Wisconsin Lawyer
Vol. 78, No. 10, October 2005

Court of Appeals Digest

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

Arbitration Civil Procedure Criminal Law

Criminal Procedure Insurance Torts

Arbitration

Arbitration Agreements - Unavailability of Arbitrator Named in Agreement

Madison Teachers Inc. v. Wisconsin Educ. Ass'n Council, 2005 WI App 180 (filed 6 July 2005) (ordered published 31 Aug. 2005)

The issue in this case was whether the circuit court erred in ruling that the unavailability of the arbitrator, who was identified by name in an arbitration provision of the parties' affiliation agreement, resulted in a dissolution of the arbitration provision. In a majority decision authored by Judge Wedemeyer, the court of appeals concluded that the primary purpose of the dispute resolution provision in the agreement was to arbitrate disputes that arose between the parties, and therefore that the unavailability of the named arbitrator did not nullify the arbitration provision (see ¶ 6).

The court said that the general rule under the Federal Arbitration Act, 9 U.S.C. §§ 1-16 and the Wisconsin Arbitration Act, Wis. Stat. §§ 788.01-.18, which is patterned after the federal act, is that "`where the arbitrator named in the arbitration agreement cannot or will not arbitrate the dispute, a court does not void the agreement but instead appoints a different arbitrator.' This rule is qualified, however, when it appears that the named arbitrator is central to the arbitration agreement. In other words, if the agreement makes clear that arbitration was only acceptable to the parties on the specific condition that a particular individual arbitrator is utilized, then the unavailability of that person results in nullification of the entire arbitration provision" (¶ 10) (citations omitted). Thus, the question before the court was whether having the person named in the agreement arbitrate this dispute was "as important a consideration as the agreement to arbitrate itself" (id.).

The appellate court began its analysis by stating its presumption that the primary purpose of the agreement was to arbitrate any and all disputes that arose between the parties who were covered under the agreement (see ¶ 12). It then observed that "[w]hen one particular term of an arbitration agreement has failed, we look to the intent of the parties at the time the agreement was entered to determine whether a substituted term should be inserted or whether the agreement will fail altogether" (¶ 12). In order to ascertain that intent, the court looked to the language of the agreement and the surrounding circumstances. The fact that the agreement identifies an arbitrator by name supported the argument that this individual was an important part of the agreement. The agreement language also indicates, however, that the parties wanted prompt resolution of their disputes. Further, "there is no language specifically stating that if [the named arbitrator] is not available, then the parties prefer to take their disputes to the courthouse" (¶ 13).

The surrounding circumstances, as evidenced by the history the parties shared (which is recounted in the opinion at ¶ 14), suggested to the court that arbitration by a neutral party was "the central factor" to these parties. "The history between these parties demonstrates that arbitration was the overriding consideration, rather than the existence of a specifically named arbitrator. There is nothing in the Agreement or the parties' conduct over the last twenty-five years to suggest that [the named arbitrator] personally was more important than the arbitration process itself. The circumstances clearly demonstrate that the parties' chosen preference was resolution of disputes by a neutral party without having to engage in litigation" (¶ 14).

The court of appeals concluded that the trial court erred in ruling that the named individual's ability to act as arbitrator was central to the agreement and that without him no arbitration could take place. "We hold that the essence of the dispute resolution provision was to arbitrate all disputes before a neutral and objective third party without having to rush to the courthouse" (¶ 15).

Judge Fine filed a dissenting opinion, in which he argued that the named arbitrator was the "very essence" of the agreement's dispute-resolution system and that with him no longer available, "that essence is gone" (¶ 19).

Civil Procedure

Mediation - Settlements - Estoppel - Attorney's "Assurances"

Affordable Erecting Inc. v. Neosho Trompler Inc., 2005 WI App 189 (filed 6 July 2005) (ordered published 31 Aug. 2005)

Neosho hired Affordable Erecting to move Neosho's equipment. When Neosho did not pay the bill for the move, Affordable sued for payment and Neosho counterclaimed, alleging that an expensive lathe had been damaged during the move. Affordable brought in its insurer, Acuity, to defend on the counterclaims. The circuit court ordered mediation, and on May 21, 2003, attorneys for Acuity, Affordable, and Neosho signed a settlement agreement. Affordable's lawyer added the following notation on the document: "Settlement contingent on approval from [Affordable's owner] by May 22, 2003 at 12:00 p.m." Acuity later prepared a formal settlement document and a stipulation and order for dismissal, which were sent to all the parties along with settlement checks, as "agreed" upon. Neosho signed the documents and cashed its check (as did its insurer). Affordable did not sign the formalized settlement document or the stipulation and order for dismissal, and it returned its settlement check to Acuity without cashing the check (see ¶¶ 2-5).

