Author: Hamilton

Society Insurance v. Bessemer Plywood Co. (Duty to Defend)

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In Society Insurance v. Bessemer Plywood Co. (2018AP224), the Court of Appeals District III held that an insurer had no duty to defend because an injury occurred during the course of employment; therefore, the policy’s employment exclusion applied.

Bessemer Plywood Co. hired Maki Trucking & Logging to pick up a load of plywood from a Bessemer facility. At the facility, Maki employee Scott Friedle fell off the trailer of a Maki truck while securing the plywood.

Society insured Maki for worker’s compensation claims and made payments to Friedle accordingly. Great West Casualty Co. insured Maki for other liability. The Great Lakes policy specifically excluded coverage for injuries to employees arising out of the course of their employment with Maki.

Society brought the instant case against Bessemer to recover the worker’s compensation payments, arguing Bessemer was negligent. Bessemer tendered its defense to Great West, arguing it was an insured because it was a permissive user of the Maki truck covered under the Great West policy.

The appeals court held that Great West had no duty to defend because Friedle’s injury arose from the course of his employment, and such employment injuries were specifically excluded from the Great West policy. The court said that, because the employment exclusion applied, it did not matter whether or not Bessemer was a permissive user of the covered truck.

Roggensack Re-Elected as Wisconsin Supreme Court Chief Justice

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The Wisconsin Supreme Court has re-elected Chief Justice Patience Roggensack as Chief Justice for another two-year term. The Chief Justice serves as the administrative leader of the Wisconsin Court system.

Chief Justice Roggensack was elected to the court in 2003 and re-elected in 2013. She became the first Justice elected by members of the court to serve as Chief Justice after a 2015 constitutional amendment requiring election. This election begins her third term as Chief Justice. She is up for re-election to the court in 2023.

Wisconsin Supreme Court Accepts New Cases

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The Wisconsin Supreme Court recently accepted several new cases. Cases of note include:

  • Clean Wisconsin v. DNR. This case will decide whether 2011 Act 21 precludes the Department of Natural Resources (DNR) from considering cumulative environmental impacts in issuing high capacity well permits under Wis. Stat. § 281.34. The Wisconsin legislature recently moved to intervene in this case and a second Clean Wisconsin case (discussed below).
  • Clean Wisconsin v. DNR. This case will decide whether DNR has the authority as prescribed in Act 21 to impose off-site groundwater monitoring requirements and an animal maximum for CAFO wastewater permits.
  • Lamar Central Outdoor, LLC v. Division of Hearings & Appeals. In this case, the court of appeals held that the enlargement of a nonconforming outdoor advertising sign along an interstate highway caused it to lose its nonconforming status, making it illegal and subject to removal. The Supreme Court will decide whether Wis. Stat. § 84.30(14) gives the Department of Transportation the authority to promulgate rules related to outdoor advertising and whether those rules and applicable statutes apply to the sign at issue. Court of appeals decision.
  • Veritas Steel, LLC v. Lunda Construction Co. In this case, the Supreme Court will review a court of appeals decision maintaining a narrow application of the “de facto merger” and “mere continuation” exceptions to Wisconsin’s general rule against successor liability. The Supreme Court will review its decision in Fish v. Amsted Indus. Inc., determining 1) whether proof of identity of ownership between an original and successor entity is required to establish successor liability and 2) whether actual transfer of stock is required to establish successor liability under the de facto merger and mere continuation exceptions. Court of appeals decision.
  • Official Committee of Unsecured Creditors of Great Lakes Quick Lube LB v. John Theisen. This case will decide whether the fraudulent transfer statute of limitations in Wis. Stat. § 893.425 begins when plaintiffs could reasonably have discovered the fraudulent nature of the transfer, or when the transfer itself occurred. Court of appeals decision.

Legislature to Intervene in Act 21 Cases

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The Legislature’s Joint Committee on Legislative Organization has voted to intervene in two cases addressing the application of 2011 Act 21. The 2011 legislation clarified that agencies may not enforce requirements unless explicitly permitted by statute or properly promulgated rule. The two cases, both titled Clean Wisconsin, Inc. v. DNR, would clarify the general scope of Act 21 in environmental cases.

