Supreme Court Digest

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This column summarizes all decisions of the Wisconsin Supreme Court (except those involving lawyer or judicial discipline, which are digested elsewhere in the magazine). Profs. Daniel D. Blinka and Thomas J. Hammer invite comments and questions about the digests. They can be reached at Marquette University Law School, 1103 W. Wisconsin Ave., Milwaukee, WI 53233, (414) 288-7090.

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

Civil Procedure Commercial Law Criminal Procedure Employment Discrimination Family Law Incompetents

Insurance Municipal Law Prisoner Litigation Property Torts

Civil Procedure

Personal Jurisdiction - Long-arm Statute - Minimum Contacts

Kopke v. A. Hartrodt S.R.L., 2001 WI 99 (filed 10 July 2001)

A truck driver was injured when a pallet loaded with paper fell out of a ship's cargo container. The paper had been shipped to Wisconsin from Italy. The truck driver sued the paper manufacturer, "Binda," and "L'Arciere," an Italian cooperative that supplied Binda with workers to help load the cargo containers. L'Arciere moved to dismiss based upon lack of personal jurisdiction, but the circuit court ruled that its workers' acts of stabilizing the product for shipment were part of a processing of the product itself. The court of appeals certified the appeal to the supreme court.

The supreme court affirmed the circuit court in a decision written by Justice Bablitch. The first issue concerned the applicability of Wisconsin's long-arm statute, Wis. Stat. section 801.05(4) (1997-98). The court held that because the objective of the long-arm statute is to expand personal jurisdiction, it was most appropriate to adopt the "broad definition" of "process" set forth by the Seventh Circuit (¶: 17). This "broad definition" extends beyond the act of manufacture and includes "handling" the product and processes that prepare it for market (see ¶: 11). The court considered and rejected a host of arguments assailing the broad definition.

Second, the court held that the long-arm statute's application was constitutional. The plaintiff met his burden of showing that L'Arciere had sufficient contacts to satisfy the due process requirement of the Fourteenth Amendment. More specifically, the court applied the "stream of commerce" theory as propounded by Justice Brennan in Asahi Metal Indus. v. Superior Court of Cal. (1987). Critical factors here included the contractual relationship between Binda and L'Arciere, the identification of Appleton, Wis., in the loading plans as the cargo's destination, and the not insignificant volume of such business conducted between Binda and the Wisconsin company. The court then analyzed whether L'Arciere carried its burden of demonstrating that "fair play" and "substantial justice" negated personal jurisdiction. Considering the plaintiff's severe injury, Wisconsin's interest in providing justice, and the minimal burden imposed on L'Arciere to conduct its defense here, the court declined to excuse this defendant.

Dissenting were Justices Crooks, Wilcox, and Sykes. Justice Crooks was not persuaded that minimum contacts were present. Justice Sykes disagreed as well with the majority's construction of the "broad definition" that governs the long-arm statute.

Commercial Law

Secured Creditors - UCC Remedies - Issue Preclusion

National Operating L.P. v. Mutual Life Ins. Co. of New York, 2001 WI 87 (filed 3 July 2001)

As succinctly framed by Justice Prosser, this case "addresses the rights of a debtor in default under Article 9 (Secured Transactions) of the Uniform Commercial Code (UCC), both before and after a declaratory judgment obtained by the secured party to declare its rights in relation to the debtor" (¶: 1).

In 1978 a partnership, National Operating, borrowed $3 million from Mutual of New York (MONY) to purchase a shopping plaza. The parties also entered into various mortgages and security agreements. In 1990 National Operating sold the property to Bridgeview in exchange for a "wrap-around note" and a mortgage. The deal did not, however, alter National Operating's original debt to MONY. In 1993 MONY and National Operating renegotiated their original agreement in order to avoid default and foreclosure. The renegotiated loan also involved an assignment of the Bridgeview "wrap note" and mortgage. Following National Operating's loan default in 1996, MONY brought a declaratory judgment action that sought confirmation of the 1993 assignments. MONY later received a default judgment against National Operating that tracked its complaint.

In 1998 MONY and Bridgeview negotiated an agreement that allowed Bridgeview to satisfy its debt of $5.5 million by paying only $4 million. Since only $2.4 million remained unpaid on National Operating's underlying note, MONY stood to gain an additional $1.6 million. National Operating stood to realize nothing from this deal, so it tendered full payment on the underlying note in order to reacquire the Bridgeview wrap note and mortgage. MONY rejected the tender and argued that National Operating's rights were terminated by the 1996 declaratory judgment. The circuit court agreed based upon the doctrine of claim preclusion. The court of appeals affirmed.

The supreme court, in an opinion written by Justice Prosser, reversed. A declaratory judgment is binding only as to matters that actually were decided in the action; thus, claim preclusion does not extend to matters that could have been raised or decided. In this case, the 1996 declaratory judgment did not specifically waive National Operating's right to redeem collateral upon payment of the loan, nor did it explicitly "extinguish" the debtor's rights under Article 9 of the UCC (Wis. Stat. chapter 409). Summarizing debtors' protections under the UCC, the court explained that "a secured transaction debtor in default may not waive or vary its right to surplus equity upon the disposition of the collateral, or its right to contest the commercial reasonableness of the disposition of its collateral. It may waive or vary its right to redeem the collateral by tendering fulfillment of its obligation, but only in writing, after default" (¶: 47).

In short, the 1996 default judgment merely confirmed and enforced the earlier assignment and eliminated any doubt that Bridgeview should make payments on the wrap note to MONY, the assignee. MONY also could sell the property to Bridgeview, provided it did so in a commercially reasonable manner. MONY could not, however, sell the collateral without notice to National Operating. Nor could it behave in a commercially unreasonable manner or keep surplus equity for itself. (¶:¶: 97-98).

Justice Crooks, joined by Justice Wilcox, dissented.

Criminal Procedure

Search Warrants - No-knock Entry

State v. Henderson, 2001 WI 97 (filed 9 July 2001)

Police executed a search warrant for evidence of drug dealing at defendant's dwelling without knocking and announcing their presence. The trial court denied the defendant's motion to suppress and he later pleaded guilty. The court of appeals certified the case to the supreme court to resolve several issues relating to no-knock entries in light of recent case law.

The supreme court, in an opinion written by Justice Sykes, affirmed. Recent case law established the following propositions: "1) the rule of announcement is a requirement of the Fourth Amendment's reasonableness clause, not its warrant clause; 2) the validity of a no-knock execution of a search warrant is subject to after-the-fact judicial review for constitutional reasonableness, which is determined by reference to the circumstances as they existed at the time of the entry; and 3) the manner in which a search warrant is executed is not subject to the requirements of the warrant clause and therefore does not require prior judicial authorization" (¶: 29).

Applying these principles, the supreme court held "that a court reviewing the reasonableness of a no-knock execution of a search warrant is not precluded from considering facts known to the police but not included in the search warrant application" (¶: 30). Put differently, the cases "establish quite clearly that as a matter of Fourth Amendment law, a no-knock entry is subject only to an after-the-fact judicial review for reasonableness; it does not require prior judicial authorization inasmuch as it is not a component of the Fourth Amendment's warrant clause" (¶: 35). The facts of record in this case supported the circuit court's conclusion that the no-knock entry was reasonable.

Chief Justice Abrahamson, joined by Justice Bradley, dissented because they would find that the record did not meet the standard required for no-knock entries.

Biased Jurors - Harmless Error

State v. Lindell, 2001 WI 108 (filed 11 July 2001)

A jury convicted the defendant of assorted felonies, including murder, burglary, and arson. In post-conviction proceedings, he alleged that reversible error occurred because the trial judge failed to strike for cause a juror who was biased, thus forcing the defendant to use one of his peremptory challenges. The trial court denied the post-conviction challenge and the court of appeals affirmed.

The supreme court, in an opinion written by Justice Prosser, also affirmed in an opinion that canvasses Wisconsin's newly developed doctrine on juror bias and which reverses State v. Ramos, 211 Wis. 2d 12, 564 N.W.2d 328 (1997), which required an automatic reversal in any situation in which the defendant used a peremptory strike to remove a prospective juror who should have been removed for cause, irrespective of prejudice or harmless error analysis (¶: 5).

First, the supreme court held that the juror in question should have been stricken for cause based on "objective bias." Among a host of factors, the prospective juror knew the murder victim, attended his funeral, and was well aware of a long-standing business relationship between her parents and the murder victim. The supreme court reiterated its cautionary warning from other cases that trial judges should excuse jurors when they "reasonably suspect" a bias exists.