On July 24, 2003 the circuit court sent out an order for dismissal with prejudice on the ground that the matter had not been diligently prosecuted. Several follow-up letters were sent to Affordable requesting its signature on the settlement documents, but Affordable did not sign the documents. In March 2004 Affordable filed another action seeking payment by Neosho. The circuit court dismissed the complaint, holding that Affordable and Neosho had entered into a valid settlement agreement and that Affordable was estopped from reasserting its contract claim.

The court of appeals, in a decision written by Judge Snyder, disagreed with the circuit court's holding as to the validity of the settlement agreement but affirmed dismissal of the complaint on the basis of the estoppel holding. First, the court of appeals held that there was no valid settlement pursuant to Wis. Stat. section 807.05. The court "agree[d] with Affordable that the mediated agreement does not comport with the requirements of Wis. Stat. § 807.05. The verbal assurances of Affordable's attorney do not satisfy the statutory requirement that an agreement be `subscribed' by a party or the party's counsel" (¶ 13). In past cases the court had "rejected the contention that oral assurances satisfy the statutory requirements and concluded that Wis. Stat. § 807.05 is an exception to the general rule that oral agreements are binding" (¶ 14). Moreover, the court has also rejected "the argument that a party may subscribe to an agreement by his or her conduct alone" (¶ 15). "Because Wis. Stat. § 807.05 does not provide for a party to subscribe to an agreement through verbal assurances or general conduct, the mediated agreement between Affordable, Neosho, and the insurers is deficient. Consequently, the circuit court's determination that Affordable's attorney's verbal assurances along with Affordable's failure to diligently prosecute its claim complied with § 807.05 reflects an erroneous view of the law" (¶ 16).

The court of appeals also held, however, that dismissal of the complaint was justified on the second ground, equitable estoppel. "All of the elements required to invoke estoppel are present in this case. Affordable concedes the first two elements of estoppel, stating that `Affordable did not attend the mediation hearing and after the mediation hearing Affordable was not decisive in assuring all parties that the case was not settled.' However, it disputes that Neosho reasonably relied on the mediated agreement because the contingent approval by Affordable was not forthcoming" (¶ 18).

The court of appeals disagreed with Affordable. The court of appeals held that the circuit court properly determined that "Neosho, General Casualty, and Affordable's insurer, Acuity, acted in reasonable reliance on the mediated agreement. Specifically, the court found that following mediation, Acuity `immediately circulated a draft version of the more formal Mutual Release and Settlement Agreement' and two weeks later sent the `stipulation and order for dismissal along with settlement payments to all parties.' Furthermore, Acuity acknowledged in its letter `the above captioned matter has settled.' Neosho and General Casualty signed the formalized settlement agreement and cashed their settlement checks. The court also observed that `[e]ven after the case was dismissed, [Affordable] sat back and did nothing for eight months, until March 2004 when it re-filed the exact same complaint, word for word, in Waukesha County.' Based on the record, we conclude that Neosho had no reason to doubt that the settlement was final and binding" (¶ 19).

Jurisdiction - Preemption - Animal Vaccines

Patrick Fur Farm Inc. v. United Vaccines Inc., 2005 WI App 190 (filed 26 July 2005) (ordered published 31 Aug. 2005)

Patrick, a large mink farm, purchased the BIOCOM-DP vaccine for its mink herd from United Vaccines, which was federally licensed to sell the drug. Later that year the mink herd suffered outbreaks of several different diseases, which Patrick attributed to the vaccine's failure. Patrick sued United Vaccines for damage to the herd and alleged that United Vaccines made several misrepresentations about BIOCOM-DP's

effectiveness. Patrick also alleged breach of warranty. The circuit court granted summary judgment in favor of United Vaccines on three separate grounds, including federal preemption.

