Wisconsin Lawyer: Wisconsin Lawyer June 1998: Supreme Court Digest:

Home > News & Publications > Wisconsin Lawyer > Article

June 01, 1998

Wisconsin Lawyer June 1998: Supreme Court Digest

Attorney Fees - Contingent Fee Agreements

Gorton v. Hostak, Henzl & Bichler S.C., No. 96-2776 (filed 6 May 1998)

The plaintiffs were former clients who sued the law firm that successfully represented them in a damages action. According to the fee agreement, the defendant law firm was entitled to "40 percent of the gross amount of any recovery 'obtained after a lawsuit which involves an appeal.'" In the underlying case, a jury assessed actual damages at $129,000 and awarded punitive damages of $50,000. On post-verdict motion, the court awarded an additional $307,000 in reasonable attorney fees based on the jury's finding that misrepresentations had been made concerning the sale of an agricultural product under section 100.18 of the Wisconsin Statutes. The court of appeals upheld the judgment and awarded the plaintiffs additional reasonable attorney fees based on the appellate litigation. Eventually, the original tortfeasor tendered a check to the defendant law firm for more than $1 million in damages, costs, and attorney fees. In this lawsuit the plaintiffs (the former clients) allege that under terms of the contingent fee agreement they are entitled to a 60 percent share in the entire amount. The defendant law firm argued that the fee agreement did not reach the award of attorney fees. The circuit court ruled in favor of the plaintiffs.

The supreme court considered three issues that were certified from the court of appeals. "First, when an attorney and a plaintiff are parties to a contingent fee agreement, does a statutory award of reasonable attorney fees pursuant to Wis. Stat. sec. 100.18 belong to 'the person suffering the pecuniary loss' or to the representative attorney? Second, do principles of equity apply to a Wis. Stat. sec. 806.04(8) award of appellate counsel fees when the client suing a trial attorney has already been made more than whole for damages sought in the circuit court proceedings? Finally [the court also considered] whether multiple partners in a lawsuit on behalf of a partnership may each collect $100 attorney fees as statutory items of cost under Wis. Stat. secs. 814.01(1) and 814.04(1)(a)." The supreme court, in an opinion written by Justice Bradley, affirmed in part and reversed in part.

As to the first issue, the court held that under section 100.18 the attorney fees are awarded to the "person suffering pecuniary loss," that is, the party, not the "representative attorney." Fee agreements, such as the one in this case, "can control the ultimate disposition of statutory fee awards." In this case the fee agreement gave the law firm 40 percent of the "gross amount recovered" following an appeal. The court held that "the burden is on the attorney who possesses legal knowledge and who drafts the agreement to state clearly the terms of the fee agreement and to address specifically the allocation of court-awarded attorney fees." Nor had there been a "mutual mistake" by the law firm and the former clients. The law firm's failure to specify otherwise meant that the plaintiffs were entitled to 60 percent of the reasonable attorney fees awarded under section 100.18.

Second, the court upheld the trial judge's refusal to grant the plaintiffs actual attorney fees against the defendant law firm in this declaratory judgment action. Wisconsin adheres to the American Rule, which embraces only "limited and narrow exceptions." The supreme court declined "to adopt the rule proposed by the plaintiffs that in every instance of a suit between a fiduciary and a beneficiary the prevailing beneficiary is entitled to attorney fees under Wis. Stat. sec. 806.04(8)."

Finally, sections 814.01(1) and 814.04(1)(a) did not permit each of the four named plaintiffs to collect $100 in attorney fees as items of cost. Rather, the statutes contemplated only a single award of $100.

Civil Procedure

Statute of Limitations - "Foreign Causes" - Contract Actions

Abraham v. General Casualty Co., No. 95-2918 (filed 17 April 1998)

Paul Abraham had underinsured motorist (UIM) insurance issued by General Casualty, which had its principal place of business in Wisconsin. In 1988 Abraham was struck and injured by an underinsured motorist in Florida. In late 1990 General Casualty refused to pay UIM benefits to Abraham. In 1994 Abraham filed a declaratory judgment action against the insurer seeking the UIM coverage. The circuit court granted the insurer's motion to dismiss based on the Florida statute of limitations. The court agreed that Abraham's lawsuit was a "foreign cause of action" within the meaning of section 893.07(1) of the Wisconsin Statutes. Moreover, the action was governed by Florida's five year statute of limitations because that state had the most significant contacts with the parties.

On certification from the court of appeals, the supreme court, in an opinion written by Justice Wilcox, reversed. First, the court held that Wisconsin's borrowing statute, section 893.07, applies to contract actions as well as personal injury claims. The court reaffirmed prior case law holding that in tort actions the "place of injury" determines the applicable statute of limitations. The place of injury was not, however, appropriate for contract actions because it did little to further the interest of certainty. Following federal case law, the supreme court held that "a claim sounding in contract is a 'foreign cause of action' when the final significant event giving rise to a suable claim occurs outside the state of Wisconsin." In this case, Wisconsin's statute of limitations controlled because the alleged contractual breach consisted of General Casualty's denial of the UIM benefits requested by Abraham.

