Month: March 2012

Wisconsin Supreme Court Rules that Default Judgment Was Void Due to Plaintiff’s Failure to Name Proper Corporate Defendant

Posted on by Hamilton

The Wisconsin Supreme Court today issued its decision in  Johnson v. Cintas Corp. No. 2, et al., 2012 WI 31, which is the latest in a number of recent cases accepted by the Court dealing with default judgments. (Oral arguments can be viewed on WisconsinEye.)

The issue is in the case was whether a default judgment is void because the summons and complaint names the wrong corporate defendant and thus personal jurisdiction is not obtained over the correct corporate entity.

The Wisconsin Supreme Court ruled that default judgment was void because the complaint was “fundamentally defective” because it failed to name the proper defendant in the summons and complaint. As a result, the Supreme Court ruled that the circuit court lacked personal jurisdiction over the incorrectly named defendant.

Facts

Robert Johnson, an employee for Cintas Corporation No. 2 (“Cintas No. 2”), was injured in a car accident resulting in permanent injury. Johnson was a passenger in the vehicle, which was being driven by a friend. Johnson was required to use his vehicle during the course of his employment and held auto liability insurance through Cintas No. 2. Johnson sought treatment coverage from Cintas No. 2 through its health insurance provider. When Cintas No. 2 refused to pay benefits, Johnson filed suit.

Johnson’s attorney filed the original summons and complaint naming “Cintas Corporation” as the defendant, instead of Cintas Corporation No. 2. Cintas Corporation No. 2 is a wholly-owned subsidiary of Cintas Corporation. Cintas Corporation No. 2 is a foreign corporation registered with the State of Wisconsin, whereas Cintas Corporation is a foreign corporation not registered in Wisconsin and does not do business within the State of Wisconsin.

Neither Cintas Corporation No. 2 nor Cintas Corporation responded to the complaint, and Johnson moved for default judgment. Cintas Corporation filed an Emergency Motion to Strike and Dismiss for Lack of Personal Jurisdiction. At the default judgment hearing Johnson was allowed to amend the summons and complaint. The trial court then granted default judgment against Cintas Corporation No. 2.

Cintas No. 2 then contacted the trial court and filed its answer to the original and amended complaints, but the court refused to hear Cintas No. 2’s motions because it had already granted default judgment against Cintas No. 2.

Cintas No. 2 filed a motion for relief from judgment, which the court granted and then vacated the default judgment. Johnson filed a motion for reconsideration and argued that newly obtained information proved that Cintas No. 2 effectively held itself out as Cintas Corporation. The trial court granted Johnson’s motion and reinstated the default judgment.

Court of Appeals Decision

The court of appeals reversed the trial court. The court held that because Johnson’s summons failed to accurately name the proper defendant (Cintas Corporation No. 2), the service of process failed to confer personal jurisdiction over that defendant.

The court further explained that regardless of how Cintas Corp. No. 2 held itself out to the public, the amendment of the summons and complaint had the effect of bringing a new party into the action. According to the court, added parties must be served with the summons or voluntarily appear. The court further noted that strict compliance with the rules of statutory service upon amendment naming a new corporate entity is consistent with Wisconsin’s policy viewing default judgments with disfavor.

Wisconsin Supreme Court Affirmed Court of Appeals

In a 4-2 decision, the Wisconsin Supreme Court on Tuesday, March 27, 2012 affirmed the court of appeals’ decision. According to the Supreme Court:

We conclude that service in this case was fundamentally defective because Johnson failed to name Cintas No. 2 as a defendant in his summons and complaint, contrary to Wis. Stat. §§ 801.02(1) and 801.09(1). Therefore, the circuit court lacked personal jurisdiction over Cintas No. 2, regardless of whether or not the defect prejudiced Cintas No. 2 and regardless of the manner in which Cintas No. 2 held itself out to the public or to Johnson specifically.