The court of appeals, in an opinion written by Judge Peterson, affirmed. "The Viruses, Serums, Toxins, Antitoxins and Analogous Products Act, 21 U.S.C. §§ 151-159, prohibits the preparation, sale, barter or exchange of an animal vaccine that is `worthless, contaminated, dangerous, or harmful ....' See 21 U.S.C. § 151 (1999). The Act also delegates authority to regulate animal vaccines such as BIOCOM-DP. Regulatory authority of this vaccine ultimately rests with a federal agency, the Animal and Plant Health Inspection Service" (¶ 9).

"Under its authority, the agency has promulgated an extensive regulatory scheme governing animal vaccines. See 9 C.F.R. §§ 101-23 (2005). It has also expressed its intent to preempt state law. `States are not free to impose requirements which are different from, or in addition to, those imposed by [the United States Department of Agriculture] regarding the safety, efficacy, potency, or purity of a product.' 57 Fed. Reg. 38758, 38759 (Aug. 27, 1992)" (¶ 10).

The court of appeals rejected Patrick's argument, based on a Minnesota case, that "preemption analysis turns on whether [an off-label] representation is substantially similar to BIOCOM-DP's federally approved label" (¶ 12). The court was unpersuaded in light of the federal agency's "express statement regarding its intended scope of preemption: `where safety, efficacy, purity, and potency of biological products are concerned, it is the agency's intent to occupy the field'" (¶ 15).

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Criminal Law

Child Neglect - "Person Responsible for Child's Welfare" - Application of Statute to 17-Year-Old Actor

State v. Hughes, 2005 WI App 155 (filed 14 June 2005) (ordered published 29 July 2005)

Gooden asked Etter Hughes to care for Gooden's 1-year-old son because Gooden was being evicted from her apartment. Etter Hughes agreed. During the two weeks when Gooden's son was residing in the Hughes' home, Etter Hughes asked her 17-year-old daughter to share responsibility for the boy's welfare (a fact which the daughter admitted). The boy died and the 17 year old was charged in connection with the death, ultimately pleading guilty to three charges, including a charge of child neglect resulting in death.

The defendant filed a postconviction motion in which she sought to withdraw her guilty plea to the child neglect charge. She claimed that she cannot, as a matter of law, be considered a "person responsible for the [victim's] welfare," which is an element of the child neglect charge. The circuit court denied the motion and the court of appeals, in a decision authored by Judge Wedemeyer, affirmed.

The crime of neglecting a child can only be committed by a "person responsible for [the] child's welfare." See Wis. Stat. § 948.21(1). For purposes of chapter 948, a "person responsible for the child's welfare" includes "the child's parent; stepparent; guardian; foster parent; treatment foster parent; an employee of a public or private residential home, institution or agency; other person legally responsible for the child's welfare in a residential setting; or a person employed by one legally responsible for the child's welfare to exercise temporary control or care for the child." Wis. Stat. § 948.01(3) (emphasis added).

The court of appeals concluded that that "the plain language of the statute makes clear that a seventeen-year-old employed by a parent to care for the parent's child can be a person responsible for the welfare of the child. The record reflects that [the defendant] freely chose to assume responsibility for the welfare of [the one-year-old boy] at her mother's request. Thus, [the defendant] became a voluntary caretaker of [the child] and, as such, she was a person responsible for his welfare" (¶ 16). The court was not persuaded by the defendant's contention that because she was not yet 18, she cannot be considered a responsible person. "There is no indication that the statutory language requires a person to be eighteen years old in order to satisfy the definition" (¶ 15).

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Criminal Procedure

Withdrawal of Insanity Plea - Personal Colloquy by Court Not Required

State v. Francis, 2005 WI App 161 (filed 15 June 2005) (ordered published 29 July 2005)

The defendant entered pleas of not guilty and not guilty by reason of mental disease or defect (NGI) to numerous charges arising out of a single incident. She later accepted a plea bargain in which she pleaded no contest to one count and guilty to several other counts. Her attorney encouraged acceptance of the plea offer because the reduction in charges reduced the potential prison sentence and because the doctor's report did not support a viable NGI defense.

