Wisconsin Business and Commercial Litigation

In Miller v. Hanover Ins. Co., the Wisconsin Supreme Court undertook a careful analysis of the law surrounding the re-opening of default judgments, particularly the five interest of justice factors under Wis. Stat. s. 806.07(1)(h).  Notably, the court determined that no finding of excusable neglect is required under (1)(h) to re-open a default judgment:

We conclude that M.L.B., and subsequent cases, unambiguously establish that a circuit court is to consider the five interest of justice factors in determining whether extraordinary circumstances are present under Wis. Stat. § 806.07(1)(h) such that relief from a judgment, including a default judgment, is appropriate. M.L.B., 122 Wis. 2d at 552­53; see Connor, 243 Wis. 2d 279, ¶41 (applying the five interest of justice factors to determine whether the circuit court properly exercised its discretion in denying relief from default judgment under para. (1)(h)); Johns v. Cnty. of Oneida, 201 Wis. 2d 600, 607­08, 549 N.W.2d 269 (Ct. App. 1996) (same). A finding of excusable neglect is not required under the extraordinary circumstances test to obtain relief from a default judgment under para. (1)(h). See generally M.L.B., 122 Wis. 2d 536.

The court went on to apply each of the five factors to the facts in the case, which will, of course, be of use to those of us who find ourselves behind a default judgment 8 ball.  There is a spirited concurrence from Justice Bradley, who reaches the same result for drastically different reasons, concentrating on the “extraordinary circumstances” phrase, arguing that the majority’s approach is too formulaic.

Upside down house courtesy Sideshow Bruce’s flickr gallery via this license.

In Simandl & Murray v. Mainstreet Homes, the appellate court reviewed Milwaukee County Judge Elsa Lamelas’s grant of summary judgment to a law firm suing to recover unpaid legal fees.  When the affidavits supporting the summary judgment motion didn’t attach or authenticate the bills, the circuit court relied on the bills that were attached to the complaint.  While the defendant had denied in its answer that the bills were accurate, and that the bills reflected reasonable work and fees, the court granted summary judgment anyway, and the appellate court upheld the decision.  I always thought that denials in the complaint were sufficient until the moving party proved up a prima facie case by evidence as defined in the statutes, but apparently, the standards are now a little more generous.

Mainstreet’s argument fails because it ignores the summary judgment procedure. The trial court was first obligated to look at the pleadings. The complaint stated that Simandl & Murray was retained by Mainstreet, Simandl & Murray provided legal services to Mainstreet which amounted to approximately $27,000, Simandl & Murray sent requests for payments along with itemized bills and no money was paid on the account, and Mainstreet did not object to the bills. In addition, the complaint contained the letter of engagement stating what work Simandl & Murray was to do for Mainstreet and the hourly rate of the lawyers. It also contained all the itemized bills sent to Mainstreet. The answer filed by Mainstreet denies knowledge or information sufficient to form a belief as to the truth of the averments, but also lists the following as affirmative defenses: improper service of process; lack of personal jurisdiction; that Mainstreet is a dissolving limited liability company and any distribution of its assets is subject to Chapter 184 of the Wisconsin Statutes; and finally, that Simandl & Murray breached the contract by engaging in a conflict of interest. Inasmuch as the pleadings state a claim, the trial court was required to then examine the moving party’s affidavits for evidentiary facts and other proof. Here, Attorney Simandl explained in his affidavit that his firm was hired by Mainstreet, that there was no conflict as the issue of a conflict was addressed in the letter of engagement, that work was done and monthly bills sent, and that Mainstreet failed to pay them.

It’s an interesting decision, and definitely worth reading the entire analysis.  I can tell you that my summary judgment submissions will not change as a result of this case, and I don’t think that most others will change theirs, either.  But it’s good to know that you’ve got options.

By the beginning of next year, Wisconsin will have new rules governing e-discovery.  In the Wisconsin Law Journal, Jack Zemlicka writes about the path and content of the new rules.  The rules aren’t final yet, and will require some additional tweaking, but they generally follow the outline of the federal rules on the same topic.

E-discovery, much discussed in the past five years or so, hasn’t made as much of a day-to-day impact as was predicted (buth then again, what ever does?  remember the swine flu epidemic, the avian flu, the year 2000, etc.?).  Nevertheless, in cases where e-discovery is important, it can become one of the central issues in the case, and certainly one of the most expensive components of discovery. 

