July 26, 2013 – In Showers Appraisals LLC v. Musson Bros. Inc., 2013 WI 79 (July 18, 2013), the Wisconsin Supreme Court reversed the Court of Appeals in a case involving a claim of immunity by a governmental contractor.

The case arises from flood damage to Mark Showers’ property in the city of Oshkosh, where Musson Brothers Inc. (Musson) was conducting sewer removal and installation as a contractor for the Wisconsin Department of Transportation (DOT). The circuit court, and the court of appeals, in granting summary judgment, concluded that Musson was a governmental contractor entitled to immunity under Wis. Stat. section 893.80(4). The Wisconsin Supreme Court reversed the decision and clarified the law in Wisconsin related to governmental contractor immunity under the statute.

Background 

In September 2007, the DOT and city of Oshkosh entered into a state-municipal agreement for a sewer improvement project along Ohio Street in Oshkosh. As part of the bidding process, the DOT informed potential bidders that they would be “responsible for any damages to property … occurring through their own negligence … incident to the performance of work under this contract.” The DOT ultimately awarded the contract to Musson.

Showers, who owns property on the corner of Ohio Street and Sixth Avenue, had just completed constructing a new building on that property in November 2007. Work on the DOT-funded Ohio Street sewer project began in Spring 2008.

At that time, Musson removed the entire roadway along Ohio Street, from the storm sewer’s outlet at the Fox River to the end of Ninth Street, disconnected the storm sewers, and placed a bladder at the discharge at the Fox River so that water would not flow from the river into the non-operational sewer system. Musson’s decision to proceed in this manner caused some disputes with city officials, as the city was concerned that by removing the entire storm sewer, Musson would compromise the city’s ability to manage storm water.

On June 8, 2008, rain storms inundated Oshkosh, leaving water standing in the exposed roadbed outside Showers’ property on Ohio Street. A manager with Musson noted that Musson’s pumps were unable to maintain drainage for the amount of rain that had fallen. Showers noted multiple conditions that impeded drainage, including mounds of soil in the roadbed and drainage inlets clogged with soil and debris. When Showers spoke with representatives of the city and Musson about the issue and expressed concern about another rainstorm that was predicted to occur, he was told there was nothing they could do about the situation.

During a torrential rainstorm on the evening of June 12, 2008, water was overflowing from the storm sewers in Showers’ parking lot, and Ohio Street was completely flooded. After the June 12 rains, the basement at Showers’ property flooded with more than 7 feet of water. An engineer retained by Showers concluded that 117,500 gallons of water had been trapped in the roadbed outside Showers’ property for 15 to 18 hours, and the hydrostatic pressure caused by that water caused Showers’ basement floor to rupture, allowing the water to seep up into the basement. Showers incurred at least $140,000 in damage to his business and personal property, and was forced to relocate for four months while the property could be cleaned, repaired, and restored.

In July 2009, Showers commenced an action against Musson and the city, alleging “improper drainage, design, maintenance, excavation, construction procedures, and failure to take corrective measures,” caused Showers’ basement to flood following the June 8 and June 12 storms. The city and Musson moved for summary judgment, which the circuit court granted, on the basis that both entities were entitled to governmental immunity under Wis. Stat. section 893.80(4). Showers appealed the grant of summary judgment as to Musson, and the court of appeals affirmed the grant of summary judgment. Showers then filed a petition for review with the supreme court.

Analysis of the Governmental Immunity Statute 

When beginning a statutory analysis, the courts first look at the language of the statute itself. Section 893.80(4) provides that, “[n]o suit may be brought against any [governmental entity] … or against its officers, officials, agents or employees for acts done in the exercise of legislative, quasi-legislative, judicial or quasi-judicial functions.”

Justice Patience Drake Roggensack, writing the majority opinion for the court, noted that, “Legislative and quasi-legislative functions generally refer to those policy choices made in an official capacity, e.g., when a governmental entity chooses one project design over another. Quasi-judicial functions generally refer to those acts that involve the exercise of discretion in coming to a judgment.”

