Author: Hamilton

Mechanical, Inc. v. Venture Electrical Contractors, Inc. (Economic Loss Doctrine)

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*This case is recommended for publication.

 

In Mechanical, Inc. v. Venture Electrical Contractors, Inc. (2018AP2380), the Court of Appeals District II held the economic loss doctrine bars a negligence claim from a subcontractor against another subcontractor with whom there was no contract. The economic loss doctrine is a judicially created doctrine typically barring lawsuits that seek to recover solely economic losses arising from the nonperformance of a contract, including costs associated with delays and lost profits.

J.P. Cullen & Sons, Inc. hired both Mechanical, Inc. and Venture Electrical Contractors, Inc. as subcontractors in a construction project. Mechanical and Venture did not have a contractual relationship with each other. The contracts between Mechanical and Cullen and between Venture and Cullen both required that the subcontractors perform the work within a specified amount of time. The subcontractors would be responsible for any costs incurred by delay.

There was a delay in the construction, and Venture first sought to recover its overtime pay and other incurred costs of delay from Cullen. Cullen denied Venture’s claim pursuant to the contract. Venture later sought these delay-related damages from Mechanical, claiming Mechanical was negligent in failing to timely perform work on the project, which in turn caused Venture to incur delay-related losses.

Mechanical argued Venture’s claims were barred by the economic loss doctrine. Venture argued that the economic loss doctrine does not preclude its claims because Mechanical and Venture did not have a contractual relationship.

The court held that the economic loss doctrine still applies to the horizontal relationship between subcontractors, even when there is no direct contractual relationship. In this case, the economic loss doctrine applied because the loss arose from construction duties under interrelated contracts on the Cullen project. Venture had the opportunity to address risk of economic loss due to delay in its contract with Cullen. In accordance with the purpose of the economic loss doctrine – to avoid tort claims when parties have contracted for potential losses – Venture cannot pursue a tort claim outside its contract with Cullen, which was interrelated to Cullen’s contract with Mechanical. Since Venture had the opportunity to address the risk of delay-related loss by contract, even if not in a contract specifically with Mechanical, it cannot file a tort claim against Mechanical for those losses.

Gunderson v. Franks (Personal Injury)

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In Gunderson v. Franks (2018AP981), the Court of Appeals District IV upheld a jury verdict on damages to a plaintiff involved in a vehicle accident. The plaintiff challenged the jury’s decisions on future damages and whether the court should have provided instruction on the collateral source rule.

Plaintiff Gunderson was injured in a vehicle accident caused by defendant Franks. Franks stipulated to her own negligence, so the question left for the jury was the extent of damages owed to Gunderson. The jury awarded Gunderson damages for past medical expenses, future medical expenses, past loss of earning capacity, and past pain and suffering. The jury did not award any damages for future loss of earning capacity, future pain and suffering, or loss of society and companionship of Gunderson’s son.

Gunderson appealed the jury’s verdict, arguing that

  1. The awarding of future medical expenses but not future pain and suffering was inconsistent.
  2. The jury should have been instructed on the collateral source rule, which provides that damages from the tortfeasor cannot be limited by outside benefits the plaintiff receives. In this case, Gunderson argued that instructions on the collateral source rule were necessary because the jury heard evidence about possible Social Security payments Gunderson received.
  3. There was insufficient evidence to support the award of $0 for future loss of earnings.

The appeals court upheld the verdict. The court found that

  1. The verdict was not inconsistent because there was evidence that Gunderson’s preexisting injuries could account for his future pain and suffering.
  2. Jury instructions on the collateral source rule were not necessary because the jury did not hear clear evidence that Gunderson did receive or would later receive Social Security payments.
  3. The jury heard evidence that Gunderson had extensive preexisting injuries, so the verdict awarding no future loss of earnings due to the accident was supported by credible evidence.

Defendant Franks had also filed a cross-appeal challenging the sanctions against her for failing to preserve data from the accident. The appeals court upheld those sanctions.

Wisconsin Civil Justice Council, Business Coalition Call for Additional Liability Protections to Help Reopen and Restart the Wisconsin Economy

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Wisconsin Civil Justice Council (WCJC) and a coalition of 40 Wisconsin businesses and chambers of commerce are calling for the Legislature to enact civil liability protections to help Wisconsin businesses as the state begins to reopen the economy. The Wall Street Journal recently editorialized calling for quick action, noting plaintiff attorneys are already targeting reopening businesses.