In federal court, many lawyers have taken to using e-discovery as a crowbar to open opponents’ wallets and get a case resolved through financial blackmail rather than through consideration of the substance of the claims and defenses.  While I don’t at this time quibble much with the details of the suggested rule, my fervent hope is that Wisconsin courts will police the use of the rule in a way that preserves the facts of the case as the most important part of the dispute.

computer photo courtesy dlisbona’s flickr gallery via this creative commons license

In Loppnow v. Bielik, the court of appeals reversed the decision of Waukesha County Circuit Court Judge Michael Bohren that the plaintiff hadn’t exercised reasonable diligence in attempting to personally serve the defendant before resorting to service by publication.  The court of appeals explained its reasoning:

The guiding principle in these cases is that, when pursuing any leads or information reasonably calculated to make personal service possible, the plaintiff must not stop short of pursuing a viable lead–or in other words, stop short “of the place where if [the diligence] were continued might reasonably be expected to uncover an address of the person on whom service is sought.” Haselow, 212 Wis. 2d at 589. In West, the plaintiff stopped short of pursuing information he had about the defendant’s whereabouts, and also stopped short of making an inquiry to either his relatives or defendant’s relatives who were likely to know the defendant’s whereabouts. West, 82 Wis. 2d at 164-65. In Haselow, the plaintiff stopped short of attempting to locate the defendant in Hawaii despite information from the defendant’s father that he was living there. Here, there is simply no evidence that Loppnow “stopped short” in his pursuit of Bielik’s address, in Orlando or elsewhere.

If you’re like me, you’re wondering what good this definition of “reasonable diligence” is.  How can you ever tell when you’re at a place where if diligence were continued, you might find the address of the person you’re looking for?  Don’t you only know that if you’ve taken the step and it either succeeds or it doesn’t?  And if it doesn’t, how can you know whether the next thing you try won’t do the trick?   The next private investigator you hire may be the one who gets the information.

This isn’t the first time a court has given us the “I’ll know it when I see it” standard, though.  I think the court in this case was influenced by defense counsel’s close personal relationship with his client’s family and his related refusal to provide any information permitting service.

The court’s analysis (although short) of the adequacy of service by publication is also instructive.  While it doesn’t provide a wealth of guidance, this case should figure prominently in your next sufficiency-of-service argument.

In a case arising out of Madison, the Court of Appeals decided that to qualify under the business records exception to the hearsay rule, a party must provide testimony of someone with personal knowledge of how the business records were prepared and used.  Palisades Collection v. Kalal puts Wisconsin in the minority, according to Dave Ziemer of the Wisconsin Law Journal:

Nationwide, there is a consensus among the federal courts of appeal that third party business records are admissible evidence under the hearsay exception in FRE 803(6).

Ziemer’s article about the case provides some interesting insights into the Wisconsin rule and its comparison with other jurisdictions, pointing out many that go exactly the opposite direction:

However, there is a plethora of federal cases holding that records created by a third party and integrated into another entity’s records is admissible as the record of the custodian entity, provided the custodian relied on the accuracy of the record. (U.S. v. Adefehinti, 510 F.3d 319 (D.C.Cir.2007); Air Land Forwarders, Inc. v. U.S., 12 F.3d 1338 (Fed.Cir.1999); U.S. v. Childs, 5 F.3d 1328 (9th Cir. 1993); U.S. v. Duncan, 919 F.2d 981 (5th Cir. 1990); Resolution Trust Corp. v. Eason, 17 F.3d 1126 (8th Cir. 1994).)

The Eighth Circuit reaffirmed this principle just last month in Brawner v. Allstate Indemnity Co., No. 08-3544 (8th Cir., Jan. 8, 2010).

In addition, on facts materially identical to those in the case at bar, Massachusetts highest court held that the records were admissible business records. (Beal Bank, SSB, v. Eurich, 831 N.E.2d 909 (Mass. 2005).)

Regardless, for now, those of you who intend to rely on the business records of another company to prove your case would be wise to come prepared with a witness who has personal knowledge of the creation and use of those records.

Witness photo courtesy Extraordinary Chambers in the Courts of Cambodia flickr photostream through this creative commons license.

In the Wisconsin Law Journal, Jack Zemlicka writes about a potential statutory change that would increase the statute of limitations on an intentional cause of action from two years to three years.  The additional time would bring the statute on intentional claims into line with the statue for negligent claims, which is already three years. 

From a practical perspective, it may not make much of a difference, except in cases where there are likely to be claims of both negligent and intentional action.  For instance, negligent hiring and supervision claims often include claims of intentional action by the employee, or claims of inadequate security which often include claims of an underlying attack by a patron or invitee. 

This change might also curb attempts by plaintiffs’ counsel to characterize intentional behavior as negligent in order to obtain the benefit of a longer statute of limitation.  While not often successful, this strategy can cause expensive motion practice which increase settlement leverage.

Although it’s not Wisconsin-related yet, those of you in in-house practice want to keep a close eye (if you haven’t already been) on a case currently up on appeal from the First Circuit to the Supreme Court:  U.S. v. Textron.  The issue in the case is the viability of the work product privilege as it relates to the work of in-house counsel.  Susan Hackett of the Association of Corporate Counsel filed an amicus brief with the court, and writes a great post on the topic.  As I said, although it’s not a Wisconsin court, the case will impact what you do for your company and how you do it.