One case (appeal no. 2018AP59) will decide whether Act 21 precludes the Department of Natural Resources (DNR) from considering cumulative environmental impacts in issuing high capacity well permits under Wis. Stat. § 281.34. DNR argues that Act 21 prevents the agency from considering environmental impacts not specifically noted in the statutes. DNR’s argument relies on a May 2016 formal opinion from former Attorney General Brad Schimel.

Clean Wisconsin argues that the 2011 Supreme Court decision Lake Beulah Management District v. DNR still holds. Lake Beulah broadly held that DNR has the authority to preserve waters of the state under the constitutional and statutory public trust doctrines. Since the Supreme Court decided Lake Beulah after the enactment of Act 21 but declined to address the Act’s bearing on the case, a decision in the Clean Wisconsin case would clarify DNR’s authority on high capacity well permits.

The second case (consolidated appeal nos. 2016AP1688 and 2016AP2502) will decide whether DNR has the authority to impose off-site groundwater monitoring requirements and an animal maximum for CAFO wastewater permits. In this case, Clean Wisconsin argues that a Wisconsin Pollution Discharge Elimination System permit allowing the expansion of Kinnard Farms CAFO in Kewaunee County should have included these restrictions. DNR argues Act 21 prohibits DNR from imposing the permit conditions because the statutes do not grant the agency explicit authority.

The Supreme Court accepted both Clean Wisconsin appeals on April 9 and stated it will hear oral arguments on the cases on the same date (not yet scheduled). Several business groups are participating as amici curiae and intervenors in the cases.

Previously, the Department of Justice (DOJ) sided with DNR in both cases. However, this week Attorney General Josh Kaul filed two motions seeking to change DOJ’s position on the cases.

Swanson v. Gatzke (Dental Malpractice)

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In Swanson v. Gatzke (2018AP305), the Court of Appeals District III held that a circuit court erred in changing jury apportioned negligence in this dental malpractice case.

Mary Swanson was diagnosed with a dental disease that increases the patient’s susceptibility to tooth decay. Despite recommendations from several practitioners, Swanson did not see her dentist Dr. Gatzke regularly. Dr. Gatzke failed to diagnose tooth decay in Swanson’s teeth, forcing her to ultimately undergo a total restoration of her teeth. Swanson filed the instant lawsuit against Gatzke for dental malpractice.

At the circuit court trial, the jury found Swanson 60 percent negligent for her own injuries. According to Wisconsin’s contributory negligence laws (Wis. Stat. § 895.045), Swanson did not receive damages because her negligence was greater than Dr. Gatzke’s. However, the circuit court later determined that the jury did not properly apportion negligence and reapportioned negligence to 50 percent liability for both Swanson and Dr. Gatzke. The new apportionment allowed Swanson to recover damages.

The court of appeals determined that the circuit court erred in reapportioning negligence. Furthermore, the court declined to award Swanson a new trial. The appeals court determined there was sufficient evidence supporting the jury’s decision that Swanson’s negligence was greater than Dr. Gatzke’s.

Gene Frederickson Trucking and Excavating, Inc. v. Wagner (Prima Facie Tort)

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In Gene Frederickson Trucking and Excavating, Inc. v. Wagner (2018AP436), the Court of Appeals District III declined to adopt a new “prima facie tort” under Wisconsin law.

Frederickson contracted with an LLC to perform trucking and excavation work. The LLC failed to fully pay Frederickson. The LLC later defaulted on two separate loans from a bank and faced a foreclosure action. Frederickson was unable to collect the unpaid fees from the contract because of the foreclosure. Owners of the LLC then formed a new entity which purchased the bank’s rights to the foreclosed property and purchased the property back from a sheriff’s sale. The sale extinguished Frederickson’s ability to collect the unpaid fees from its contract with the original LLC.

In the instant lawsuit, Frederickson alleged the owners’ deliberate default on the loans, formation of a new entity, and buyback of the property was a civil conspiracy. Furthermore, Frederickson asked the court to adopt a new civil cause of action for “liability for intended consequences.” What Frederickson refers to as a “prima facie tort” would provide a cause of action for harmful conduct that does not fall within an existing category of tort liability.

The appeals court declined to adopt the “prima facie tort,” which the opinion notes has been adopted in other states, because it does not currently exist under Wisconsin law. Instead, the appeals court leaves the development of a new form of tort liability up to the state Supreme Court. The appeals court also dismissed Frederickson’s civil conspiracy argument for failure to state a claim.