Second, and most important, the court reversed the Ramos remedy, described above. The majority decision carefully reviewed Ramos, which had "neglected to fully describe and analyze long-standing Wisconsin law on peremptory challenges and harmless error" (¶: 53). These earlier cases are explicated in the opinion. Ramos also ran counter to the subsequent decision by the Supreme Court in United States v. Martinez-Salazar, 528 U.S. 304 (2000). Finally, the majority considered the "systemic problems" induced by the Ramos automatic reversal remedy. "The reality of Ramos is that whenever two members of the court of appeals or four members of the supreme court make a different call on bias than the circuit court, the automatic result is a new trial" (¶: 103). Henceforth, the failure to excuse a juror for bias will be analyzed according to whether the error affected the defendant's substantial rights, according to Wis. Stat. section 805.18(2), unless the defendant claims that the error actually deprived him of an impartial jury in violation of the Sixth Amendment (¶: 111).

The majority stressed that its opinion changes "nothing" in the fundamental law that guarantees an impartial jury. "Our decision requires a defendant to make a conscious choice between exercising a peremptory challenge or waiting for a Sixth Amendment challenge after conviction." The defense strategy, in turn, leaves the state with three options: "1) It can join the defendant in urging the court to remove a juror for cause; 2) it can exercise one of its own limited peremptory strikes to remove a juror who should have been struck for cause; or 3) it can do nothing and risk a new trial if an appellate court finds that a biased juror sat on the panel" (¶: 118). (The majority opinion also found that defendant had not been denied effective assistance of counsel based on how trial counsel impeached a state's witness.)

Justice Bradley concurred but argued that the majority opinion "erases the deference that a reviewing court owes to a circuit court's objective bias determination" (¶: 133). She also expressed concern that the overruling of Ramos undercut the principle of stare decisis.

Dissenting, Chief Justice Abrahamson, joined by Justice Bablitch, argued that the majority opinion traduced stare decisis, violated principles of statutory construction, and leaves defendants bereft of a satisfactory remedy.

Probation Conditions That Infringe on Constitutional Rights - Challenge to State's Withdrawal from Plea Agreement

State v. Oakley, 2001 WI 103 (filed 10 July 2001)

The defendant has fathered nine children with four different women. He was convicted of multiple counts of intentionally refusing to support his children. Part of the disposition in the case was a term of probation that imposed the following condition: while on probation, the defendant cannot have any more children unless he demonstrates that he has the ability to support them and that he is supporting the children he already has. A critical issue before the supreme court was the lawfulness of this probation condition. The defendant argued that the condition violates his constitutional right to procreate.

In a majority decision authored by Justice Wilcox, the court concluded that "in light of [the defendant's] ongoing victimization of his nine children and extraordinarily troubling record manifesting his disregard for the law, this anomalous condition - imposed on a convicted felon facing the far more restrictive and punitive sanction of prison - is not overly broad and is reasonably related to [the defendant's] rehabilitation. Simply put, because [the defendant] was convicted of intentionally refusing to pay child support - a felony in Wisconsin - and could have been imprisoned for six years, which would have eliminated his right to procreate altogether during those six years, this probation condition, which infringes on his right to procreate during his term of probation, is not invalid under these facts" (¶: 1).

The court concluded that the probation condition does not eliminate the defendant's ability to exercise his constitutional right to procreate. He can satisfy the condition of probation by making efforts to support his children as required by law. Further, the probation condition will expire at the end of the term of probation. The condition is narrowly tailored to serve the state's compelling interest in having parents support their children and is reasonably related to the goal of rehabilitation.

There also was an issue in this case about whether the defendant waived his claim of error that the state was impermissibly allowed to withdraw from an earlier plea agreement when he entered into a subsequent plea agreement with the state. The change occurred when the state moved to withdraw from the original plea agreement at sentencing. As part of the second plea agreement, pursuant to which the defendant entered no contest pleas to the multiple counts described above, he agreed that he would not complain on appeal about the state's withdrawal from the first plea agreement.

The supreme court concluded that it is well established that a plea of no contest, knowingly and understandingly made, constitutes a waiver of nonjurisdictional defects and defenses, including claimed violations of constitutional rights. "Therefore, when a defendant pleads no contest, he or she waives all defenses based on a denial of due process because the prosecutor breached an earlier plea agreement" (¶: 23). In this case, the defendant pled no contest based on the second plea agreement. By doing so, he waived any claim of error that may have occurred when the circuit court permitted the state to withdraw from the first plea agreement.

Justice Bablitch filed a concurring opinion that was joined by Justices Wilcox and Crooks. Justice Crooks filed a concurring opinion that was joined by Justices Bablitch and Wilcox. Justice Bradley filed a dissent that was joined by Chief Justice Abrahamson and Justice Sykes. Justice Sykes filed a dissent that was joined by Chief Justice Abrahamson and Justice Bradley.

Effectiveness of Counsel - Failure to Object to Six-person Misdemeanor Juries

State v. Franklin and State v. Huck, 2001 WI 104 (filed 11 July 2001)

The defendants were convicted in separate trials on misdemeanor counts by six-person juries at a time when the statutes allowed for a jury of six in misdemeanor cases. Both defendants argued that they received ineffective assistance of counsel because their trial attorneys failed to object to the six-person juries, even though around the time of their trials the court of appeals certified the case of State v. Hansford to the supreme court and the supreme court accepted the certification. The certified issue in Hansford was whether Wis. Stat. section 756.096(3)(am) (1995-96), the statute authorizing six-person juries in misdemeanor cases, was constitutional. Ultimately, the supreme court held the statute unconstitutional. See State v. Hansford, 219 Wis. 226, 580 N.W.2d 171 (1998).

In a challenge to the effectiveness of counsel, a defendant must show that his or her counsel's representation was deficient and that this deficient performance resulted in prejudice to the defense. See Strickland v. Washington, 466 U.S. 668 (1984). With respect to the prejudice prong of the Strickland analysis, a defendant is required to show that counsel's errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable. The defendant must show that there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome. The defendant's burden is to show that counsel's errors actually had an adverse effect on the defense. See ¶: 14.

Applying this test, a majority of the supreme court, in a decision authored by Justice Bablitch, concluded that the defendants failed to prove prejudice. In particular, they did not show that, but for their attorney's failure to object, there was a reasonable probability for a different result in their cases. Said the court, "a six-person jury in and of itself is an insufficient basis upon which to conclude that the defendants were deprived of a fair trial whose result is reliable" (¶: 15). "We do not find any reason why six-person juries would undermine the confidence of an otherwise fair and error-free trial. Thus, beyond mere speculation, we cannot conclude that the six-person juries had an actual adverse effect on the defense in the defendants' cases, and therefore, the defendants are not entitled to a reversal of their convictions" (¶: 16). The court rejected the argument that it ought to find automatic prejudice in six-person jury cases.

Chief Justice Abrahamson filed a dissenting opinion that was joined by Justices Bradley and Sykes.

Fourth Amendment - Exclusionary Rule - "Good Faith" Exception Recognized

State v. Eason, 2001 WI 98 (filed 9 July 2001)

This case involved a no-knock search warrant that authorized police officers to enter an apartment without first knocking on the door and announcing their presence. The defendant moved to exclude evidence obtained during the execution of the warrant, arguing that the part of the search warrant that authorized a no-knock entry was not supported by any specific information that anyone in the premises possessed weapons or would destroy evidence if the officers knocked and announced their presence. The circuit court agreed, granting the motion to suppress. The court of appeals affirmed.

In a majority decision authored by Justice Crooks, the supreme court reversed. It agreed that the information in the affidavit submitted in support of the search warrant was not sufficiently particularized to establish reasonable suspicion that knocking and announcing would have been dangerous or would have inhibited the effective investigation of the crime by allowing, for example, for the destruction of evidence. However, the court concluded that the evidence should not be suppressed even though the no-knock portion of the warrant was invalid. "Although the exclusionary rule typically operates to exclude evidence obtained from unreasonable searches and seizures - and a search based upon an invalid search warrant is per se unreasonable - there are exceptions. Here, because the police officers acted in objectively reasonable reliance upon the search warrant, which had been issued by a detached and neutral magistrate, the laudable purpose of the exclusionary rule - deterring police from making illegal searches and seizures - would not be furthered by applying the exclusionary rule. Accordingly, we recognize a good faith exception to the exclusionary rule" (¶: 2).

Under similar circumstances, the U.S. Supreme Court has recognized that applying the exclusionary rule would not effectuate its purpose. Thus, in United States v. Leon, 468 U.S. 897 (1984), it formulated a good faith exception to the exclusionary rule where police officers act in objectively reasonable reliance on a facially valid search warrant issued by a neutral and detached magistrate that later was held to be invalid.