The defendant subsequently moved to withdraw her pleas, claiming that the circuit court erred when it accepted her guilty and no contest pleas without conducting a personal colloquy to ensure that she waived her NGI plea knowingly, voluntarily, and intelligently. The circuit court denied the motion and the court of appeals, in a decision authored by Judge Brown, affirmed.

The court concluded that "only fundamental constitutional rights warrant [the] special protection [of a personal colloquy] and that an NGI plea falls outside the realm of fundamental rights" (¶ 22). Further, with regard to whether the judge must personally address the defendant to ensure a knowing, voluntary, and understanding waiver of an NGI plea, the court discerned the following "prevailing rules" from cases in multiple jurisdictions (including Wisconsin):

"First, defendants can withdraw their NGI pleas through counsel rather than personally. In deciding whether to withdraw a plea of NGI, counsel has no right to act contrary to the defendant's expressed wishes, as the decision ultimately belongs to the defendant. In the absence of an objection, however, counsel acts on the defendant's behalf when counsel withdraws the defendant's NGI plea and may exercise professional discretion in choosing whether or not to do so" (¶ 23) (citations omitted). "In accepting counsel's withdrawal of an NGI plea, the circuit court need not personally address the defendant to ascertain his or her assent" (¶ 24) (citations omitted).

"Moreover, some courts even recognize implicit withdrawals of NGI pleas, i.e., nobody, including defense counsel, formally withdraws the plea. The Ohio courts have held that a validly entered guilty plea automatically waives any insanity defense because such a plea amounts to an implied admission of sanity and has the same effect as an adjudication of guilt following a trial.... A valid guilty plea entered by a defendant is an `implied admission of sanity.' Thus, when a defendant enters a plea of not guilty by reason of insanity, and then later enters a plea of guilty without formally withdrawing the not guilty by reason of insanity plea, the defendant has waived any argument pertaining to the insanity defense" (¶ 25) (citations omitted). "Based [on the cases from which these principles were discerned, the defendant] had no right to insist on a personal colloquy as a prerequisite to a valid plea withdrawal.... [B]ecause her subsequent plea of guilty is fundamentally inconsistent with an NGI defense, she implicitly withdrew the NGI by her own act. So long as the latter plea was not otherwise deficient ... she has no valid complaint (¶ 26) (citations omitted). The court also noted that at the time the defendant entered the guilty and no contest pleas, the circuit judge had no reason to doubt her sanity "either at that time or when she committed the offenses" (¶ 27).

In sum, the court of appeals concluded that "[c]ourts engage in personal colloquies in order to protect defendants against violations of their fundamental constitutional rights. Neither the federal constitution nor our state constitution confers a right to an insanity defense or plea. The court therefore had no obligation to personally address [the defendant] with respect to the withdrawal of her NGI plea" (¶ 1).

In a footnote the appellate court offered the following advice to circuit judges: "While we hold that a personal colloquy is not required to withdraw an NGI plea, we believe it is nonetheless advisable for trial courts to engage in personal colloquy for at least two reasons: First, it helps satisfy the court that the defendant is aware and alert as to what is going on. Second, the record is protected from later ineffective assistance of counsel claims where a convicted defendant might assert that counsel never discussed the NGI withdrawal" (¶ 27 n.5).

Sentencing - Erroneous Information About Prior Convictions

State v. Tiepelman, 2005 WI App 179 (filed 14 July 2005) (ordered published 31 Aug. 2005)

The defendant, who had received a lengthy sentence, brought a postconviction motion seeking resentencing. He claimed that the judge imposed the sentence under the mistaken belief that the defendant had more than 20 prior convictions, when in fact he had only nine. The defendant did not dispute the occurrence of any of the underlying conduct considered by the court. The trial judge acknowledged that his reference at sentencing to "over twenty prior convictions" was wrong but went on to explain that when he fashioned the sentence, he was looking at the defendant's "well-established pattern of criminal behavior" and that such behavior was not disputed. The judge denied the motion for resentencing. In a decision authored by Judge Lundsten, the court of appeals affirmed.

