Vol. 78, No. 4, April 2005

Court of Appeals Digest

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

Civil Procedure Criminal Procedure Employment Law Insurance

Motor Vehicle Law Paternity Torts Trade Secrets

Civil Procedure

Notice of Claim - Prejudice

Moran v. Milwaukee County, 2005 WI App 30 (filed 25 Jan. 2005) (ordered published 24 Feb. 2005)

The plaintiff, Moran, claimed that she tripped over a "sign plate" in an airport garage and suffered an injury in November 2000. The circuit court dismissed the complaint because Moran failed to give the county the notice required by Wis. Stat. section 893.80(1)(a).

The court of appeals, in an opinion written by Judge Fine, affirmed. Moran claimed that she provided the requisite notice in December 2000 by filing a "combined report" on a county form. The court held that the report failed to provide the statutory notice because it was not signed by Moran or her attorney, and it was never served on the chairperson of the county board or the county clerk. Moran also failed to show that the county was not prejudiced by her omission to comply with the notice requirements. "The December 2000 `Combined Report,' however, gave no notice that Mrs. Moran's injuries were or could be that serious. Thus, although Milwaukee County took two photographs of the sign holder, the County had no reason or duty to investigate further. Simply put, it is contrary to the protection afforded by Wis. Stat. § 893.80(1) to force a government entity to spend resources and taxpayer money to investigate every injury where the requisite 120-day notice is not given on the mere chance that the injury may turn out to be catastrophic, irrespective of how minor it may seem initially. As of the December 5, 2000, `Combined Report,' as far as Milwaukee County knew, Mrs. Moran's tripping-related injury was not serious" (¶ 10).

In April 2002 Moran did file a "notice of claim" that alerted the county to the seriousness of her alleged injury, but the notice was silent about "(1) who might have seen her trip; (2) who saw her immediately after she tripped; or (3) to whom she spoke after the accident" (¶ 12). The court pithily concluded that "Milwaukee County is stuck with Mrs. Moran's recollections" (¶ 12).

Top of page

Criminal Procedure

Preliminary Hearings - Hearings Conducted by Court Commissioners - No Right to De Novo Preliminary Hearing in Circuit Court

State v. Gillespie, 2005 WI App 35 (filed 5 Jan. 2005) (ordered published 24 Feb. 2005)

The defendant was charged with a felony. A preliminary hearing was conducted by a circuit court commissioner, who found probable cause to believe that the defendant had committed a felony and bound him over for trial. The defendant then filed a motion for a de novo preliminary hearing before the circuit court. The circuit court denied the request, instead ruling that it would review a transcript of the preliminary hearing. The defendant then petitioned for leave to appeal, which was granted by the court of appeals. In a decision authored by Judge Nettesheim, the court of appeals affirmed the circuit court.

The defendant argued that he was entitled to a de novo preliminary hearing before a circuit judge by virtue of Wis. Stat. section 757.69(8). This statute, which deals generally with circuit court commissioners' powers and duties, provides that "any decision of a circuit court commissioner shall be reviewed by the judge of the branch of court to which the case has been assigned, upon motion of any party. Any determination, order, or ruling by a circuit court commissioner may be certified to the branch of court to which the case has been assigned, upon a motion of any party for a hearing de novo."

The appellate court concluded that a more specific statute in the Criminal Procedure Code precluded the defendant's request for a second preliminary hearing. Wis. Stat. section 970.04 (entitled "Second Examination") provides that "if a preliminary examination has been had and the defendant has been discharged, the district attorney may file another complaint if the district attorney has or discovers additional evidence." While the factual scenario under section 970.04 (the defendant has been discharged and a new complaint filed) is different from that presented in the defendant's case, the appellate court concluded that the statute nevertheless reveals that the legislature had the opportunity to address a second examination in the defendant's situation and chose not to do so. "We also observe that the Wisconsin Supreme Court has decreed that a motion to dismiss is the proper procedure for obtaining circuit court review of a court commissioner's bindover ruling and that such review is limited to a transcript of the preliminary examination" (¶ 9).