In the Legislature’s first COVID-19 bill (2019 Act 185), WCJC worked with legislators to enact protections for health care workers and to take good first steps in protecting manufacturers, sellers and distributors of medical equipment to fight COVID-19. Now, WCJC is calling for additional protections for those manufacturing, selling and distributing medical equipment, as well as protections for employers seeking to keep their employees and customers safe and for persons rendering aid.

WCJC sent this memo to the Legislature last week outlining details of these civil liability protection measures. Wisconsin Manufacturers & Commerce, on behalf of 40 trade associations and chambers of commerce including WCJC and National Federation of Independent Business – Wisconsin, also sent a similar letter to the Legislature. The goal is to enact measures to protect Wisconsin businesses and their employees from being sued, for example, by a plaintiff alleging contracting COVID-19 at the place of business though the plaintiff never actually got sick. WCJC stands ready to work with legislators and the rest of the Wisconsin business community on these important reforms.

The wave of COVID-19 related lawsuits is already starting, as plaintiff attorneys file frivolous lawsuits against hand sanitizer manufacturers, health care providers and hospitals, and other essential businesses. These lawsuits will seriously undermine efforts to restart and rebuild the Wisconsin economy, so it is vitally important that Wisconsin has appropriate liability protections for employers and their workers from the very real threat of frivolous lawsuits related to COVID-19.

Gov. Evers Signs Legislation with COVID-19 Liability Protections

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On April 15, Gov. Tony Evers signed into law legislation on COVID-19 that included liability protections for health care workers and a limited liability provision for manufacturers. The bill was sent to the governor after passing on a bipartisan basis in both the Senate and Assembly.

The bill (AB 1038, now 2019 Wisconsin Act 185) includes provisions to: 

  1. Exempt manufacturers, distributors and sellers of emergency medical supplies and equipment that donate or sell their product from civil liability. Entities would be exempt from civil liability only if the product were sold or donated at a price that does not exceed the cost of production.
  2. Create liability protections for health care professionals acting to address the COVID-19 pandemic during the public health emergency. To be immune from liability, actions must be in good faith or be consistent with state or federal guidance related to the public health emergency.

WCJC worked with the Legislature on including protections for healthcare providers and their employees. However, WCJC opposed the unnecessary limitations on the civil liability protections for manufacturers of PPE and COVID-19 treatment equipment. WCJC also encouraged the Legislature to enact civil liability protections for employers keeping their workers and workplaces safe and for persons rendering aid. Those provisions were not included in the final legislation. (WCJC memo on liability protections in Wisconsin COVID-19 legislation.)

WCJC is continuing to work with the Legislature, the Governor, and the Wisconsin business community on enacting these further liability protections for employers and manufacturers as the state begins to look at reopening the economy.

Legislature Files Legal Challenge to DHS “Safer At Home” Order Extension

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On April 16, Gov. Tony Evers directed Department of Health Services Secretary-designee Andrea Palm to extend Wisconsin’s Safer at Home Order to May 26 under Emergency Order #28. Less than a week later, the Republican-led Wisconsin Legislature filed a lawsuit challenging DHS’s authority to issue such an order.

DHS issued the order under Wis. Stat. §§ 252.02(3), (4), and (6), which allow the secretary to “close schools and forbid public gatherings in schools, churches and other places,” “promulgate and enforce rules or orders,” and “authorize and implement all emergency measures” to control communicable diseases, epidemics and outbreaks like COVID-19.

The Legislature’s lawsuit alleges that, even given this statutory authority:

  • The Emergency Order is a “rule” under Wisconsin rulemaking statutes (Wis. Stat. Ch. 227) and should have gone through the statutory emergency rulemaking process, which allows for legislative oversight and public input.
  • Even if the order does not violate Wisconsin rulemaking laws, the content of the order exceeds DHS’s authority under those statutes.
  • DHS acted arbitrarily and capriciously in issuing the order because it did not provide a reasoned basis for distinguishing between essential and nonessential businesses.

The Legislature is asking the court for a temporary injunction of the Emergency Order, but suggests the court give DHS six days of lead time to promulgate an emergency rule to lawfully enforce the order. The intent of the six day stay request is to ensure the state is not without protective measures against COVID-19 and to continue mitigation of the public health risk, but still ensure that DHS is acting within its authority under the law.