The opinion was authored by Justice Annette Ziegler, and joined by Justices Patrick Crooks, Patience Roggensack, and Michael Gableman. Justice David Prosser did not participate in the case.

Dissent

Justice Ann Walsh Bradley, joined by Chief Justice Shirley Abrahamson, dissented. In their dissenting opinion, Justice Bradley argues that the “summons and complaint contained a mere misnomer – a technical defect that does not deprive the circuit court of jurisdiction.” Specifically, the dissent argues that the omission of “No. 2” was a misnomer, and as a result, did not deprive the circuit court of personal jurisdiction.

According to the dissenting opinion, the majority reached “the wrong result by dodging the applicable standards for mere misnomers” and “craft[ed] an unreasonable and unnecessary rule.”

Andrew Cook is an attorney and Director of Legal Services for the Great Lakes Legal Foundation.

Current and Former Justices Discuss Judicial Turmoil

Posted on by Hamilton

The Wisconsin Supreme Court has been in the news lately, not for its opinions, but for its inner workings and interpersonal conflicts. Former Wisconsin Supreme Court Justices Janine Geske and Jon Wilcox were recent guests on Wisconsin Eye’s Legally Speaking, where they offered their opinions on many issues facing the courts. Current Justice Michael Gableman published an article in the latest issue of Wisconsin Policy Research Institute’s Wisconsin Interest providing his opinions on many of the same issues.

The first subject broached by the former justices was the Judicial Commission’s decision-making process generally and as it relates to the recent charges filed against current Justice David Prosser. Both former justices expressed their concerns about how the existing Commission processes will play out when a sitting justice is the subject of investigation.

Next, the former justices discussed the allegations that Justice Gableman has a conflict of interest when the firm that represented him in the past appears before the court. Geske said she assumed there would be a complaint filed with the Judicial Commission in the future. Wilcox agreed, lamenting that the justices are operating in a “gotcha world.”

The interview also included a discussion of the court’s recent decision to limit open judicial conferences. Wilcox indicated he respected the court’s judgment in closing the conferences, while Geske disagreed expressing her disappointment in the court’s decision.

The former justices touched on the topics of court management, the legislative effort to amend the Chief Justice selection process, and the funding and propriety of judicial elections.

Throughout the interview, both former justices expressed concern about the public perception of the court, and expressed their desires that the court move forward and work to improve its reputation in the eye of the public.

Sitting Justice Michael Gableman addressed many of the same issues as were discussed in the Legally Speaking interview in a recent piece he authored for the latest issue of Wisconsin Policy Research Institute’s Wisconsin Interest.

The Legally Speaking video is available from Wisconsin Eye. The article by Justice Gableman is available on the Wisconsin Policy Research Institute’s website.

High Court Rules that Owners of Property Destroyed by a Forest Fire Are Entitled to Double Damages

Posted on by Hamilton

In a 6-1 decision authored by Justice Annette Ziegler, the Wisconsin Supreme Court held that if an owner’s property is destroyed by a forest fire that is caused by negligence of another person, then the property owner automatically is entitled to double damages. Chief Justice Abrahamson, along with Justices Crooks, Prosser, Roggensack, and Gableman joined the majority. Justice Bradley dissented from the majority decision. The case is Heritage Farms v. Markel Ins. Co., 2012 WI 26.

Facts

The case involved a forest fire that extensively damaged nearby property owned by Heritage Farms, Inc. The fire started by the defendant was extinguished, but weeks later flared up and escaped the defendant’s property and entered onto Heritage Farms’ property.

Heritage Farms’ owners were awarded $568,422 in compensatory damages in a previous decision after it was determined that the defendant’s negligence led to the forest fire.  Heritage Farms then brought a separate motion against the defendant seeking double damages, along with costs for legal representation.

Decisions by the Trial Court and Court of Appeals

The issue before the trial court was whether Heritage Farms was automatically entitled to double damages, or whether the statute grants the court discretion when deciding whether to award double damages.

