Author: Hamilton

Lang v. Lions Club of Cudahy Wisconsin, Inc. (Recreational Immunity)

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In Lang v. Lions Club of Cudahy Wisconsin, Inc. (2020 WI 25), the Wisconsin Supreme Court held that recreational immunity applied to a sound engineer who set up cords that injured a woman at a music performance because the sound engineer was an agent of the festival owner.

 

Facts

At an event run by the Lions Club, plaintiff Antoinette Lang tripped over an electrical cord placed by sound engineer Fryed Audio, LLC. Fryed’s principal and a member of the band using the cords, Steve Fry, positioned the cord prior to the event. Freyed Audio, LLC was the lead member of Rhythm Method, LLC, with whom the Lions Club contracted to provide music for the festival.

A separate case ruled the Lion’s Club was entitled to recreational immunity as “owner” of the event under Wis. Stat. § 895.52(2). The question before the Wisconsin Supreme Court was whether Fryed Audio was also entitled to immunity as an “agent” of the Lions Club.

 

Decision

 The court held that Fryed was an agent of the Lion’s Club entitled to recreational immunity because the Lion’s Club had the right to control Fryed’s conduct in setting up the music equipment that allegedly caused Lang’s injury.

The court rejected Lang’s argument that the Lion’s Club did not have the right to control Fryed’s conduct because the Lion’s Club lacked expertise to perform and control such a complicated task. The injury-causing conduct in this case – placing the cords – was not so complicated that the Lion’s Club could not have controlled the conduct. Furthermore, placing the cords did not require the Lion’s Club to provide Fryed with “reasonably precise specifications” in order for Fryed to be determined an agent. (The court noted that this case differed from Westmas v. Creekside Tree Service, Inc. (2018), where reasonably precise specifications would have been required for the tree-trimming service to be considered an agent of the immune owner because the injury-causing conduct was too complicated for the property owner to have control over.)

Since Fryed was the subagent of Rhythm Method, LLC, which was acting as the Lion’s Club’s agent in setting up the music for the festival, the court determined Fryed was an agent entitled to recreational immunity.

Chief Justice Roggensack wrote the lead opinion for the court, joined by Justice Ziegler.

 

Concurring Opinion

In a concurring opinion, Justice R. Bradley (joined by Justice Kelly) agreed that Fryed was an agent entitled to recreational immunity but disagreed with the court’s reasoning related to Westmas. The concurring opinion would have overturned Westmas and simply relied on whether the Lion’s Club had a right to control Fryed’s actions, instead of on whether the Lion’s Club had the expertise to do so. The concurring opinion argued that a principal’s lack of expertise or precise specifications, as the court said in its Westmas analysis, does not equate to lack of control. Therefore, the court should have eliminated the “reasonably precise specifications” and expertise analysis and found Fryed an agent simply based on the Lion’s Club’s ability to control Fryed’s actions.

 

Dissents

In a dissent, Justice Dallet (joined by Justice Walsh Bradley) would have determined that Fryed was not an agent of the Lion’s Club entitled to recreational immunity. According to the dissent, the contract between the Lion’s Club and Rhythm Method did not establish the Lion’s Club’s right to control Rhythm Method and its subagent Fryed; instead, the contract left control of setting up the music equipment up to Rhythm Method.

The dissent argued it does not matter if the task is simple or complex. Since the Lion’s Club did not give “reasonably precise specifications” to Rhythm Method, Westmas dictates that Fryed was not an agent of the Lion’s Club. The dissent also would not have provided immunity to Fryed because it was a subagent, not an agent, of the Lion’s Club.

Overall, the dissent argued that, under the court’s decision, recreational immunity would be too broad, applying to anyone associated with the event.

In a second dissent, Justice Hagedorn would also have determined Fryed was not an agent of the Lion’s Club entitled to recreational immunity. The dissent would have determined that Fryed was acting as an independent contractor of the Lion’s Club, not in a master-servant relationship where the agent’s physical conduct is controlled by the principal. As an independent contractor, Fryed was not acting within the scope of agency when it allegedly negligently placed the cords causing injury. The Lion’s Club did not have the right to control how Fryed set up the music equipment. Therefore, Fryed was not an agent entitled to recreational immunity.