The Legislature filed the action at the Wisconsin Supreme Court. DHS filed their response on April 28. Then, the Legislature will have until April 30 to respond before the court makes a decision.

As of right now, the Emergency Order extending Safer at Home is still in effect.

Wisconsin Supreme Court Rejects ACLU Coronavirus Lawsuit

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The Wisconsin Supreme Court has denied the petition of American Civil Liberties Union of Wisconsin (ACLU) seeking removal of inmates from Wisconsin correctional facilities to address the COVID-19 pandemic. The lawsuit had argued that Wisconsin prisoners and jail inmates should be released because subjecting prisoners to a likely outbreak of COVID-19 violates the rights to be free of cruel and unusual punishment and to receive due process.

The plaintiffs asked the court to ensure enough prisoners are released so that no person shares a cell with another person, there is six feet of separation between beds, and other social distancing guidelines are achieved in order to reduce the spread of the coronavirus. ACLU suggested that individuals at high risk of contracting the disease should be prioritized for removal.

ACLU, along with Wisconsin Association of Criminal Defense Lawyers and Disability Rights Wisconsin, filed the lawsuit against Gov. Tony Evers, Wisconsin Department of Corrections Secretary Kevin Carr, and the chairman of the Wisconsin Parole Commission. The defendants opposed the petition. The Wisconsin Supreme Court denied the petition for original action on April 24, stating that the administration is already taking concrete steps to manage COVID-19 in Wisconsin correctional facilities and the remedies requested by the plaintiffs are outside the scope of the court’s powers.

AG Kaul Asks EPA to Strengthen PFAS Regulations

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Wisconsin Attorney General Josh Kaul on April 20 joined 17 other state attorneys general in comments asking the Environmental Protection Agency (EPA) to strengthen its proposed regulations on importation of PFAS products.

PFAS (per- and polyfluoroalkyl substances) are a group of thousands of man-made chemicals found in many everyday products, including nonstick pans, cleaning products, paints, and firefighting foam. The most extensively studied PFAS compounds are “long-chain” PFOA and PFOS, which have been phased out of domestic manufacturing over the past decade. Competing studies debate whether or not these chemicals have negative health effects and, if they do, at what level they are harmful.

 EPA is proposing to require importers of products that contain long-chain PFAS as part of surface coating to notify EPA before importation. EPA would then evaluate the conditions of use associated with the intended significant new use of the product before manufacturing and processing could begin.

In their comments, the attorneys general ask EPA to strengthen these regulations on imported PFAS-containing products by

  1. Including the entire family of long-chain PFAS in the regulations, not just the individual PFAS chemicals specified in the proposed rule.
  2. Expanding the regulations to products that contain PFAS anywhere within them, not just within surface coating.
  3. Applying the rule to all processing of PFAS-containing products, not just imports.
  4. Removing exemptions for de minimis amounts of PFAS.

Joining AG Kaul in the comments were the attorneys general of New York, Pennsylvania, California, Connecticut, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, Oregon, Rhode Island, Virginia, and Washington.

More on proposed PFAS regulation in Wisconsin.

AG Kaul also recently joined a group of state attorneys general asking EPA to rescind its policy of limiting civil enforcement in environmental actions during the COVID-19 crisis.

Assembly Passes COVID-19 Liability Protections

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On April 14, the Wisconsin Assembly met in its first ever virtual session to pass legislation on COVID-19. The bill included liability protections for health care workers and a limited liability provision for manufacturers. The Senate is expected to pass the bill, also in virtual session, on Wednesday. With the Assembly passing the bill on a bipartisan basis, it is expected that Gov. Tony Evers will sign the bill into law.

The Assembly’s virtual session featured many members participating remotely via Skype, while the remaining legislators, including leadership, were present in the chamber and practicing social distancing.

As passed by the Assembly, the bill, SB 932/AB 1038, includes provisions to: 

  1. Exempt manufacturers, distributors and sellers of emergency medical supplies and equipment that donate or sell their product to be exempt from civil liability. Entities would be exempt from civil liability only if the product were sold or donated at a price that does not exceed the cost of production.
  2. Create liability protections for health care professionals acting to address the COVID-19 during the public health emergency. To be immune from liability, actions must be in good faith or be consistent with state or federal guidance related to the public health emergency.