The statute states that an owner “whose property is injured or destroyed by forest fires, may recover, in a civil action, double the amount of damages suffered, if the fires occurred through willfulness, malice or negligence.” (Wis. Stat. § 26.21(1)).

The trial court held that the statute allowed the court to exercise discretion in deciding whether to award double damages. The trial court decided that the defendant’s conduct did not warrant punishment, and therefore did not grant Heritage Farms double damages.

The court of appeals upheld the lower court, ruling that the decision to award double damages under the statute is subject to the circuit court’s discretion. The court noted that the legislature used the permissive word “may” in the statute in describing the property owner’s right to recover double damages in the event that a forest fire result from willfulness, malice, or negligence.

Wisconsin Supreme Court Decision – Statute Mandates Double Damages

The Wisconsin Supreme Court reversed, holding that property owners are entitled to double damages. The court reasoned that, “once it is determined that the forest fire occurred through willfulness, malice, or negligence, the property owner is entitled to double damages as a matter of course.”

The court further held that their ruling should apply retroactively, not prospectively, thereby ensuring that Heritage Farms received the full double damages.

Interest on Judgments

The court further held that the plaintiff was entitled to interest on the double damages from the date of the jury’s verdict (October 13, 2006). At the time the lawsuit was brought, the interest on judgments was 12 percent.

The defendant argued that the 12 percent interest was unconstitutional because the high interest rate is so severe and so far removed from the national prime lending rate that it tends to “chill” defendants from properly defending their claims on appeal.

The court rejected this claim and said that the legislature was the proper branch of government to determine the proper interest rate. The court noted that the legislature this session in fact changed the interest on judgments from 12 percent to the federal reserve prime rate, plus one percent. This law, 2011 Wisconsin Act 69, was championed by the Wisconsin Civil Justice Council and was introduced by Gov. Walker as part of his numerous civil justice reforms.

Dissent

Justice Bradley dissented, arguing that the legislature did not intend that the award of double damages in these types of cases be mandatory. Instead, the legislature’s use of the word “may” signaled its intent that the courts are to exercise discretion when deciding whether to award double damages.

Legislature Passes Ski Hill Liability Protection Legislation, Sent to Governor’s Desk

Posted on by Hamilton

This week, the Wisconsin Assembly passed Senate Bill 388, which expands the “assumption of risk” doctrine to protect ski operators who follow certain safety protocols from lawsuits. The bill will now be sent to the Governor for his signature.

The assumption of risk doctrine provides that when an individual engages in a potentially dangerous activity, that person does so with the knowledge that the activity contains the possibility of injury.

Current law provides that one who has assumed a risk and sustained injury or death from the activity may still recover damages from the responsible party even if the injured party failed to follow prescribed protocols.

Under SB 388, if a ski area operator follows certain safety precautions, the operator will not be responsible for any injuries an individual may suffer while skiing on the operator’s ski hill.

Below are just a few of the duties a ski operator must comply with to obtain liability protection:

  • Provide a notice on the ticket or hill pass that the ski hill operator is not liable for any injuries.
  • Post signs containing warnings reminding participants of the dangers of skiing. Signs must be at least 10 feet inside the area where tickets are sold, and on slopes, tubing areas, trails, and terrains.
  • Provide copies of trail and ski area maps in the ticketing area.

If the ski operator follows these and other requirements, then he or she is not responsible for any injuries sustained by an individual who has assumed the risk of skiing. WCJC supported SB 388.

Senate Passes Ski Hill Liability Protection Legislation

Posted on by Hamilton

This week, the Wisconsin Senate passed Senate Bill 388 on a voice vote, expanding the “assumption of risk” doctrine to protect ski operators who follow certain safety protocols from lawsuits. The bill will now be sent to the Assembly for a vote.

The assumption of risk doctrine provides that when an individual engages in a potentially dangerous activity, that person does so with the knowledge that the activity contains the possibility of injury.