In Parkland Plaza Vet. Clinics v. Gerard, the court of appeals upheld Waukesha County Judge Ralph Ramirez’s restrictions on Gerard’s access to courts.  The court describes Gerard’s “Quixotic tilting at windmills,” and her frequent and unfounded tilting practices.  As a result of Gerard’s actions, Judge Ramirez imposed a number of sanctions “designed to protect the court and its staff from her vexatious conduct”:

That the Clerk of Courts for Waukesha County shall no longer accept any filings or correspondence from Gerard or anyone on her behalf;

That any documents or filings that are received by mail are to be sent back to Gerard’s last known address without review by the court or clerk;

That only upon proof of payment in full ($2,538.82) to Parkland Plaza Veterinary clinic S.C., or its attorney Basil Loeb, shall any documents be accepted from Defendant Gerard.

Gerard naturally appealed, and the appellate court upheld Ramirez:

An individual has a due process right of access to the courts, Piper v. Popp, 167 Wis. 2d 633, 644, 482 N.W.2d 353 (1992), however, that right is not absolute and may be curtailed where a litigant abuses the court system.  See Support Sys. Int’l, Inc. v. Mack, 45 F.3d 185, 186 (7th Cir. 1995) (prohibiting prodigious litigator from filing noncriminal motions).  A trial court has “inherent power to protect itself against any action that would unreasonably curtail its powers or materially impair its efficiency.”  Jacobson v. Avestruz, 81 Wis. 2d 240, 245, 260 N.W.2d 267 (1977) (citation omitted).

. . . .

 We agree with the trial court’s finding that Gerard’s vast and vexatious filings in this case establish Gerard has “a history of non-compliance with court orders, prosecution of frivolous motions, [and] reckless disregard of court orders.”  A court faced with a litigant who has engaged in a pattern of frivolous litigation has the authority to implement a remedy that may include restrictions on that litigant’s access to the court.  Minniecheske v. Griesbach, 161 Wis. 2d 743, 748, 468 N.W.2d 760 (Ct. App. 1991).  Such restrictions may include barring the litigant from filing further civil actions, aside from habeas corpus, until the litigant has paid fees or costs imposed in the same case or a prior case.  Puchner v. Hepperla, 2001 WI App 50, ¶¶6, 10 and n.7, 241 Wis. 2d 545, 625 N.W.2d 609.  We are satisfied the trial court’s restriction on future filings by Gerard was appropriately crafted to be a bar only until she paid the sanction previously imposed and well within its discretion given Gerard’s pattern of abusing the court system.

Although unpublished, the court’s reasoning will provide ammunition when faced with an unreasonable chronic filer of lawsuits.

Cannon County Courthouse photo courtesy SeeMidTn.com (aka Brent) flickr gallery under this creative commons license.

The case law, although there is not much of it, indicates that offers of judgment inclusive of costs are acceptable.

When an offer-of-settlement provision is implicated, as it is here, costs are added to any settlement, unless the terms of the settlement provide otherwise. Alberte v. Anew Health Care Serv., Inc., 2004 WI App 146, ¶6, 275 Wis.2d 571, 685 N.W.2d 614.  That case cites Marek v. Chesny, 473 U.S. 1, 6, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985), for the proposition that cost-inclusive offers are legitimate within the bounds of the statute:

If an offer recites that costs are included or specifies an amount for costs, and the plaintiff accepts the offer, the judgment will necessarily include costs; if the offer does not state that costs are included and an amount for costs is not specified, the court will be obliged by the terms of the Rule to include in its judgment an additional amount which in its discretion, it determines to be sufficient to cover the costs. In either case, however, the offer has allowed judgment to be entered against the defendant both for damages caused by the challenged conduct and for costs.

The Marek case analyzes the federal counterpart to Wis. Stat. §807.01, Fed. R. Civ. P. 68.

FRCP 68 is the Federal Rules’ equivalent of Wis. Stat. § 807.01(1), and is descended from the same New York statute from which 807.01 traces its lineage.  DeWitt Ross & Stevens, S.C. v. Galaxy Gaming and Racing Limited Partnership, 2004 WI 92, ¶35, 273 Wis.2d 577, 682 N.W.2d 839; see, e.g., Duello v. Board of Regents of University of Wisconsin System, 220 Wis.2d 554, 570, 583 N.W.2d 863 (Ct. App. 1998)(noting the similarity between FRCP 68 and Wis. Stat. §807.01 and finding it appropriate for Wisconsin courts to apply the state rule to federal claims); Donaldson v. West Bend Mut. Ins. Co., 2009 WI App 134, n. 9, 773 N.W.2d 470 (“When a state statute mirrors federal law, we may look to federal cases for guidance in interpreting the state statute.”)