Accordingly, the appellate court affirmed the circuit court's order denying the defendant's request for a de novo preliminary hearing.

Traffic Stops - Consent to Search Vehicle

State v. Jones, 2005 WI App 26 (filed 26 Jan. 2005) (ordered published 24 Feb. 2005)

A deputy sheriff stopped a vehicle for speeding and asked both the driver and his passenger for identification. The deputy then returned to his squad car and ran checks on the identifications and the vehicle registration; he found nothing irregular or suspicious. The deputy wrote a warning citation for the driver and also called for backup assistance. The deputy then had the driver accompany him to the rear of the vehicle and at that point explained the warning citation to him. Once the deputy returned the identification cards to the driver and passenger, he asked the driver if he had any further questions regarding the citation, and the driver indicated he did not. A few seconds later, the deputy asked whether there was anything illegal in the vehicle. The driver responded there was nothing illegal, and the deputy asked if he could search the vehicle. The driver granted permission. The deputy found a semiautomatic handgun under the front passenger seat and cocaine under the hood. The driver and the passenger were arrested.

The parties agreed that the initial stop of the vehicle was legal and that the traffic stop had concluded before the deputy made the request to search the vehicle. Therefore, the narrow issue before the court of appeals was whether, at the time the driver consented to the vehicle search, he was considered to be "seized" for purposes of the Fourth Amendment. In a decision authored by Judge Nettesheim, the court of appeals concluded that he was.

The court looked to the decision in State v. Williams, 2002 WI 94, 255 Wis. 2d 1, 646 N.W.2d 834, for guidance in resolving the issue in this case. Williams involved similar facts, except that the officer, after returning the driver's license to Williams, told him that "we'll let you get on your way then okay," shook hands with him, and exchanged common parting pleasantries. Only then did the officer ask Williams for consent to search. The Williams court concluded that "the officer's words and actions, considered as a whole, communicated permission to leave, as the traffic stop was over. The officer did nothing, verbally or physically, to compel Williams to stay. That Williams stayed, and answered the questions, and gave consent to search, is not constitutionally suspect, and does not give rise to an inference that he must have been compelled to do so" (Williams, 2002 WI 94, ¶ 29, 255 Wis. 2d 1).

In this case the court of appeals saw an important factual difference. The officer never advised the driver that he was free to leave, nor did he engage in any physical exchange with the driver, such as a handshake or other gesture, that conveyed the idea that the driver was free to leave. The Williams court saw such facts as significant. In this case the court indicated that it was reading Williams "to require some verbal or physical demonstration by the officer, or some other equivalent facts, which clearly conveyed to the person that the traffic matter is concluded and that the person should be on his or her way. Absent that, it is a legal fiction to conclude that a reasonable person would deduce, infer or believe that he or she is free to depart the scene" (¶ 17).

Under the totality of the circumstances present in this case, the appellate court concluded that a reasonable person in the defendant's position would not have believed that he or she was free to leave. The defendant was thus seized for purposes of the Fourth Amendment at the time he gave consent for the search, and the consent was therefore invalid because there was no other legal justification for the seizure.

Top of page

Employment Law

Misrepresentation - Omissions

Bellon v. Ripon College, 2005 WI App 29 (filed 26 Jan. 2005) (ordered published 24 Feb. 2005)

Ripon College (the college) hired the plaintiff as an assistant professor in 2000. She turned down an offer for a higher paying position from another, less prestigious, academic institution. In August 2001, the college notified the plaintiff that budgetary considerations necessitated the elimination of her position. The plaintiff filed suit, alleging common law misrepresentation to induce employment and a claim of misrepresentation under Wis. Stat. section 103.43 (2003-04). The trial court granted summary judgment in favor of the college.

