Wisconsin Business and Commercial Litigation

Whichever side of the v. you’re on, preservation of evidence can cause heartburn.  In this opinion, issued on July 15, 2009, the Court addressed a dismissal granted to the defendant roofers sued by a homeowner’s insurance company after the insured home burned down, allegedly because of substandard roof repair.  After notification by mail, the homeowners insurance company destroyed the home, and the defendant roofers moved for dismissal based on spoliation.  Here’s the rub:

We conclude that the duty to preserve relevant evidence is discharged when a party or potential litigant with a legitimate reason to destroy evidence provides reasonable notice of a possible claim, the basis for that claim, the existence of evidence relevant to the claim, and a reasonable opportunity to inspect that evidence. We further hold that such notice can be properly effectuated by mailing a letter via first-class mail. We also affirm that dismissal is an appropriate sanction for spoliation of evidence only if a party acts egregiously—-that is, in a conscious effort to affect the outcome of litigation or in flagrant, knowing disregard of the judicial process. Applying the law to the facts of this case, we conclude that as a matter of law, Joseph and Charles Golke received the March 13, 2000, letter, and that American Family provided the Golkes with reasonable and sufficient notice, thereby discharging its duty to preserve the evidence from the fire. The circuit court therefore erroneously exercised its discretion when it dismissed American Family’s suit. Because American Family discharged its duty to preserve evidence and no sanctions are appropriate, the judgment of the circuit court is reversed, and the cause is remanded to the circuit court for trial on the merits.

Abrahamson and Bradely are critical of the majority’s application of the general principles to the facts of the case.  Both would have preferred to remand to the circuit court for a determination of whether a lesser sanction than dismissal was appropriate.  Regardless of who’s right, the case provides a nice discussion of spoliation law.

Olson v. Darlington Mut. Ins. Co., has made yet another interlocutory trip to the appellate court.  This time, the issue was a proposed jury instruction that would have informed the jury that the total damages suffered by the plaintiff did not exceed $75,000.  The trial court determined that the instruction was justified because of the allegation in the complaint:

THAT THE AMOUNT OF DAMAGES SOUGHT AND IN CONTROVERSY IS LESS THAN THE AMOUNT REQUIRED FOR REMOVAL TO THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WISCONSIN UNDER DIVERSITY OF CITIZENSHIP PURSUANT TO 28 USC 1332(A).

The appellate court disagreed:

The complaint clearly states Olson is seeking less than $75,000 in damages, not that she has, in fact, suffered less than $75,000 in damages.

The Court analogized the plaintiff’s position to that of a small claims plaintiff who proceeds in small claims court to obtain procedural benefits, even though the amount of damages might exceed the amount a small claims court may award. 

Cases like this emphasize the care that must be taken in word and phrase selection in pleadings and briefs.  Choosing phrases that don’t say exactly what you want to convey, no more and no less, can come back to haunt you.  Of course, even painstaking drafting cannot possibly take into account the endless possible issues that may later arise.  If you didn’t believe that writing is one of the most important crafts a lawyer can perfect, this case should convince you.

Tonight I will be talking with the members of the Wisconsin Chapter of the International Association of Certified Home Inspectors, Inc. about the contracts they use with their clients, including arbitration clauses, exculpatory clauses, and other contract language that may cause difficulty.  The meeting will be held at the Pettit Ice Center, 500 S. 84th Street in Milwaukee.  You can get more information here.  Non-members are welcome and your entrance fee includes dinner.

Congratulations to my colleague Jeff Fertl who recently prevailed (July 17, 2009) on questions certified from the Seventh Circuit to the Wisconsin Supreme Court on Lemon Law issues.  In Tammi v. Porsche Cars, the Supreme Court considered four certified questions and concluded:

When a consumer who is leasing a motor vehicle brings an action against the manufacturer of the vehicle pursuant to subsection (7) of Wis. Stat. § 218.0171, and then exercises his option to purchase the vehicle under the terms of the lease, the consumer is not entitled to damages for the price of his voluntary purchase because his purchase was not “caused” by any violation of the statute by the manufacturer. See Wis. Stat. § 218.0171(7).