I feel somewhat guilty that between the holidays and a recent crush of work, I’ve been unable to meaningfully post something for a while.  So here’s a pretty lengthy discussion of offers of judgment and plaintiffs who seek to have a court construe the offer before the plaintiff decides to accept or reject it.

Like many defense lawyers, I occasionally make offers of judgment under Wis. Stat. 807.01. The upside, while minor, is that the costs that are awarded to the prevailing party is shifted by the making (and subsequent rejection) of the offer. Also like many defense lawyers, my offers typically include a total amount offered for judgment. That is, judgment is offered in a given amount, including whatever potential costs are outstanding at the time. I might make an offer of judgment “in the total amount of Fifty Thousand and 00/00 Dollars ($50,000.00). Such amount includes all costs and fees.”

The plain language of the offer (in the total amount of Fifty Thousand,” “Such amount includes all costs and fees) specifically includes costs in the total amount of the offered judgment. A cost-inclusive offer makes sense, in that it sets the potential liability for the offering defendants at a specific number, rather than leaving an open-ended addition (costs) that the offering defendants have no way of accurately estimating before making the offer.  More in my next post on authority regarding the enforceability of cost-inclusive offers of judgment.

Plaintiffs, on the other hand, are fully capable of determining what their costs are, and can make a reasoned judgment to accept or reject the offer. Hadrian v. State Farm Mut. Auto. Ins. Co., 2008 WI App 188, ¶8, 315 Wis.2d 529, 763 N.W.2d 215 (party to whom offer is made must be able “to fully and fairly evaluate the offer from his or her own independent perspective.”)

Recently, I had a plaintiff ask the court to “construe” the offer (although the plaintiff had not yet accepted or rejected the offer), arguing that because the language of the statute contains the phrase “with costs,” that the offer does not comply with the statute. Attorneys are free to hold that opinion, and ignore or reject the offer for costs.  If their interpretation is accurate, they will suffer no ill effects, regardless of whether they recover more or less than the offer.  

Some plaintiffs may argue, despite their ability to understand the terms of the offer and simply ignore or reject the offer, that an offer specifically including the costs in the total amount offered, should be transformed by the court into an offer they believe comports with the language of the statute (that is, fifty thousand plus whatever accrued costs are at the time of the offer). 

There are multiple problems with this approach. First, it demands that the require the defendants to offer more to settle the matter than they intended to offer, or did offer. If the defendants intended to offer to settle the matter for $50,000 plus whatever unknown costs the plaintiffs have incurred, the defendants could make that offer. Second, I’ve never seen any authority that the court has the ability to unilaterally alter the terms of an unaccepted offer of judgment.

In fact, it is likely this issue, unless the plaintiff has either accepted or rejected the offer, is not ripe for consideration.  Among other reasons, the offer remains susceptible to revocation. until it’s accepted or time runs out.  See, e.g., Sonnenburg v. Grohskopf, 144 Wis.2d 62, 65-66, 422 N.W.2d 925 (Ct. App. 1988)(offers under Wis. Stat. §807.01(3) revocable at any time prior to acceptance); See, e.g., DeWitt Ross & Stevens, S.C. v. Galaxy Gaming and Racing Limited Partnership, 2004 WI 92, ¶39, 273 Wis.2d 577, 682 N.W.2d 839 (“If Wis. Stat. § 807.01 is to fulfill its purpose, litigants must have clear guidance about the proper scope of a valid offer.  A clear rule will help parties draft valid offers and assess their potential exposure to costs and prejudgment interest. Moreover, it will expedite dispute settlement by minimizing the need for post-trial litigation about rejected settlement offers. We further note that Wis. Stat. § 807.01(1) and 807.01(3) provides: “If notice of acceptance is not given, the offer cannot be given as evidence nor mentioned on the trial . . . .” A clear rule is therefore uniquely appropriate here because the parties may not obtain a ruling on the validity of the offer during trial.)

Plaintiffs who seek a court determination of the viability of the offer (or, for whatever reason, a judicial re-writing) of the offer before they make their decision to accept or reject the offer, oppose the goals of the statute.  If plaintiffs wish to reject a cost-inclusive offer, and recover less than the offer, they are free to argue to the court at that time that the offer does not comport with the statute. On the other hand, if the plaintiffs wish to accept the offer as it’s been presented, they can also do that, and then argue to the court that it should enter costs in addition, despite the language of the offer document.  

If a court accepts a motion ceeking a “construction” of the offer before the offer is accepted or rejected, the court removes the risk of rejecting the offer from the plaintiffs. This action opposes the purpose of the statute, which is to encourage settlement by increasing the downside of losing at trial.