The court of appeals, in an opinion written by Judge Snyder, affirmed. The record revealed that the college had truthfully disclosed the actual value of its endowment and its actual student enrollment figures and trends when the plaintiff interviewed for the position. She claimed, however, that the college "had a duty to say more" (¶ 10). The court rejected this contention of "passive fraud" or "misrepresentation by nondisclosure" because the plaintiff sought, in essence, to impose a duty "to supply predictions, not facts" (¶ 10). In a related contention, the plaintiff also unsuccessfully argued that the nondisclosure of details regarding the college's financial straits prevented her from "predicting future economic events"(¶ 11). The court held that the college had no duty to disclose such details.

Finally, the court of appeals held that the trial court properly restricted the scope of Wis. Stat. section 103.43 "to manual laborers only" (¶ 12). Indeed, the plaintiff's argument was foreclosed by dispositive case law.

Top of page

Insurance

CGL Policies - Limited Liability Companies - Named Insureds

Brown v. MR Group LLC, 2005 WI App 24 (filed 26 Jan. 2005) (ordered published 24 Feb. 2005)

After a child drowned in a water-filled excavation site, the child's parents and estate sued various defendants including the MR Group LLC, which owned the real estate, and Raush, its de facto manager. Raush counterclaimed against other defendants for contribution or indemnification. An insurer, West Bend, obtained summary judgment on the ground that it owed no duty to defend or to indemnify Raush, and Raush appealed.

The court of appeals, in a decision authored by Judge Brown, affirmed in "the first case that construes how comprehensive general liability [CGL] policies should be interpreted as they apply to Wisconsin limited liability companies with respect to `Named Insured' language" (¶ 1). The court held that "when a clause in a standard CGL policy refers to a `manager' or `member' of a limited liability company, the signators to the insurance policy intend for those words to mean the same as they are defined pursuant to Wisconsin's limited liability company statute, Wis. Stat. § 183.0102 (2003-04), and are not defined according to the common usage found in a recognized dictionary" (¶ 1). "[A] reasonable insured that is a limited liability company would understand `manager' and `member' to mean `manager' and `member' as the terms are used with respect to limited liability companies. The relevant provision of the policy providing coverage for managers and members applies exclusively to limited liability companies. It does not deal with other sorts of business establishments commonly thought to have `managers' or `members.' In addition, we must keep in mind that limited liability companies are statutory creatures. We expect that a reasonable insured would be familiar with statutory definitions of major players in its organizational structure and that references to such players would commonly be thought to allude to those particular definitions" (¶ 10).

The term "real estate manager" in the CGL policy was not restricted to limited liability companies nor was it defined by Wis. Stat. chapter 183 (see ¶ 12). The court used a dictionary definition of "real estate manager": "one who manages the business affairs of certain real estate" (¶ 13). Construing the complaint in its most liberal sense, the court held that Raush was neither a member nor a real estate manager within the meaning of West Bend's CGL policy.

Interest - Third-Party Claims

Kontowicz v. American Standard Ins. Co., 2005 WI App 22 (filed 19 Jan. 2005) (ordered published 24 Feb. 2005)

The court of appeals consolidated two cases that raised identical issues, namely, "whether the [Wis. Stat.] § 628.46 interest penalty, by reference to Wis. Stat. § 646.31(2)(d), applies to a third-party personal injury claim against a liability insurance policy" (¶ 2). In an opinion by Judge Snyder, the court held that the third-party claimants were not entitled to the statutory interest penalty.

Finding that Wis. Stat. section 628.46 was ambiguous (see ¶ 10), the court turned to the statute's historical context. In the mid-1970s, while dealing with the issue of fair practices within the insurance industry, the legislature enacted a predecessor statute. At the same time, the supreme court was grappling with "bad faith" actions. Based on this history, the court of appeals concluded "that § 628.46 arose from the legislature's intent to protect the insured from improper claims settlement practices" (¶ 17). Third-party claimants' rights under the statute were restricted, as made clear by later amendments to section 628.46. Specifically, "[b]y eliminating the bodily injury and personal injury language from the statute, the legislature has preserved eligibility for a more narrow group, specifically: (1) third parties whose claims arise under the policy in the same manner and under the same provisions as the named insured, and (2) third-party worker's compensation claimants" (¶ 18).