WCJC worked with the Legislature on including protections for healthcare providers and their employees. However, WCJC opposed the unnecessary limitations on the civil liability limitations for manufacturers of PPE and COVID-19 treatment equipment. WCJC also encouraged the Legislature to enact civil liability protections for employers keeping their workers and workplaces safe and for persons rendering aid. Those provisions were not included in the final legislation. (WCJC memo on liability protections in Wisconsin COVID-19 legislation.)

Democrats offered several amendments to the bill, including one that would remove the provision providing immunity for health care providers acting in good faith in response to the public health emergency. That amendment was tabled on a party line vote with no discussion.

After voting on amendments, the bill passed 97-2, with Reps. Jonathan Brostoff (D-Milwaukee) and Marisabel Cabrera (D-Milwaukee) the only no votes.

Karofsky Wins State Supreme Court Election

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April 7 Election Results

 One week after election day, Wisconsin spring election results were finally released on April 13. On the ballot on April 7 was the Democratic primary for president, a state Supreme Court seat, and many local races. Turnout was the highest for a spring election since 2016, when there were primaries for both Democrat and Republican presidential nominees.

Wisconsin Supreme Court: Liberal Dane County Circuit Court Judge Jill Karofsky beat incumbent conservative Justice Daniel Kelly in the race for Wisconsin Supreme Court with about 55 percent of the vote. When she is inaugurated to the bench in August, Karofsky’s addition will move the court from a 5-2 to a 4-3 conservative majority. The next Supreme Court election will not be until Chief Justice Roggensack is up for reelection in 2023.

Democratic primary: Vice President Joe Biden won the Democratic primary for president in Wisconsin. His opponent Sen. Bernie Sanders dropped out on April 8, the day after the Wisconsin election, making Wisconsin the last contested primary of the 2020 primary race. Biden had around 63 percent of the Wisconsin vote, and Sanders had about 32 percent. Biden gained the endorsement of both Sanders and President Barack Obama following his win in Wisconsin.

Constitutional amendment: Voters approved a constitutional amendment on victims’ rights. Known as Marsy’s Law, the constitutional amendment passed the Legislature for the second time in 2019 and now, with voter approval, becomes law. About 75 percent of voters voted in favor of the constitutional amendment.

 

Election Litigation

Wisconsin’s spring election on April 7 gained national attention as several lawsuits sought to make changes to in person and absentee voting in the midst of the COVID-19 pandemic.

Although the lawsuits were resolved the day before the election, it is expected that there will be more post-election litigation. Already, before election results were released, on April 13 a group of Milwaukee-area residents filed a class action lawsuit against the Legislature and the Wisconsin Elections Commission seeking a partial revote for the April 7 election and election changes for Wisconsin’s remaining elections in 2020. (Plaintiffs’ press release)

After Court Rulings, In-Person Voting Proceeds in Supreme Court Election

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After rulings from the Supreme Court of the United States and the Wisconsin Supreme Court the night before election day upheld the April 7 date and absentee voting requirements, Wisconsin’s election for state Supreme Court proceeded with few changes. In-person voting was held, and absentee voter requirements were largely the same (though at record high numbers). Wisconsin’s spring elections included the race between incumbent state Supreme Court Justice Daniel Kelly and Judge Jill Karofsky, as well as the Democratic primary for president and many local offices. Results will not be released until April 13, the deadline for clerks to receive absentee ballots.

 

Background

As COVID-19 began spreading throughout the state, Wisconsin Gov. Tony Evers had initially maintained – and legislative leadership agreed – that the April 7 election in Wisconsin should not be moved. Instead, the Governor and other state and local officials encouraged voters to request absentee ballots. The Governor’s Office was also working with the Wisconsin Elections Commission and local election officials on obtaining sanitizing supplies to keep polling sites clean, obtaining more absentee ballots, recruiting poll workers, and addressing other issues related to the unusual circumstances of these elections.

As the election date came closer, local governments began putting pressure on the Evers administration to make changes to keep poll workers and voters safe. On March 22, a large group of local officials sent Gov. Evers and legislative leadership a letter asking for options to make holding elections easier on municipalities and voters in the midst of COVID-19.

On March 27, Gov. Evers called on the Legislature via Twitter to send absentee ballots to all Wisconsin voters. Legislative leadership said this would not be logistically feasible in time for the April 7 election. (Senate Majority Leader Fitzgerald statement. Assembly GOP statement.)