In this case, the Wisconsin Supreme Court held that "the good faith exception applies where the state has shown, objectively, that the police officers reasonably relied upon a warrant issued by an independent magistrate. The burden is upon the state also to show that the process used in obtaining the search warrant included a significant investigation and a review by either a police officer trained and knowledgeable in the requirements of probable cause and reasonable suspicion, or a knowledgeable government attorney [see next paragraph]. We hold that this process is required by Article I, Section 11 of the Wisconsin Constitution, in addition to those protections afforded by the good faith exception as recognized by the United States Supreme Court in United States v. Leon ...." (¶: 3).

In various footnotes the court fleshed out its holding. With regard to the "government attorney" referred to in the preceding paragraph, the court stated that this term does not refer to the magistrate or court commissioner or judge who issues the search warrant. The court also indicated that in the future the better practice will be that search warrant applications should reflect not only substantial investigation, but a review by a knowledgeable government attorney or police officer trained to be knowledgeable in such matters. Finally, the court articulated its expectation that there will be testimony offered at suppression hearings on questions concerning significant investigation and review by a knowledgeable police officer or government attorney.

Chief Justice Abrahamson filed a dissenting opinion that was joined by Justice Bradley. Justice Prosser filed a dissent that was joined by Justice Bradley.

Probation Conditions - Requirement That Probationer Notify Immediate Neighbors Regarding His Sex Offender Status

State ex rel. Kaminski v. Schwarz, 2001 WI 94 (filed 9 July 2001)

The defendant was convicted of second-degree sexual assault of a child and placed on probation. Both the court and the Department of Corrections (DOC) placed numerous conditions on the probation. One of the DOC conditions required the defendant to inform his immediate neighbors of his status as a convicted sex offender.

The issue before the supreme court was whether this probation condition was valid. In a majority decision authored by Justice Prosser, the supreme court concluded that Wisconsin's sex offender registration laws do not occupy the entire field in regulating the dissemination of sex offender registration information or prohibit a probation agent from imposing a rule requiring a convicted sex offender to notify his or her immediate neighbors of his or her sex offender status.

The sex offender registration laws (see Wis. Stat. §§ 301.45, 301.46) reflect a legislative intent to protect the public and assist law enforcement, and are related to community protection. "Mindful of these legislative intentions, we think it unlikely that the Legislature intended, by creating secs. 301.45 and 301.46, to prohibit probation agents from requiring actively-supervised convicted sex offenders to disclose limited information to specified persons or narrow categories of persons such as employers, landlords, neighbors, and new social acquaintances, whom offenders are likely to encounter, perhaps on a daily basis" (¶: 41).

The majority also concluded that the rule requiring neighbor notification was reasonably tailored to further the dual goals of probation, which are to protect the public from criminal conduct and to help the probationer become a useful member of society.

Chief Justice Abrahamson filed a dissenting opinion that was joined by Justices Bablitch and Bradley.

Employment Discrimination

Sexual Harassment and Gender Discrimination - Front Pay - Back Pay - Damage Caps

Salveson v. Douglas County, 2001 WI 100 (filed 10 July 2001)

The plaintiff began work as a part-time employee with Douglas County Ambulance Service in 1981. Over the next several years she enhanced her credentials and in 1986 was given a full-time position. "During her employment with the county ambulance service, [the plaintiff] was subjected to crude sexual harassment and discrimination by her supervisor, Richard Collyard. The long litany of epithets, insults, abuses, actions, and discrimination which she endured eventually led to serious psychological problems affecting [her] future employment" (¶: 7). Near the end of her employment, the plaintiff suffered some physical injuries. In November 1995, she was granted a disability pension due to these injuries and her employment with Douglas County was terminated.

Two months later Gold Cross Ambulance took over the operations of the Douglas County Ambulance Service, and Collyard began to work for Gold Cross. His presence with the company made it impossible for the plaintiff to seek employment with the new operation, even though the circuit court found that she would have been hired by Gold Cross either as a paramedic instructor or in some other limited capacity.

In 1996 the plaintiff filed suit under Title VII of the Civil Rights Act of 1964, alleging that she had been subjected to illegal sexual harassment and gender discrimination during virtually the entire time of her service with the county. In 1998 a jury awarded $356,220 in damages. The circuit court denied the county's post-trial motion to reduce the award to $200,000 pursuant to 42 U.S.C. section 1981a(b)(3), a provision that limits awards of compensatory and punitive damages based upon the number of persons employed by the employer. As to "equitable remedies" that were left to the court to determine separately, the judge awarded the plaintiff back pay, front pay, attorney fees, interest, and costs which brought the total judgment to $555,779. The court of appeals affirmed.

In a unanimous decision authored by Justice Prosser, the supreme court affirmed. It first considered whether the circuit judge properly exercised his discretion in awarding back pay. Whether to award back pay in Title VII cases is a discretionary decision for the circuit court. Once a court finds unlawful discrimination, it is to presume that back pay should be awarded. The appropriate amount of back pay is determined by ascertaining the difference between actual wages earned and what would have been earned if not for the discrimination.

The court concluded that back pay for the period between termination by the county and the date of the verdict was equitable and appropriate in this case because evidence in the record indicated that the plaintiff would likely have been hired by Gold Cross had she applied. Evidence further supported the circuit court's finding that the plaintiff was unable to work for Gold Cross because of the psychological injury she suffered as a result of sexual harassment and discrimination and because Collyard was employed by Gold Cross.

Front pay is used to compensate an employee for the difference in earnings between what the employee would have received in his or her former employment, and what he or she can expect to receive in his or her present or future employment. The supreme court concluded that the circuit judge properly exercised his discretion in awarding the plaintiff one year of front pay. The county did not establish that the plaintiff could have found a position comparable to the one she held as a paramedic for Douglas County. Nothing in the record indicated that the plaintiff could have mitigated her damages by obtaining employment comparable to her position as a paramedic, other than by working for Gold Cross (which she could not reasonably be expected to have done).

The court next considered whether the amount of back pay and front pay awarded to the plaintiff should have been offset by disability payments she received. Under the federal collateral source rule, it is within the circuit court's discretion to determine whether benefits received from a source collateral to employment should offset an award of back pay or front pay. The rule operates not to prevent the plaintiff from being overcompensated, but rather to prevent the tortfeasor from paying twice. The court concluded that the plaintiff's awards of back pay and front pay should not be offset by benefits she received for her disability because she and other paramedics paid for those benefits by foregoing pay increases and other benefits in conjunction with the paramedic union's collective bargaining. "Douglas County should not benefit simply because [the plaintiff] also received collateral disability benefits. The county will not pay twice" (¶: 61).

The next issue was whether the circuit court erred in determining that the award of front pay is not subject to the damages cap imposed by 42 U.S.C. section 1981a(b)(3), which limits compensatory and punitive damages. The supreme court concluded that the circuit court correctly determined that front pay does not fall under compensatory or punitive damages and therefore is not subject to the damages cap.

Finally, the court considered the question of whether the size of an employer for purposes of the statutory damages cap should be measured at the time of the discrimination or at the time the award is made. [Note: The cap varies according to the size of the employer]. The supreme court concluded that the circuit judge properly measured the number of employees at the time the discrimination occurred.

Family Law

Termination of Parental Rights - Abandonment - Default Judgment

Evelyn C.R. v. Tykila S., 2001 WI 110 (filed 12 July 2001)

In this termination of parental rights case, the mother violated a court order to appear in person at the fact-finding hearing intended to determine whether she had abandoned her son. The circuit court entered a default judgment against the mother on the issue of abandonment without first taking any evidence on the matter. At the subsequent dispositional hearing, the circuit court accepted testimony supporting the termination of the mother's parental rights and, based on this testimony, reaffirmed the default judgment against the mother and entered an order terminating her parental rights to her son. The court of appeals affirmed. In a majority decision authored by Justice Wilcox, the supreme court affirmed the court of appeals.

The supreme court first considered whether the circuit court erred in entering a default judgment on the issue of abandonment without first taking evidence sufficient to support a finding of abandonment by clear and convincing evidence. The supreme court concluded that by entering a default judgment against the mother on the issue of abandonment without first taking evidence sufficient to support such a finding, the circuit court failed to comply with the constitutional and statutory requirements for termination of parental rights. Accordingly, the circuit court erroneously exercised its discretion in entering a default judgment.

Nevertheless, upon review of the entire record in this case, the supreme court held that the circuit court remedied the error described above at the dispositional hearing when, prior to reaffirming the default judgment and entering the order terminating parental rights, the court took sufficient evidence to support by clear and convincing evidence a finding that the mother had abandoned her son. As such, the error was harmless.