In delimiting the first category of third-party claimants, the court offered this explanation: "Under Wis. Stat. § 632.32(3)(a), an automobile insurance policy must provide coverage `to any person using any motor vehicle described in the policy when the use is for purposes and in the manner described in the policy.' Furthermore, a policy may not exclude coverage for `[p]ersons related by blood, marriage or adoption to the insured' or a `passenger in or on the insured vehicle.' Sec. 632.32(6)(b)1. and 2.a. Consequently, the insured has paid premiums with the expectation that these third parties will be covered under the policy and the insurer has set premiums and issued coverage accordingly" (¶19). Since the third-party claimants in this case fell under neither eligibility category, they were not entitled to the interest penalty set forth in section 628.46.

Top of page

Motor Vehicle Law

OWI - Field Sobriety Tests - Admissibility

City of West Bend v. Wilkens, 2005 WI App 36 (filed 12 Jan. 2005) (ordered published 24 Feb. 2005)

This case involved a question of admissibility versus weight of evidence. The defendant was charged with driving with a prohibited alcohol concentration. He complained that the field sobriety tests (FSTs) the arresting officer administered to him were unreliable because they failed to conform to standardized FST procedures approved by the U.S. Department of Transportation's National Highway Traffic Safety Association. In municipal court and circuit court proceedings, the defendant unsuccessfully sought to suppress evidence of his performance on the FSTs, arguing that the evidence was not scientifically reliable.

The defendant was convicted following a trial in the municipal court. He appealed to the circuit court, where a trial de novo on stipulated facts also resulted in a guilty finding. The circuit court relied on the FST evidence as well as other evidence of impairment. The circuit court determined that the reliability of the FST evidence was for the fact finder to determine.

In a decision authored by Judge Brown, the court of appeals affirmed. It rejected the defendant's argument for suppression of the FST evidence on two grounds. First, it concluded that FSTs are not "scientific tests." Said the court, "We reject [the defendant's] attempt to cast this case as one involving the use of scientific evidence, the reliability of which this court must determine before the fact finder may consider it. FSTs are not scientific tests. They are merely observational tools that law enforcement officers commonly use to assist them in discerning various indicia of intoxication, the perception of which is necessarily subjective. Moreover, it is not beyond the ken of the average person to understand such indicia and to form an opinion about whether an individual is intoxicated. The evidence was not without probative value and therefore was admissible" (¶ 1).

Second, the court concluded that, even if FSTs are "scientific tests," reliability is not a prerequisite to admitting scientific evidence in this state. "Wisconsin, unlike the federal courts, considers the reliability of scientific evidence a question of weight and credibility for the trier of fact to decide. A party can challenge the reliability of such evidence through cross-examination or other means of impeachment. The evidence is admissible as long as it is relevant, the witness testifying to such evidence is a qualified expert, and the evidence will assist the fact finder in understanding the evidence or determining some factual issue. [The defendant] has not challenged the trial court's consideration of the FST evidence on any of these grounds" (¶ 23).

Top of page

Paternity

Lying-in Expenses - Lack of Ability to Pay

Rusk County Dep't of Health & Human Servs. v. Thorson, 2005 WI App 37 (filed 11 Jan. 2005) (ordered published 24 Feb. 2005)

The Wisconsin Medical Assistance Program paid expenses associated with the birth of the twin children of the respondent. The Rusk County Department of Health and Human Services filed a paternity petition seeking, among other things, reimbursement for the lying-in expenses. The parties agreed, and the circuit court found, that the respondent did not have the present ability to pay any of the expenses. Nevertheless, the court ordered that he was obligated for more than $4,300, although it held the payment in abeyance.