DSG Evergreen Family Limited Partnership v. Town of Perry (Eminent Domain)

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In DSG Evergreen Family Limited Partnership v. Town of Perry (2020 WI 23), a unanimous Wisconsin Supreme Court held that claim preclusion did not apply, but the plaintiff had no private right of action against the town, barring this eminent domain case.

The Town of Perry took property from DSG in an eminent domain action. The land taken included a road, and the condemnation petition required the town to replace the road with the same standards as the former road – the statutory standards for construction of town roads in Wis. Stat. § 82.50(1). DSG argued that the new road did not meet the statutory standards, so the town violated the petition.

At issue before the Supreme Court was whether claim preclusion barred DSG’s lawsuit and whether DSG had a private right of action to hold the town accountable for failing to meet the statutory standards.

The court found that claim preclusion did not bar DSG’s claims against the town. The previous two cases litigated between DSG and the town were limited by statute to only certain issues regarding eminent domain procedure. DSG in the previous cases would not have been able to bring its instant claims about the town’s failure to construct the road to appropriate standards. Because there was no identity of the causes of action between the previous cases and the instant case, claim preclusion did not apply.

However, the court did bar DSG’s claims on the grounds that DSG had no private right of action either to 1) request a declaration that the town must improve the road to the statutory standards or 2) seek damages from the town via a private cause of action so DSG could improve the road itself. The court could not award DSG a declaration of rights because § 82.50 gives the town discretion as to if and how it meets the construction standards. The town can petition to the Department of Administration for exceptions to some of the statutory standards. Thus, the request for declaration of rights was not ripe for judicial review. The court further found that § 82.50 does not create a private cause of action against a municipality, so DSG could not seek damages.

Town of Wilson v. City of Sheboygan (Annexation)

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In Town of Wilson v. City of Sheboygan (2020 WI 16), the Wisconsin Supreme Court upheld the approval of Kohler Co.’s annexation of land from the Town of Wilson to the City of Sheboygan for the purpose of developing a golf course.

 

Facts & Decision

The Town argued that the City, in adopting the annexation ordinance, failed to meet statutory requirements on contiguity, abused its powers of annexation, and failed to meet signature and population certification requirements.

The Supreme Court held that the city met all statutory requirements for annexation and did not abuse its powers of annexation.

Contiguity. The court agreed with the Department of Administration’s (DOA) determination that the annexed territory was contiguous to the City.

 Rule of reason. The judicial doctrine of the “rule of reason” determines whether municipalities have abused their powers of annexation. The court found that the City satisfied the rule of reason because:

  • The City did not act arbitrarily. When property owners initiate an annexation (as Kohler facilitated the property owners to do here), courts typically do not charge the municipality with arbitrariness unless the municipality is the “real controlling influence” in selecting the boundaries of the annexation or the annexation has an “exceptional” shape. Here, the City was not the real controlling influence behind the annexation petition and the boundaries of the proposed annexation were not an exceptional shape.
  • There was a reasonable need for the annexation. The City needed the annexed territory for additional housing and economic development. Kohler needed the annexation for approval of its golf course and for sufficient water resources.
  • The City did not abuse its discretion because it conducted a thorough analysis of the annexation petition.

Signature requirements. Wisconsin law (Wis. Stat. § 66.0217(3)(a)1.) requires owners of one-half of the real property in assessed value within the annexed territory to sign the annexation petition. The town argued that the City should have included non-assessed state and city-owned property in the count to determine the signature requirement. However, the court rejected the Town’s argument because the law specifically states the signature requirements are determined by amount of assessed property. The petition here met the signature requirement according to the assessed value determination.

Population certification requirements. The court found that DOA had certified the petition’s population count by accepting the petition for public interest review. DOA did not have to engage in a formal process to certify the population count.