Current law provides that one who has assumed a risk and sustained injury or death from the activity may still recover damages from the responsible party even if the injured party failed to follow prescribed protocols.

Under SB 388, if a ski area operator follows certain safety precautions, the operator will not be responsible for any injuries an individual may suffer while skiing on the operator’s ski hill. Senate Bill 388 provides that the operator must comply with the following duties to obtain liability protection:

  • Provide a notice on the ticket or hill pass that the ski hill operator is not liable for any injuries.
  • Post signs containing warnings reminding participants of the dangers of skiing. Signs must be at least 10 feet inside the area where tickets are sold, and on slopes, tubing areas, trails, and terrains.
  • Provide copies of trail and ski area maps in the ticketing area.

If the ski operator follows these requirements, then he or she is not responsible for any injuries sustained by an individual who has assumed the risk of skiing.

This post was authored by Hamilton intern Andrew Bassan, a 2L at the University of Wisconsin Law School.

Wisconsin Bar Article Explains How SB 202 is a Victory for Employers and Still Protects against Illegal Discrimination

Posted on by Hamilton

An article by attorney Saul Glazer in the Wisconsin Bar Journal explains how a bill (SB 202) championed by the Wisconsin Civil Justice Council will help employers. The article also dispels the myth that SB 202 somehow negatively affects women.

Opponents of Senate Bill 202, which eliminates punitive and compensatory damages under the Wisconsin Fair Employment Act (WFEA), have attempted to paint the bill as negatively affecting a woman’s right to equal pay.

The argument goes something like this: Because SB 202 removes the ability of a person alleging workplace discrimination to seek punitive and compensatory damages, women are no longer entitled to equal pay. This is a rather dubious claim, but one that has been touted by the opponents of SB 202 nonetheless.

The Wisconsin Bar Journal article dispels this myth. The author explains that women will still be entitled to equal pay under the law. According the article, after SB 202’s repeal of punitive and compensatory damages:

“Discrimination claims for equal pay are still actionable under the WFEA. The repeal has no impact on whether a woman may file a discrimination claim based on unequal pay.”

SB 202 takes the law back to 2009, before 2009 Wisconsin Act 20 went into effect. Act 20 for the first time allowed a person to seek punitive and compensatory damages under WFEA.

As further explained in the Wisconsin Bar Journal article, plaintiffs still have plenty of recourse under current law. They can seek reinstatement, back pay up to two years, and be awarded considerable attorney fees and court costs.

The Wisconsin Bar Journal article nicely explains what a victory SB 202 is for WCJC’s members:

“On balance, the repeal of the compensatory and punitive damages is a win for innocent Wisconsin employers, although employers who engage in most forms of illegal discrimination will most likely suffer the same fate as before in front of a federal jury.”

Senate Bill 202 has passed both the Senate and the Assembly, and is expected to be signed into law by Gov. Walker.

Wisconsin Supreme Court Confirms that Plaintiffs are Entitled to Phantom Damages

Posted on by Hamilton

On Wednesday, March 7, the Wisconsin Supreme Court issued an opinion adding to the line of cases involving the collateral source rule.

Specifically, the court held that the collateral source rule applies to cases involving underinsured motorist claims. Therefore, the court held that the plaintiff is entitled to the full amount of past medical expenses, even those amounts that were written off by the medical providers as a result of a contractual agreement between the medical provider and health insurer.

These expenses are often referred to as “phantom damages,” because no one ever paid the medical expenses, yet the plaintiff receives the full sticker price.

Typically, the plaintiff’s insurer has negotiated rates with the the health care provider. The health care provider submits a bill for the full price, but due to these contractual rates, the health insurer pays less than the full price. Yet, as the court held in this case and numerous other decisions, the defendant has to pay the full sticker price even though this was not the amount actually paid.

