Vol. 77, No. 9, September 2004

Court of Appeals Digest

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

Civil Proceducre Criminal Procedure Family Law

Insurance Trademarks

Civil Procedure

Attorney Fees - Offer to Settle

Alberte v. Anew Health Care Servs. Inc., 2004 WI App 146 (filed 29 June 2004) (ordered published 28 July 2004)

The plaintiff's complaint alleged violations of the Americans with Disabilities Act (ADA) and various civil liberties claims. She filed an offer to settle the claims pursuant to Wis. Stat. section (rule) 807.01. The trial court ruled that the written offer, which included recovery of the plaintiff's "costs," did not include reasonable attorney fees.

The court of appeals, in an opinion written by Judge Fine, reversed. The term "costs" in section (rule) 807.01(3) means "taxable costs" as provided by Wis. Stat. section (rule) 814.04. "Costs recoverable under Rule 814.04 include 'fees allowed by law'" (¶ 5). The court and the parties assumed that the plaintiff "prevailed" in her discrimination claim; therefore, the ADA provided that she was entitled to her reasonable attorney fees. Case law holds that when a statute defines costs to include attorney fees, such fees are "costs" under rules governing an offer of settlement (¶ 6).

Forum Selection Clause - Unconscionability

Pietroske Inc., v. Globalcom Inc., 2003 WI App 142 (filed 16 June 2004) (ordered published 28 July 2004)

The plaintiff, the owner of a car dealership, negotiated a telecommunications contract with the defendant company. The contract provided that all disputes will be decided under Illinois law in the Cook County courts. The plaintiff sued the defendant for breach of contract in a Wisconsin court. The circuit court refused to enforce the forum selection clause based on an "unconscionability" analysis.

The court of appeals, in an opinion written by Judge Anderson, reversed. "In Wisconsin a forum-selection clause is presumptively valid" (¶ 1). The court found no "substantive unconscionability" in the clause, citing such factors as the location of the defendant's headquarters and the relatively low "personnel and financial impact" on the plaintiff of traveling to Cook County (¶ 7). Nor was there procedural unconscionability - all pertinent facts were revealed and the clause's format was straightforward (for example, short and in "plain English") (¶ 9). Although the clause was not explained to the plaintiff (the buyer), this was not fatal in light of his "savvy" and considerable business experience.

Sanctions - Attorney Fees

Forman v. McPherson, 2004 WI App 145 (filed 30 June 2004) (ordered published 28 July 2004)

Earlier litigation in this case concerned the propriety of the court's decision to disqualify Attorney Forman, who appeared pro hac vice, from representing a plaintiff in a medical malpractice case. In this appeal, Forman contended that it was error to grant the defendant's original motion for mistrial and to impose sanctions of costs and attorney fees.

The court of appeals, in an opinion written by Judge Anderson, affirmed in part and reversed in part. It upheld the grant of a mistrial and the award of costs and attorney fees. First, the motions for fees and costs were timely filed. The court rejected Forman's contention that the time of filing was controlled by Wis. Stat. section 806.06, which provides that parties must file their bills of costs within 30 days of the rendering of a judgment. In this case, the key date in question was that of an order for consolidation, not the entry of a judgment; thus, section 806.06 did not apply (¶ 28).

Second, the trial court properly granted the mistrial; the record reflected that the mistrial was granted "after allowing ample time for argument and thoughtful consideration of other alternatives" (¶ 32). Third, the sanctions of costs and attorney fees were proper. Trial courts are required to find "bad faith" or "egregious conduct" only before imposing the sanction of dismissal of claims or defenses; such was not the case here (¶ 34). Case law and statute allow courts to impose costs when a mistrial is granted. Attorney fees also may be granted in appropriate cases, but the court of appeals agreed with Forman "that the information provided by the defense was not sufficient to enable the trial court or this court to determine a reasonable figure for attorneys' fees in this case" (¶ 38). In particular, the court noted the insufficiency of affidavits and bills of costs referencing, for example, "trial attendance." The matter was remanded for additional evidence on the issue of attorney fees.