Chief Justice Abrahamson filed a concurring opinion. Justice Crooks filed a concurrence that was joined by Justice Wilcox.

Incompetents

Protective Placements - Continuation - Hearings - Factual Findings

County of Dunn v. Goldie H., 2001 WI 102 (filed 10 July 2001)

The supreme court, in an opinion written by Justice Prosser, affirmed lower court orders that continued an elderly woman's, Goldie H.'s, protective placement even though she was not given even a summary hearing and the circuit court had made no factual findings. The issues in this case were: "1) whether Goldie H. had a right to a hearing before her protective placement was continued; and 2) whether the circuit court had a duty to make findings of fact to supports its continuation order" (¶: 3).

The supreme court held that "a person is entitled to a hearing on the record before his or her protective placement is continued, and that the circuit court must make factual findings to support the need for continuation, as required by Wis. Stat. § 55.06(1) (1999-2000)" (¶: 6). Such hearings, however brief, promote accountability and permit more informed fact finding. The court explained that such hearings need not be extensive nor need they take on an "evidentiary" character (¶: 35). Although the court in this case failed to conduct even a summary hearing, its determination was "undoubtedly correct" and a remand for a second hearing was unnecessary.

Insurance

Notice of Accident - Timeliness - Prejudice - Presumption

Neff v. Pierzina, 2001 WI 95 (filed 9 July 2001)

Plaintiffs were ascending an elevator in a chicken coop when the elevator's cable snapped and plunged them from the second to the first floor. The accident occurred in July 1996 and plaintiffs commenced this action one year later in July 1997. American Family had issued a renter's policy to the wife of one of the defendants, but the insurer did not receive notice that its insured was involved until a second amended complaint was filed in June 1998, nearly two years after the fall. The circuit court held a coverage trial which found that the insured had breached his duty to provide American Family with timely notice and had prejudiced the insurer by his omission. The court of appeals affirmed.

The supreme court, in an opinion written by Justice Prosser, affirmed in an opinion that clarified the standard of review governing the timeliness and prejudice issues. The timeliness issue raises a question of fact that is subject to the clearly erroneous standard of review. The insurer bears the burden of establishing that its insured failed to provide notice within the notice requirements of the policy, although the insured may claim that he did not have reasonable grounds to believe that he "participated" in an accident or that notice was not reasonably possible within the prescribed time. Prejudice to the insurer also raises a question of fact that is subject to a clearly erroneous standard (¶: 47).

Applying these standards to the record before it, the court found no clear error in the trial court's determination that the notice was untimely. The same held for prejudice. Moreover, the insured's "failure to provide timely notice within one year of the accident created a presumption that American Family was prejudiced by the lack of notice" (¶: 58). Although another insurance company had conducted an "investigation" shortly after the elevator accident, the record raised substantial questions about its thoroughness and its germaneness to American Family's very different coverage concerns.

UIM Coverage - "Illusory" Coverage - Frivolous Claim

Brunson v. Ward, 2001 WI 89 (filed 6 July 2001)

The court of appeals certified the following question to the supreme court: "Does the remedy in Meyer v. Classified Ins. Co., 192 Wis. 2d 463, 531 N.W.2d 416 (Ct. App. 1995), prohibiting illusory insurance coverage, still hold where an insurer fails to update its underinsured motorist (UIM) insurance coverage pursuant to Wis. Stat. § 632.32(4m) (1995-96), but has included a provision stating that the policy shall conform to the Wisconsin Statutes?" The supreme court, in an opinion authored by Justice Sykes, answered no to this question. The alleged tortfeasor had insurance coverage of $100,000. By operation of Wis. Stat. section 632.32(4m)(d), the law required UIM coverage of at least $50,000 even though the plaintiff's policy carried facial UIM limits of $25,000. Clearly, the $25,000 would have been illusory except that the law "read in" the $50,000 minimum mandatory limit, which was not an "illusory" amount (¶: 24). In any event, the required $50,000 was still less than the tortfeasor's $100,000; thus, the plaintiff was not underinsured.

The supreme court reversed the circuit court's determination that plaintiff's motion to reconsider its ruling was frivolous. Noting the "delicacy" of such determinations, the court pointed to the unsettled law on this point and its own decision to accept this case on certification. Although the plaintiff lost the appeal, his arguments were reasonable.

Justice Bradley dissented, joined by Chief Justice Abrahamson. The dissenters contend that the majority ignored the plain meaning of Wis. Stat. section 631.15(3m), which is designed to protect the insured, not to shield noncomplying insurers whose policies violate state law.

Bad Faith - Implied Covenant and UIM - Time of Breach

Danner v. Auto-Owners Ins., 2001 WI 90 (filed 6 July 2001)

Following an accident in 1990 with an underinsured motorist and her increasing frustration with her own insurer, the plaintiff brought this bad faith action in 1995. A jury found that the insurer acted in bad faith by denying her claim. It awarded her $125,000 in attorney fees for the bad faith claim but no damages (including attorney fees) for the underlying claim. At post-verdict proceedings, the trial judge increased the bad faith attorney fee award to $142,000 and also changed the verdict to reflect an award of $81,000 in attorney fees on the underlying claim. The court of appeals affirmed.

The supreme court, in an opinion written by Justice Crooks, affirmed. (Justice Bradley did not participate.) The first issue before the court was whether an insurer who provides underinsured motorist (UIM) coverage had a duty to act in good faith at all times with its insured. The insurer argued that UIM claims are "fundamentally different" from other first-party bad faith claims and that no bad faith action arises until liability is first established by verdict or arbitration. The court rejected the argument. Wisconsin case law firmly establishes that every insurance contract carries an "implied covenant" of good faith and fair dealing, the breach of which are torts apart from any contract damages. The "special duty of good faith and fair dealing runs throughout the contract relationship between the insurer and the insured" (¶: 49). The court held that "every insurance contract from its inception has an implied covenant of good faith and fair dealing between the insured and the insurer" (¶: 54), a principle that applies to the "investigation, evaluation and processing" of UIM claims (¶: 57).

The court also affirmed the sufficiency of the verdict finding bad faith and upheld the circuit court judge's changes to the verdict after trial. These issues are record-intensive and raise no novel issues of law.

UIM - Settlements - Liability Limits - "Exhaustion"

Danbeck v. American Family Mut. Ins. Co., 2001 WI 91 (filed 6 July 2001)

The plaintiff, who had underinsured motorist (UIM) coverage of $100,000, was injured by a driver who carried only $50,000 in liability coverage. While settling with the other driver for $48,000, the plaintiff advised his insurer, American Family, of his UIM claim. American Family refused to pay the UIM claim because the plaintiff had settled for less than the other driver's liability limits, and thus had not "exhausted" the limit within the meaning of the UIM coverage. The circuit court ruled in the plaintiff's favor and concluded that UIM coverage must be reduced by the difference between the settlement amount and the tortfeasor's liability limits. The court of appeals reversed.

The supreme court, in an opinion written by Justice Sykes, affirmed the court of appeals. The "narrow issue" before the court was "whether a UIM insurer's obligation to pay UIM benefits to its insured is triggered when the insured settles with the tortfeasor's liability insurer for less than full liability limits and then credits the UIM carrier for the difference" (¶: 11). The policy language governing the "exhaustion" of the underlying liability limits was clear and unambiguous. Although the "practical effect" of the "settlement plus credit" approach was identical to payment of full policy limits, the practice nonetheless violated the policy language. Its merits from a public policy position did not permit the court to ignore the "clear language of the contract" (¶: 22).

Justice Bradley, joined by Chief Justice Abrahamson, dissented on the ground that case law had long established the ambiguity of the UIM exhaustion language at issue in this case.

UIM Coverage - "Illusory" Coverage

Taylor v. Greatway Ins. Co., 2001 WI 93 (filed 6 July 2001)

In 1993 the plaintiff's husband was killed in a car accident. The other driver carried liability limits of $50,000. Plaintiff settled with the liability insurer for the limits and filed underinsured motorist (UIM) claims against American Family based on her two automobile insurance policies, each of which provided $50,000 UIM coverage. American Family denied coverage. The circuit court, however, agreed with plaintiff's argument that the net effect of the policy's reducing clause and statutes that require at least $25,000 in liability coverage rendered the $50,000 UIM coverage illusory. The court of appeals reversed. It found that the other driver's vehicle was not "underinsured" as defined by the policy; it did not reach the "illusory coverage" issue.

