Wisconsin Business and Commercial Litigation

The lawyers who work in my office will sometimes share stories of friends or acquaintances who ask for assistance in areas of the law that are outside their expertise, like family law, trusts and estates, criminal law, or consumer bankruptcy.  Their response to those requests is the same as mine usually is:  “It sounds like you need to get a lawyer.”  The same advice can be true for litigators who find themselves in unfamiliar surroundings because of a case in which they’ve become involved.

As a litigator, I spend a lot of time learning about subspecialties of different industries, like deep-hole drilling of industrial heat exchangers, proper operation of bovine slaughter and processing facilities, design of intake and outflow pipes for municipal water supplies, or proper construction of a latch bolt on a livestock trailer.  This is one of the reasons that I love what I do.  Learning the facts and background information necessary to understand, develop, and advocate my client’s case is both challenging and immensely rewarding.

Many cases, though, require additional expertise in an area of law rather than merely learning the facts of the matter.  In those instances, to provide excellent representation, it can be necessary to obtain qualified and expert assistance.  For instance, while I will happily and competently litigate an adverse possession case, I will also seek the assistance of a real estate transactional lawyer in drafting the easement negotiated to settle the matter.  If a particular case calls for expertise in the worker’s compensation law and surrounding procedures, patent work, or trusts and estates, I will seek the assistance of those lawyers who work day in and day out in those fields.

While not everyone does, I have the luxury of finding those specialized lawyers in the same firm in which I practice.  It is this kind of collaboration and willingness to recognize the limits of our experience that provides efficient, focused, and effective client service. 

To be sure, there are many competent general practitioners out there who can represent a criminal client in the morning, draft a will at lunch, and argue a summary judgment motion in a legal malpractice case in the afternoon.  I, however, am not one of them.  In my mind, excellent representation is most often provided by those who practice in specific areas, keep up on the most current changes in those areas, and are knowledgeable about the details of the practice area.

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.

When I was in law school, the UCC was one of the most dense and arcane pieces of literature it was my misfortune to read.  Years later, the same writing has a lot more relevance and meaning, and holds the answer to many of life’s riddles.  Take Kraenzler v. Brace (August 5, 2009), for example. 

The court of appeals recognized that while the UCC applies to commercial transactions.  However, because it was written by lawyers, there is an exception that permits parties to opt out of the UCC when drafting contract terms in a security agreement, waiving its requirements.  And also because it was written by lawyers, there are exceptions to the exception, a number of provisions that are unwaivable by stipulation. 

[Wis. Stat.] Section 401.102(3) states:

     (3)  The effect of chs. 401 to 411 may be varied by agreement, except as otherwise provided in chs. 401 to 411 and except that the obligations of good faith, diligence, reasonableness and care prescribed by chs. 401 to 411 may not be disclaimed by agreement but the parties may by agreement determine the standards by which the performance of such obligations is to be measured if such standards are not manifestly unreasonable.  (Emphasis added.)

The provision at issue in this case was just such an exception to the exception:

For the reasons stated above, we hold that the plain language of § 401.102(3) states first an exception that parties may vary the effect of U.C.C. provisions by agreement and, second, an exception to the exception that Wis. Stat. chs. 401 to 411 include provisions that certain rights may not be waived by contract.  The subsections in Wis. Stat. § 409.602 are plainly just such an exception to the exception defined in § 401.102(3), so the parties must abide by them. 

The unwaivable provisions that the court identified were many:

These include the right to:  (a) require that the secured party may use the collateral only in the manner and extent agreed to by the debtor, subsec. (1); (b) request an accounting from the secured party regarding the collateral and any surplus from the sale of the collateral, subsec. (2); (c) require that the secured party proceed in a commercially reasonable manner when enforcing the obligation against the debtor, subsecs. (3) and (4); (d) application of the proceeds from the collateral to the debtor’s obligation under the loan, subsec. (5); (e) receive timely notice upon disposition of the collateral by the secured party, subsec. (7); (f) a calculation and explanation of the surplus or deficiency on disposition of the collateral, subsecs. (8) and (9); (g) redeem the collateral, subsec. (11); and (h) remedies under Wis. Stat. §§  409.625 and 409.626 when the secured party fails to comply with ch. 409, subsec. (13).  Sec. 409.602(1)–(5), (7)-(9), (11), (13).

So read closely, and if you’re in default (or think you are), there are a number of rights that you may retain, despite what your contract says.

In Donaldson v. West Bend Mut. Ins. Co. (August 4, 2009), the court of appeals addressed the statute of limitations relating to personal injury counterclaims.  After Berg hit her with his bicycle on October 3, 2004, Donaldson filed a September 27, 2007 lawsuit against Berg and his insurance company.  Insurance defense counsel filed an answer and affirmative defenses, but Berg hired separate counsel to pursue a counterclaim against Donaldson for causing injury to Berg.  Berg’s counsel filed a counteclaim on December 14, 2007, outside Wis. Stat. s. 893.54’s three year statute of limitations for personal injury claims.

The court concluded that the statute of limitations applied to personal injury actions, whether or not brought as counterclaims.  However,

While it is true that Wis. Stat. § 893.54 references only “actions” and not counterclaims, Wis. Stat. § 893.14 provides the link between §§ 893.14 and 893.54.  Section 893.14 provides:

Limitation on use of a right of action as a defense or counterclaim.  Unless otherwise specifically prescribed by law, the period within which a cause of action may be used as a defense or counterclaim is computed from the time of the accrual of the cause of action until the time that the plaintiff commences the action in which the defense or counterclaim is made.  A law limiting the time for commencement of an action is tolled by the assertion of the defense or the commencement of the counterclaim until final disposition of the defense or counterclaim.  If a period of limitation is tolled under this section and the time remaining after final disposition in which an action may be commenced is less than 30 days, the period within which the action may be commenced is extended to 30 days from the date of final disposition.