 

Concurring Opinions

In a concurring opinion, Justice R. Bradley (joined by Justice Kelly) agreed that the petition met statutory signature and population certification requirements, allowing the annexation to move forward. However, the concurring opinion would have overturned precedent (Town of Mount Pleasant v. City of Racine) and abolished the “rule of reason” because the judicially created rule is not based in statute.

In a second concurring opinion, Justice Hagedorn agreed with the points made by Justice Bradley. However, because the parties in this case did not ask the court to revisit the rule of reason, the concurring opinion recommended the court wait for a more opportune case to decide on the rule of reason.

Choinsky v. Employers Insurance Co. of Wausau (Duty to Defend)

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In Choinsky v. Employers Insurance Co. of Wausau (2020 WI 13), a 5-1 Wisconsin Supreme Court held that insurers did not breach their duty to defend when they did not immediately accept the defense of their insured. Insurers may initially deny a tendered claim, then follow a judicially preferred method of determining coverage to avoid breaching duty to defend.

 

Facts

The underlying issue in this case involved a group of retired teachers who filed a lawsuit against their school district for breach of contract following the enactment of 2011 Act 10. The district tendered its defense to its insurers, Employers Insurance Company of Wausau and Wausau Business Insurance Company.

The insurers determined there was no coverage and, according to the coverage dispute procedure recommended by Wisconsin courts, moved to 1) intervene, 2) bifurcate the coverage issue from the underlying merits of the case, and 3) stay the merits case until the resolution of the coverage issue. The court agreed to bifurcate the issues but denied the motion to stay, citing the need for urgency in resolving the underlying employee benefits issue. The insurers agreed to meanwhile provide defense to the school district on the merits case – including retroactive fees – until the court decided the coverage issue.

The school district argued the insurers breached their duty to defend by not immediately providing the school district a defense.  

 

Decision

The Supreme Court held that the insurers did not breach their duty to defend because, upon finding there was a coverage dispute with the insured, the insurers properly sought bifurcation of the coverage dispute and stay of the liability proceedings. Bifurcation and stay are one of four judicially preferred methods to litigate a coverage dispute between insurer and insured.

When the circuit court denied the motion to stay, the insurers properly followed another judicially preferred method by defending the insured in the liability lawsuit under a reservation of rights until the coverage dispute was resolved. Because the insurers followed the judicially preferred methods, they did not breach their duty to defend and did not owe attorney fees to the school district for the coverage dispute.

 

Dissent

In a dissent, Justice Kelly argued that the insurers did have a duty to defend until the coverage dispute was resolved, notwithstanding a request to bifurcate and stay.

The dissent argued that the court improperly introduced a new concept of “retroactive defense” wherein an insurer can initially refuse coverage without consequence because it can always pay for the defense retroactively if a court later decides coverage is due. The “retroactive defense” concept adopted by the court allows insurers to initially breach their duty to defend and forces the insured to defend itself in coverage and liability trials simultaneously, contrary to the intent of the judicially preferred methods for coverage disputes.

Here, according to the dissent, the insurers did breach their duty to defend by not providing a defense to the school district until the coverage dispute was resolved. The insurers had a duty to defend the school district until coverage was resolved, regardless of whether the insurers sought and the circuit court approved a motion to bifurcate and stay the liability proceedings.

Kasal v. Stryker Corp. (Attorney Fees in Worker’s Compensation)

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In Kasal v. Stryker Corp. (2019AP1017), the Court of Appeals District I held that an insurer was not entitled to attorney fees in a third-party liability worker’s compensation case because the insured’s policy precluded recovery of attorney fees.

Aurora hospital employee Mary Kasal was injured by a piece of equipment at work. Kasal subsequently filed a third-party liability worker’s compensation claim against Stryker Corp., which manufactured the equipment. Aurora and its insurer Sentry Insurance joined the claim, as allowed under Wis. Stat. § 102.29. When Kasal reached a settlement with Stryker, Sentry objected to the settlement, seeking attorney fees, which were not included in its payment under the proposed settlement. The circuit court approved the settlement without attorney fees for Sentry. Sentry appealed.