The second and third questions were mooted by the answer to the first question.  As to the final question, the Supreme Court concluded:

The plain language of the statute makes clear that a consumer’s refund under Wis. Stat. § 218.0171(2)(b)2.b. or 3.a. is subject to a reasonable allowance for use. Because we read subsection (7) in conjunction with the rest of the statute, we conclude that the amount of “pecuniary loss” under Wis. Stat. § 218.0171(7) must incorporate a reasonable allowance for use before the pecuniary loss is doubled.

With the questions answered, the case has been remanded to the Seventh Circuit for further proceedings.

If you’re a lemon law practitioner, the analysis is interesting.  If you’re not, the background discussion of the lemon law and its history might still be interesting.  In either event, congratulations to Jeff and his client.

I’ve recently been working on a number of cases in both federal and state court that involve out-of-state opposing counsel.  While they’ve either pro hac viced in, or have been previously admitted, it has been clear (painfully so, on a number of occasions) that they do not have experience with, and therefore do not understand, the way Wisconsin courts work.  Sure, you can obtain the local rules for the Eastern and Western Districts of Wisconsin and the circuit courts easily enough. 

But that’s not usually enough.  Which clerks will work with you and which won’t?  Often, local counsel will have a pre-existing relationship with the power behind the bench, the clerks and judicial staff.  Are there any twists to the local rules that don’t appear in writing?  The answer is almost always yes — but unless you’ve practiced there, you don’t know when those twists will grow into major kinks in your litigation.

Perhaps the best example is the Western District of Wisconsin, proudly bearing the colloquial title of the “Rocket Docket.”  Even though Judge Shabaz has retired, the timelines haven’t stretched noticeably.  Many are the out-of-state attorneys who heard tales of the Rocket Docket, but were caught flat-footed when they found that the legend was not only for real, but often understated the actual effect of the agressive schedules. 

The upshot of all of this is that when litigation arises, it’s vitally important to have access to counsel who know the courts, the staff, and the potential jurors.  Local counsel is worth the additional investment.

In Behrendt v. Silvan Industries, Inc. , opinion filed July 9, 2009, the Wisconsin Supreme Court addressed a question that plagues many manufacturing and service provider employers:  What is the employer’s liability for side jobs performed by its employees using company equipment?  The answer (not as clear as you might like):

In order for an employer to be vicariously liable for an employee’s act, the act must have been within the scope of employment. We agree with the court of appeals that summary judgment is appropriate on the claim of vicarious liability because the only evidence presented was that the tank was a side project that was completed for the employee’s own purpose and thus was outside the scope of employment.

The plaintiff’s argument that permitting side jobs raised employee morale did not persuade the court. 

In the lengthiest portion of the decision, the court emphasized that the employer bore the duty that all Wisconsin residents bear to exercise care to prevent creating an unreasonable risk of injury to another.  However, it also concluded that the injury here, caused when a tank, originally built as a side job by a Silvan employee and later modified, exploded, was not a reasonably foreseeable risk.  The court’s language is worth a look by any employer whose employees occasionally take on side jobs.

However, we then look at whether Silvan breached that duty by failing to exercise the care a reasonable person would use in similar circumstances. In most cases, whether a defendant breached a duty is a question of fact that is submitted to the jury and thus is not appropriate for summary judgment. In this case, however, it is the lack of foreseeable risk that convinces us, as a matter of law, that Silvan cannot be said to have failed to exercise ordinary care with regard to its policy on side jobs. Further, there is no material fact in dispute as to Silvan’s policies about side jobs and its prohibition on employees making pressurized vessels as side jobs for personal use. There is in addition uncontroverted evidence in the record that Silvan took steps such as having holes cut into any tanks that were considered as scrap—-as well as testimony of the tank’s owner that this tank itself originally had holes in it—-and that the point of cutting holes into the tanks was to keep them from being used with air pressure. Summary judgment is appropriate on the negligence claim because under these circumstances Silvan did not breach its duty to act with ordinary care.

In Luckett v. Bodner, 2009 WI 68, the Supreme Court exhaustively (I’m not kidding — the thing is 70 pages long) addressed the standards for withdrawal of an admission.  You may prefer to read the summary by Alex De Grande of the Wisconsin State Bar (for some reason that link’s not working, but you can find the article, for the moment, at www.wisbar.org) which distills the opinion to a more manageable length. 