A defendant who asks for resentencing on the ground that the court relied on inaccurate information must show both that the information was inaccurate and that the court relied on it. The defendant carries the burden of proving inaccuracy of the information and prejudicial reliance by the sentencing court by clear and convincing evidence. Once a defendant has done so, the burden shifts to the state to show that the error was harmless. An error is harmless if there is no reasonable probability that it contributed to the outcome (see ¶ 6).

The appellate court concluded that the defendant failed to carry his burden of showing that the sentencing judge prejudicially relied on inaccurate information. The court said that "the record supports the trial judge's view that it was the defendant's prior conduct that mattered, not the number of his prior convictions" (¶ 8).

Said the court, "[c]onviction information is normally used by sentencing judges simply as one means of determining whether a defendant has previously engaged in criminal conduct. If, for example, a defendant admits to three prior bank robberies, but only one of those robberies resulted in a conviction - perhaps because of a plea agreement - the sentencing judge typically considers the defendant's actual behavior, not the number of convictions, when assessing his or her character and dangerousness. It is the defendant's prior behavior that logically informs a judge of the defendant's character or propensity to commit crimes, not whether that behavior is proven at sentencing by means of a conviction record" (¶ 9).

In this case the appellate court was satisfied that the record establishes that the sentencing judge did not prejudicially rely on the number of prior convictions but instead relied on what the judge characterized as the defendant's "`well-established pattern of criminal behavior'" (id.).

Speedy Trial - Successive Prosecutions - Determining Length of Delay

State v. Urdahl, 2005 WI App 191 (filed 14 July 2005) (ordered published 31 Aug. 2005)

On April 16, 2001 the state charged the defendant with numerous offenses arising out of an incident that occurred on April 13, 2001. The charges were dismissed on Aug. 8, 2001, when the state's witnesses did not appear for the preliminary hearing. The state recharged the defendant on Oct. 3, 2001. After numerous delays, a trial was scheduled for Dec. 19, 2003. However, the trial was adjourned after the court granted the defendant's motion to discharge his attorney. Acting through new counsel the defendant filed a motion to dismiss on the ground that he had been denied a speedy trial. The motion was heard and denied in January 2004. The case concluded with sentencing in February 2004.

The defendant appealed, arguing that the delay in bringing him to trial in the second prosecution violated his right to a speedy trial under the Sixth Amendment to the United States Constitution and article I, section 7 of the Wisconsin Constitution. A key factor in analyzing speedy trial claims is the length of the delay. The parties disagreed on how that calculation should be made here. The defendant argued that the length of delay should be calculated from the date of his original arrest (April 13, 2001) to the date he was scheduled for trial in the second action (Dec. 19, 2003), including the time from the dismissal of the first action until the filing of the second. The state argued that the speedy trial right did not attach until the filing of the complaint in the second action on Oct. 3, 2001.

In a decision authored by Judge Vergeront, the court of appeals concluded that, under United States v. MacDonald, 456 U.S. 1 (1982), the time between the Aug. 8, 2001 dismissal of the initial charges against the defendant and the filing of the second complaint on Oct. 3, 2001 is not included in determining whether the defendant's constitutional right to a speedy trial was violated (see ¶ 20).

The court noted different approaches among jurisdictions as to whether the predismissal time period (here, the time between the arrest on April 13, 2001, and the dismissal on Aug. 8, 2001 of the first prosecution) should be counted in analyzing the length of delay for speedy trial purposes. It indicated a reluctance to decide which approach to follow in the absence of fuller briefing by the parties. The court concluded that it need not make that decision in this case because, even if the court determined that the predismissal time period should be initially included, only two weeks of it would be assessed against the state when the reason for the delay is factored in. To resolve the defendant's appeal, the court assumed without deciding that it should include the predismissal time period (see ¶ 24). Applying all the factors that pertain to the speedy trial calculus, the court concluded that the defendant's right to a speedy trial was not violated (see ¶¶ 26-37).

