Wisconsin Business and Commercial Litigation

On July 9, 2009, I posted about Luckett v. Bodner, a Wisconsin Supreme Court case that dealt with the withdrawal of responses to requests to admit.  One year later, and we’re right back where we started.  In Rivera v. Perez, the court of appeals reviews an Iowa County circuit court case on withdrawing admissions.  There, Perez failed to answer requests to admit, and the opposing parties moved for summary judgment based on the constructive admissions.  The court of appeals decided that the trial court erroneously exercised its discretion by denying Perez’s motion to withdraw the admissions.

The key issue, according to the court of appeals, is the centrality of the admission to the case, not whether there is evidence in the record that may contradict the admission.  Analyzing Luckett:

The court then said that “[t]he first requirement of WIS. STAT. § 804.11(2) emphasizes the importance of having the action resolved on the merits.” Id., ¶38. The court rejected the argument “that withdrawal of an admission cannot subserve the presentation of the merits of the action unless the admission is ’squarely and conclusively contradicted by something in the court’s record,’” holding instead “that withdrawal or amendment of an admission will promote the presentation of the merits of the action even when the admission is not conclusively contradicted by something in the record.” Id., ¶40. The court then concluded that “[t]he [trial] court’s discretionary determination that withdrawal of the plaintiffs’ admissions will subserve the presentation of the merits of the action was not an erroneous exercise of discretion,” because “[t]he parties evidently regard[ed] the question of Ms. Luckett’s damages for conscious pain and suffering as a key issue that they [would] dispute at trial,” and “[t]he plaintiffs’ admissions, if allowed to stand, would [have] effectively eliminate[d] a determination on the merits of these issues.” Id., ¶41. Accordingly, the court concluded that “granting the plaintiffs’ motion to withdraw the admissions aid[ed] in the ascertainment of the truth and the development of the merits,” satisfying the first requirement under § 804.11(2). Id.

So apparently, the only admissions that will not be subject to immediate withdrawal are those that are peripheral to the claims.  Why would anyone bother with admissions that are not central to the case?

Paralleling the prejudice element of the withdrawal inquiry with the application of a discovery penalty, the court established  what appears to be a nearly unreachable hurdle for those who try to enforce admissions.

Here, in contrast, the requests for admissions and interrogatories were approximately two months overdue when Perez moved to withdraw her admissions and provided answers to the requests; Perez agreed to participate in a deposition scheduled for the time period while the requests for admissions were outstanding, and further agreed to reschedule the deposition at the request of counsel; only approximately one month passed between the time of the deemed admissions and Perez’s request to withdraw her admissions; and Perez moved to withdraw her admissions when trial was still several months away.⁽¹⁶⁾ These facts, unlike the facts in Mucek, do not support a reasonable finding that allowing Perez to withdraw her admissions would result in prejudice to Haushalter based on egregious discovery violations.

We conclude that, under Mucek and Luckett, the record does not support a finding of prejudice in this case. While NCI’s egregious conduct supported the trial court’s exercise of discretion in Mucek, the same is not true of Perez’s conduct here. In Mucek, NCI took no action to comply with discovery for two years, separate from its failure to answer the requests for admissions; its first attorney withdrew based on NCI’s refusal to cooperate with discovery; NCI failed to comply with an order by the court compelling discovery; and NCI did not request to withdraw its admissions until five days before trial, and did not respond to Mucek’s requests for admissions until the first day of trial. Mucek, 252 Wis. 2d 426, ¶¶7, 14, 27. Accordingly, the trial court exercised its discretion to find that Mucek would be prejudiced by allowing NCI to withdraw its admissions, saying: “Rarely have I really seen such egregious conduct on the part of a defendant and to come in at the last moment and say the other side is not prejudiced and we should be able to essentially reopen this matter simply doesn’t carry any weight with me.” Id., ¶27.

Read it, perhaps weep, but almost certainly give up using requests to admit.  What’s the point when the only admissions that will stick are those that aren’t central to the case and only made by those who have committed egregious discovery violations?

The way things are going, I might as well re-name the blog “All About E-Discovery Rules.”  Based on the latest feedback about the 7th Circuit’s pilot e-discovery program, I would be willing to bet that the pilot program is going to take full flight soon.  Have a look at Lawyers USA’s Correy Stephenson’s column about the survey results from the 7th Circuit program.  Apparently, everyone loved it (or at least didn’t hate it), which is pretty incredible coming from a bunch of lawyers.

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

On May 18, 2009, I wrote about Racine County v. Oracular, and I said that it didn’t appear that the case had been appealed.  I was wrong.  The Supreme Court just released its decision on April 2, 2010, in which it confirmed the court of appeal’s ruling that the issues in the case did not require expert witness testimony to assist the jury.  The court of appeals reversed Racine County Judge Steve Simanek’s dismissal of Racine County’s case because of its failure name an expert.

Contrary to the circuit court’s conclusion, the court of appeals held that for purposes of this case, computer consultants are not “professionals” and thereby not subject to professional standards of care.  Instead, the court concluded that the Agreement between Racine County and Oracular was a simple contract for services.

The Supreme Court, through Justice Ziegler, agreed:

In this case, in order to survive summary judgment, Racine County was not required to name an expert witness.  As a preliminary point, Racine County alleged breach of contract, not negligence.  There is no allegation that Oracular’s performance failed to meet the standards of the computer consulting industry——whatever those may or may not be.  Accordingly, the issue is not whether Racine County is required to present expert testimony in order to demonstrate that Oracular’s performance fell below the industry standard of care. Instead, the issue is whether in order to survive summary judgment, Racine County was required to name an expert witness when the complaint alleged that Oracular breached the parties’ Agreement.

