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Vol. 72, No. 5, May 1999

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Court of Appeals Digest

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

| Civil Procedure | Consumers| Corporation Law |
| Criminal Law | Criminal Procedure | Employee Benefits |
| Estate Planning | Medical Assistance | Medical Records |
| Torts | Zoning |

Health-care Retirement Benefits - Change in Benefits of Retired Employees Negotiated by Union Representing Current Employees

 Roth v. City of Glendale, No. 97-3467 (filed 23 Feb. 1999) (ordered published 31 March 1999)

Plaintiffs are retired employees of the City of Glendale, most of whom had been members of a collective bargaining unit. They were covered by a series of collective bargaining agreements spanning the years 1972 to 1997. Through 1992 the various contracts required the city to pay the entire premium for health-care benefits for retirees. In 1992 that provision was renegotiated with the union to provide for a change in the formula for health-care coverage. The retirees were not a party to these negotiations.

After the change was negotiated, the retirees brought suit against the city, claiming they had a vested interest in the retirement benefits that were established under the various contracts in operation when they each retired and that the 1992 change was being improperly applied to them.

The circuit court granted summary judgment to the city, relying on the rule of law found in Senn v. United Dominion Indus. Inc., 951 F.2d 806 (7th Cir. 1992), which states that retirees have no vested right to benefits beyond the expiration of the benefit agreement where the agreement does not specifically provide otherwise. In a decision authored by Judge Curley, the court of appeals affirmed.

The first issue considered by the appellate court was the contention of the retirees that because they are not part of the current bargaining unit and the labor union does not represent retired persons, the trial court erred in finding that the city could lawfully negotiate with the union for a change in retiree benefits. The court of appeals disagreed. Under Rosetto v. Pabst Brewing Company, 128 F.3d 538 (7th Cir. 1997), a union has no duty to represent retirees, but retirees are free to make the union their agent if they so choose. In this case the retirees did not affirmatively agree to have the union represent them, but they accepted the terms of other collective bargaining agreements negotiated by the union after their retirement, and this acceptance implied that they consented to have the union negotiate on their behalf. Thus, the court concluded that the retirees implicitly agreed to allow the union to represent them and the trial court's finding that the city could properly negotiate changes in retiree benefits with the union was correct, both because the retirees were not entitled to representation in such negotiations and, in any event, the union was given the implicit authority to represent the retirees by their acceptance of such previous negotiation.

The appellate court further concluded that because none of the collective bargaining agreements specifically provided for the vesting of health insurance benefits and none provides that the same level of benefits would continue until the death of the retiree, and because the retirees can point to no other provisions in any of the collective bargaining agreements that would form a basis for a lifetime benefits claim, the court of appeals concluded that the circuit judge properly granted summary judgment to the city.

Judge Fine filed a dissenting opinion.

Wills - Anti-lapse Statute

Firehammer v. Marchant, No. 98-0586 (filed 20 Jan. 1999) (ordered published 31 March 1999)

The testator in this case died in 1996. In his will he split the residue of his estate into seven shares. One share went to each of his two daughters, one to his sister, and one to a niece. The other three were placed in trust for his grandchildren, to be distributed to them when the youngest reaches age 40.

Six days after the testator died, one of his daughters also died. The will has a provision that if any beneficiary dies within five months after the testator's death, "any interest which would have passed to said beneficiary under other provisions of this Will are to be disposed of according to the plan of distribution which would have been effective ... if such beneficiary had predeceased me."

The personal representative distributed the deceased daughter's share to her son (appellant Firehammer) pursuant to Wisconsin's anti-lapse statute. See Wis. Stat. § 853.27 (1995-96). [In footnote the court of appeals noted that the probate code of Wisconsin has recently been revised and that, though the revisions were not in effect at the time of this case, the result would be the same under the new anti-lapse statute. See Wis. Stat. § 854.06 (1997-98).]

The testator's surviving daughter filed a motion seeking to prevent this distribution. The circuit court determined that it was the testator's intent to split the share of his deceased daughter among the surviving residual beneficiaries. In a decision authored by Judge Brown, the court of appeals reversed.