Requests to admit are very handy tools to narrow the issues that must be tried, and for pinpointing areas of need for both parties.  And, despite my griping about the length of the discussion, it’s good to have a detailed review of this somewhat under-served procedural implement. 

The Court wasted little time in deciding that the trial court properly exercised its discretion by permitting the withdrawal in that the withdrawal would aid in the ascertainment of truth and the development of the merits (which seems fairly obvious).  The sweet marshmallow center of the opinion (depending, as always, upon which side of the dispute you fall) is this:

The “prejudice” contemplated by Wis. Stat. § 804.11(2) “is not simply that a party [obtaining the admissions] would be worse off without the admissions.”  To demonstrate prejudice in maintaining the action or defense on the merits, the party who obtained the admission “must show prejudice in addition to 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 in maintaining the action or defense on the merits “relates to the difficulty a party [here the defendants] may face in proving its case, e.g., caused by the unavailability of key witnesses, because of the sudden need to obtain evidence with respect to the questions previously answered by the admissions.”

The prejudice inquiry requires a court to “focus on the prejudice that the nonmoving party [here the defendants] would suffer at trial.”

It is the defendants’ burden to demonstrate that withdrawal or amendment of the admissions will prejudice them in maintaining their defense on the merits.

The defendants made a variety of prejudice assertions, none of which convinced the Court.  The lone dissenter, Justice Prosser, makes an impassioned argument for overturning the lower court’s decision. 

Whether you agree or disagree with the holding, this case is sure to provide some bullets for your next round of discovery skirmishes.

Undoubtedly most of you have heard about the Altman-Weil study which identifies most in-house counsel as “deeply skeptical” of their outside counsels’ commitment to changing pricing and staffing models. 

“This is a dramatic vote of no confidence from Chief Legal Officers,” said Altman Weil’s Dan DiLucchio, in a statement. “Either many law firms just don’t understand that clients today expect greater value and predictability in staffing and pricing legal work, or firms are failing to adequately communicate their understanding and willingness to make real change. In either case, it’s a big problem.”

The Business Journal provides some more discussion of the study.  From my perspective, this is actually heartening news.  Too often businesses and their inside counsel, acting out of habit or familiarity, return time and time again to law firms that do not provide the best service or the best value.  But comfort and history are two luxuries that are becoming less affordable all the time. 

Merely changing staffing models isn’t going to do the trick — outside counsel have to prosecute the litigation as part of the client’s overall business strategy.  This means that alternative billing arrangements should be discussed, in an open manner with a variety of options, including fee caps, blended fee agreements, litigation support economies, and other alternatives to the almighty billable hour.  If both the client and the lawyer want to be in business together, there’s generally a way to make it work for both.

There’s no question that some measure of “you get what you pay for” applies in litigation.  I’ve seen too many clients, in the face of stark evidence of who is the better lawyer, choose only the cheaper lawyer.  As with everything, there must be balancing of the often competing interests of victory and cost, as well as a clear identification of a client’s goals.  In my mind, the value of a law firm’s service should be measured by its contribution to its clients’ success.

Mike Dillon has a great discussion of this issue from the perspective of a general counsel, at his blog the legal thing.

Recently, Dave Ziemer of the Wisconsin Law Journal wrote about a June 29, 2009 7th Circuit decision that replaces the time-honored moniker of “de novo” review with the phrase “independent decision,” at least for district court review of administrative decisions.

All in all, it would be best for judges and lawyers to stop thinking about ‘de novo review’ — with the implication that the judge is ‘reviewing’ someone else’s action — and start thinking about independent decision, which is what Firestone [a leading case on ERISA procedure] requires.

While the case considered ERISA, which is a specialized field, and is limited to the consideration of an administrative decision, Ziemer opines that it’s likely we’ll see the same change apply to typical litigation.  The opinion itself (only seven pages long) contains good shorthand of the differences between simple review and independent decisions:

In a contract suit the judge does not “review” either party’s decision. Instead the court takes evidence (if there is a dispute about a material fact) and makes an independent decision about how the language of the contract applies to those facts.