The Court of Appeals agreed that Sentry was not entitled to attorney fees. A provision in the Aurora policy with Sentry allows Sentry to recover payments from anyone liable for the injury (i.e. Stryker). Because the policy is silent on whether Sentry may recover attorney fees from a third party liable for the injury, the court found that Sentry was not entitled to attorney fees in the settlement. The court determined that the policy provisions superseded Wis. Stat. § 102.29(1)(c), which typically requires attorney fees for third-party liability worker’s compensation lawsuits.

 

Central United Methodist Church v. City of Milwaukee (Tax Exemption)

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In Central United Methodist Church v. City of Milwaukee (2019AP778), the Court of Appeals District I held that a Milwaukee church accepting donations for use of its parking lot used its property exclusively for benevolent purposes; therefore, the church was entitled to a property tax exemption under Wis. Stat. § 70.11(4).

Central United, a non-profit church located near the Rave/Eagles Club concert venue in Milwaukee, began accepting donations from concert-goers who wished to park in its lot. Several years after Central United began offering concert parking, the City of Milwaukee changed the parking lot’s tax assessment classification from “exempt” to “local mercantile.” Central United filed this lawsuit seeking a declaration that the parking lot was exempt and seeking recovery of taxes paid based on the reclassification.

The court found that the church’s parking lot was exempt under Wis. Stat. § 70.11(4), which exempts benevolent associations from property tax payments. According to the court, donations from concert-goers for parking spaces in the church lot were incidental to the benevolent purpose of the church. The church used profits from the voluntary parking lot donations as it used donations from any other source – to support its primary benevolent functions. Furthermore, the church had only begun using volunteers to collect parking lot donations after unauthorized neighbors not associated with the church had attempted to use the parking lot to make a profit. Because the use of the parking lot to accept donations was incidental to the benevolent purpose of the church, the court ruled against the city and found the church exempt from paying property taxes under Wis. Stat. § 70.11(4).

Hickethier v. Janesville Kia (Fraudulent Misrepresentation)

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In Hickethier v. Janesville Kia (2018AP2276), the Court of Appeals District IV held that plaintiffs failed to sufficiently allege that their car dealership knowingly misrepresented defects in the vehicle they purchased or that the dealership engaged in unconscionable practices.

Dawn Livingston-Hickethier and Chris Hickethier purchased a used Buick from Janesville KIA. When the Hickethiers got the vehicle’s oil changed for the third time, a mechanic found that the vehicle had an excessive oil consumption issue. The Hickethiers later obtained a vehicle history report showing that there had also been a recall for seat wiring in the vehicle. As a result, the Hickethiers filed this lawsuit alleging that Janesville KIA had engaged in fraudulent conduct and unconscionable practices in violation of auto dealer statutes in Wis. Stat. Ch. 218.

The court found that the Hickenthiers failed to sufficiently allege the Ch. 218 claims. The court determined that, for their fraud claims to succeed, the Hickenthiers must have established that Janesville KIA made a knowing misrepresentation. The Hickethiers failed to allege that Janesville KIA made such a knowing misrepresentation. The court could not infer that Janesville KIA had known about the excessive oil consumption issue, especially since it had taken three trips to mechanics before the Hickenthiers discovered the issue. Regarding the seat wiring recall, Janesville KIA was not obligated to find and disclose recalls for Buick, for which it did not hold a franchise (see Wis. Admin. Code § Trans 139.04(9)). Finally, the court held that Janesville KIA did not engage in unconscionable practices because the dealership did not inflate the price and the vehicle was not unsafe to drive at the time of purchase.

Because the Hickenthiers’ claims failed to meet the required pleading standards, the court dismissed the case.