The court's task in construing a will is to determine the testator's intent and the best evidence of this is the language of the document itself. When the will is unambiguous, there is no need to look any further to ascertain the testator's intent, as it is clearly stated in the will. In this case the testator's will contained the clause quoted above. The appellate court concluded that there is no ambiguity in that clause. The rule of law in Wisconsin is that, if a beneficiary predeceases a testator, the anti-lapse statute works to give the beneficiary's share to the beneficiary's issue, not to the surviving beneficiaries, unless a contrary intent is clearly established. In this case, if the testator had intended that a deceased beneficiary's share be returned to the residue to be split six ways, he would have said so. In the absence of a clear contrary intent by the testator, the anti-lapse statute controls.

Medical Assistance Recovery Program - Hardship Waivers

Gorchals v. Wisconsin Dept. of Health and Family Services, No. 98-0212 (filed 27 Jan. 1999) (ordered published 23 Feb. 1999).

This case concerns the application of the hardship criteria in the hardship waiver provision of the medical assistance recovery program. The program enables the Wisconsin Department of Health and Family Services to recoup medical assistance payments from the estates of deceased medical assistance recipients. Under the waiver allowance, however, the department must forego its claim against the estate if the beneficiaries of the estate meet certain criteria.

In this case Shirley and James Gorchals are the surviving sister and nephew of John Hawkinson, who received medical assistance while in a nursing home. In 1994 the Department of Health and Family Services obtained a lien on Hawkinson's home pursuant to section 49.496(2)of the Wisconsin Statutes. Hawkinson died in 1996 and Shirley and James were the beneficiaries of his will. The principal asset of his estate was his home, where Shirley and James have lived since 1953 and 1964, respectively. Both Shirley and James are recipients of Supplemental Security Income (SSI), medical assistance, and food stamps.

In 1996 the department filed a claim against Hawkinson's estate. In response, Shirley and James requested a hardship waiver of this claim, pursuant to section 49.496(6m) of the Wisconsin Statutes and Wis. Admin. Code section HFS 108.02(12). The latter provides that the department shall waive its claim if the beneficiary or heir of a decedent meets one of the criteria for a hardship waiver. Among the situations constituting an undue hardship on the waiver applicant is that the applicant would become or remain eligible for SSI, food stamps, and medical assistance if the department pursued its claims. The department denied the waiver.

In a decision authored by Judge Brown, the court concluded that Shirley and James should have been granted a waiver under the plain meaning of the administrative rule cited above. The stipulated facts in the case stated that at all times relevant to this case, Shirley and James have been and will remain recipients of SSI, medical assistance, and food stamps. Since they will remain eligible if the department pursues its claim, they satisfy the hardship criterion and should have been granted a waiver.

In so holding, the court rejected the department's interpretation that hardship exists under this criterion only when an inheritance normally would allow a beneficiary to get off SSI, food stamps, or medical assistance, but the department's claim would instead cause the beneficiary to remain on such governmental entitlement programs. The court declined to rewrite the administrative rule in question. If the department intends the rule to include such a "but for" test, it is free to rewrite the rule. But as it stands, the rule is clear. It mandates only a determination of eligibility - not causation.

Pharmacists - Wis. Stat. Section 146.84 - Mistake of Law

Hannigan v. Sundby Pharmacy Inc., No. 98-1673 (filed 25 Feb. 1999) (ordered published 31 March 1999)

As a result of a personal injury action, Hannigan authorized the disclosure of some of his medical records to his employer's attorneys. The attorneys requested and received records maintained by Sundby Pharmacy. Hannigan asserted that he had not authorized the release of the pharmacy's records and alleged that the lawyers had used "false pretenses." When the pharmacy failed to provide information about the release of the records, Hannigan alleged that it had violated his rights under section 146.83 of the Wisconsin Statutes "by failing to provide him with a statement paraphrasing his rights to access his medical records and by failing to maintain proper information regarding requests for his medical records." The trial judge granted summary judgment to Sundby Pharmacy based on the finding that the violations were not "knowing or willful" because the pharmacist was ignorant of section 146.83.

The court of appeals, in an opinion written by Judge Deininger, reversed and remanded the case. It was undisputed that the pharmacy had violated sections 146.83(2) and (3). Carefully considering the statute's prolix legislative history, the court held that "licensed pharmacists are charged with the knowledge of the statutes and regulations governing the practice of their profession." The court also determined that the pharmacy's conduct was not "apparently innocent" because "[a] reasonable pharmacist should know that the release of confidential prescription records poses a risk of significant harm to a patient, and that release of prescription records are likely a subject of regulation." Finally, if mistake of law was a recognized defense, it might undermine the scheme of private enforcement recognized by the Legislature.

