Civil Procedure
Default – Surety
Backus Elec. v. Petro Chem. Sys., (filed 13 Feb. 2013) (ordered published 27 March 2013)
Holding: The circuit court properly granted a default judgment in a situation in which a surety failed to timely file an answer.
Petro Chemical Systems (PCS), a general contractor, and Backus agreed to a subcontract for Backus to perform electrical work on a construction project. PCS contracted with Old Republic Insurance to act as its surety, guaranteeing PCS’s performance and payments. PCS terminated the contract with Backus, which sued PCS alleging wrongful termination of the contract and seeking payment for work already done. Old Republic was also named in the complaint, but it did not file a timely answer. The circuit court granted a default judgment against Old Republic, which appealed.
Prof. Daniel D. Blinka, U.W. 1978, is a professor of law at Marquette University Law School, Milwaukee.
Prof. Thomas J. Hammer, Marquette 1975, is a law professor and Director of Clinical Education at Marquette University Law School, Milwaukee.
The court of appeals affirmed in an opinion written by Judge Gundrum. The court rejected Old Republic’s contention that as a surety it could not be found liable before PCS was found liable. Case law establishes that a party must answer on its own behalf; “it will not suffice to avoid default judgment that another party has denied liability on behalf of the nonanswering defendant” (¶ 9).
“Here, Old Republic did not file a timely answer or move for an extension of time to make its untimely answer timely. It cannot contest liability when it has no valid answer putting liability in issue” (¶ 13). “As a matter of law, Old Republic’s surety status does not save it from default judgment” (¶ 14). Nor had Old Republic suggested any options short of default; thus, the circuit court did not abuse its discretion (see ¶ 20).
Criminal Procedure
Search and Seizure – Suppression of Evidence Not Required When Excessive Force Is Causally Unrelated to Recovery of Evidence
State v. Herr, 2013 WI App 37 (filed 6 Feb. 2013) (ordered published 27 March 2013)
Holding: Suppression of evidence is not required when excessive force by police is causally unrelated to the recovery of the evidence.
Police officers apprehended Herr after a lengthy (more than 15 miles) vehicle chase that involved speeds in excess of 85 miles per hour. After the officers were finally able to stop Herr’s vehicle, they drew their weapons and ordered Herr to show his hands and exit the vehicle. Herr did not follow the command to exit but remained inside. While attempting to light a cigarette, he put his hands out of the officers’ view.
One of the officers then drew his taser and deployed it on Herr for five seconds. The officer later testified that he used the taser because he feared that the pursuit might continue, because he believed Herr had the opportunity to put the car back into gear and hit a squad car or an officer. “The taser had its effect,” and the officers then took Herr into custody (¶ 4). Subsequent investigation revealed evidence that Herr was driving under the influence of intoxicants. He was charged with fifth-offense operating while intoxicated (OWI) and fleeing an officer.
Herr filed a motion to suppress all statements he had made, the results of the chemical test of his blood (which revealed a blood-alcohol concentration of 0.229 percent), and evidence concerning any other observations made by the arresting officer on the ground that the officer’s use of the taser was unreasonable. The circuit court denied the motion based on a finding that there was no causal connection between the use of force and the evidence collected against Herr. In a decision authored by Judge Reilly, the court of appeals affirmed.
Wisconsin’s appellate courts have not yet addressed whether the exclusionary rule pertains to the excessive use of force, and therefore the court of appeals in this case looked to federal law for guidance. “Our answer is provided by the Seventh Circuit. In United States v. Watson, 558 F.3d 702 (7th Cir. 2009), the Seventh Circuit held that even if police use excessive force, a defendant’s remedy is a suit for damages under 42 U.S.C. § 1983 (2012) or a state statute in conformity therewith, rather than exclusion of the evidence in the defendant’s criminal trial” (¶ 9).
Herr did not argue that there was a causal relationship between the evidence he sought to suppress and the officer’s use of allegedly excessive force. Because recovery of this evidence was not causally related to the use of force, the court of appeals affirmed the circuit court’s decision denying Herr’s motion to suppress. (In a footnote, the appellate court noted that the circuit judge made no findings with respect to the reasonableness of the officer’s use of the taser against Herr. “While we do not decide the issue, our independent review of the record suggests that the use of the taser was most likely reasonable” (¶ 11 n.1).)
Waiver of Counsel – Collateral Attack on Prior Convictions Used to Enhance Penalties
State v. Bohlinger, 2013 WI App 39 (filed 5 Feb. 2013) (ordered published 27 March 2013)
Holding: A defendant can collaterally attack convictions used to enhance penalties by claiming that waivers of counsel in the prior proceedings were not knowing, intelligent, and voluntary even though there were no defects in the plea colloquies in those proceedings.
