Author: Hamilton

Connecticut Court Dismisses Local Governments’ Lawsuit Against Opioid Manufacturers

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In January 2019, a Connecticut state court dismissed one of many lawsuits against opioid manufacturers because the local governments did not have standing to sue. Specifically, the court held the cities were indirectly harmed by the opioid epidemic, and therefore did not have standing to sue.

Local governments, with the aid of contingency fee private attorneys, have brought numerous lawsuits like the Connecticut case against drug manufacturers throughout the country, including in Wisconsin. To date, there are roughly 1,000 lawsuits against opioid manufacturers filed by local governments. A recent report from the American Tort Reform Association outlined the rise in recent years of private plaintiff attorneys bringing these types of lawsuits against businesses on behalf of local governments.

Citing a 1992 U.S. Supreme Court decision, Holmes v. Securities Investor Protection Corp., the Connecticut court held that it must consider three factors to determine whether plaintiffs have direct enough cause to sue:

  • How indirect is the injury;
  • How complicated is it to decide who gets what money;
  • Whether directly injured parties could sue instead.

The court then analyzed the local governments’ lawsuit against the many drug companies and determined that they had not met the three factors.

First, the court determined that alleged injury to the local governments caused by opioid addiction was too attenuated and any injury to the local governments was too indirect.

Second, the court held that deciding who should get the money would require the court to engage in “rank speculation,” and noted that each city is completely different in terms of how the opioid epidemic has affected their respective services.

Third, the court held that there are clearly other directly injured parties, those who became addicted to prescription drugs who could, and have, sued the drug companies. The court said the lawsuit by the cities is not about the victims, but instead is about obtaining money for local government services.

Based on these factors, the court dismissed the lawsuit brought by the local governments. The court decision is City of New Haven v. Purdue Pharma, L.P., et al.

Financial Exploitation Cause of Action Legislation Introduced

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Sen. Bob Wirch (D-Racine) has introduced legislation (SB 41) that would create a new civil cause of action for financial exploitation of a vulnerable person. The bill awards prevailing plaintiffs treble damages (economic and noneconomic), attorney fees, and fees for services of any guardian ad litem incurred because of the litigation.

The bill allows the injured vulnerable person, the person’s guardian, or a representative of the person’s estate to bring an action for financial exploitation. SB 41 defines “vulnerable person” as an elderly, financially incapable, or incapacitated person, or a person with a disability who is susceptible to coercion because of his or her impairment.

According to Wirch’s cosponsorship memo, the bill is modeled after an Oregon law. Only three other states (Arizona, California, and Florida) have adopted similar laws.

SB 41 has been referred to the Senate Judiciary Committee. In addition to Wirch, the bill has 12 Democratic cosponsors – three senators and nine assembly representatives.

West Bend Mutual Insurance Co. v. Ixthus Medical Supply, Inc. (Duty to Defend)

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In West Bend Mutual Insurance Co. v. Ixthus Medical Supply, Inc. (2019 WI 19), a 6-0 Wisconsin Supreme Court held that the insurer had a duty to defend in an advertising injury case.

Health care manufacturing company Abbott filed a suit against Ixthus, claiming that Ixthus wrongfully diverted test strips intended for international markets to domestic markets. Ixthus subsequently tendered its defense to its insurer West Bend. West Bend denied Ixthus’s defense, arguing there was no duty to defend because the policy also contained exclusions for knowing violations and criminal acts. West Bend also argued there was no connection between Ixthus’s covered advertising activity and the injury to Abbott. Instead, West Bend claimed Abbott’s complaint alleged only wrongful importation and distribution against Ixthus.

In an opinion authored by Justice Rebecca Bradley, the court ruled against West Bend. First, the decision stated that Abbott’s complaint did allege a causal connection between Abbott’s injury and Ixthus’s covered advertising activity. Since the complaint includes Ixthus in the defendants who allegedly advertised, West Bend has a duty to defend, even if later proceedings might prove Ixthus was not one of the defendants who actually advertised.

Next, the court analyzed whether the knowing violation and criminal acts exclusions of the policy applied. The court found that neither exclusion applied because the complaint contained at least one allegation that would not require intent and at least one allegation that would not require a criminal charge for the plaintiff Abbott to prevail. Since there is at least one claim in the complaint that is potentially eligible for coverage under the policy, West Bend has a duty to defend.