Child Witnesses - Videotaped Statements - Confrontation

State v. James, 2005 WI App 188 (filed 6 July 2005) (ordered published 31 Aug. 2005)

James was charged with several counts of sexually assaulting a child based on incidents involving two children. Before trial, the state gave notice that it would introduce at trial videotaped statements made by the children pursuant to Wis. Stat. section 908.08. The state also declared that "[i]t would play the videotapes, perhaps conduct an abbreviated direct examination, and then produce the children for cross-examination at James' request." The defendant moved to exclude this evidence on the basis that his constitutional rights, as defined in Crawford v. Washington, 541 U.S. 36 (2004), would be violated (see ¶ 3).

The circuit court sustained the defense objection that this procedure violated James' rights. First, "§ 908.08(3)(e) imposed a prerequisite to the court's admission of videotaped statements: it charged the court to determine that the statements, if admitted, would not `deprive any party of a fair opportunity to meet the allegations made in the statements.' The court concluded that it could not make such a determination prior to live testimony because it would not know whether a Crawfordviolation would occur until meaningful cross-examination had taken place" (¶ 5). The circuit court also looked to its authority under Wis. Stat. sections 904.03 and 906.11 to regulate evidence.

The court of appeals, in an opinion written by Judge Brown, reversed. "We appreciate the trial court's concern with administering justice in a fair and efficient manner and its desire to do so proactively without waiting until it is too late to avert prejudice. However, it is apparent to us that underlying the court's decision was the premise that this statute had no legitimate purpose and was not a proper exercise of authority.... We conclude that the court's rationale was motivated by the belief that the legislature had improperly usurped the court's authority, in violation of the constitutional separation of powers doctrine" (¶ 14).

The court of appeals held, however, that section 908.08 is constitutional. First, "the order of evidence prescribed in the statute furthers the protective purpose of the statute and therefore legitimately qualifies as an exercise of legislative power to regulate for the welfare of the public" (¶ 18). Second, section 908.08 falls "within the vast region of shared power between the judiciary and the legislature" (¶ 19). "Although the statute requires the court to admit the videotapes once the court has satisfied itself that certain prerequisites have been met and deprives the court of the right to control the order in which this evidence is to be taken, it in no way fetters the fact finder's consideration of the evidence presented. The statute does not determine the result of any case before the court and therefore leaves the judiciary's authority fully intact with respect to its most important function" (¶20). Wisconsin courts have upheld other statutes that actually exclude evidence; in contrast, section 908.08 affects only the "order and presentation of admitted evidence" (¶ 21).

"Finally, we observe that the mere hypothetical possibility that one or both children will `clam up' on the stand does not operate to void an otherwise constitutional exercise of legislative power. Speculation cannot overcome the presumption in favor of a statute's constitutional validity. The State has promised to produce the children for cross-examination upon James' request. Nothing in the record demonstrates that either girl is disinclined to testify or that the State has in bad faith made an empty promise. The notion that James cannot expect a full and exacting cross-examination lacks any factual basis" (¶ 22).

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Insurance

Duty to Defend - Defamation

Baumann v. Elliott, 2005 WI App 186 (filed 20 July 2005) (ordered published 31 Aug. 2005)

Baumann and his security firm filed a complaint against Elliott, Elliott's security firm, and Elliott's insurer. The complaint set forth three claims: 1) tortious interference with contracts and prospective contracts, 2) defamation, and 3) threats to injure or accuse of a crime. After Elliott tendered his defense to the insurer, the latter sought a declaration that it had no duty to defend or to indemnify. The circuit court granted summary judgment in favor of the insurer on the grounds that it had no duty to indemnify or to provide its insured a defense in an action "for defamation of character because the policy required an `occurrence' to trigger coverage for `personal injury'" (¶ 1).

The court of appeals, in an opinion written by Judge Brown, affirmed. Case law mandates that in coverage disputes, the court looks only to the four corners of the complaint itself. "[T]he duty to defend is `predicated on allegations in a complaint which, if proved, would give rise to recovery under the terms and conditions of the policy'"(¶ 7). Yet, once the coverage issue is decided, "coverage is no longer open to debate. An insurer need not defend a suit in which it has no economic interest"

(¶ 10). Moreover, even assuming the circuit court "should have limited its duty-to-defend analysis to the `four corners' of the complaint, it reached the correct result. Elliott concedes that the `occurrence' prerequisite to personal injury coverage purports to afford coverage only for negligent defamation. No fair reading of this complaint reveals such a claim. Rather, the allegations assert intentional, willful, malicious defamation" (¶ 12). The court of appeals also considered the plaintiff's "prayer for relief," despite case law that holds that the ad damnum clause is not a "substantive part" of the complaint (¶ 16).