Facts

The plaintiff (Linda Orlowski) was injured in an automobile accident caused by an underinsured driver. Orlowski recovered damages up to the limits of the underinsured driver’s insurance. Orlowski also had health insurance coverage which paid a portion of her medical expenses. In addition, Orlowski had an automobile insurance policy with State Farm, including underinsured motorist (UIM) coverage.

Orlowski submitted a claim to State Farm to recover under her UIM coverage. An arbitration panel awarded Orlowski $11,498.55 for the medical service provided to her as a result of the accident. This amount ($11,498.55) was the amount that was actually paid to the health care provider, rather than the full amount billed by the medical provider ($72,985.94).

The arbitration panel did not include in its award to the amount of Orlowski’s medical expenses that had been written off by her medical provider because of discounts through her health insurance coverage with United Healthcare. The amount that was written off by the medical provider was $61,487.39. No one paid this amount, yet the plaintiff was seeking the full value of the medical expenses.

Orlowski appealed the arbitration panel’s decision to the Milwaukee County Circuit Court, which modified the award. The judge awarded the plaintiff the full amount billed by the medical provider ($72,985.94), instead of the amount actually paid ($11,498.55). As a result, the plaintiff was awarded $61,487.39 in damages that was written off and never paid to the medical provider.

Wisconsin Supreme Court Decision

The case was appealed to the court of appeals, which certified the case to the Wisconsin Supreme Court. In a 7-0 decision authored by Justice Patrick Crooks, the court upheld the trial court’s decision and awarded Orlowski the full amount billed by the medical provider rather than the amount actually paid; therefore, handing the plaintiff a windfall of $61,487.39 in damages that neither she nor anyone else paid to the medical provider.

The court cited its previous decisions, all of which have held that the plaintiff is entitled to the full amount of medical expenses, even those amounts that were written off by the medical provider.

According to the court:

“We reaffirm what our prior precedent has clearly established: an injured party is entitled to recover the reasonable value of medical services, which, under the operation of the collateral source rule, includes written-off medical expenses.”

The case is Orlowski v. State Farm Auto. Ins. Co., 2012 WI 21.

Wisconsin Supreme Court Rules that Insurance Policy Does Not Cover Losses Caused by Bat Guano

Posted on by Hamilton

On Tuesday, March 6, the Wisconsin Supreme Court held (5-2) that an insurance policy’s “pollution exclusion” clause excluded coverage for the loss of the plaintiff’s home that resulted from the accumulation of bat guano, or bat waste.

The plaintiff, a lawyer representing himself in the case, sued Auto-Owners Insurance Company for breach of contract and bad faith. The plaintiff alleged that his vacation home became uninhabitable and therefore was unable to sell the home due to accumulation of bat guano in the house’s siding and walls. As a result, the plaintiff argued that the insurance company was liable for the total loss of the home.

The trial court ruled in favor of the insurance company. The court of appeals reversed the trial court. The Wisconsin Supreme Court reversed the court of appeals and held in favor of the insurance company.

The specific issue was whether the insurance company’s pollution exclusion clause excluded coverage of the loss of the plaintiff’s home due to the bat guano.

The pollution exclusion clause excluded from coverage any “loss resulting directly or indirectly from: … discharge, release, escape, seepage, migration or dispersal of pollutants…” The policy further defined “pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot fumes, acids, alkalis, chemicals, liquids, gases and waste.”

First, the court held that the bat guano fell within the policy of pollutant. Second, the court held that the damage to the plaintiff’s house was in fact caused by the “discharge, release, escape, seepage, migration or dispersal” of the bat guano. Therefore, the court held that bat guano fell within the policy’s “pollution exclusion” absolving the insurance company for the loss of the home.

The case is Hirschhorn v. Auto-Owners Insurance Co., 2012 WI 20. Justice Annette Ziegler authored the opinion and was joined by Justices Patrick Crooks, Patience Roggensack, David Prosser, Jr., and Michael Gableman. Chief Justice Shirley Abrahamson authored a dissenting opinion, and was joined by Justice Ann Bradley.