In 2011, the state charged the defendant, Bohlinger, with fourth-offense operating while intoxicated (OWI). He moved to collaterally attack OWI convictions obtained in 2008 and 2009, arguing that his guilty pleas in those cases were entered despite him not validly waiving counsel. He did not allege any deficiencies in the plea colloquies conducted in those cases; rather, he argued that, because he has cognitive and learning disabilities, he did not understand the information provided to him about his right to an attorney.
After conducting a hearing, which included testimony by a psychologist, the circuit court concluded that the evidence showed the defendant did not have the cognitive ability to validly waive his right to counsel. However, because the defendant did not allege that the guilty plea colloquies in the 2008 and 2009 cases were deficient, the circuit court held that the defendant could not, as a matter of law, make a prima facie showing that his right to counsel was violated (see ¶ 17).
In a decision authored by Reserve Judge Cane, the court of appeals disagreed. Said the court, “[n]either the circuit court nor the State has pointed to any authority for the proposition that a defendant must allege a defective waiver colloquy in order to make a prima facie showing that his or her right to counsel was violated in an earlier case” (¶ 18). While case law establishes that a defective colloquy can form the basis for a collateral attack when supported by additional evidence, it does not hold that a defendant must allege a defective colloquy to state a prima facie case (id.). See State v. Ernst, 2005 WI 107, 283 Wis. 2d 300, 699 N.W.2d 92.
In this case, the court concluded, “Bohlinger submitted ample evidence to make a prima facie showing that he did not execute knowing, intelligent, and voluntary waivers of counsel in the 2008 and 2009 cases. His affidavit averred that he has trouble reading and understanding information and that he did not understand the information provided to him during the 2008 and 2009 proceedings. [Dr. Brian] Stress [the psychologist] testified that Bohlinger suffers from ‘mild mental retardation or cognitive disability’ and, therefore, did not have the mental capacity to understand the rights he was waiving” (¶ 20).
“Similarly, Smith [Bohlinger’s former special education teacher] testified Bohlinger was not capable of reading and understanding the waiver of attorney form he signed and did not have the capacity to understand court proceedings without an attorney. Bohlinger therefore pointed to specific facts showing that he did not have the mental capability to understand the information the courts provided about his right to an attorney and, consequently, did not execute knowing, intelligent, and voluntary waivers of counsel. Even the circuit court admitted that the evidence showed Bohlinger did not have the cognitive capability to waive his right to counsel. Accordingly, Bohlinger made a prima facie showing that his waivers of counsel in the 2008 and 2009 cases were invalid” (id.).
Because Bohlinger made a prima facie showing, the burden shifts to the state to prove by clear and convincing evidence that Bohlinger’s waivers were in fact knowing, intelligent, and voluntary (see ¶ 21). The appellate court remanded the case to the circuit court for an evidentiary hearing at which the state will be permitted to attempt to meet that burden.
Search and Seizure – Consent Search of Vehicle – Inspection of Briefcase Found in Vehicle
State v. Wantland, 2013 WI App 36 (filed 20 Feb. 2013) (ordered published 27 March 2013)
Holding: Under the circumstances of this case, a law enforcement officer’s search of a passenger’s briefcase was reasonable during a vehicle search performed with consent of the driver.
A deputy sheriff performed a traffic stop on a vehicle in which the defendant, Wantland, was a passenger. The driver, Wantland’s brother, consented to a search of the vehicle and placed no relevant limit on the scope of his consent. The driver and Wantland got out of the vehicle and remained close to the back of the vehicle during all pertinent aspects of the deputy’s search. After searching the front and center areas of the vehicle, the deputy opened the hatchback and continued the search.
While looking in the back of the car, the deputy found a briefcase and asked the men what was inside it. The defendant responded, “a laptop” and “got a warrant for that?” The deputy said that he (the deputy) could open the briefcase. Wantland laughed and said the briefcase also contained Visine and antacid pills. The deputy then opened the briefcase, which was unlocked and contained no markings or tags indicating it belonged to Wantland instead of his brother. The deputy found Visine, one empty antacid pill bottle, and one antacid pill bottle with two pills (which turned out to be morphine) inside the briefcase. He arrested Wantland. Law enforcement officers found additional morphine pills when they searched Wantland at the jail. Documents in the briefcase indicated that Wantland was its owner.
