 77.51(20) is entitled to due weight deference and that its rule interpretation of Wis. Admin. Code § Tax 11.71(1)(e) is entitled to controlling weight deference. We further conclude that when a DOR decision is appealed by the taxpayer to the Commission, the Commission is not required to give deference to the DOR's interpretation of Wis. Admin. Code § Tax 11.71(1)(e) when deciding that appeal" (¶ 3).

These conclusions were described by the court as having "great import to the average taxpayer in this state" (¶ 5). "More typically, it is the individual taxpayer who seeks a fair and neutral hearing before the Commission when that person believes that he or she has been taxed incorrectly by the DOR. If the Commission must defer to the DOR, the average taxpayer does not receive a fair hearing before a neutral tribunal. Although the Commission is subject to judicial review, the legislature specifically charged the Commission as `the final authority for hearing and determination of all questions of law and fact' under the tax code. We must not second guess that act of the legislature" (id.).

Applying these principles the court held that the commission reasonably concluded that the R/3 System was a custom program and therefore not subject to sales and use tax (see ¶ 2). The description of a custom program, which is provided in an administrative rule (Wis. Admin. Code § Tax 11.71(1)(e)), includes seven relevant factors. Applying those factors the commission concluded that the R/3 system was a custom program because of the significant investment Menasha made in presale consultation and analysis, testing, training, written documentation, enhancement, and maintenance support, and because it was not a prewritten program (see ¶ 102).

The supreme court was likewise "persuaded by the initial cost, the costs for modifications, the presale consultations over the span of a few years, the testing required once installed, the requisite training, the requisite enhancement and maintenance, and that the R/3 System cannot be used until modified - in this case some 3,000 modifications. As a result, we conclude that the Commission's conclusion that the R/3 System was custom is reasonable. Accordingly, we will not substitute our judgment for that of the Commission" (¶ 103). In sum, the court concluded that "when applying the controlling weight deference standard to the Commission's interpretation of Wis. Admin. Code § Tax 11.71(1)(e), the Commission reasonably interpreted the rule and concluded that the R/3 System was custom" (¶ 108).

Justice Crooks filed a concurring opinion in which he joined the majority opinion but "[wrote] separately to emphasize that resolving the issue of deference is key to a correct decision in this case" (¶ 109). His concurrence was joined in by Justice Prosser and Justice Roggensack. Chief Justice Abrahamson filed a dissent that was joined in by Justice Bradley and Justice Butler. Justice Bradley filed a dissent that was joined in by Justice Butler.

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Torts

Hornback v. Archdiocese of Milwaukee, 2008 WI 98 (filed 16 July 2008)

The plaintiffs' complaint against the Archdiocese of Milwaukee (Archdiocese) and the Diocese of Madison (Diocese) alleged that the plaintiffs were sexually abused by Gary Kazmarek from 1968 to 1973, while Kazmarek taught at a school in Louisville, Kentucky. Kazmarek had previously taught at Catholic schools in the Archdiocese and in the Diocese. The plaintiffs claimed that both the Archdiocese and the Diocese "knew or should have known of Kazmarek's propensity for sexually abusing children" and were negligent for failing to take certain steps to prevent Kazmarek's future sexual abuse (¶ 2). In oral argument before the supreme court, the plaintiffs specified that their claims included one that alleged a negligent failure to warn unforeseeable third parties of Kazmarek's propensity for sexual abuse (see id.).

"A significant difference between the plaintiffs' claims against the Archdiocese and the Diocese is that the plaintiffs' complaint alleges that when the sexual abuse of students in Milwaukee was brought to the attention of the Archdiocese of Milwaukee, the Archdiocese promised two dozen of the victims' parents `that Kazmarek would be sent to a treatment center and that he would never have contact with children again' and `pleaded with parents to not report Kazmarek's crimes to the police.' However, the complaint alleges, instead of subsequently referring Kazmarek to the police or alerting others about the abuse, the Archdiocese simply told Kazmarek `to leave Milwaukee quietly.' Similar claims were not alleged as to the Diocese" (¶ 3).

In a response to motions to dismiss brought by the Archdiocese and the Diocese, the circuit court dismissed the complaint as to both on statute of limitation grounds. In an unpublished opinion, the court of appeals affirmed the circuit court order on the same grounds.

The supreme court was equally divided on whether to affirm or reverse the decision of the court of appeals dismissing the plaintiffs' complaint against the Archdiocese. Justice Crooks, Justice Roggensack, and Justice Ziegler would have affirmed; Chief Justice Abrahamson and Justice Bradley and Justice Butler would have reversed. Justice Prosser did not participate in the case. Consequently, the supreme court affirmed the court of appeals' decision to affirm the circuit court's dismissal of the plaintiffs' claims against the Archdiocese (see ¶ 5).

The supreme court did not reach the statute of limitation issue with regard to the case against the Diocese because, as discussed below, it held that the plaintiffs failed to articulate a claim upon which relief could be granted (see ¶ 6). The complaint alleged that the Diocese "knew or should have known of Kazmarek's propensity for sexually abusing children and, despite this knowledge, did not refer Kazmarek to the police or take any other action to prevent Kazmarek from continuing his pattern of sexually abusing children." The complaint further alleged that the failure of the Diocese to refer Kazmarek to the police or to take "other action to prevent Kazmarek's continuation of his pattern of sexually abusing children" constitutes negligence, and that the Diocese's negligent conduct was a substantial factor in causing Kazmarek's sexual abuse of and resulting injuries to the plaintiffs (¶ 8). When these allegations are viewed in conjunction with the plaintiffs' clarification of their position at oral argument before the supreme court as described above, the supreme court concluded that "the plaintiffs' negligence claim is premised on an alleged failure to warn unforeseeable third parties, including any potential future employers of Kazmarek at dioceses and parochial school systems everywhere in the country, as well as parents of unforeseeable victims" (¶ 27).