 

CityDeck Landing LLC v. Circuit Court for Brown County (Arbitration)

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In CityDeck Landing LLC v. Circuit Court for Brown County (2019 WI 15), the Wisconsin Supreme Court held that circuit courts may not stay private arbitration, even when there is an ongoing insurance coverage dispute connected to the arbitration parties. The 4-2 decision, authored by Justice R. Bradley (joined by Chief Justice Roggensack, Justice Kelly and Justice Ziegler, with Justice Dallet not participating), allows CityDeck Landing to proceed in private arbitration with its contractors.

 

Facts

The underlying issue in this case began when a dispute arose between CityDeck and its contractor. CityDeck and the contractor had contracted to use private arbitration. Several of the subcontractors joined the arbitration, and one subcontractor tendered its defense to its insurer Society Insurance. The main contractor claimed it was an additional insured under the Society policy. In turn, Society filed a lawsuit seeking a determination on coverage in the CityDeck arbitration and asked the circuit court to stay the arbitration until the resolution of the coverage dispute. The circuit court agreed to stay the arbitration. CityDeck asked the Supreme Court to vacate the stay.

 

Opinion

The Supreme Court opinion undertakes a historical analysis of the development of the four factors it uses in issuing supervisory writs, such as CityDeck requested in this case. Then, the opinion applies the four factors to the CityDeck case, finding that it meets the criteria for a supervisory writ, and vacates the circuit court order to stay arbitration.

The court found the CityDeck meets the criteria for a supervisory writ because:

  1. The circuit court had a plain duty to comply with the Wisconsin Arbitration Act (Wis. Stat. § 788.01), which holds arbitration agreements as “valid, irrevocable, and enforceable.” Even though Wisconsin courts typically recommend the bifurcation and stay of liability cases and coverage disputes, circuit courts do not have the authority to stay arbitration.
  2. CityDeck could not receive an adequate remedy through the ordinary appeal process because continuing to stay the arbitration on appeal would be a non-reparable and non-compensable damage. Furthermore, an appeal would subject CityDeck to even more litigation, which the parties intended to contract out of via arbitration.
  3. Grave hardship or irreparable harm would have resulted if the Supreme Court did not issue the writ because CityDeck had been denied its right to arbitration and would be forced into public proceedings when it contracted to resolve the matter privately.
  4. CityDeck filed for the writ promptly and speedily.

 

Dissent

 In a dissent, Justice Walsh Bradley (joined by Justice Abrahamson) argued that the majority opinion too broadly expands the hardships and harms eligible for a supervisory writ under factor number three above. The dissent states that CityDeck does not meet the grave hardship and irreparable harm criterium because a delay in arbitration is not a grave hardship, and any harm caused could be reparable by a monetary award. According to the dissent, applying the supervisory writ criteria in the broad way the majority does here would make the criteria applicable to almost any request for a writ.

Choinsky v. Germantown School District (Duty to Defend)

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In an opinion authored by Chief Judge Lisa Neubauer and joined by Judge Brian Hagedorn (both Wisconsin Supreme Court candidates), the Court of Appeals District II held in Choinsky v. Germantown School District (2018AP116) that insurers did not breach their duty to defend when they did not immediately accept the defense of their insured. Furthermore, the insurers did not owe unpaid fees beyond what was agreed upon between the insurers and the attorneys.

 

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 district on the merits case – including retroactive fees – until the court decided the coverage issue.

Before the court decided on the insurers’ motion to intervene, the school district moved to dismiss the teachers’ merits case. There was relatively little other activity on the merits case between when the district filed its motion to dismiss and when the court issued its decision to bifurcate but not stay the merits case.

 

Attorney Fees in Establishing Coverage

The district contended that, because the insurers did not immediately accept its defense and instead waited until the court decision on the bifurcation and stay, the insurers owed the district attorney fees for the coverage dispute. Elliot v. Donahue required an insurer to pay attorney fees for establishing coverage when the insurers denied defense to an insured and moved to bifurcate but not stay the merits proceedings. In the instant case, the appeals court ruled that Elliot did not apply here because the insurers timely and properly followed the court-approved coverage issue procedures. Even though there was no stay granted, the insurer properly filed the motion to stay and timely decided to defend the district when the stay was denied. The court furthermore ruled that waiting to defend until the circuit court decided on the coverage dispute was not a breach of the insurers’ duty to defend.