Two things cause a little concern.  First, the Supreme Court claims that it decided the appeal on “different grounds” than the appellate court.  The grounds, if different, appear only  minimally so.  Second, the Supreme Court went to great pains to repeatedly point out that Racine County did not have to name an expert witness to “survive summary judgment.”  This begs the question whether Racine County is required to name an expert at some other point in the process. 

For practical purposes, this case falls into the category of one to cite when your opponent takes a shot at your case because you didn’t name an expert in discovery. 

Permission to speak freely image courtesy jurvetson flickr gallery via this creative commons license.

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.

Although Wisconsin’s rules of civil procedure don’t currently deal specifically with e-discovery, the spectre of continuing increases in the number of cases that require it may force action sooner rather than later.  Jack Zemlicka of the Wisconsin Law Journal writes:

According to the Wisconsin Judicial Council, about 25 other states are considering or have already implemented rules incorporating elements of the 2006 amendments to the Federal Rules of Civil Procedure pertaining to e-discovery.

The Judicial Council recently presented a petition to the state Supreme Court seeking many of the same updates, including enabling parties to specify the form or forms in which electronically stored information is to be produced and a “safe harbor” provision that would prohibit court sanctions if a party fails to produce electronically stored information lost as a result of routine operation of a system

The Council is also recommending that business records be allowed to be produced in electronic form and that parties be permitted to request an opportunity to test or sample materials sought in addition to inspecting and copying them. However, the petition includes commentary from the Federal Rules of Civil Procedure Advisory Committee notes stating that “courts should guard against undue intrusiveness resulting from inspecting or testing such systems.”

One of the major problems with the current proposal, points out Zemlicka, is that there is no claw-back provision.  Given the volume of production and the time required to review the information, claw-back has become a mainstay of the federal system.  Of course, nothing official has happened yet, but stay on your toes — it’s sure to impact you one way or another.

Photo courtesy Robert S. Donovan’s Flickr gallery under this creative commons licence.

In a single appeal from a Racine County case, a busy court of appeals addressed three issues of first impression.   The first issue from S.C. Johnson v. Morris revolved around the impact of invoking Fifth Amendment rights in civil discovery proceedings:

The first issue concerns a party’s continuous invocation of the Fifth Amendment privilege against self-incrimination in a civil action where that party later waives the privilege in the middle of trial when all discovery and preparation for trial is complete and the other party’s theory of the case has been established.  Federal case law instructs that this decision requires the trial court to balance the prejudice to both parties.  And one of the most important factors in the balancing test is the timing of the request to withdraw because invoking during discovery and then waiting until trial to withdraw runs the danger of undermining the purpose of discovery.  We find this authority persuasive and adopt it in Wisconsin. 

Second, the court addressed the duty to mitigate in intentional tort cases:

We again adopt persuasive federal case law which explains that expanding the duty to mitigate in such a way as to place a burden on the victim to investigate whether warning signals existed would allow tortfeasors to purposely exploit a victim’s weak internal investigation mechanism and then use it as an affirmative defense at trial.  We conclude that adopting Russell and Buske’s position would place too high a burden on victims.  Thus, as the trial court ruled, actual knowledge is required for the duty of mitigation to apply.

Finally, the court analyzed the damages provision of WOCCA:

And third, is the multiple damages provision of the Wisconsin Organized Crime Control Act (WOCCA) remedial such that the entire damage award is doubled?  The answer is “yes” because that provision, like its federal counterpart, is a remedy to address the private economic injury aspect of the violation, not the penal, criminal feature.  Therefore, we again affirm the trial court, and thus uphold its doubling of the entire damage award.

Cases of this size ($147 million damages finding remitted to $101.9 million) make it worthwhile for parties to chase down and elaborate novel issues.

municipal court judges 2001 photo courtesy Seattle Municipal Archives flickr gallery under this creative commons license

Read what Hinshaw & Culbertson LLP’s Steve Puiszis writes about the Seventh Circuit’s new electronic discovery pilot program.  As everyone’s aware, electronic discovery necessitated changes to procedural rules in courts across the country.  The Seventh Circuit’s program is road-testing approaches to the issue.  If you or someone you know is involved in a case that’s been selected to take part, have a look at Puiszis’s post.  It’ll be worth your time.

Brilliance Business Solutions, Milwaukee-based website design and search engine optimization firm, has invited me to post on the Brilliance blog.  I will briefly discuss the use of social networking sites by lawyers and employers.  The information that’s available on any one person has multiplied astronomically in the last few years. 

Some information is put out on the web in first-person format (facebook, myspace, etc.) and some is put out there by others (check out Sorry I Missed Your Party and the facebook open group 30 Reasons Girls Should Call It a Night ).  Regardless of how it gets there, the information can come back to haunt you. 

These sorts of sites provide fertile ground for lawyers seeking to obtain information about a plaintiff or witness.  Employers doing due diligence before hiring may run across all sorts of things that should not impact the hiring decision, but why take the chance?  That applies equally to either – it’s no good for the potential employee, and creates the possibility of litigation for an employer who misuses the information. 

For lawyers, doing a quick search on the deponent or party is always a good idea.  You  never know what might be behind the next mouse click.

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.