Southwest Airlines Co. v. DOR (Tax Assessment)

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In Southwest Airlines Co. v. DOR (2019AP818), the Court of Appeals District I held that Southwest Airlines and AirTran Airways did not meet the statutory requirements to qualify for a “hub facility” exemption from property taxes. The “hub facility” exemption from property taxes exempts air carriers from paying property taxes if they operate at least 45 common carrier departing flights each weekday, among other requirements (Wis. Stat. § 70.11(42)(a)2.a.).

Southwest and AirTran merged in 2011 but filed separate air carrier reports – not seeking the hub facility exemption – to the Wisconsin Department of Revenue (DOR) for their 2013 and 2014 property tax assessments. While undergoing later audits by DOR, the airlines realized that they believed their flight data showed they collectively had met the requirements for the hub facility exemption for the 2013 and 2014 assessments. The airlines filed this lawsuit seeking the amount they paid in property taxes for those years.

The Court of Appeals agreed with DOR that the airlines did not meet the requirements for the hub facility exemption for the 2013 and 2014 assessments. For the 2013 assessment, there were six weekdays where the airlines did not meet the minimum 45 departing flights requirement. The court rejected the airlines’ argument that those shortfalls should not count because they were caused by holidays or bad weather. For the 2014 assessment, the court rejected the airlines’ argument that they had met the minimum 45 flights based on their average number of departing flights. The court said the statute does not provide an exemption for airlines operating an average of 45 flights per weekday.

Because the airlines did not strictly meet the statutory requirements for the hub facility exemption, the court dismissed the airlines’ case.

Paustian Medical & Surgical Center, S.C. v. IMT Insurance Co. (Duty to Defend)

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In Paustian Medical & Surgical Center, S.C. v. IMT Insurance Co. (2019AP141), the Court of Appeals District IV held that the insurer had no duty to defend because an impaired property exclusion applied.

Paustian contracted with RC Heating & Cooling so RC could design and install an HVAC system in the build-out of Paustian’s medical facility. After RC completed the project, Paustian sued RC and RC’s insurer IMT for breach of contract and negligence. Paustian alleged it lost income because it couldn’t use the build-out area for procedures and it incurred expenses for repairing RC’s work.

IMT argued and the court agreed that it had no duty to defend under its policy with RC. The policy excluded coverage for 1) property damage to property that has not been physically injured and 2) loss of use of property arising out of RC’s failure to perform a contract. This “impaired property” exclusion applied here because Paustian did not allege the HVAC system had been physically injured or caused physical injury to the Paustian facility – the HVAC system just had some deficiencies that required repair. The exclusion also applied because Paustian alleged its damages arose from RC’s breach of the contract for installation of the HVAC. Because the exclusion applied, IMT had no duty to defend.

Vistelar, LLC v. Cincinnati Specialty Underwriters Insurance Co. (Duty to Defend)

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In Vistelar, LLC v. Cincinnati Specialty Underwriters Insurance Co. (2019AP633), the Court of Appeals District I held that the insurer did not have a duty to defend against claims of trademark infringement because the policy prohibited coverage for known losses.

Vistelar and Verbal Judo entered into a licensing agreement wherein Vistelar could use Verbal Judo’s intellectual property. In 2013, the agreement expired, and Verbal Judo did not renew the agreement. Verbal Judo then sent a letter asking Vistelar to cease and desist use of its intellectual property. In July 2017, Verbal Judo sued Vistelar, alleging trademark infringement.

Vistelar tendered its defense to its insurer Cincinnati. Cincinnati denied coverage, arguing that Vistelar knew the alleged injuries to Verbal Judo began to occur before the policy period, which commenced in August 2016.

The court agreed that Cincinnati did not have a duty to defend because the policy had provisions excluding coverage for a “known loss.” Under the policy, Cincinnati would not provide coverage if Vistelar was “aware…of a condition from which injury is substantially certain to occur.” Since Verbal Judo sent the cease and desist letter in 2013, the court found that Vistelar was aware of potential injury and liability before its Cincinnati policy began in 2016. Therefore, the “known loss” provision in the policy applied, and Cincinnati had no duty to defend.