In this case, the parties’ arguments center on the application of the statute in regard to a governmental contractor who claims immunity derived from the governmental entity with which the contractor has a contractual relationship. The U.S. Supreme Court analyzed this issue in Boyle v. United Technologies Corp., 487 U.S. 500 (1988). In that case, the Supreme Court set out a three-part test to determine whether the relationship between the governmental contractor and the governmental entity was such that the contractor should be immune from liability, namely, that “(1) the United States approved reasonably precise specifications; (2) the equipment conformed to those specifications; and (3) the supplier warned the United States about the dangers in the use of the equipment that were known to the supplier but not to the United States.”

In further explanation of this test, the Supreme Court made it clear that a discretionary act of a governmental officer is a necessary component to potential immunity for the governmental contractor.

The Wisconsin Supreme Court here further expanded on the test presented in Boyle and subsequent cases in Wisconsin, such as the Estate of Lyons v. CNA Insurance Cos., 207 Wis. 2d 446 (Ct. App. 1996), noting that analyzing whether the conduct of a governmental contractor was undertaken as a statutory “agent” within the scope of the immunity afforded by Wis. Stat. section 893.80(4) is not sufficient. An equally dispositive question is whether the relevant decision of the governmental entity itself is entitled to immunity under the statute because it was made through the exercise of a legislative, quasi-legislative, judicial, or quasi-judicial function of the governmental entity. Or, as Justice Roggensack noted, “only certain types of acts fall within the immunity shield of § 893.80(4).”

The court went on to further clarify, stating that “When a governmental contractor seeks immunity under Wis. Stat. § 893.80(4), the contractor must show both that the contractor was an agent as that term is used in § 893.80(4), i.e., as is expressed in the Lyons test, and that the allegedly injurious conduct was caused by the implementation of a decision for which immunity is available for governmental entities under § 893.80(4).” [Emphasis added by the court.]

This analysis is well supported nationwide, as the court noted that “other jurisdictions have concluded that while governmental contractors will not be liable for injuries alleged to have arisen from defects in a design the government chose, it is well settled that this rule of non-liability does not exempt a contractor from liability where the injury arises from the contractor’s negligent performance of the work.”

In applying the analysis to the facts in this case, the court found that under the Lyons test, Musson failed to demonstrate it is an agent entitled to governmental contractor immunity, because the relevant contractual language demonstrates it was not subject to “reasonably precise specifications” as are necessary to invoke contractor immunity as an agent of a governmental entity.

In fact, the contract provided that Musson “is solely responsible for the means, methods, techniques, sequences and procedures of construction.” [Emphasis added by the court]. Put another way, Musson was not only empowered to take actions involving how the construction process was to proceed, but also had responsibility for the actions it took, including incurring liability if its actions caused injury. Evidence was presented at the circuit court that showed numerous instances of Musson taking actions without DOT or city approval, demonstrating Musson had substantial independent decision-making authority in performing its tasks.

As such, the court found the Musson failed to satisfy the Lyons test and is not an agent under Wis. Stat. section 893.80(4).

The court also further analyzed Musson’s claim for immunity in light of the injury alleged, in the statute’s limit of immunity to those “acts done in the exercise of legislative, quasi-legislative, judicial or quasi-judicial functions.” Showers’ claims are that Musson negligently performed its excavation, construction, and drainage responsibilities under the contract. This is fundamentally different from the assertion that a governmental entity negligently selected a design that a contractor implemented for a government project. As a result, Showers’ allegations do not implicate the types of acts for which Wis. Stat. section 893.80(4) affords immunity to a governmental entity, therefore they cannot form the basis for immunity for the contractor.

The supreme court therefore concluded that Showers’ claims should be analyzed under standard negligence principles, and that summary judgment was inappropriate based on the substance of the complaint. As a result, the decision of the court of appeals was reversed and the cause remanded back to the circuit court. 

Deborah Spanic is a legal writer for the State Bar of Wisconsin.