Carlin Lake Association, Inc. v. Carlin Club Properties, LLC (County Ordinances)

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In Carlin Lake Association, Inc. v. Carlin Club Properties, LLC (2017AP2439), the Court of Appeals District III upheld an injunction on a business’s pumping and transporting well water on its property and allowed riparian property owners’ claims that the activity violated county ordinances to proceed.

Carlin Club owned a lodge on Carlin Lake that was deemed a legal nonconforming use with respect to a Vilas County zoning ordinance prohibiting commercial use of the property. When Carlin Club began making changes to the property in order to start transporting, bottling, and selling well water, seven landowners and the Carlin Lake Association filed the instant lawsuit claiming the activity was distinct from the legal nonconforming use of the lodge and thus in violation of county ordinances. The circuit court issued an injunction on Carlin Club’s new pumping and transporting activities and declared them in violation of the Vilas County ordinances.

On appeal, Carlin Club argued:

  1. The landowners lacked standing to sue under the state statute for enforcement of county ordinances (Wis. Stat. § 59.69(11)) because they were not “affected by the regulation.”
  2. The Lake Association lacked standing under § 59.69(11) because it was not an “owner of real estate” in the regulated zone.
  3. The landowners’ claims were not ripe because Carlin Club had not yet engaged in commercial activity in violation of the ordinance.
  4. The injunction was not equitable.
  5. The county ordinance is preempted by the Department of Natural Resources’s (DNR) authority to regulate groundwater withdrawal.

The appeals court rejected all Carlin Club’s arguments but the second. The court said:

  1. The language “affected by regulation” refers to the “district” not the “owner of real estate” in § 59.69(11). Therefore, the landowners did not need to show they suffered special damages in order for their claims to stand.
  2. The Lake Association was made up of individual property owners but did not own property itself, so its claims could not stand under § 59.69(11). The appeals court ordered the Lake Association to be removed as a party.
  3. An enforcement claim under § 59.69(11) is ripe, even before a zoning violation actually occurs, if plaintiffs show a “sufficient probability” that a violation will occur. Here, Carlin Club’s activities in preparation for pumping and transporting well water were enough for the landowners to show a sufficient probability the violation would occur.
  4. Circuit courts should not shift the burden of showing whether an injunction would be equitable from the plaintiff to the defendant in § 59.69(11) cases. Although the circuit court should not have shifted this burden to Carlin Club, the facts presented in the case still led the appeals court to the “only reasonable conclusion” that the injunction should be upheld.
  5. The general duty of DNR to regulate groundwater withdrawal does not interfere with the local ordinances at issue here.

Town of Lincoln v. City of Whitehall (Annexation of Town)

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In Town of Lincoln v. City of Whitehall (2019 WI 37), the Wisconsin Supreme Court held that a petition for direct annexation not signed by all property owners is not a petition “by unanimous approval,” allowing a town to challenge the petition more broadly.

Wis. Stat. § 66.0217(2) requires petitions for “direct annexation by unanimous approval” to list signatures of all property owners and electors in the territory to be annexed. Such petitions by unanimous approval may only be challenged in circuit court regarding the contiguity of the annexed territory to the city (Wis. Stat. § 66.0217(11)(c)).

In this case, Whitehall Sand wanted a sand mine site it was purchasing in the Town of Lincoln to be included in the limits of the City of Whitehall. Whitehall Sand submitted a petition to the city for “direct annexation by unanimous approval”; however, the petition was missing a signature from a railroad owner in the territory.

The City of Whitehall approved the annexation petition. Following the approval, the Town of Lincoln sought review from the Department of Administration (DOA), which determined that the annexed territory was not contiguous. The DOA determination allowed the town to challenge the annexation in circuit court pursuant to Wis. Stat. § 66.0217(11)(c) and § 66.0217(6)(d)(2). The town’s challenges included:

  • The petition was not “unanimous” because it was missing a signature.
  • The annexed territory was not contiguous, as determined by DOA.
  • The annexation was arbitrary.
  • The city was the “real controlling influence” behind the petition.

In response to the town’s challenges, the City of Whitehall argued that Wis. Stat. § 66.0217(11)(c) prevented the town from bringing any challenges other than contiguity. However, the supreme court agreed with the town that, since the petition was not “unanimous” as required by § 66.0217(2), the limitation on challenges to petitions by unanimous approval in § 66.0217(11)(c) did not apply. The court remanded the case to circuit court to rule on the substance of the town’s challenges.