The supreme court, in an opinion written by Justice Crooks, affirmed. The court held that this appeal was governed by Smith v. Atlantic Mut. Ins. Co., 155 Wis. 2d 808, 456 N.W.2d 597 (1990). As in Smith, plaintiff's policy defined an underinsured vehicle as one whose liability limits are "less than" UIM limits. Thus, her policy clearly and unambiguously excluded UIM coverage where the tortfeasor's liability coverage is equal to the UIM limits.

Based on this reasoning, the supreme court declined to address whether American Family's reducing clause created illusory coverage. The majority went on, however, to explain why the cases on illusory coverage cited by plaintiff did not govern the result of this case. It also rejected an argument advanced in WATL's amicus brief that the UIM policy language combined with the reducing clause contravened Dowhower v. West Bend Mut. Ins. Co., 2001 WI 73.

Justice Bradley, joined by Chief Justice Abrahamson and Justice Bablitch, dissented. They argue that the policy's language is inconsistent with the stated purpose of UIM coverage and defeats an insured's reasonable expectations. The dissent observes that there are two competing definitions of UIM coverage: the "limits of coverage approach," which the dissenters find flawed, and one that compares the "at-fault driver's liability limits with the damages sustained by the insured (limits of damages)," a definition that does accord with insureds' reasonable expectations (¶: 34).

Coverage Disputes - Attorney Fees

Reid v. Benz, 2001 WI 106 (filed 11 July 2001)

Reid sued Benz for injuries incurred when he fell on her driveway. Benz tendered her defense to American Family, which had issued a homeowner's policy to her. American Family assigned counsel to Benz, reserved its rights, and later moved to bifurcate coverage and liability issues. American Family alleged that the "business pursuits" exclusion eliminated coverage for Reid's injuries. In the coverage proceeding, the judge ruled that an exception to the business pursuits exclusion applied; thus, American Family was obligated to defend and indemnify Benz. The trial court also awarded Benz attorney fees with respect to the coverage litigation. The court of appeals certified the issue of attorney fees to the supreme court.

The supreme court, in an opinion written by Justice Crooks, reversed the award of attorney fees in an opinion that clarifies the reach and rationale of Elliott v. Donahue, 169 Wis. 2d 310, 485 N.W.2d 403 (1992). The award of attorney fees in Elliott was predicated upon the insurer's failure to follow the coverage dispute procedures set forth in Mowry v. Badger State Mut. Cas. Co., 129 Wis. 2d 496, 385 N.W.2d 171 (1986) (insurers should bifurcate coverage and liability issues, staying the latter until the former is resolved). The award of attorney fees "should not be the usual result" (¶: 27), and the court refused to apply Elliott to the situation in this case. Benz presented no authority to support her argument that incurring attorney fees to establish coverage denies her benefits under the policy (¶: 33). The court also rebuffed Benz's contention, supported by WATL as amicus, that insurance companies should pay the insured's attorney fees whenever the insurer fails to prevail. Nonetheless, insurers may escape attorney fees only where coverage is "fairly debatable" (¶: 37).

Justice Bablitch, joined by Chief Justice Abrahamson, dissented on grounds that the majority opinion is "bad law," "anti-consumer," and permits insurers to "win" under any scenario.

Renter's Policy - Business Pursuits Exclusion - Exception

Vandenberg v. Continental Ins. Co., 2001 WI 85 (filed 3 July 2001)

Riehl provided paid day care services for three children, including Justin V., while also caring for her own three children. The day care services took place in her rented home, which was covered by renter's insurance. While Riehl was caring for the other children, her own son, age five, accidentally smothered and killed eight-month-old Justin V. Justin's mother (the plaintiff) sued Riehl, alleging she had negligently supervised both Justin and Riehl's own son. The plaintiff also named Riehl's renter's insurance carrier as a defendant. The insurer contended that the incident was excluded by the policy's business pursuits exclusion. The plaintiff argued that her claim against Riehl for the negligent treatment of Riehl's own son fell within the "usual to nonbusiness pursuits" exception to the business pursuits exclusion. The circuit court ruled in the insurer's favor.

On certification from the court of appeals, the supreme court, in an opinion written by Chief Justice Abrahamson, reversed the circuit court. Under the policy, the home day care business clearly constituted a "business pursuit" that fell within the exclusion. The issue, however, was whether Riehl's care for her own son while operating the day care business was an activity that is "usual to nonbusiness pursuits" and thus within an exception to the exclusion (¶: 16). In resolving the issue, the supreme court analyzed three somewhat conflicting court of appeals decisions, that also involved different policy language, and five different approaches taken by other jurisdictions. The supreme court elected to follow precedent that construed similar policy language as ambiguous and applied a rule of narrow construction "in which the ambiguity exists as an exception to liability." Put differently, "[r]easonable persons in the position of the plaintiff in the present case could reasonably believe that they had coverage under this exception for the supervision and control of their own child" (¶: 42). The court also rejected arguments that the exception, so construed, would swallow the rule.

Finally, the court addressed whether the contract should be reformed to provide coverage on the claim that Riehl had negligently supervised Justin V. On this issue the circuit court had also granted summary judgment in the insurer's favor. The supreme court reversed on this point as well, finding that an issue of fact was raised concerning a "mutual mistake" based on the "Riehls' belief that the policy provided coverage and the mistake or neglect of the agent in failing to provide the intended coverage" (¶: 57).

Justice Wilcox, joined by Justices Prosser and Crooks, dissented on points concerning the policy's ambiguity and the problem of unlicensed day care facilities.

Municipal Law

Property Taxes - Limited Judicial Review in Populous Counties - Wis. Stat. Section 74.37(6) Held Unconstitutional

Nankin v. Village of Shorewood, 2001 WI 92 (filed 6 July 2001)

A property owner who disagrees with the assessment of his or her property may file a formal objection with the local board of review. After the board renders its decision, the statutes provide for multiple avenues of appeal as follows:

1) An owner can appeal from the board's determination by an action for certiorari to the circuit court under Wis. Stat. section 70.47(13).

2) Pursuant to section 70.85, a property owner may submit a written complaint with the Department of Revenue requesting that the department revalue the property. The department's decision may then be appealed through an action for certiorari in the county in which the property is located.

3) The property owner may proceed under section 74.37 with a claim for an excessive assessment against the taxing entity after first paying the tax on the assessment. If this claim is denied, the aggrieved property owner may then commence an action in the circuit court using ordinary civil procedure and practice to recover the amount of the claim not allowed.

Except in Milwaukee County, property owners may use any of these three mechanisms to appeal the decision of the board of review. However, in Milwaukee County, section 74.37(6) limits property owners to the first two mechanisms (involving review by certiorari) but prohibits the full trial "de novo" in the circuit court under the third option.

A property owner in a village located within Milwaukee County challenged this statutory scheme, contending that section 74.37(6) is unconstitutional because it violates the constitutional guarantee of equal protection of the law, that is, it treats owners of property located in Milwaukee County differently than owners of property located in other counties without a rational basis.

In a majority decision authored by Justice Bablitch, the supreme court agreed. The court concluded that, in enacting section 74.37(6), the Legislature created a distinct classification of citizens, that is, owners of property located in counties with a population of 500,000 or more. Secondly, this legislation treats the class of people in Milwaukee County significantly different than all others who are similarly situated inasmuch as a property owner who is able to pursue a circuit court "de novo" action is placed at a significant advantage when compared to those who are limited to certiorari review. Finally, the court concluded that the property owner met his burden of proving beyond a reasonable doubt that there is no rational basis for the classification under section 74.37(6): the Legislature did not articulate any rationale for the classification and the court was unable to construct a rationale for the classification.

The court also concluded that section 74.37(6) is severable from the remainder of the statute.

Justice Crooks filed a dissenting opinion that was joined by Justice Wilcox. Justice Sykes did not participate in this case.

Prisoner Litigation

Prisoner Litigation Reform Act - Exhaustion of Administrative Remedies Required

State ex rel. Hensley v. Endicott, 2001 WI 105 (filed 11 July 2001)

The plaintiff, who was incarcerated in a state correctional institution, filed a complaint for declaratory judgment against the Department of Corrections (DOC) challenging the validity of an administrative regulation prohibiting prisoners from having pornographic materials, and another prohibiting prisoners from having cassette tapes and tape players. His challenges were premised on First Amendment and Equal Protection grounds.

DOC responded with a motion to dismiss because the plaintiff failed to plead exhaustion of administrative remedies pursuant to the Prisoner Litigation Reform Act (PLRA). Although the circuit court found that the plaintiff stated a claim, it concluded that he was required by the PLRA to exhaust his administrative remedies before filing suit and, because he did not, it dismissed his complaint.