Finally, the court of appeals held that its construction of the policy did not render coverage "illusory." "Because the parties agree that the Cincinnati policy purports to offer coverage for negligent defamation, we conclude that the `occurrence' requirement in the policy precludes coverage only for defamation in the following circumstances: (1) ordinary cases where the plaintiff proves express malice or (2) conditional privilege situations where the plaintiff proves express malice upon a showing of fault exceeding negligence. It does not deny coverage where a plaintiff proves that Elliott abused a qualified privilege by failing to exercise due care, nor does it deny coverage where a plaintiff can recover without showing express malice, i.e., where Elliott does not put conditional privilege at issue. Thus, we deem the policy nonillusory" (¶ 24).

Statute of Limitation - Date of "Loss"

Bronsteatter & Sons v. American Growers Ins. Co., 2005 WI App 192 (filed 26 July 2005) (ordered published 31 Aug. 2005)

The Bronsteatter company, which engages in cash crop farming, purchased a farm owner's insurance policy that covered damage caused by vandalism. Unaware that its 12-row corn planter had been vandalized, Bronsteatter planted more than 1,000 acres of corn with the damaged planter, which overfertilized the seeds and killed them. The planting occurred on May 17 or 18, 2002. On June 3, 2002, Bronsteatter reported the damage to the police and the insurer. On June 4, 2003, Bronsteatter filed this lawsuit against the insurer for not paying its damages. The circuit court granted summary judgment in favor of the insurer on the ground that Wis. Stat. section 631.83(1)(a) requires the action be commenced within 12 months after the inception of the loss.

The court of appeals, in an opinion written by Judge Peterson, affirmed. The parties agreed that the policy was governed by Wis. Stat. section 631.83(1)(a), which provides that an action on a farm insurance policy must "be commenced within 12 months after the inception of the loss." But they disagreed as to what date constituted the inception of the loss. Bronsteatter argued that "its loss did not occur until it completed its corn harvest in December 2002, making its June 4, 2003, complaint timely." The insurer argued that the loss occurred on the date of the actual vandalism, which occurred sometime in May 2002 (before the police report). And the "circuit court took a third approach, fixing the inception of the loss at the time of planting" (¶ 7).

The court of appeals rejected Bronsteatter's argument because "it ignores the word `inception.' While the damage or loss Bronsteatter seeks recovery for is reduced crop yield, we agree with the circuit court that the inception of that loss was the moment the overfertilized seeds were planted with the vandalized corn planter. That Bronsteatter did not know what the actual yield from the field would be, and therefore could not exactly value that loss, does not mean that it was not damaged at the time of planting" (¶ 10).

Bronsteatter also unsuccessfully argued that the statute contemplated a distinction between "the damage date" and "the date of the insured-against peril or `event'" (¶ 11). The court of appeals held that the purported distinction had no support in the case law and "hinge[d] on the same premise [the court] rejected above: that it suffered no damage or loss until the completion of the crop harvest" (¶ 12).

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Torts

Breach of Fiduciary Duty - Statute of Limitation

Zastrow v. Journal Communications Inc., 2005 WI App 178 (filed 28 July 2005) (ordered published 31 Aug. 2005)

This action involved a trust agreement under which employees of Journal Communications and its subsidiaries can acquire units of beneficial interest in the stock of Journal Communications. After a trial to the court, the circuit court found that the trustees had negligently failed to fulfill their fiduciary duty, by failing to disclose to a certain group of former employees the availability of a longer period for selling back their units if they chose to retire when the subsidiary that employed them was sold. The court entered judgment in favor of the employees. This appeal followed.

The dispositive issue before the appellate court was whether the circuit court correctly decided that the action was governed by a six-year statute of limitation rather than a two-year statute of limitation. The plaintiffs argued that either Wis. Stat. section 893.52 (Action for Damages for Injury to Property) or section 893.43 (Action on Contract) applies to a breach of fiduciary duty claim. The defendants argued that the section 893.57 two-year statute of limitation for intentional torts applies. The circuit court applied the six-year statutes on the ground that the claim involved a negligent rather than intentional breach of duty.

