July 8, 2009 – A party resisting withdrawal of an opponent’s admission made during discovery must show prejudice greater than that of having to prove a once-settled matter, the Wisconsin Supreme Court held on July 7 in Luckett v. Bodner, 2009 WI 68.

But dissenting Justice David Prosser warned that the majority is undermining an important procedural tool that saves time and money by narrowing litigation down to the truly contested issues, prompting settlements.

Luckett’s vegetative state

Doctors operated to remove a small mass in the abdomen of Tywanda Luckett which was discovered shortly after an earlier surgery in August 2000. While in intensive care, Luckett suffered cardiac arrest resulting in permanent severe brain damage.  In September 2000, she was transferred to a rehabilitation center, where she remained until her death in October 2005.

Luckett’s family filed a lawsuit in December 2003. In July 2005, Luckett’s attorney made the following three admissions that precluded any claims for Luckett’s conscious pain and suffering from Sept. 29, 2000, until her death:

•  Tywanda Luckett was in a persistent vegetative state on July 22, 2005, the date of the admission. 
  
•  Tywanda Luckett had been in a persistent vegetative state since she was admitted to the Silver Spring Health and Rehabilitation Center on Sept. 29, 2000 until July 22, 2005.
  
• The persistent vegetative state of Tywanda Luckett was permanent from July 2005 until her death a little more than two months later.

But two weeks before trial, Luckett’s lawyer said in an email to opposing counsel that he had overlooked among the 2,000 pages of records doctors’ notes reporting possible glimmers of understanding and awareness from Luckett. Because of his mistake, he intended to withdraw these admissions.

The defendants argued at the circuit court that permitting the plaintiffs to withdraw these admissions would prejudice their case by forcing them to conduct new discovery – complicated by Luckett’s death and the passage of time – and would expose them to potentially greater losses. However, the circuit court allowed the withdrawal, reasoning that the disadvantage imposed on the defendants was outweighed by the furtherance of presenting the case on its merits.

On appeal before the supreme court, the plaintiffs clarified that they only sought to withdraw the second admission.

Trial court incorrectly applied standard

A trial court’s discretion to allow withdrawal of an admission is guided by the two-part test of Wis. Stat. § 804.11 (2), the supreme court explained. Specifically, the court must find that presentation of the action’s merits will be subserved by the withdrawal and that the opposing party cannot show a withdrawal will prejudice the merits of its case.

In this case, the trial court mistakenly interpreted the statute as requiring a two-factor balancing test, rather than two independent requirements, the court noted. A circuit court erroneously exercises its discretion when it applies an incorrect standard of law, the court stated. But this does not trigger an automatic reversal, the court said, citing Schmid v. Olsen, 111 Wis. 2d 228 (1983).

Withdrawal furthers full adjudication

Following Schmid, the supreme court examined the record to determine whether it supports the circuit court’s ultimate decision despite the incorrect standard.

Withdrawal would facilitate consideration of the merits of Luckett’s case, the supreme court agreed with the lower court. The justices rejected a standard that would permit withdrawal on this prong of the two-part test only when the record “squarely and conclusively” contradicts the admission.

‘Prejudice’ not shown

Turning to the second prong, the court explained that the nonmoving party must show prejudice greater than “the inherent consequence that the party will now have to prove something that would have been deemed conclusively established if the opposing party were held to its admissions.”

Prejudice occurs when the nonmoving party faces difficulties in proving its case, such as the unavailability of key witnesses in its sudden need to obtain evidence on an issue previously admitted, the court said.

Under this standard, the court found no prejudice to the defense. The court categorized and rejected the following purported hardships:

• Adjourning the trial for additional discovery. The defendants said that Mucek v. Nationawide Communications, 2002 WI App 60, established “prejudice” as a matter of law when withdrawal necessitates additional discovery and adjournment of a trial.   But the justices said that the Mucek court’s refusal to permit withdrawal actually focused on the moving party’s continued failure to comply with discovery orders. Consequently, the nonmoving party was “all the more dependent on admissions to identify what is actually in dispute.” Considerations of adjournment and renewed discovery remain within a trial court’s discretion, the justices said.
  
  Similarly, the justices found the defendants’ reliance on Estate of Hegarty v. Beauchaine, 2006 WI App 248, to be misplaced. The circuit court in Hegarty refused to permit a withdrawal that came “pretty late in the game” and would force more discovery. But the justices said that the reviewing court had merely sustained the circuit court’s discretionary determination, falling short of declaring this type of delay prejudicial as a matter of law.
  
  
• Unable to independently examine Luckett. The defendants argued that Luckett’s death impairs their ability to refute claims by independently examining her. Likewise, the defendants said that after receiving the admission, they had curtailed a records review by their expert witness who had since died and could not resume work following the withdrawal.
  
  But the court said that the defendants offered no evidence that a medical examination between July and October 2005 would have shed light on her condition for the period in question, Sept. 29, 2000, through July 22, 2005. The justices further noted that the defense could have examined Luckett before the admission, but did not, even though their request for admission demonstrated the unsettled question of her condition.
  
  
• Affected depositions. The defendants said that they did not depose certain witnesses while their memories were fresh because of their reliance on the admissions. Unpersuaded, the court doubted these witness’ memories of events occurring in 2001 were fresh in 2005. The court added that the defendants share the blame because these depositions could have occurred prior to the July 2005 admissions.
  
  
• Increased financial exposure. With the admissions, the defendants pointed out, their potential liability for pain and suffering spanned the 33 days between Luckett’s operation and her arrival at the rehabilitation center. Without the three admissions, they said this period expands from Sept. 29, 2000, until her death, adding an uncapped claim for conscious pain and suffering. But the justices said none of this could be considered “prejudice” because the defendants remained in the same position of litigating Luckett’s condition they would have been in had the admissions not been mistakenly made.
  
  
• Excusable neglect not a factor. The defendants argued that the plaintiffs cannot demonstrate excusable neglect or good cause for withdrawal of the admissions, but the court said that the plaintiffs do not have to make such a showing under sec. 804.11 (2).

Prosser’s dissent

In dissent, Prosser argued that not only did the circuit court incorrectly apply the test of sec. 804.11 (2), no facts in the record justified withdrawal of the first and third admissions.

The withdrawn admissions dramatically expanded the time period for which the defendants might be liable on a claim of conscious pain and suffering, but the circuit court unreasonably refused to consider that “prejudice,” Prosser continued.

“This was an erroneous exercise of discretion,” Prosser wrote. “When the majority disregards a court’s multiple errors, it rewrites the law on erroneous exercise of discretion.”

Prosser noted the majority also found the defendants’ increased exposure not prejudicial on the theory that, following withdrawal of the admissions, the defendants are only left to litigate the issue of Luckett’s condition, a consequence without special hardship.

But if the admissions had never been made, Prosser argued, the defendants most likely would not have had to litigate the issue. Rather, he said, the defendants’ interrogatories and request for production would have forced the plaintiffs to thoroughly examine their case, encouraging a settlement.

Further, Prosser said that admissions are supposed to identify the truly contested issues because a matter admitted is “conclusively established.” Attorneys must carefully consider what to admit and a court should make withdrawal difficult or else the reliability of admissions – hence, their utility – is compromised, he warned.

In this case, Prosser noted that the basis for withdrawal was not the discovery of new evidence, but doctors’ notes in the attorney’s possession when he made the admissions.

Prosser also advocated “a broad standard” when determining whether prejudice exists. The delay in a years-long case as well as the time and cost for additional discovery amounts to “conspicuously obvious” prejudice, Prosser said.