Reopening Judgments - Change in Case Law

Sukala v. Heritage Mut. Ins. Co., 2004 WI App 128 (filed 17 June 2004)
(ordered published 28 July 2004)

The Sukalas originally sued their insurer to recover underinsured motorist (UIM) coverage under their auto policies. An earlier appeal resolved the issues against them in 2001 (Sukala I), but a 2002 supreme court decision changed the prevailing law and referred to Sukala I as "incorrect" (see ¶ 5). This appeal arose when the trial court refused the Sukalas' motion to reopen their original case. The trial court reasoned that, following Sukala I, the plaintiffs had released one insurer and stipulated to the dismissal of another. Moreover, seven months passed between the supreme court's denial of the petition for review in Sukala I and its decision to grant a review in the other (2002) case. Finally, the supreme court had not expressly overruled Sukala I in the later decision.

The court of appeals, in an opinion written by Judge Dykman, reversed. "We can ascertain no valid justification for protecting a release from being opened while stipulations are subject to equitable relief. Both methods are commonly used to terminate litigation. Therefore, for the purposes of a motion under § 806.07(1), we consider a release and a stipulation to dismiss a claim one and the same" (¶ 14). The court also declined to demand "similitude" between such requests and the facts in Mullen v. Coolong, 153 Wis. 2d 401 (1990). "Like Mullen, the Sukalas were victims of circumstance.... The crux of our inquiry is whether fairness mandates opening the judgment, despite compelling justifications for protecting the finality of a judgment" (¶ 12).

Judge Deininger dissented on the ground that the majority paid only "lip service to the standard for our review of the trial court's exercise of discretion" (¶ 15). Posing a hypothetical in which insurers ask to reopen judgments in light of later case law
developments favorable to their interests, Judge Deininger asked: "[W]ill this case ever end, regardless of the number of final judgments that are entered or opportunities for appellate review that are exhausted, so long as the law regarding UIM clauses continues to evolve?" (¶ 28).

Criminal Procedure

Warrantless Entry of Attached Garage - Exigent Circumstances - Threat to Safety - OWI Investigation

State v. Leutenegger, 2004 WI App 127 (filed 24 June 2004) (ordered published 28 July 2004)

A person telephoned police to report what he believed to be an intoxicated driver. Using a cellular telephone, the person called from a tavern parking lot and gave specific information indicating that a man, later identified as the defendant, was very intoxicated and was driving a car away from the tavern. Using information supplied by the caller, a police officer located the defendant sitting in his car in a garage attached to his home. After viewing the situation for a short time, the officer approached the open garage door and proceeded into the garage, making contact with the defendant, who was still in his car. After entering the garage, the officer made observations supporting the inference that the defendant was intoxicated. The defendant was arrested and a breath test showed that his blood alcohol content was .28 percent.

The defendant moved to suppress all evidence obtained after the police officer entered his garage. The circuit court concluded that the attached garage was part of the curtilage of the defendant's residence (a finding not contested by the state on appeal - see ¶ 21 n.5) and, therefore, the officer's warrantless entry into the garage was presumptively unconstitutional. However, the court also concluded that the entry was justified by exigent circumstances and thus denied the suppression motion. The defendant pled no contest to the OWI charge (fourth offense) and then challenged the circuit court's suppression ruling on appeal. In a decision authored by Judge Lundsten, the court of appeals affirmed.

As phrased by the court, the issue before it was whether the officer's warrantless entry into the defendant's attached garage was lawful because of a possible need to render assistance or prevent harm. Applying State v. Richter, 2000 WI 58, 235 Wis. 2d 524, 612 N.W.2d 29, the court concluded that "whether a warrantless home entry is justified based on the need to render assistance or prevent harm is judged by an objective test. The test is whether a police officer under the circumstances known to the officer at the time of entry reasonably believes that delay in procuring a warrant would gravely endanger life" (¶ 19) (internal quotes and citations omitted).