The court of appeals reversed. It concluded that the constitutional questions raised by the plaintiff are unsuited to resolution by the prison's inmate complaint review committees and appeal personnel (the administrative remedies available to the prisoner). The appellate court also found that Wis. Stat. section 806.04, which sets forth the general rules governing declaratory relief, and section 227.40(1), which deals with contesting the validity of administrative rules through declaratory judgment proceedings, trumped the PLRA's exhaustion requirement.

In a majority decision authored by Justice Wilcox, the supreme court concluded that the PLRA is clear on its face in requiring prisoners to exhaust their administrative remedies prior to bringing an action in circuit court. Accordingly, there is no common law futility exception to the PLRA, as urged by the plaintiff. The court also concluded that because the PLRA is more specific and was passed later in time than section 227.40, it should have been applied to require the prisoner to exhaust his administrative remedies.

[Note: Before reaching these conclusions, the court determined that it would address the issues described above even though the underlying dispute in this case may have been rendered moot by the implementation of an emergency administrative rule which temporarily supplanted the particular prison regulations challenged by the plaintiff.]

Justice Bradley filed a dissenting opinion that was joined by Chief Justice Abrahamson.

Property

Depositing Fill on Lands Sometimes Submerged by Navigable Water - Wis. Stat. Section 30.12(1)(a)

State v. Kelley, 2001 WI 84 (filed 3 July 2001)

The Town of Little Rice completed construction of a town dam on the Little Rice River in 1961, creating Lake Killarney. The defendants own property bordering the lake. The western edge of their property includes a parcel of land which, during certain periods of high water, is inaccessible because the old logging roads leading to it are submerged. In 1988 the defendants deposited fill on a section of their land that was at times submerged. No Department of Natural Resources (DNR) permit was applied for or issued to deposit the fill.

This action arose as a civil proceeding in which the state sought an injunction ordering the defendants to remove the fill and pay a forfeiture and penalties. The state proceeded under Wis. Stat. sections 30.12(1)(a), 30.15(1)(a), and 30.15(1)(d). The circuit court granted summary judgment in favor of the state holding that the defendants violated these statutes by depositing fill on a section of land submerged at times by Lake Killarney, a navigable water, without a permit. The court of appeals affirmed.

The first issue before the supreme court was whether a property owner is required to obtain a permit before depositing fill on land submerged below navigable water regardless of whether the land is above or below the ordinary high water mark. "This issue presents a complex question that affects not only the parties to the present lawsuit but the people of the State of Wisconsin. Because this issue has not been sufficiently explored in the briefs or at oral argument to enable us to decide it, this case provides an inappropriate vehicle for resolving the issue the case presents. Nevertheless, because the issue seems to be of statewide importance, we take the unusual step of remanding the matter to the circuit court where the parties can develop the facts and legal analysis to enable the circuit court to address the legal issue presented" (¶: 7).

The defendants also raised constitutional challenges involving uncompensated taking, excessive fines, and a five-year delay in enforcement. As to these, the court concluded that the constitutional arguments were not fully developed and are "unpersuasive." See ¶: 8.

Finally, the supreme court concluded, as did the circuit court, that the dam permit did not set forth mandatory water levels and, therefore, the water levels about which the defendants complained did not violate the dam permit.

Accordingly, in a decision authored by Chief Justice Abrahamson, the court reversed the court of appeals and remanded the case to the circuit court to determine whether the defendants were required in 1988 to obtain a permit from the DNR before depositing fill on the section of land described above.

Justice Wilcox filed a concurring opinion as did Justice Crooks. Justices Bablitch and Wilcox joined Justice Crooks' concurrence. Justice Bradley did not participate.

Lis Pendens - Relationship of Common Law and Statutory Lis Pendens

Gaugert v. Duve, 2001 WI 83 (filed 2 July 2001)

The Gaugerts held an option to purchase real estate owned by Duve. Notwithstanding the option, Duve entered into an offer to purchase contract with Hansen. The Gaugerts sued Duve and Hansen seeking specific performance of their contract. After a trial the circuit court dismissed the complaint and the Gaugerts appealed. Following the filing of this appeal but before the court of appeals issued its decision, the circuit court discharged a statutory lis pendens filed by the Gaugerts pursuant to Wis. Stat. section 840.10. The Gaugerts did not obtain a stay of the order discharging the statutory lis pendens or an injunction prohibiting the sale of the property from Duve to Hansen. While the case was pending before the court of appeals, Duve conveyed the real estate to Hansen.

The court of appeals reversed the circuit court. On remand the circuit court denied the Gaugerts' motion for specific performance. The Gaugerts brought another appeal and the court of appeals affirmed the denial of specific performance. That denial was before the supreme court in the current appeal.

In a unanimous decision authored by Justice Bablitch, the supreme court reversed the court of appeals. Two issues were presented to the supreme court. First, following a discharge of a filing of lis pendens pursuant to section 840.10, to what extent, if any, does the common law of lis pendens apply to a party to a lawsuit affecting the disputed real property? The court held that because Hansen was a party to the lawsuit and thus had actual notice of the pendency of the appeal, under the doctrine of common law lis pendens he purchased the property subject to the final outcome of the litigation on appeal.

Under the lis pendens doctrine, when property that is the subject of a suit is conveyed, the purchaser or encumbrancer pendente lite (while the action is pending) is bound by the outcome of the litigation. Under the common law doctrine of lis pendens all purchasers were bound by the result of pending litigation even when they had no actual notice of the litigation. The pending action itself was deemed notice of the title, or claim of title, being asserted by the particular parties to the litigation. The common law method of deeming a pending suit to be constructive notice of lis pendens proved unsatisfactory, due to the potentially harsh impact on purchasers who did not have actual notice of pending real estate transactions. As a result, Wisconsin and most other jurisdictions enacted lis pendens statutes. However, the plain language of section 840.10(1)(a) leads to the conclusion that Wisconsin's lis pendens statute plays no role as to a purchaser who is a party to the relevant litigation. Parties have actual notice of the dispute and, therefore, as to these individuals the statute plays no role.

In this case, because Hansen was a party to the lawsuit and thus had actual notice of the pending appeal, the doctrine of common law lis pendens continued to protect the Gaugerts' interest. Therefore, Hansen took the property subject to the outcome of the litigation on appeal.

This result was not affected by the Gaugerts' failure to obtain a stay pursuant to section 808.07(2) of the circuit court order expunging statutory lis pendens. Hansen was bound by the original decision of the court of appeals to reverse the circuit court dismissal order because of the common law of lis pendens and his party status. The order expunging statutory lis pendens had no effect on the Duve to Hansen transaction.

The supreme court next considered whether the circuit judge erroneously exercised his discretion in denying the Gaugerts' request for specific performance. The court held that the Gaugerts were entitled to specific performance on their contract. "We find it unreasonable to conclude that the Gaugerts should be denied specific performance when the law of lis pendens protected their interest" (¶: 47).

Landlord-tenant - Leases - Unfair Trade Practice

Baierl v. McTaggart, 2001 WI 107 (filed 11 July 2001)

In 1996 the McTaggarts entered into a one-year residential lease with Baierl for an apartment. The lease contained a provision purportedly requiring the tenant to indemnify the landlord for all costs and attorney fees incurred in enforcing the lease. This provision was in direct violation of Wis. Admin. Code § ATCP 134.08(3), which labeled it an unfair trade practice. The McTaggarts vacated the apartment about six months early and moved to Ohio for employment reasons. They instructed Baierl to deduct a month's rent from the security deposit. Baierl deducted for the rent as well as damages, and when he was unable to re-rent the unit, he sought to enforce the lease.

Baierl later brought this action to collect damages under the lease. The McTaggarts countered that the lease was void and unenforceable because of § ATCP 134.08(3). They also counterclaimed that Baierl had wrongfully retained their security deposit to satisfy rent for which they had no obligation under the void lease. Accordingly, they sought double damages, costs, and attorney fees under Wis. Stat. section 100.20(5) (1995-96). The circuit court granted summary judgment to the McTaggarts. A divided court of appeals reversed.

The supreme court, in an opinion written by Justice Bradley, reversed the court of appeals. The court held that a landlord who includes a provision specifically prohibited by Wis. Admin. Code § ATCP 134.08(3) in a residential lease may not enforce the lease. Severing the invalid provision and enforcing the remainder of the lease, said the court, would undermine the regulatory scheme (¶: 37).

Justice Crooks, joined by Justice Wilcox, concurred and wrote separately to emphasize that landlords may pursue noncontract remedies against tenants.