In sum "the statute imposes liability only if the violation is 'willful' in the sense that the act that caused the violation was intentional and voluntary, rather than inadvertent or coerced." The court remanded the case for trial because disputed issues of fact remained.

Statute of Limitations - Duty - Negligent Contract Performance

Atkinson v. Everbrite Inc., No. 98-1806 (filed 4 Feb. 1999) (ordered published 31 March 1999)

Harry Atkinson worked for Everbrite from 1969 to 1989, when he became totally disabled. Atkinson had a group life insurance policy on which Everbrite paid the premiums. The policy further provided that should the insured become disabled before age 65, all premiums would be waived provided the insurer received proof of disability between the sixth and twelfth months of the disability. Atkinson became disabled in 1990. At no time did Everbrite ever send the waiver of premium forms to the Atkinsons or notify the insurer as required by the policy. Atkinson died in 1992. Mrs. Atkinson began this suit in her dual capacity as wife and special administrator in 1998. She claimed that Everbrite was liable in tort for the loss of insurance coverage. The trial court dismissed the tort claim because Everbrite had no duty to provide the forms under tort law.

The court of appeals, in an opinion written by Judge Deininger, affirmed. The sole issue was whether Everbrite's duty sounded in tort or contract. The plaintiff asserted the tort theory because the statute of limitations had run on the contract. The court of appeals rejected her argument that Everbrite had "gratuitously assumed" the duty under tort law. "The obligation to provide Mr. Atkinson with waiver of premium forms, if Everbrite was indeed so obligated, was part of its obligation to compensate Mr. Atkinson for his services, and is therefore not a duty Everbrite assumed independent of its employment contract with Atkinson." In short, the law rejects "a claim in tort arising from the negligent performance of a contract." Mrs. Atkinson's remedy was in contract, not tort.

Conditional Use Permits - Revocation by Boards of Adjustment

Bettendorf v. St. Croix County Board of Adjustment, No. 98-2327 (filed 9 Feb. 1999) (ordered published 31 March 1999)

A portion of land owned by the plaintiffs is used to operate a trucking business. In 1990 the county board of adjustment approved, without conditions, the plaintiffs' application for a truck repair shop and transfer point. Conditions were apparently proposed regarding the intensity of use of the premises, but the board of adjustment ultimately issued the permit without them. The plaintiffs' adjoining property was not subject to the conditional use permit and remained zoned as agriculture/residential.

In 1996 the county zoning office notified the plaintiffs that semi-trailers and employees were parking on the plaintiffs' land zoned agriculture/residential as described above and that this violated the county zoning ordinance. A year later the zoning office ordered the plaintiffs to confine their truck repair and transfer point operations to the parcel subject to the conditional use permit and to remove all trucks, trailers, and other equipment from their property not subject to the permit. The plaintiffs did not comply with this order to the zoning office's satisfaction, and the board of adjustment then sought to revoke the conditional use permit pursuant to the county's zoning code. After a hearing the board added a condition to the permit by requiring the plaintiffs to construct a fence around the commercially zoned premises. It further ordered that failure to comply would result in the immediate revocation of the conditional use permit.

The plaintiff sought certiorari review in the circuit court, which affirmed the board's decision and set time limits for the construction of the fence. This appeal followed.

The issue before the court of appeals was whether the board can add a condition to or revoke a conditional use permit with no conditions because the plaintiffs allegedly used their adjoining agriculture/residential property improperly. In a decision authored by Judge Hoover, the court answered in the negative. The local zoning code provides that where a special exception use or a variance has been approved subject to specified conditions and where the conditions are not complied with, the board of adjustment may conduct a hearing. A finding by the board of noncompliance with the conditions originally imposed shall be grounds for revocation. In this case, however, the permit was issued without any conditions. The court of appeals declined to read into the permit any conditions the board discussed at the time of permit application but chose not to incorporate.

The court noted that the county has other appropriate remedies in this situation. It can, and recently did, commence an enforcement action in connection with the adjoining parcel. That property is zoned agriculture/residential; commercial activities are not permitted.

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.