June 29, 2012 – Some discretion to implement state contract provisions did not destroy a private contractor’s governmental immunity, according to a recent appeals court decision.

Musson Bros. Inc. (Musson), a construction company, was under contract with the Wisconsin Department of Transportation in 2008 to replace storm sewers. Amidst the work, flooding caused damage to a business, Showers Appraisals (Showers), which sued Musson.

Musson had a duty to ensure proper drainage, the plaintiff claimed. Musson defended on governmental immunity grounds, citing Estate of Lyons v. CAN Ins. Cos., 207 Wis. 2d 446, 558 N.W.2d 658 (Ct. App. 1996), which grants immunity to “agents” in certain circumstances.

Showers responded that governmental immunity did not apply because Musson had discretion to implement contract provisions related to drainage. But in Musson Bros. Inc. v. Showers Appraisals LLC, 2011AP1158 (June 27, 2011), a Wisconsin appeals court disagreed.

“Lyons and its progeny confirm that some discretion on the part of an independent contractor does not, in and of itself, destroy governmental immunity,” wrote Chief Appeals Court Judge Richard Brown, affirming a circuit court order for summary judgment.

Musson had decided to disconnect a large portion of the sewer system, although there was a “prior unwritten decision” to disconnect the lines block-by-block. Musson’s decision affected water drainage when heavy rains hit Oshkosh in 2008, the plaintiff alleged.

Under Wis. Stat. 893.80(4), government agents can’t be sued in tort “for acts done in the exercise of legislative, quasi-legislative, judicial, or quasi-judicial functions.”

To be considered an “agent” under Lyons, the government must approve reasonably precise specifications for the job, the contractor must conform to the specifications, and the contractor must warn the government of possible dangers associated with the specifications.

First, Showers argued that Musson did not meet the Lyons test because it had too much discretion under the contract. The appeals court disagreed.

“[W]e disagree with the principle that just because the contractor has some discretion in how to meet a desired specification outlined in the contract, Lyons immunity is lost as to that decision,” wrote Judge Brown, noting the state’s oversight. “The bottom line is that the DOT was regularly on site and kept a close eye on Musson’s activities.”

Showers also argued that regardless of Lyons, Musson had a ministerial duty to alleviate the known and compelling danger created by the heavy rains. Ministerial duties, unlike discretionary duties that involve decision making, are not protected by immunity.

Again, the appeals court disagreed. “Musson, the DOT, and the City had the discretion to decide how to address the danger – which is why this exception does not apply to remove Musson’s immunity pursuant to Lyons,” the chief judge wrote.

Joe Forward is the Legal Writer for the State Bar of Wisconsin.