Wantland was charged with possession of a narcotic drug. He moved to suppress the evidence obtained as a result of the search of the briefcase. The circuit court denied the motion. Wantland pleaded guilty and then appealed. In a decision authored by Judge Gundrum, the court of appeals affirmed.
The court of appeals concluded that “the circuit court correctly found that Wantland did not limit the driver’s consent to search because a reasonable person considering the totality of the circumstances would not have interpreted the exchange between Wantland and the deputy as Wantland clearly and unequivocally identifying himself as the owner of the briefcase and objecting to the search of it. We further reject Wantland’s alternative position that if the deputy was uncertain whether Wantland owned the briefcase and was objecting to the search of it, it was unreasonable for him to search it without seeking clarification. The deputy’s search of the briefcase pursuant to the driver’s consent was reasonable” (¶ 1).
Attorneys – Conflicts
State v. Villarreal, 2013 WI App 33 (filed 21 Feb. 2013) (ordered published 27 March 2013)
Holding: Defense counsel had an actual conflict of interest when he represented both the defendant and his sister, a defense witness, who was being investigated for perjury.
The state charged the defendant with incest. At the defendant’s first trial in 2008, the defendant’s sister testified as a defense witness. The jury did not reach a verdict. Before the defendant’s second trial in 2009, the prosecution threatened the sister with perjury charges. The lawyer who represented the defendant in both trials also represented the sister during the wrangling over possible perjury charges. The jury in the second trial convicted the defendant. In postconviction proceedings, the judge found no actual conflict of interest.
The court of appeals reversed in an opinion written by Judge Sherman. Because the defendant had not objected to a potential conflict of interest, the issue was whether there had been an actual conflict (see ¶ 8). “If a defendant demonstrates an actual conflict of interest that adversely affects his or her attorney’s performance, prejudice is presumed” (¶ 10).
The court of appeals noted that it was “important” for the defendant that his sister testify at the second trial in a manner consistent with her testimony at the first trial (see ¶ 13). The threat of perjury placed her at “odds” with the defendant’s interest (see ¶ 15). It was not in the defendant’s interest that his sister be interviewed by state investigators. The “police interview did have a negative effect on [her] credibility at the second trial” (¶ 21). Thus, the defendant was denied effective assistance of counsel because of the presumed prejudice triggered by the actual conflict.
Focusing on the law, not the facts, of the case (see ¶ 26), Judge Lundsten concurred. He wrote separately to question whether the actual-conflict test “makes sense when the identified conflict of interest has no effect on the fairness of the trial or other proceeding at issue” (¶ 25).
Employment Law
Wage Claims – Liquidated Damages – Attorney Fees
Johnson v. Roma II-Waterford LLC, 2013 WI App 38 (filed 7 Feb. 2013) (ordered published 27 March 2013)
Holding: The record in this unpaid-wage-claim case failed to establish that the circuit court properly exercised its discretion when it dramatically reduced the award of attorney fees and denied liquidated damages.
This case involved claims for unpaid wages under both the Federal Labor Standards Act (FLSA) and Wisconsin wage-and-hour laws. A jury awarded Shawn Johnson $3,648 in compensation for unpaid wages from her employer, Roma, based on its failure to pay her at the minimum-wage rate. The circuit court denied Johnson’s postverdict requests for “liquidated damages” under the Act and for a penalty under a state-law provision. In addition, the court awarded Johnson only $10,000 of the $112,000 in attorney fees she requested in reliance on fee-shifting provisions in the FLSA and the state law.
Johnson appealed the resulting judgment. She argued that the circuit court erroneously exercised its discretion in denying her request for the liquidated damages and the penalty and in awarding her only $10,000 in attorney fees. In a decision authored by Judge Blanchard, the court of appeals reversed.
Turning first to the attorney fees, the court noted that both 29 U.S.C. § 216(b) and Wis. Stat. section 109.03(6) provide for an award of attorney fees to a prevailing plaintiff in a wage-claim case such as Johnson’s. The amount of the fees awarded is a discretionary decision for the court. In exercising this discretion in the context of a fee-shifting statute such as the one at issue here, the circuit court must use the “lodestar” approach.
“Under the lodestar approach, the starting point is the number of hours reasonably expended, multiplied by a reasonable hourly rate, with upward or downward adjustments then made after taking other relevant factors into account. The ‘other relevant factors’ include but are not limited to the factors set forth in the rule of professional responsibility that addresses the fees that attorneys are ethically permitted to charge” (¶ 17) (citations and internal quotations omitted). In her postverdict petition, Johnson submitted a detailed affidavit with attachments that included 25 pages of itemized billing records. Those records showed that her attorneys worked approximately 480 hours and that the bulk of the work was performed by employment-law attorneys at the law firm Johnson retained, with rates ranging from $160 to $250 per hour, depending on the attorney’s experience.