In reaching this conclusion, the court declined to apply State v. Boggess, 115 Wis. 2d 443, 340 N.W.2d 516 (1983), which used a two-pronged objective/subjective test and held that a warrantless entry based on a safety concern is illegal unless the entering officer subjectively believes that entry is necessary to render assistance or prevent harm. "When our supreme court most recently dealt with a proffered safety justification for a warrantless entry under circumstances similar to those before us - that is, in Richter - it applied a purely objective test" (¶ 7). This does not mean, though, that the officer's subjective beliefs are irrelevant; a court may consider them but only insofar as such evidence assists the court in determining objective reasonableness. See State v. Kyles, 2004 WI 15, 269 Wis. 2d 1, 675 N.W.2d 449.

Applying these standards to the facts of this case, the court concluded that the facts would have led a reasonable officer to conclude that the defendant was in his 70s or 80s and was highly intoxicated. As the circuit court explained, the defendant's age, combined with his high degree of intoxication, would lead a reasonable officer to be concerned about the defendant's health. The officer also observed that the defendant delayed leaving his car for no apparent reason. The officer knew that the caller had followed the defendant home and returned a short distance to a main street where the caller made contact with the officer. After driving a short distance to the defendant's house, the officer stood in the street for about a minute. Combining these time periods, it is apparent that, after driving into his garage, the defendant sat in his car for at least two to three minutes before the officer entered the garage.

The circuit court credited the officer's testimony that she was subjectively motivated, in part, by a concern for the defendant's safety. "The obvious inference (from her testimony) is that the officer thought (the defendant) might be experiencing a physical problem related to his intoxication that was preventing him from taking the normal action of exiting his car and entering his home.... We agree with the circuit court that this circumstance, combined with other information, suggested a current intoxication-related health problem" (¶¶ 29-30). Accordingly, exigent circumstances justified a warrantless entry of the garage.

The state did not argue that entry into the defendant's garage was justified under the "community caretaker" doctrine, and thus the court of appeals did not address the application of this doctrine.

Investigative Stops - OWI - Sufficiency of Evidence to Support Initial Stop

State v. Powers, 2004 WI App 143 (filed 16 June 2004) (ordered published 28 July 2004)

A drugstore clerk who provided his name called the police to report that an intoxicated man had come into the store to purchase beer, a small outfit, and another item. The clerk indicated that the man's credit card had been declined and that the man left the store after stating that he would be coming back with money. The clerk supplied to the police a description of the man's truck and also provided the truck's license plate number.

The officer assigned to the call located the truck near the store. He then saw the defendant walking unsteadily to the truck carrying a case of beer and a bib or some type of small item. The officer observed the defendant enter the vehicle, start it, and drive through the parking lot and onto a public street. Although the defendant did not immediately respond to the officer's emergency lights, he eventually pulled over.

The defendant was charged with OWI (fifth offense). He filed a motion seeking to suppress all of the evidence, claiming that the officer lacked reasonable suspicion to conduct an investigative traffic stop. The circuit court held that the tip from the drugstore clerk was reliable and that the officer properly relied on that tip and on his personal observations in accumulating reasonable suspicion to conduct an investigatory stop. The defendant subsequently pled guilty, and he appealed the denial of his motion to suppress.

In a decision authored by Judge Anderson, the court of appeals affirmed. The court began its analysis by clarifying when the seizure, within the meaning of the Fourth Amendment, of the defendant occurred. The trial court had held that the defendant was seized when the officer activated his emergency lights. The court of appeals disagreed. In order to effect a seizure, an officer must make a show of authority and the citizen must actually yield to that show of authority. In this case, the seizure did not occur until the officer stopped the defendant.

Turning to the main issue in the case, the court concluded that the tip from the drugstore clerk was reliable for several reasons. First, the tip was based on the clerk's firsthand observations. Second, even though the clerk did not actually see the defendant drive the vehicle, cases from other jurisdictions have found reliable tips that come from employees of businesses who have observed individuals they believe to be drunk, whether or not those individuals were driving. Third, the officer could rely on the clerk's assessment that the defendant was drunk because, in Wisconsin, a lay person can give an opinion that he or she believes another person to be intoxicated. Finally, the officer independently verified the clerk's tip. "Where a tip has a high degree of reliability because the informant identified himself or herself and the police independently verified the information before conducting a stop, the resulting stop is supported by reasonable suspicion" (¶ 14).