The respondent appealed the order, arguing that the circuit court had no authority to order that he was obligated to pay the lying-in expenses for his children when, at the time of the order, he had no ability to pay.

In a decision authored by Judge Peterson, the court of appeals agreed with the respondent and reversed the circuit court order. Wis. Stat. section 767.51(3)(e) authorizes the circuit court to order a "father to pay or contribute to the reasonable expenses of the mother's pregnancy and the child's birth, based on the father's ability to pay or contribute to those expenses." Under the plain language of the statute, the circuit court's ability to order payment is contingent on "the father's ability to pay." Because it was undisputed that the respondent had no ability to pay at the time of the hearing, the circuit court had no authority to set his obligation to pay lying-in expenses.

However, the appellate court did indicate that "when and if a father has the ability to pay, the court may order him to pay or contribute to the lying- in expenses. If the father's ability to pay changes, the order may be modified" (¶ 7).

Top of page

Torts

Worker's Compensation - "Temporary Help Agency"

Peronto v. Case Corp., 2005 WI App 32 (filed 26 Jan. 2005) (ordered published 24 Feb. 2005)

Jacquelyn Peronto was employed by a service contractor, Compass Group, and suffered an injury while working at Case Corp. Peronto filed suit against Case. The circuit court granted summary judgment in favor of Case.

The court of appeals, in an opinion written by Judge Anderson, reversed. The sole issue on appeal was whether Compass was a "temporary help agency" under Wis. Stat. section 102.29(6). If Compass was a temporary help agency, the negligence action against Case would be barred. The court held that Compass "did not place [Peronto] with Case, Case did not control her work activities and Case did not compensate Compass for [her] services" (¶ 1). Under Wis. Stat. section 102.201(2)(f), a "`temporary help agency' has the following characteristics: (1) an employer who places its employee with a second employer, (2) the second employer controls the employee's work activities, and (3) the second employer compensates the first employer for the employee's services" (¶ 9).

The court applied each of these factors to the Case/Compass relationship. First, "Case and Compass had a contractual arrangement that left the details of how to fulfill that contract to Compass. Compass maintained exclusive control over the day-to-day operations of the catering and vending services, including the employees. The purpose of [Peronto]'s work was to assist Compass in fulfilling its contractual obligations - to plan meals, prepare meals, serve meals and clean up after meals. Her activities at the Case facility had only an incidental benefit to Case - well-fed employees. Thus, while [Peronto] worked at Case facilities, she did not work for Case" (¶ 12).

Second, Case's supervision of Peronto "was not sufficient to constitute control of her work activities" (¶ 16). Indeed, the record showed that "Compass exercised near complete control over [Peronto]'s daily work activities" (¶ 18). Third, "when Case paid Compass under the contract, it was paying for the end product - the cafeteria and vending services - and not specifically for the labor of the individual employees like [Peronto]. The compensation element then is not satisfied" (¶ 19).

Top of page

Trade Secrets

Misappropriation of Trade Secrets - Customer Lists - Pricing Data - Statutory Preemption of Certain Common Law Claims

Burbank Grease Servs. LLC v. Sokolowski, 2005 WI App 28 (filed 20 Jan. 2005) (ordered published 24 Feb. 2005)

Burbank Grease Services collects and processes used restaurant fry grease, trap grease, and industrial grease. The defendant was a former employee of Burbank, where his final position was as a procurement and territory manager. When he left Burbank, the defendant retained certain information about Burbank's customers and pricing data.

The defendant later helped form a new company that competed with Burbank. He used customer information he had learned at Burbank to solicit some of Burbank's customers for his new business. Burbank then filed suit asserting several claims, all of which were dismissed on summary judgment. In a decision authored by Judge Vergeront, the court of appeals affirmed.

The first claim involved an allegation that the defendant misappropriated trade secrets in violation of Wis. Stat. section 134.90, Wisconsin's Uniform Trade Secrets Act. By definition, a trade secret must involve information that "derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use." Wis. Stat. § 134.90(1)(c)1.