In a decision authored by Judge Vergeront, the court of appeals reversed. It concluded that under Beloit Liquidating Trust v. Grade, 2004 WI 39, 270 Wis. 2d 356, 677 N.W.2d 298, section 893.57 applies to breach of fiduciary duty claims. This statute provides that "[a]n action to recover damages for libel, slander, assault, battery, invasion of privacy, false imprisonment or other intentional tort to the person shall be commenced within 2 years after the cause of action accrues or be barred."

In Beloit Liquidating, the supreme court characterized a breach of fiduciary duty as an intentional tort and applied the two-year statute of limitation for intentional torts, even though the conduct alleged was that the defendants negligently allowed certain contracts and failed to keep adequate accounts, act prudently, and disclose losses. Here, the court of appeals said that it could not see how the conduct involved in Beloit Liquidating was any more "intentional" than the conduct forming the basis of the Zastrow plaintiffs'claim, i.e., the failure of the defendants to make certain disclosures as described above. Said the court, "[w]e conclude that the supreme court's decision in Beloit Liquidating is controlling and requires the application of the two-year statute of limitations in Wis. Stat. § 893.57 to the ... employees' breach of fiduciary duty claims that the court decided in their favor. From the standpoint of the intentionality of the conduct, we see no significant distinction between that alleged in Beloit Liquidating and the failure to disclose information that the circuit court found to be a breach of fiduciary duty here" (¶ 28).

The plaintiffs also argued that the two-year statute for intentional torts is inapplicable to this case because, by its terms, it applies to an intentional tort "to the person," whereas their injuries are economic, that is, injury to their property. The court of appeals disagreed, again relying on Beloit Liquidating. "[T]he injury in Beloit Liquidating was not bodily injury but was economic injury, that is, injury to personal property, as is the injury in this case" (¶ 28).

Finally, the plaintiffs did not provide and the appellate court could not find any authority that would support applying a different statute of limitation to a breach of fiduciary duty claim in a situation, such as the one here, in which the fiduciary relationship arises out of a trust agreement or employee stock purchase agreement (see ¶ 28).

Cause-in-Fact - Public Policy

Cefalu v. Continental W. Ins. Co., 2005 WI App 187 (filed 6 July 2005) (ordered published 31 Aug. 2005)

A truck driven by Theys overturned while traveling on a highway and spilled its load of limestone. Police responded, closed the roads, and set up flares. Wojnowski, a fire chief, responded in his department's fire truck and turned off the siren as he approached the intersection. The fire truck struck a car driven by Cefalu as it approached the scene. A stopped garbage truck apparently had blocked the line of vision between the two vehicles. Wojnowski and his insurer contended that Theys' rollover accident was a cause-in-fact of Cefalu's injuries. The circuit court disagreed.

The court of appeals, in an opinion written by Judge Anderson, affirmed. "The test of cause-in-fact is whether the negligence was a `substantial factor' in producing the injury. `The phrase, substantial factor, denotes that the conduct has such an effect in producing the injury as to lead a reasonable person to regard it as a cause, using that word in the popular sense. There may be several substantial factors in any given case.' To prove that a tortfeasor's negligence was a substantial factor in producing a plaintiff's injuries, it must be shown that there was an `unbroken sequence of events' where the negligence of the tortfeasor was actively operating at the time of the accident which produced the plaintiff's injury" (¶ 11).

The court of appeals distinguished other cases: "[U]nlike the drivers in [three cited cases], Theys' negligence was not actively operating by the time of the Cefalu-Wojnowski collision and was not a substantial factor in producing the damages Cefalu sustained as a result of the collision. This is the only reasonable conclusion that can be drawn from the facts presented. Accordingly, we conclude the circuit court properly ruled, as a matter of law, that Theys' rollover accident was not a cause-in-fact of the Cefalu-Wojnowski collision and Cefalu's resulting injuries" (¶ 19). Finally, the court said that even if it held that Theys' negligence was a cause-in-fact, public policy considerations, especially remoteness, precluded Theys' liability for Cefalu's injuries (see ¶ 20).

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