Because the statute of limitations was tolled from the date of the plaintiff’s filing, the counterclaim was timely.

The reason this became an issue at all is because most insurance companies refuse to pay for anything more than pure defense, even if a colorable counterclaim will provide great leverage.  The position can be shortsighted, often leading to later problems when settlement is being seriously discussed, and the plaintiff wants a package deal including the counterclaim that now belongs to the insured defendant. 

Ideally, talk with your insurer early and in detail about the usefulness of potential counterclaims and the role they’ll play (if any) in defense.  It may prevent your case from being the next reported statute of limitations case out there.

The Wisconsin Supreme Court recently (July 14, 2009) undertook to analyze non-compete and confidentiality agreements between an employee and employer.  In Star Direct v. Dal Pra, the court considered claims that Dal Pra violated various provisions of his agreement by, after voluntarily terminating his employment with Star Direct, starting his own competing business servicing Star Direct’s customers.

The Court addressed each of the three contract clauses at issue, beginning with the “customer clause,” and focusing on Star Direct’s interests in prohibiting competition:

The customer clause prohibits Dal Pra, for 24 months following termination, from interfering with or endeavoring to entice away a person or entity “which is a customer” or “which was a customer . . . within a period of time of one year prior to . . . termination.”  The clause further specifies that prohibited customers are those “for which Employee performed services or otherwise dealt with” or “obtained special knowledge” about in the course of employment.  The provision also prohibits Dal Pra from approaching “any such customer or past customer” for prohibited purposes or cooperating with others toward that end.

Addressing an issue not previously directly decided, the Court approved of the customer clause’s application to past customers of Star Direct.  In reaching its decision, the Court relied primarily on the idea that Dal Pra would have a significant advantage in competing for those past customers because of his special knowledge of Star Direct’s business and of the customers themselves.  Moreover, the Court pointed to the nature of the business itself as support for this decision and for its conclusion that Star Direct had an interest in protecting customers with whom Dal Pra had not recently contacted.

The court turned next to the “business clause:”

[F]or a period of twenty-four (24) months after termination of Employee’s employment with Employer, Employee shall not, directly or indirectly . . . become engaged in any business which is substantially similar to or in competition with the business of the Employer, within a fifty (50) mile radius of Rockford, Illinois.

The Court concluded that the business clause’s restriction on engaging in a “substantially similar” business was overbroad and not reasonably necessary to protect Star Direct:

The lack of any protectable interest means the business clause is unreasonable and unenforceable.

Finally, the Court turned to the “confidentiality clause:”

The confidentiality clause bars Dal Pra, for 24 months following his termination, from using or disclosing “any information or knowledge, known, disclosed or otherwise obtained by him during his employment by Employer or CB Distributors.” It then lists a variety of specific information that is to be deemed confidential and protected, including but not limited to knowledge “conceived, discovered or developed by Employee or CB Distributors,” “proprietary products or procedures,” trade secrets, customer lists, “marketing techniques which are not generally known in the business community, and which relate to the business of the Employer or CB Distributors or are in the nature of trade or business secrets,” mailing lists, and special pricing information.

Again, the court focused on whether the clause was necessary to protect Star Direct.  Because it concluded that the information protected was proprietary, it determined that the clause was reasonably necessary.  Finally, the court addressed divisibility of restrictive covenants in general, and particularly those above. 

If you haven’t read it, and you or your company uses restrictive covenants, click the link and get going.

The parties in Horst v. Deere & Co. (decided July 14, 2009) dispute the proper phrasing of jury instructions in a products liability case.  Here, the father backed up a riding lawnmower, running over the legs of his son. 

The plaintiffs sought to alter the standard products liability jury instructions that use the words “user” or “consumer” to include the words “or bystander,” effectively introducing a bystander contemplation test mirroring the typical consumer contemplation test.  The circuit court refused, instead adding the following:

The law in Wisconsin imposes a duty on a manufacturer to a bystander, if the bystander is injured by a defective product, which is unreasonably dangerous to the ordinary user or consumer.

After reviewing multiple cases cited by the parties, the court determined that no case addressed the issue of whether a bystander contemplation test existed.  More importantly, it decided that the consumer contemplation test is the proper standard for all strict products liability cases:

We hold that the consumer contemplation test, and not a bystander contemplation test, governs all strict products liability claims in Wisconsin, including cases where a bystander is injured. While bystanders may recover when injured by an unreasonably dangerous product, the determination of whether the product is unreasonably dangerous is based on the expectations of the ordinary consumer.

Interestingly, Justice Gableman, who authored the majority opinion, adds a concurrence in which he argues that:

it is time for this court to adopt the Restatement (Third) of Torts: Products Liability § 2(b) (1998) in design defect cases.

Justices Prosser and Roggensack join in his concurrence, and Crooks, while part of the majority, writes to express his displeasure with Gableman’s going beyond the main scope of the parties’ arguments and discussing a “sea change” in Wisconsin law (although he’ll support the change, as his concurrence in Godoy v. E.I. duPont shows).  All in all, a very interesting read.