The Diocese argued that common law tort rules do not impose a duty on employers to seek out and disclose information to an employee's subsequent employers or the public at large concerning a former employee's history of misconduct or antisocial behavior. The Diocese contended that under the law of "negligent referral or duty to warn," unless an employer gives a favorable reference to a subsequent employer or third party about the former employee while withholding negative information, there is no breach of duty established by the employer's failure to seek out subsequent employers and alert them to prior negative history of the former employee (see ¶ 28).

In a decision authored by Justice Butler the supreme court concluded that "the third party failure to warn claims recognized in this state do not encompass the type of failure to warn claimed by the plaintiffs" (¶ 32). Said the court, "The Diocese's mere knowledge of Kazmarek's past sexual abuse, or a presumed knowledge of a continued sexual propensity for abuse, is not enough to establish negligence. Reasonable and ordinary care does not require the Diocese to notify all potential subsequent employers within dioceses and parochial school systems across the country, along with all parents of future unforeseeable victims. Requiring such notification under these circumstances would create a vast obligation dramatically exceeding any approach to failure to warn recognized either in this state or in other jurisdictions" (¶ 34).

Accordingly, the court concluded that the plaintiffs' complaint failed to allege negligence (a duty of care and a breach thereof) sufficiently to survive a motion to dismiss. "Although the plaintiffs allege that the Diocese knew that Kazmarek had a propensity for sexual abuse, what is more pertinent is what the plaintiffs did not allege. They did not allege that the Diocese knew that Kazmarek was in Kentucky, still teaching children, or working for the Archdiocese in Louisville. They did not allege any knowledge that the children at the [school] in Louisville were in any danger. They did not allege that the Archdiocese of Louisville asked the Diocese for a reference, that the Diocese made a reference recommending Kazmarek, or that the Diocese had any communication whatsoever with the Archdiocese of Louisville regarding Kazmarek" (¶ 46).

Finally, the court held that, even if a viable negligence claim had been made, "recovery against the Diocese would be precluded on the public policy ground that allowing recovery would send this court down a slippery slope with no sensible or just stopping point" (¶ 64).

Rechsteiner v. Hazelden, 2008 WI 97 (filed 16 July 2008)

Rechsteiner, a surgeon, worked for Spooner Health System, which demanded he undergo an alcohol assessment at Hazelden. Hazelden diagnosed Rechsteiner with "alcohol dependence," which in turn led to inpatient and outpatient treatment. In light of later information, Hazelden amended the diagnosis to mere "alcohol abuse." He later sued Hazelden and Spooner for damages, including lost wages. In subsequent proceedings, the circuit court denied the plaintiff's request for a continuance and granted summary judgment to the defendants on the ground that the peer review process afforded immunity. The court of appeals affirmed. See 2007 WI App 148.

The supreme court affirmed in an opinion authored by Justice Prosser. Two issues were procedural, record-intensive matters. The court found no abuse of discretion in the circuit court's denial of a continuance and affirmed the ruling that the plaintiff failed to raise an issue of material fact that obviated summary judgment.

Regarding the substantive issue, the court surveyed the basic principles of statutory immunity for alleged medical negligence and defamation in the context of health care peer review. It held "that Hazelden is eligible for immunity under Wis. Stat. § 146.37 because it played an integral role in Spooner's medical peer review process. Hazelden's medical diagnosis of Dr. Rechsteiner is immune, even if its diagnosis is deemed negligent, because Hazelden's diagnosis was central to its requested evaluation. If Dr. Rechsteiner's complaint is viewed as focusing on Hazelden's treatment of Dr. Rechsteiner, as opposed to its diagnosis of Dr. Rechsteiner, the complaint cannot survive summary judgment" (¶ 71).

More precisely, the court addressed four questions, which are summarized as follows. "Question (1): Is Hazelden, a third-party addictionology center, too removed from the peer review process initiated by Spooner to be eligible for immunity under Wis. Stat. § 146.37? Answer (1): No. Hazelden is eligible for immunity under Wis. Stat. § 146.37 because it played an integral role in Spooner's medical peer review of Dr. Rechsteiner. Question (2): Does Hazelden's diagnosis of Dr. Rechsteiner during the medical peer review process qualify for immunity, under Wis. Stat. § 146.37, even if its diagnosis is deemed negligent? Answer (2): Yes. Hazelden's medical diagnosis of Dr. Rechsteiner is immune under Wis. Stat. § 146.37, even if the diagnosis is deemed negligent, because Hazelden's diagnosis was made in good faith and was central to a requested evaluation of Dr. Rechsteiner in peer review. Question (3): Does Hazelden's treatment of Dr. Rechsteiner, following its diagnosis of his medical condition, qualify for immunity under Wis. Stat. § 146.37? Answer (3): The court is not required to decide whether treatment related to the peer review process qualifies for immunity. If Dr. Rechsteiner's complaint is viewed as focusing on Hazelden's treatment of Dr. Rechsteiner, as opposed to its diagnosis of Dr. Rechsteiner, his complaint cannot survive a motion for summary judgment on the facts of this case. Question (4): Do the actions and statements of the Spooner defendants qualify for immunity under Wis. Stat. § 146.37? Answer (4): Yes. The actions and words of the Spooner defendants are immune under Wis. Stat. § 146.37 because they were part of Dr. Rechsteiner's peer review and because the Spooner defendants were presumed to be acting in good faith" (¶ 102).

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