Ethics Violation by Prosecutor - Suppression of Evidence Not Required

State v. Maloney, 2004 WI App 141 (filed 29 June 2004) (ordered published 28 July 2004)

The circuit court denied the defendant's motion for postconviction relief after rejecting allegations that trial counsel provided ineffective assistance. One of the defendant's arguments was that his trial counsel should have moved to suppress certain evidence because the prosecutor committed an ethical violation. The rule in question prohibits a lawyer who is representing a client from communicating about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so. See Supreme Court Rule 20:4.2. The circuit court held that there had been no violation of this rule and that, even if there had been, suppression of evidence would not be the remedy.

In a decision authored by Judge Hoover, the court of appeals agreed "that suppression is not available for an ethics violation" (¶ 11). The court therefore did not need to decide whether the prosecutor actually violated the ethical rule cited above. Suppression of evidence is only required when evidence has been obtained in violation of a defendant's constitutional rights or if a statute specifically provides for the suppression remedy.

With regard to the impact of violations of the Rules of Professional Conduct, the court noted that the preamble to those rules provides in pertinent part as follows:

"Failure to comply with an obligation or prohibition imposed by a rule is a basis for invoking the disciplinary process. ...

"Violation of a rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached. The rules ... are not designed to be a basis for civil liability. Furthermore, the purpose of the rules can be subverted when they are invoked by opposing parties as procedural weapons. The fact that a rule is a just basis ... for sanctioning a lawyer ... does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the rule. Accordingly, nothing in the rules should be deemed to augment any substantive legal duty of lawyers or the extra-
disciplinary consequences of violating such duty."

Said the court, "the rule provides neither a constitutional nor a statutory basis for (the defendant) to seek suppression of (evidence) as a 'procedural weapon.' Because suppression is not available for an ethical violation, counsel (was) not ineffective for failing to raise the argument" (¶ 12).

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Family Law

Modification of Custody and Physical Placement - Status Quo Presumption

Abbas v. Palmersheim, 2004 WI App 126 (filed 3 June 2004) (ordered published 28 July 2004)

Palmersheim and Abbas are the father and mother of a child born in 1991. A stipulated paternity judgment was entered in 1992, awarding sole legal custody to the mother and providing that periods of physical placement with the father were to be "agreed between the parties." At the time of the 1992 judgment, Wis. Stat. section 767.51(3) provided that, unless the court orders otherwise, "the mother shall have sole legal custody of the child."

In 2001 the father filed a motion to modify the original paternity judgment, seeking joint custody and shared physical placement. The circuit court denied the motion after finding, among other things, that the father failed to rebut the status quo presumptions codified in section 767.325(1)(b)2. These presumptions are that the current allocation of decision making under the legal custody order and the continuation of the child's primary physical placement are in the child's best interest.

Among the issues on appeal was whether the circuit court applied the correct legal standard in determining whether the proposed changes in custody and placement were in the child's best interest. The father argued that the circuit court erred by applying the status quo presumptions described above rather than the joint legal custody presumption codified in section 767.24(2)(am). Section 767.24 is the current statute governing initial determinations of legal custody and physical placement.

In a decision authored by Judge Higginbotham, the court of appeals observed that, standing alone, neither section 767.24(2)(am) nor section 767.325(1)(b) is ambiguous. However, these statutes are ambiguous in their interaction because section 767.325(5m), which deals with modification of legal custody or physical placement orders, provides that the court shall make its determination "in a manner consistent with sec. 767.24."

The court concluded that there is no dispute that the legislature, by enacting section 767.24(2)(am), intended to create a rebuttable presumption, applicable in all initial custody proceedings, in favor of joint legal custody. What is not clear is whether the legislature intended this presumption to apply in custody modification determinations. In this case the court held that "the most reasonable interpretation of sec. 767.24(2)(am) is that the presumption that joint legal custody is in the child's best interest applies only in initial legal custody determinations, not in modification determinations"
(¶ 24).