Justice Bradley concurred but emphasized the need for clearer standards for cases less clear than this one.

Default Judgments - Punitive Damages - Evidentiary Basis

Apex Electronics Corp. v. Gee, No. 97-0353-FT (filed 30 April 1998)

The plaintiff sued the defendant for breach of contract and conversion. After the defendant failed to file an answer, the court entered a default judgment for $356,000 plus costs. The amount included $100,000 in punitive damages. The judge later denied a motion to set aside the judgment based on excusable neglect and a meritorious defense. The court of appeals affirmed but refused to address any error involving punitive damages because the defendant had failed to challenge the award at the trial court level.

The supreme court, in an opinion written by Chief Justice Abrahamson, reversed. Initially, the court exercised its discretion to reach the punitive damages issue despite the defendant's failure to challenge the award in the motion to vacate the default judgment. The defense argued that the trial judge erred by granting punitive damages based solely on the complaint. The supreme court observed that the punitive damages were based on the tort of conversion. And despite the clear proscription of section 802.02(1m)(a) of the Wisconsin Statutes, the plaintiff stated a dollar amount ($100,000) in the complaint. Thus, the trial judge erred as a matter of law in awarding punitive damages on the amount of money specified in the complaint. Moreover, section 806.02 "makes clear that when a complaint seeks unliquidated damages on a tort claim, a circuit court must first determine whether proof of any fact is necessary for the court to give judgment. Wisconsin courts have declared that when determining damages for personal injury or other unliquidated damages, a circuit court will require additional proof beyond the complaint." Proof can take the form of affidavits or a hearing; the form is within the court's discretion. No such proof was presented in this case; therefore, reversible error occurred in granting such damages.

Default Judgments - Excusable Neglect - Valid Defense

J.L. Phillips & Assoc. v. E & H Plastic Corp., No. 96-3151 (filed 24 April 1998)

A circuit court granted a default judgment against the defendant. On a motion to vacate, the judge agreed that the defense had demonstrated "excusable neglect or some good faith." Nevertheless, the judge ruled that the defense must also show not just a valid defense, but that it had a "good chance of success on the merits."

On certification from the court of appeals, the supreme court reversed. Writing for the court, Justice Wilcox first concluded that "a party moving to vacate a default judgment pursuant to sec. 806.07(1) (a) must: (1) demonstrate that the judgment against him or her was obtained as a result of mistake, inadvertence, surprise or excusable neglect; and (2) demonstrate that he or she has a meritorious defense to the action." In addressing what constituted an adequate demonstration of a meritorious defense, the supreme court did "not deem it necessary or even equitable to require a party who has met its burden under that standard to establish a defense which is somehow more 'complete' or thorough that a timely filed answer would need to be." Rather a "meritorious defense is a defense good at law that requires no more and no less than that which is needed to survive a motion for judgment on the pleadings." In this case, judgment on the pleadings was inappropriate because the answer raised issues of fact.

Criminal Law

Double Jeopardy - Multiple Homicide Convictions for the Same Death - Multiple Endangering Safety Convictions Arising Out of a Single Driving Episode

State v. Lechner, No. 96-2830-CR (filed 30 April 1998)

The defendant was driving his vehicle at 60-65 MPH through a no-passing zone with a speed limit of 45 MPH. Within the course of driving along a one-half mile stretch of highway at that speed, he negotiated two separate passing maneuvers that caused both drivers to brake to avoid a collision. On his third passing maneuver, he collided head-on with a vehicle, killing a passenger in that vehicle and seriously injuring the driver and one other occupant.

Though initially charged with 10 separate violations of state law, the defendant pled no contest to a reduced number of charges, including one count of second-degree reckless homicide, one count of homicide by intoxicated use of a vehicle, and two counts of second-degree recklessly endangering the safety of another.

One issue on appeal was whether the defendant's right to be free from double jeopardy was violated when he was convicted and sentenced on two counts of homicide for the death of but one person. In a unanimous decision authored by Justice Steinmetz, the court concluded that the multiple convictions were proper and did not violate double jeopardy. The crime of reckless homicide and homicide by intoxicated use of a vehicle each requires proof of a fact for conviction which the other does not, and the court was unable to identify any intention by the Legislature to preclude a conviction on both charges even though only one victim was involved. The court further concluded that the defendant's reliance on Wis. Stat. section 939.66(2) was of no avail. This statute prohibits convictions on both a more serious and a less serious type of criminal homicide. In this instance each of the homicide offenses were "equally serious" in that each carries the same maximum penalty of 10 years in prison.

Among the other issues on appeal was whether the two convictions for recklessly endangering safety violated the defendant's right to be free from double jeopardy. These two counts involved the two separate passing maneuvers described above that allegedly endangered the safety of two different drivers. The court concluded that the defendant's conduct supported the two convictions. He committed at least two distinct acts of reckless conduct, putting at risk the life of a different person with each act. Each time he drove his vehicle across the center line of the highway, passed a different vehicle, and abruptly reentered the traffic lane, he created a separate, unreasonable, and substantial risk of harm to a different human being, that is, the driver of the vehicle he had just passed and cut off on the highway.