Torts

Medical Negligence - Burden of Proof - Jury Instructions

Nommensen v. American Continental Ins. Co., 2001 WI 112 (filed 12 July 2001)

In this case the supreme court, in an opinion written by Justice Prosser, affirmed the court of appeals' decision in this medical negligence case. The sole issue before the court was "whether the circuit court erred in failing to grant the plaintiff's request to modify the standard jury instruction on the ordinary burden of proof in a civil case by substituting the word 'probability' for the word 'certainty'" (¶: 1). More precisely, the circuit court opted to give the standard burden of proof instruction, Wis JI - Civil 200, which states, in pertinent part, that the "burden of proof ... rests upon the party contending that the answer to a question should be 'yes.' This burden is to satisfy you to a reasonable certainty by the greater weight of the credible evidence that 'yes' should be the answer" (emphasis original) (¶: 2).

In essence, plaintiff contended that the instruction was confusing, ambiguous, and perhaps erroneous. On this record the supreme court declined to grant the relief requested, namely, a new trial. The majority opinion carefully reviews the history behind the present instruction, which has remained unchanged since 1972, and concluded that the "reasonable certainty" language is well-grounded in Wisconsin case law. More compelling was the argument that the instruction is possibly misleading and confusing because it potentially conflates two different elements: "1) that the jurors must be convinced in their own mind, and 2) that they must be convinced that one side's evidence is probably more true than the other side's" (¶: 33). Yet a change in Wis JI - Civil 200 would affect language in dozens of other instructions, a prospect that the parties had failed to consider. In conclusion, the court found that plaintiff had failed to demonstrate that his "substantial rights" were affected by the flawed but adequate instruction.

Nonetheless, the supreme court requested the Wisconsin Civil Jury Instructions Committee to "revisit the instruction for a thorough review" (¶: 55). In particular, it is hoped that the committee will eliminate the instruction's unfortunate potential to mislead ordinary jurors into thinking that the burden of proof is to a "reasonable certainty."

Chief Justice Abrahamson concurred and incorporated her concurrence on the issue of harmless error in Evelyn C.R. v. Tykila S., 2001 WI 110, ¶:¶: 37-42. Justice Crooks, joined by Justice Wilcox, also concurred, but wrote separately because they disagreed with the majority's harmless error analysis which, they believed, confounded the required "reasonable probability" of error with that of a "reasonable possibility."

Damages - Medical Expenses - Collateral Source Rule

Koffman v. Leichtfuss, 2001 WI 111 (filed 12 July 2001)

The plaintiff was injured in a car accident. Although his total medical bills were $187,000, health care providers and insurers entered into agreements that reduced the total amount paid to about $65,000. At a trial on the issue of damages, the judge permitted evidence of the amount actually paid by the insurers. In post-verdict motions, the circuit court ruled that the collateral source rule was inapplicable in a subrogation setting and reduced the jury's medical expense award from $98,000 to the amount actually paid by insurers (about $65,000).

On certification from the court of appeals, the supreme court, in an opinion written by Justice Bradley, reversed the circuit court. This appeal involved the "intersection of three concepts central to the law of damages: The Wisconsin rule of valuation of medical expense damages, the collateral source rule, and subrogation" (¶: 23). Resolving confusion that had arisen in the wake of Ellsworth v. Schelbrock, 2000 WI 63, the court reconciled the three principles, which operate in the following manner: "1) the plaintiff is entitled to seek recovery for the reasonable value of medical services rendered in treating the claimed injury; 2) the collateral source rule allows the plaintiff to seek recovery for the reasonable value of medical services without consideration of payments made by the plaintiff's insurer; and 3) the insurer's subrogation rights entitle it to recoup the amounts it paid on the plaintiff's behalf" (¶: 46). Applying these rules to this case, the supreme court remanded the matter for a new trial on damages because the trial judge had erroneously admitted evidence of the amounts paid by the plaintiff insurers and thus prejudiced the plaintiff (¶: 52).

Chief Justice Abrahamson concurred and incorporated her harmless error analysis set forth in Evelyn C.R. v. Tykila S., 2001 WI 110, ¶:¶: 37-42. Justice Wilcox also concurred in order to emphasize that the civil harmless error test should be understood in terms of a "reasonable probability," not possibility, of a different outcome. Justice Crooks dissented and wrote separately on the harmless error issue. And Justice Sykes, joined by Justice Crooks, dissented from the majority's construction of the collateral source rule.

Expert Evidence - Causation - Fear of Surgery

Martindale v. Ripp, 2001 WI 113 (filed 12 July 2001)

The plaintiff was injured when a fully loaded garbage truck plowed into the back of his stopped vehicle. He claimed that as a result of the accident he suffered injury to his temporomandibular joints (TMJs) when his head and neck were violently "whiplashed" by the collision. Moreover, the plaintiff was a tall man whose head was positioned above his car's headrest. A jury found that the collision did not cause the TMJ and awarded about $6,000 for past and future pain and suffering. The trial judge excluded expert evidence regarding the "mechanism" or manner by which the plaintiff sustained the TMJ injury in the accident, and also excluded evidence of possible complications arising as a result of possible future surgery.

The supreme court, in an opinion written by Justice Prosser, reversed. The trial judge erroneously excluded the plaintiff's expert medical evidence on the cause of his TMJ injury. First, the evidence would have assisted the jury in understanding the cause of plaintiff's TMJ. Indeed, the trial judge permitted the expert to opine on cause but precluded the expert from explaining the very "mechanism" that supported the opinion on cause.

Second, the judge erroneously ruled that there was no "foundation" for the doctor's opinion regarding causation. The expert was clearly qualified to testify about TMJs and the plaintiff himself testified to the "whiplash" motion stemming from the collision.

Third, the trial judge mistakenly assumed that the medical expert was testifying as an "accident reconstruction expert." The record clearly indicated, however, that the doctor "testified that the whiplash injury caused the TMJ problem, not that the accident had caused the whiplash injury" (¶: 56). The city did not contest the fact that plaintiff had suffered a whiplash injury.

Fourth, an "accident reconstruction expert or an expert in kinematics is not required for an elementary discussion of whiplash, which is the abrupt jerking motion of the head, either backward or forward. Expert testimony on kinematics is not necessary to confirm the potential for whiplash when a fully loaded garbage truck smashes into a barely moving or stopped automobile, pushing it into another vehicle, sending it 100 to 150 feet from the point of origin, and causing $9,000 in damages to the vehicle" (¶: 65). Finally, the record also established that the expert's opinions carried the requisite degree of professional certainty and were not speculative or conjecture.

The court next determined that this erroneous exclusion of evidence affected the plaintiff's substantial right and raised a reasonable possibility of a different outcome. A new trial was thus warranted.

The plaintiff also argued that error occurred because the trial judge erroneously excluded testimony regarding his fears of possible future surgery. Rejecting this claim, the supreme court held that claims for fear of future surgery carry two elements: "1) The plaintiff must establish a reasonable fear of the possibility of future surgery, ... which may be accomplished with a doctor's realistic prediction as to the possibility of future surgery; and 2) the plaintiff may not present evidence of fear of future surgery if the evidence relates to 'remotely conceivable complications' or 'a fictitious or imagined or highly unlikely consequence'" (¶: 83). On this record the trial judge properly determined that the plaintiff's fear was based upon only "remotely conceivable implications."

Chief Justice Abrahamson concurred and incorporated her harmless error analysis set forth in Evelyn C.R. v. Tykila S., 2001 WI 110, ¶:¶: 37-42. Justice Wilcox, joined by Justice Crooks, dissented on the ground that the trial judge properly excluded the expert testimony on the "mechanism" of causation. And Justice Crooks, joined by Justice Wilcox, dissented from the majority's standard for harmless error.

Product Liability - Consumer Expectations - Foreseeable Harm - Percentage Affected - Experts

Green v. Smith & Nephew AHP Inc., 2001 WI 109 (filed 12 July 2001)

The plaintiff, a former health care worker, sued the defendant latex glove manufacturer, S&N, for damages she suffered as a result of a debilitating allergic reaction to latex contained in the gloves. A jury found that S&N's gloves were defective, unreasonably dangerous, and had caused her injuries. The court of appeals affirmed the judgment.