The court also rejected the father's argument that if the status quo presumptions of section 767.325(1)(b) cannot be rebutted by the joint custody presumption of section 767.24(2)(am), then the application of the status quo presumptions deprives him of his constitutional right to equal protection under the law.

Judge Lundsten filed a concurring opinion agreeing with much of the lead opinion but differing in how to reach the same result. Judge Deininger filed a dissent.

Insurance

Exclusions - Intentional Conduct

B.N. v. Giese, 2004 WI App 137 (filed 2 June 2004) (ordered published 28 July 2004)

B.N. alleged that she had been sexually abused by a family member when she was 11 years old. She sued the alleged abuser, his wife, and their insurer, arguing that the insurer was liable for the wife's negligent infliction of emotional distress. The trial court granted summary judgment in the insurer's favor based on a finding that the wife's conduct was intentional, not negligent.

The court of appeals, in an opinion written by Judge Nettesheim, affirmed. As a matter of law, the wife's conduct was intentional. The "mere fact" that B.N. did not allege that the wife intended to harm B.N. or that the wife's conduct was not substantially certain to produce harm did "not control the question" (¶ 14). Distinguishing several cases, the court focused on the wife's "thoughtless and needlessly cruel conduct in disregard of B.N.'s young age and emotional state" (¶ 19). "Under the objective standard, there is no ambiguity as to [the wife's] intent. That the harm to B.N. may have been different in character or magnitude from that expected by [the wife] does not bar application of the intentional acts exclusion" (¶ 20).

Trademarks

Sale of a Business - Transfer of Goodwill - Ownership of the Trademark

Koepsell's Olde Popcorn Wagons Inc. v. Koepsell's Festival Popcorn Wagons Ltd., 2004 WI App 129 (filed 16 June 2004) (ordered published 28 July 2004)

This case arose out of multiple asset purchase agreements between the parties. Part of their dispute involved whether under Wisconsin law, when goodwill is transferred, ownership of the trademark also is transferred. The purchaser argued that the sale of goodwill for a specific price in the asset purchase agreements also constituted a sale of the trademark associated with those assets.

In an opinion authored by Judge Anderson, the court of appeals began its analysis by noting that "trademark law in Wisconsin pertaining to (the specific issue in this case) appears to be undeveloped" (¶ 34). Accordingly, the court looked to federal law for guidance.

Under federal law, it is a well-established rule that sale of a trade name or mark apart from its goodwill constitutes an invalid "assignment in gross." See Marshak v. Green, 746 F.2d 927 (2d Cir. 1984). "However, the federal courts established a different standard for evaluating sale of goodwill without transfer of trademark. This issue is addressed at length in Berni v. International Gourmet Restaurants, 838 F.2d 642 (2nd Cir. 1988). Berni involved a dispute over ownership and use of an Italian trademark. The Berni court reaffirmed Marshak, noting that the mark means nothing without its accompanying goodwill. The Berni court also noted that although a trademark may not be sold independent of its goodwill, a mark or name's owner might retain the mark despite the sale of the business that underlies the mark or name. To retain such ownership after sale of a business' assets, the mark or name's owner must (1) demonstrate intent to resume making the substantially same product, (2) retain some portion of the goodwill, and (3) resume operations within a reasonable time. Retention of the mark without evidence of the aforementioned elements will constitute retention of an invalid 'mark in gross'" (¶ 37) (internal citations omitted).

"Thus, if a business sale contemplates retention of some assets, the Berni test is applied to determine whether the seller intended to resume using the mark in a new enterprise. Under this test, the plaintiff would have to meet the Berni requirements to demonstrate a protectable interest in the trademark or name" (¶ 38).

The appellate court was persuaded that the law of Berni is applicable in this case. It reversed a grant of summary judgment in the defendant's favor on the trademark claim and remanded the matter to the circuit court, because under Berni material facts are in dispute as to whether the plaintiff had a protectable interest in the trademark in question.

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