The court indicated that it was significant in this case that the defendant did more than pass a continuous line of cars in a single passing maneuver, putting each successive driver at risk as he passed him or her. "Each of the defendant's decisions to pass each successive vehicle was not the result of an original impulse to pass the first vehicle, but rather was a fresh impulse. Each of the defendant's acts of reckless conduct had come to an end before a separate act began. Each time he pulled his vehicle out and passed a different vehicle, the defendant commenced a separate, conscious decision to act. Each time the defendant exited and reentered the traffic lane, he completed a separate, distinct act of criminally reckless conduct." Based on the facts described above, the court concluded that there was a sufficient break in the defendant's conduct to constitute at least two separate and distinct criminal acts of reckless endangerment.

Motor Vehicle Law

Breath Testing Instruments - Intoxilyzer 5000 Series 6600 - Presumption of Accuracy and Reliability

State v. Busch, No. 96-2822 (filed 30 April 1998)

The defendant was arrested for operating a motor vehicle while under the influence of an intoxicant and he agreed to submit to a chemical test of his breath. The chemical test was conducted using Intoxilyzer Model 5000 Series 6600. The test results indicated a prohibited alcohol concentration.

The defendant filed a motion to suppress the chemical test results, asserting that the Intoxylizer Model 5000 Series 6600 had not been evaluated and approved for use in accordance with the Statutes and Administrative Code. The Series 6600 is a modified version of the Series 6400 machine. The defendant argued that although the Series 6400 had previously been evaluated and approved according to law, the Series 6600 had not. The circuit court denied the motion to suppress; the court of appeals reversed; and the supreme court, in an opinion authored by Justice Crooks, unanimously reversed the court of appeals.

The supreme court concluded that under Wis. Admin. Code section Trans 311.04(1), the chief of the chemical test section of the Department of Transportation (DOT) is charged with approving all instruments used for the quantitative analysis of alcohol in the breath. It also held that under section Trans 311.04(2) the chief of the chemical test section must evaluate all models of breath testing instruments, but is given the authority to determine the procedures for the evaluation of such instruments.

In the present case, the circuit court received detailed testimony from the DOT that the Series 6600 had not been separately evaluated prior to approval because the modifications did not alter the analytical functioning of the Series 6600, and that the Series 6400 had been previously evaluated. Based upon this testimony, the supreme court concluded that the circuit court did not erroneously exercise its discretion in finding that the Series 6400 and the Series 6600 were essentially the "same machine" due to their identical analytical processing.

Accordingly, the defendant's blood alcohol test results obtained by using the Series 6600 are afforded a presumption of accuracy and reliability, because a machine identical in analytical functioning (the Series 6400) has already been tested, evaluated, and approved for use in Wisconsin.

Worker's Compensation

Worker's Pain and Suffering - Actions by the Insurer

Threshermens Mutual Ins. Co. v. Page, No. 95-2942 (filed 5 May 1998)

Dorothy Gross was injured when she fell in her employer's parking lot. Her worker's compensation carrier (the insurer) sued various third party defendants for Gross's injuries. Gross declined to actively participate in the suit and was later joined as an involuntary plaintiff under section 102.29 of the Wisconsin Statutes. The judge later precluded the insurer from offering any evidence of Gross's pain and suffering. The court of appeals reversed and the defendants appealed.

The supreme court, in an opinion written by Justice Geske, affirmed. First, the court rejected the defendant's arguments that the insurer could not claim Gross's pain and suffering because a worker's compensation carrier has no legal liability for such damages. Allowing the carrier to recover for the worker's pain and suffering fully comported with the policy underlying the Worker's Compensation Act. An injured worker's physical pain "has always been a factor in calculating the rating level of disability, upon which impairment of earning capacity is established." Nor did it matter whether Gross cooperated or participated in the suit against the third party. The Act permits the insurer to maintain such actions on its own behalf.

Finally, the court determined that permitting such recoveries did not contravene the statute of limitations, which had since lapsed as to Gross's own claims during the appeal process. In essence, the defendants argued that Gross could no longer assert her own claim for pain and suffering, yet under section 102.29(1) she was entitled to share in the proceeds that her insurer might recover; hence, the insurer's claim must also be deemed "extinguished." The argument failed because the statutory distribution formula necessarily restricts the insurer's reimbursement to the amount actually paid to the employee: "The ability to assert a claim for the injured employee's pain and suffering only means that the insurer may come closer to receiving a full reimbursement for the amount it paid."

Justice Bradley dissented on the ground that the majority's opinion "changes the terms" of the historic compromise between employers and employees embodied in the Worker's Compensation Act.

This column summarizes all decisions of the Wisconsin Supreme Court. Prof. Daniel D. Blinka and Prof. Thomas J. Hammer invite comments and questions about the digests. They can be reached at the Marquette University Law School, 1103 W. Wisconsin Ave., Milwaukee, WI 53233, (414) 288-7090.

Wisconsin Lawyer