Security Finance v. Brian Kirsch (Wisconsin Consumer Act)

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In Security Finance v. Brian Kirsch (2019 WI 42), the Wisconsin Supreme Court held that debtors sued without first receiving a notice of right to cure default may not sue a creditor for damages under the Wisconsin Consumer Act.

The underlying claim in this case arose when Security Finance sued Brian Kirsch for a default on a loan. Kirsch counterclaimed that Security Finance’s complaint failed to give him proper notice of right to cure the default under Wis. Stat. Ch. 425. Security Finance ultimately voluntarily dismissed the case, but Kirsch wanted to maintain his counterclaims and pursue remedies for violations of Wis. Stat. § 427.104 (1)(g) and (j), which respectively prohibit creditors from harassing and threatening debtors and from attempting to enforce a right that doesn’t exist.

The court decided Kirsch cannot sue for damages under Ch. 427 simply because Security Finance failed to give proper notice of right to cure. Because Security violated the notice requirement under Ch. 425, Kirsch was entitled to the dismissal of the action without prejudice. However, the Ch. 425 violation is simply a procedural error and does not relinquish Security’s right to collect. In contrast, Ch. 427 addresses illegal “egregious behavior” by collectors, and Security’s Ch. 425 procedural violation does not entitle Kirsch to remedies under that chapter, which include damages caused by emotional distress (Wis. Stat. § 427.105(1)).

Justice Daniel Kelly (joined by Justice R. Bradley) wrote a concurring opinion that agreed with the court but also would have overturned Kett v. Community Credit Plan, Inc. (1999). While the court distinguished between Kett and the instant case, Kelly said both cases address the same issue: whether a procedural mistake by creditors allows debtors to collect remedies under § 427.105. The concurring opinion would overrule Kett to say that, in addition to the holding in Security Finance that violation of notice requirements do not constitute a Ch. 427 violation, filing in an improper venue is not grounds for damages under § 427.105.

In a dissent, Justice Walsh Bradley (joined by Justice Abrahamson) said the court should have followed Kett and allowed Kirsch’s § 427.105 claims to stand. Security Finance filing a lawsuit without proper notice of right to cure constituted enforcement of a right it had reason to know did not exist, thus violating § 427.104(1)(j).  Furthermore, the dissent argued the court’s ruling contradicts the overall purpose of the Wisconsin Consumer Act to protect consumers against unfair practices.

Maple Grove Country Club, Inc. v. Maple Grove Estates Sanitary District (Notice of Claim)

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In Maple Grove Country Club, Inc. v. Maple Grove Estates Sanitary District (2019 WI 43), the Wisconsin Supreme Court held that failure to comply with the notice of claim statute is an affirmative defense. If a party fails to set forth the affirmative defense in a responsive pleading, the defense is waived.

Maple Grove Country Club owned a sewer system, which it leased to the Sanitary District. When the Country Club and Sanitary District failed to come to an agreement on a new lease, the Country Club served the Sanitary District with a notice of claim under Wis. Stat. § 893.80(1d)(a), stating that the Sanitary District was illegally occupying its property in violation of statutory condemnation proceedings. Three years later, the Country Club filed the instant action in circuit court. In the Sanitary District’s response to the Country Club’s complaint, it did not affirmatively plead that the Country Club had failed to comply with the notice of claim statute. Later the Sanitary District attempted to raise the affirmative defense by motion. The Country Club then argued that the Sanitary District had waived the affirmative defense of noncompliance with the notice of claim statute by not including the defense it its initial response.

The issues before the court were 1) whether noncompliance with the notice of claim statute is an affirmative defense, and 2) whether failing to plead the affirmative defense in response to a complaint waives the defense.

First, the court determined that case law provides that failure to comply with the notice of claim statute is an affirmative defense. Second, the court determined that such an affirmative defense must be raised in a responsive pleading, not by motion. Wis. Stat. § 802.02(3) states that affirmative defenses “shall” be set forth in responsive pleadings. Furthermore, noncompliance with notice of claim is not included in the list of affirmative defenses that may be brought by motion under Wis. Stat. § 802.06(2). The court overruled previous case law Lentz v. Young (1995) that had ruled defendants may raise affirmative defenses by motion.

Accordingly, the Sanitary District’s affirmative defense that the Country Club did not comply with the notice of claim statute was waived.