In ruling on the attorney fees, the circuit court made no reference to the lodestar approach. As bases for its decision, it found that 1) the litigation had been emotionally driven, apparently as a result of a prior romantic relationship between Johnson and Roma’s owner; and 2) both parties had been “extremely loose” in handling financial aspects of the business (that is, both parties were free to open the cash register and remove sums of money that were not reported, “pretty much at will”).
The issue before the appellate court was whether it was reasonable for the circuit judge to reduce, by more than 90 percent, the number of hours of attorney time on which it based its award of attorney fees. The court concluded that while the bases articulated by the circuit court for reducing the fees could potentially be legitimate reasons for at least some reduction in the fee award, the problem in this case was that the record failed to support the substantial reduction the circuit court ordered.
“Here, when we consider the court’s fact findings and probe its reasoning, we conclude that they are insufficient to explain the $10,000 award. The court’s decision does not demonstrate a logical connection between its limited findings and the ninety-percent reduction in the number of attorney hours awarded. Rather, the court appeared to ‘eyeball’ a figure of $10,000 in light of its findings that the parties over-litigated their case and engaged in ‘loose’ financial dealings” (¶ 27). “Accordingly, we conclude that the proper course is for the circuit court to reexamine the attorney’s fees issue on remand and to exercise its discretion using the lodestar approach in a manner consistent with our decision” (¶ 28).
With respect to liquidated damages, the federal statutes provide for the award of liquidated damages (double the amount of the verdict) unless the circuit court finds that the employer was acting in good faith and reasonably believed that its conduct was consistent with the law (see ¶ 41). Wisconsin law similarly allows for a penalty of up to 100 percent of wages due provided the record shows the employer wrongfully withheld wages for dilatory or other unjust reasons (see ¶ 46).
Here, the court of appeals noted, the circuit court provided essentially no rationale for denying liquidated damages under the federal statute or for denying the penalty under the state statute (see ¶ 50). Accordingly, on remand, the circuit court must reexamine the liquidated damages and penalty issues in a manner consistent with this decision.
“If, on remand, the circuit court concludes that the pertinent conduct by Roma was in good faith and that Roma reasonably believed that that conduct was consistent with the Act, then the court may deny liquidated damages under 29 U.S.C. 216(2)(b). Otherwise, the court must impose those damages. In addition, the court must consider whether the pertinent Roma conduct was dilatory or otherwise unjust. If it was, then the court may exercise its discretion to impose a penalty under Wis. Stat. § 109.11(2)(b)” (¶ 54).
Medicaid
Fraud – Reimbursement – Justiciable Issues – Attorney Fees
State v. Abbott Labs., 2013 WI App 31 (filed 6 Feb. 2013) (ordered published 27 March 2013)
Holding: The circuit court properly awarded damages and attorney fees in a dispute concerning Medicaid reimbursement payments.
This ongoing litigation relates to Medicaid reimbursement payments. In 2004, the state sued dozens of large pharmaceutical manufacturers, including Pharmacia. After a nine-day trial, a jury decided in favor of the state. Much of the factual dispute concerned the part of the reimbursement formula known as the average wholesale price (AWP). Pharmacia appealed. The Wisconsin Supreme Court accepted the case on certification and decided major issues. See State v. Abbott Labs., 2012 WI 62, 341 Wis. 2d 510, 816 N.W.2d 145.
The opinion here, written by Chief Judge Brown, resolves issues that the supreme court had returned to the court of appeals. The parties raised a “plethora of issues” that tended to “revolve around a central theme: the debate over the degree to which the damages were the product of a political decision by the legislature and other players as opposed to being caused by fraud on the part of Pharmacia” (¶ 13).
The court of appeals affirmed the circuit court in all respects. In resolving the many issues, the opinion necessarily relies heavily on the supreme court’s earlier decision; moreover, its conclusions are fact intensive. First, the evidence supported the jury’s findings that Pharmacia made false statements regarding the AWP, contrary to Wis. Stat. section 100.18. The main issue here concerned what the state knew about the AWP.
Second, the court of appeals held that for many of the same reasons, the jury properly found that Pharmacia violated Wis. Stat. section 49.49(4m); the court also rejected a statutory interpretation issue on “plain meaning” grounds. Third, the litigated issues were “justiciable” and not simply political decisions (see ¶ 24).