The court concluded that Burbank's customer lists were not trade secrets. It held that "a straightforward application of the language of §134.90(1)(c)1. to the undisputed facts of this case persuades us that the names, addresses, and contact persons of Burbank's customers are readily ascertainable by proper means. The undisputed evidence is that any business that cooks or processes food is a potential customer for the services Burbank provides, and Burbank's own witnesses acknowledge that anyone can identify the businesses that likely have a need for the services Burbank provides from such common sources as the telephone book, the internet, and trade associations. As for contact persons, the evidence is that one can find that out by asking at the business" (¶ 18).

The information retained from the defendant's employment at Burbank also included certain pricing data. The appellate court said that no reported Wisconsin cases address the trade secret status of pricing information. Looking for guidance from other jurisdictions, the court found that "generally, it appears that when prices are based on complicated or unique formulas that the customers do not know about, courts conclude the information meets the standard embodied in Wis. Stat. §134.90(1)(c)1. .... However, when there is no such unique or complicated information behind the pricing, the actual price charged does not meet that standard because - in the absence of special circumstances - it can be readily ascertainable from the customers themselves by proper means" (¶ 22). "We conclude this general approach is sound and apply it here. There is no evidence that Burbank's prices are based on information not known to the customers. There is also no evidence of a contract prohibiting Burbank's customers from disclosing the price Burbank charges, nor is there evidence that it is the custom in this industry for customers not to disclose the prices they are charged ...We conclude the evidence is insufficient, as a matter of law, to show that the prices Burbank charges its customers are not readily ascertainable by proper means" (¶ 23).

Among the other claims pressed by Burbank were two involving breach of fiduciary duty. The question before the appellate court was whether these common law claims were preempted by section 134.90(6). According to its terms (which are subject to certain exceptions like contractual remedies), the trade secrets law "displaces conflicting tort law, restitutionary law and any other law of this state providing a civil remedy for misappropriation of a trade secret" (¶ 25, quoting Wis. Stat. § 134.90(6)). Burbank argued that preemption does not occur if the misappropriated information does not meet the definition of a trade secret.

Again looking to cases from other jurisdictions, the appellate court concluded that the majority of jurisdictions that have considered the issue have concluded that the trade secrets law preempts common law claims for unauthorized use of allegedly confidential information that does not meet the statutory definition of a trade secret. "The rationale for this conclusion is that the purpose of the preemption provision is to preserve a single tort action under state law for misappropriation of a trade secret as defined in the statute and thus to eliminate other tort causes of action founded on allegations of misappropriation of information that may not meet the statutory standard for a trade secret"(¶ 29). "On the other hand, where a claim for breach of fiduciary duty is based on allegations or factual showings that are not solely dependent on misappropriation of a trade secret or unauthorized use of allegedly confidential information, courts have concluded there is no preemption" (¶ 33).

Persuaded by the reasoning of the great majority of courts that have construed the preemption provision, the court of appeals concluded that "the purpose of Wis. Stat. § 134.90(6) is to make clear that § 134.90 is intended to provide a single, uniform standard for the type of information that, in the absence of a contract, is entitled to protection from misappropriation under civil law. We construe § 134.90(6) to preempt common law claims for unauthorized use of confidential information that does not meet the statutory definition of a trade secret, as well as common law claims, however denominated, that are based solely on allegations or evidence either of misappropriation of a trade secret in violation of § 134.90(1) and (2) or unauthorized use of confidential information. We conclude that this construction best effectuates the purpose of § 134.90(6)" (¶ 37).

On the facts of this case, the appellate court concluded that the claim that the defendant breached his fiduciary duty to Burbank was based solely on evidence that he used and disclosed Burbank's customer information after the termination of his employment with Burbank. Accordingly, that claim was preempted by Wis. Stat. section 134.90(6) and was correctly dismissed by the circuit court.

Wisconsin Lawyer