On April 3, Gov. Evers called for a special session of the legislature to make changes for the April 7 election, including: making the election mail-in only, sending ballots to all registered voters who have not yet requested one, and extending the time for ballots to be received to May 26. The Legislature gaveled in and out of the session without taking up any legislation.

 

State Lawsuit on Changing the Election Date

Despite stating multiple times that he could not and did not want to move the election date, on April 6, the night before the election, Gov. Evers issued Executive Order #74, moving the spring election date to June 9, 2020 and calling the Legislature into special session to address the election date. Under the order, voters could continue to request absentee ballots until then and ballots already submitted would be counted. Local elected office terms would be extended until the results of the June date were finalized.

Legislative leaders immediately filed an emergency petition for original action and motion for temporary injunction with the Wisconsin Supreme Court to block the Governor from moving the election (memo in support of the filings). Later the same day, the Supreme Court approved the Legislature’s motion, reinstating in person voting for April 7.

The 4-2 decision (split between the conservative and liberal justices) said the Governor does not have the constitutional or statutory authority to suspend the elections statutes. According to the court, the Governor’s emergency powers in Wis. Stat. § 323.12(4)(b) give him the power to suspend administrative rules, not statutes, in the name of public safety. The Legislature would have to give the Governor explicit authority to change statutes in the event of an emergency.

A dissent from Justices Walsh Bradley and Dallet argued that Wisconsin statutes do provide the Governor and the Department of Health Services the authority to implement emergency measures, including moving elections, during a public health emergency (see Wis. Stat. § § 252.02 and 323.12(4)(b). The dissent said the court should have upheld the executive order for the safety of Wisconsin voters.

Justice Daniel Kelly, who is on the April 7 ballot, did not participate.

 

Federal Lawsuit on Election Date & Absentee Voting Requirements

Also the night before the election, a major case in federal court regarding Wisconsin’s April election was resolved by the U.S. Supreme Court.

Three cases seeking changes to absentee voting for the April 7 election had been consolidated by a federal judge. 

  1. The Democratic National Committee sought to move the mail-in registration deadline and waive voter ID requirements during the pandemic. (A federal judge had already extended the deadline to request a mail-in ballot to April 2.)
  2. The League of Women Voters sought to waive the witness signature requirement on absentee ballots during the pandemic.
  3. Another lawsuitfiled by Souls to the Polls, Voces de la Frontera and Black Leaders Organizing for Communities argued that minority voters will be disenfranchised if the Wisconsin Elections Commission does not move the April 7 election date.

The state Department of Justice, representing Gov. Evers, had submitted a brief asking that the court again extend the deadline for requesting an absentee ballot and relax witness signature requirements, among other recommendations, while still keeping in person voting on April 7.

On April 2 the judge ruled there would be no change to the election date, but absentee ballots could be received until April 13. Ballots postmarked after April 7 could still be counted, contrary to current law. The judge’s amended order noted that election results could not be made public until April 13. The judge declined to waive voter ID requirements.

The district court judge also waived the requirement for absentee voters to have their ballot signed by a witness, but this provision was overturned by the 7th Circuit Court of Appeals.

Republicans ultimately appealed to the U.S. Supreme Court. The night before the election, the U.S. Supreme Court overturned the district judge’s ruling. The decision says absentee ballots must be postmarked by April 7 and received by April 13. Ballots delivered in person must be delivered on April 7.

 

Other Lawsuits

The City of Green Bay filed a lawsuit against the Wisconsin Elections Commission, Gov. Evers, and Department of Health Services Secretary Andrea Palm, seeking to move the election date and switch to mail-in voting only. A federal judge dismissed the case on March 27.

The Republican Party of Wisconsin asked the Wisconsin Supreme Court to intervene in Milwaukee and Dane counties, where clerks have said voters may note their status as “indefinitely confined” to avoid voter ID requirements. A Supreme Court order barred election officials from giving such advice.

 

Election Day

With the lawsuits resolved, Wisconsin’s election day proceeded largely as planned. Gov. Evers deployed the National Guard to help where there are shortages of poll workers, and many local clerks took creative safety precautions to protect poll workers and voters.

On the ballot for Supreme Court was incumbent conservative Justice Daniel Kelly and liberal Dane County Circuit Court Judge Jill Karofsky. Read more about the candidates. Results will be available April 13.