The supreme court, in an opinion written by Justice Wilcox, affirmed the court of appeals in a decision that comprehensively reviews and analyzes Wisconsin's product liability doctrine while clarifying several critical matters. First, the court held that the jury was properly instructed "that a product can be deemed defective and unreasonably dangerous based on consumer expectations about that product" (¶: 26). Rejecting the argument that case law had "abrogat[ed] or redefin[ed] Wisconsin's product liability standard," the court held unequivocally that "Wisconsin strict products liability law applies the consumer-contemplation test and only the consumer-contemplation test in all strict products liability cases" (¶: 34). In particular, the court rebuffed a policy-based analysis that argued toward a different standard (see ¶:¶: 36-44). Second, the supreme court reiterated that "foreseeability of harm" is not an element of strict products liability claims (although "duty of care" and "foreseeability" are, of course, elements of negligence claims).

The court also took the opportunity to clarify the relationship between contributory negligence and strict products liability claims. Although a contributory negligence defense implicates a consumer's "foreseeable use" of the product, this should not be confused with a "foreseeable risk of harm": "the latter concept relates [sic] the manufacturer's conduct and, hence, solely to negligence liability" (¶: 60). On a related point, the court refused to adopt a new standard for strict products liability set forth in Restatement (Third) of Torts § 2(b) (1998).

The third and fourth issues involved more fact-specific matters. S&N contended that there was insufficient evidence to support the verdict "where the evidence introduced at trial showed that the gloves contained a substance that causes an allergic reaction in 5 to 17 percent of their consumers" (¶: 75). In finding the evidence sufficient, the court held that case law discussing "idiosyncratic reactions" does not set forth a "legal prohibition" as such, but rather highlights a "frequent evidentiary shortcoming" (¶: 80). Put differently, there is no percentage threshold that must be satisfied; rather, plaintiff must satisfy the consumer expectation test on a case-by-case basis. Fourth, the court found error - albeit harmless - in the admission of testimony by an expert witness who had "specifically declaimed any expertise regarding the safety of different protein levels in latex gloves." The witness, an "expert" in latex glove manufacturing processes and quality control, was permitted to testify about "safety" anyway. The court's majority focused on the witness's specific "disavowal" of such expertise (yet found the error harmless anyway).

Chief Justice Abrahamson, joined by Justice Bradley, concurred and wrote separately to explain why she believed that the expert's testimony was properly admitted. Justice Crooks, joined by Justice Wilcox, also concurred and wrote separately only to "remark" upon the majority's harmless error standard. Dissenting were Justice Sykes, joined by Justice Prosser, who disagreed with the majority's statement of strict products liability law.

Comparative Negligence - Strict Products Liability - 1995 Amendment

Fuchsgruber v. Custom Accessories Inc., 2001 WI 81 (filed 2 July 2001)

The plaintiff was injured when the handle to his car jack broke as he lifted it from the box. This appeal posed a single issue for the supreme court: Did the 1995 amendment to the comparative negligence statute, Wis. Stat. section 895.045(1) (1999-2000), apply to strict products liability actions? The court held that it did not.

Writing for the court, Justice Sykes observed that the 1995 amendment had two apparent purposes: "1) the codification of the pre-existing requirement in negligence actions that, where there are multiple defendants, a plaintiff's negligence is compared against the separate rather than the combined negligence of the defendants for purposes of determining liability; and 2) the modification of joint and several liability" (¶: 13). Under the modified statute, only a defendant found 51 percent or more causally negligent can be jointly and severally liable for a plaintiff's damages, as adjusted by contributory negligence, and those defendants whose causal negligence is less than 51 percent are limited to their apportioned percentage. The court stressed the differences between negligence liability and strict products liability.

Conceding that contributory negligence and contribution claims in products cases raise somewhat related issues, and that language in some cases may have been misleading, the court clarified that the statutory comparative negligence scheme played no role in strict products liability. In particular, "the comparison in strict product liability actions is not a comparison of one party's conduct against another, but, rather, a comparison of the extent to which the plaintiff's injuries were attributable to his own contributory negligence as against the product's defective condition" (¶: 24).

Justice Prosser did not participate.

Joint and Several Liability - 1995 Amendment

Matthies v. The Positive Safety Mfg. Co., 2001 WI 82 (filed 2 July 2001)

When plaintiff injured his hand in a punch press accident in 1992, Wisconsin law permitted recovery from any one of two or more persons whose joint or concurring acts of negligence caused the plaintiff's injuries. After the accident but before plaintiff filed his complaint, the Legislature changed the law to limit joint and several liability to a person found 51 percent or more causally negligent. Wis. Stat. § 895.045(1) (1995-96). The defendant in this case filed a declaratory order that sought to apply the new rules on joint and several liability to plaintiff's claim in this case. The trial judge refused to grant the order, and the court of appeals certified the issue to the supreme court.

The supreme court, in an opinion written by Justice Crooks, affirmed. The retroactive application of the new rules would unconstitutionally limit the plaintiff's rights to recover all of the damages adjudged to him. The court carefully laid out the history of comparative negligence, joint and several liability, and contribution in Wisconsin. Although the supreme court had steadily resisted requests to modify joint and several liability based on contribution, the Legislature "significantly changed" the rules in 1995. Moreover, the Legislature expressly intended that the change be retroactively applied to events that occurred before the amended statute's effective date.

The court held that the plaintiff had a "vested right" to recover damages even before there was a formal judgment. Thus, the date of the injury triggered the plaintiff's rights under section 895.045(1) (¶: 22). And clearly, the amended statute adversely affected those rights, if retroactively applied. For example, under the present statute he could not recover all of his damages from any tortfeasor who is less than 51 percent causally negligent (¶: 23).

Next, the court applied a balancing test to determine if the statute's retroactive application violated the plaintiff's due process rights. The court was not convinced that the public's interest in retroactive application outweighed the statute's adverse effect on plaintiff's private interest in recovering his damages.

Safe Place Statute - "Unsafe Condition" - Notice - Nondelegable Duties

Barry v. Employers Mutual Cas. Co., 2001 WI 101 (filed 10 July 2001)

Plaintiff, a project manager for a contractor, was injured when he fell down stairs at a job site. The building's owner had hired another company to install vinyl "nosings" on the front of the stairs to hold the carpeting in place. The nosings were somewhat higher than the carpet, however, which created a gap that caused plaintiff to stumble. A jury apportioned negligence as follows: 45 percent to the building's owner, 45 percent to the "nosing" installer, and 10 percent to plaintiff. The trial judge ruled that the nosing constituted a "structural defect" and therefore the plaintiff did not carry the burden of showing that the owner was on notice. The court of appeals reversed on the ground that the loose nosing constituted an "unsafe condition associated with the structure." It refused, however, to remand the case for a new trial on the notice issue because the plaintiff had not requested one.

The supreme court, in an opinion written by Justice Sykes, reversed in a decision that addressed three issues. First, the court agreed that the loose nosing constituted an "unsafe condition associated with the structure." Extrapolating from the statute and case law, it held that "a breach of the statutory duty to repair or maintain (as distinct from the statutory duty to safely construct) creates an 'unsafe condition associated with the structure'" (¶: 25). In this case the loose stairway nosing "resulted from a failure to repair or maintain the stairway, not a failure to safely construct the stairway" (¶: 30). Second, the plaintiff was nonetheless entitled to a new trial where he might attempt to establish the owner's notice. Because the required supplemental instruction on the notice issue was not given, the jury decided the case on an erroneous statement of law (¶: 38).

Finally, the court agreed with plaintiff's position that duties under the safe place statute are nondelegable; thus, the stairway contractor's negligence, if any, should be imputed to the owner. Nonetheless, the jury must still apportion negligence for purposes of the owner's contribution claim against the stairway contractor.

Medical Malpractice - Request for Mediation - Time Limitation for Commencing Suit Tolled

Landis v. Physicians Ins. Co. of Wis. Inc., 2001 WI 86 (filed 3 July 2001)

The plaintiff filed a mediation request before she filed her medical malpractice action in circuit court. A mandatory 90-day mediation period followed. During this mediation period, the plaintiff was prohibited from filing a lawsuit. See Wis. Stat. § 655.44(5). However, during this mediation period, the five-year deadline for filing suit, as codifed in section 893.55(1)(b), passed.

The issue before the supreme court was whether the five-year deadline for filing a medical malpractice action is tolled when a party requests mediation of a medical malpractice suit pursuant to section 655.44. [Note: Section 655.44 allows a claimant to request mediation before filing an action in circuit court.] In a majority decision authored by Justice Prosser, the supreme court concluded that the section 655.44 mediation process tolls the five-year deadline for filing a medical malpractice action.

Justice Bradley filed a concurring opinion, joining the majority opinion in its entirety but writing separately to address the dissenting opinion. Chief Justice Abrahamson joined Justice Bradley's concurrence. Justice Crooks filed a dissenting opinion that was joined by Justices Bablitch and Wilcox.

Wisconsin Lawyer