Fourth, the circuit court properly refused an instruction on the state’s alleged failure to mitigate damages. Fifth, Pharmacia failed to properly preserve its “duplicative damages” argument by not timely objecting to the special verdict. Sixth, the court rejected a raft of evidentiary issues, set forth at paragraphs 32-37. Finally, the circuit court properly awarded the state’s attorneys, a private law firm, $6.5 million in attorney fees and $300,000 in costs. The issues here involved various statutes and contracts relating to the reimbursement of special counsel.
Other issues surfaced in a cross-appeal, relating to the amount of the forfeitures, the circuit court’s denial of injunctive relief, and the circuit court’s reduction of the number of violations based on its finding of “materiality.” On these issues, too, the court of appeals affirmed the circuit court.
Torts
Advertising – Internet – “Use”
Habush v. Cannon, 2013 WI App 34 (filed 21 Feb. 2013) (ordered published 27 March 2013)
Holding: There was no violation of Wis. Stat. section 995.50(2) in a situation in which a law firm bid on the names of lawyers not affiliated with the firm so as to produce a “sponsored link” on the Internet.
A law firm, Cannon & Dunphy, successfully bid on the names “Habush” and “Rottier” in various Internet search engines (for example, Google). The end result was that a search for “Habush,” for example, would produce a sponsored link to Cannon & Dunphy above the organic link to the law firm of Habush Habush & Rottier. Attorneys Robert Habush and Daniel Rottier alleged that Cannon & Dunphy violated Wis. Stat. section 995.50(2)(b) by using their names for advertising or trade purposes. The circuit court found that Cannon & Dunphy had used the names of Habush and Rottier for purposes of advertising or trade but nonetheless found this invasion to be reasonable (see ¶ 6).
The court of appeals affirmed in an opinion, written by Judge Lundsten, that “reframe[ed]” the issue as whether Cannon & Dunphy had “used” the names of Habush and Rottier in violation of section 995.50(2)(b). The court found that the parties interpreted the statute in different yet reasonable ways. It concluded, however, that Cannon & Dunphy’s approach was the “more reasonable interpretation” but also declined to adopt a “comprehensive definition” of the statutory term “use” (¶ 23).
“Although the question is a close one, we think the strategy used by Cannon & Dunphy here is akin to locating a new Cannon & Dunphy branch office next to an established Habush Habush & Rottier office when the readily apparent purpose … is to take advantage of the flow of people seeking out Habush Habush & Rottier because of the value associated with the names Habush and Rottier. We do not, however, adopt Cannon & Dunphy’s suggestion to exempt all non-visible use from coverage under the statute. There may be variations on non-visible use of a name that we are not able to anticipate. Accordingly, our holding is limited to the Internet keyword search term and results mechanism before us. As to this particular mechanism, we conclude that the more reasonable interpretation of the statute is that it is not the type of ‘use’ the legislature had in mind when it enacted Wis. Stat. § 995.50(2)(b)” (¶¶ 29-30).
The court declined to address additional arguments rooted in trademark law, a foreign case, the shareholder-standing rule, and the First Amendment.
Medical Malpractice – Pregnancy
Nell v. Froedtert & Community Health, 2013 WI App 40 (filed 30 Jan. 2013) (ordered published 27 March 2013)
Holding: Public policy precluded recovery by a woman and a man for the cost of raising a child born to them after a clinic provided the woman with vitamins instead of birth control pills.
Nell (the plaintiff) had a birth control pill prescription, which she filled at the West Bend Clinic. In February 2009, the clinic gave her prenatal vitamins instead of birth control pills. The clinic confirmed the mistake in late March, and later in April 2009 the plaintiff learned she was pregnant with her second child. She sued the clinic for the cost of raising the child as well as her own pain and suffering and loss of earning capacity. The circuit court dismissed her claims on public policy grounds.
The court of appeals affirmed in part and reversed in part in an opinion authored by Judge Neubauer. The court carefully reviewed the case law governing actions to recover in cases similar to this one. It held that public policy grounds precluded the plaintiff’s recovery for the cost of raising the child, namely, “allowance for recovery would be too likely to open the way for fraudulent claims.” The critical fact in determining whether recovery may be appropriate is whether the mother sought “permanent sterilization surgery” (¶ 15). “[The plaintiff] did not seek permanent surgical sterilization and therefore her claim for the cost of raising her child is barred by public policy” (¶ 17).
The court reversed on the issue whether the plaintiff might recover for her own personal injuries. The record did not permit a public policy determination on those claims at this stage in the proceedings (see ¶ 20).