 

Unpaid Fees on the Merits Case

The district also contended that the insurers failed to reimburse the district fully for attorney fees in the merits case. The insurers had made deductions to invoices, citing the attorneys’ violations of guidelines the attorneys and insurers had agreed upon when they worked together in previous cases. The attorneys did not dispute the insurers’ deductions. The district claimed reimbursing them for the deducted amount instead of the full invoice amount was a breach of contract and requested reimbursement of $50,000 in unpaid fees. The court rejected the district’s argument, stating that there was no evidence the unpaid fees were reasonable and owing, since the attorneys and insurers had agreed upon them.

Faude v. WERC (Wrongful Termination)

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In Faude v. WERC (2017AP842), the Court of Appeals District III held that an employer did not wrongfully terminate an employee because of her union-related activity.

Rebecca Faude was a certified nursing assistant at Clark County Health Care Center. Faude also served as a union steward who negotiated with management on employees’ behalf. Clark County placed Faude on administrative leave and ultimately terminated her after she engaged in misconduct during shift change meetings and vocally criticized several of her superiors at Clark County. Faude filed the instant complaint, arguing that Clark County wrongfully terminated her because of her aggressive advocacy as a union steward.

The appeals court found that there was substantial evidence to support the Wisconsin Employment Review Commission’s decision that Clark County did not wrongfully terminate Faude. The court reasoned that evidence showed Faude engaged in workplace misconduct. Furthermore, she had advocated as a union steward for over three years without being terminated, so the union work would not have been the cause for termination.

Town of Little Wolf v. Waupaca County (Mining Nonconforming Use)

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In Town of Little Wolf v. Waupaca County (2017AP1941), the Court of Appeals District IV upheld Waupaca County’s decision that a mine was a lawful nonconforming use after the passage of a non-metallic mining ordinance.

In 2015, Waupaca County passed the non-metallic mining ordinance, which requires new and expanding mines to obtain conditional use permits. The Waupaca County Planning and Zoning Committee determined that the Theil Pit mine was a lawful nonconforming use. Accordingly, the Theil Pit operators did not need to obtain a conditional use permit since the mine operated prior to the passage of the ordinance.

The Town of Little Wolf appealed the Zoning Committee’s decision, arguing that the Thiel Pit was not a lawful nonconforming use because its operators had failed to comply with a previous ordinance requiring them to obtain a reclamation permit. However, the court ruled that, whether the Thiel Pit was in violation of the reclamation ordinance or not, the mine was still operating legally in regard to zoning laws. The court stated that noncompliance with a regulatory, non-zoning ordinance like the reclamation ordinance does not prohibit the mine from continuing to be zoned as a lawful nonconforming use.

The court also rejected the town’s arguments that Waupaca should have considered whether the Thiel Pit was a public nuisance, that the appeal process violated the town’s due process rights, and that there was a conflict of interest related to a Waupaca attorney.

Vallier v. LIRC (Worker’s Compensation)

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In Vallier v. LIRC (2018AP936), the Court of Appeals District I held that the plaintiff was not entitled to worker’s compensation because her pre-existing condition was not aggravated by a minor injury at work.

Nurse Tamara Vallier hit her elbow against a wall while working for Aurora Health Care at St. Luke’s Medical Center. Vallier subsequently experienced pain and tingling in her right arm and sought several medical opinions. The doctors’ opinions agreed that Vallier had a pre-existing condition in her cervical spine that required surgery. However, the opinions conflicted on whether the minor elbow injury caused or aggravated the pre-existing condition.

The Labor and Industry Review Commission (LIRC) decided that Vallier was not entitled to worker’s compensation because, according to one doctor, the pre-existing cervical spine condition could not have been aggravated or caused by the way Vallier hit her elbow at work. The court upheld LIRC’s decision, agreeing that the decision was supported by the doctor’s opinion. The decision was also supported by the fact that Vallier had failed to disclose to her doctors that she had seen her family physician to be treated for pain in her shoulder before the work incident.

On appeal, Vallier further argued that LIRC’s decision should be overturned because of a factual error related to when she first complained of neck pain. The court (and LIRC) conceded the error but held that the error was not material to LIRC’s otherwise supported decision.

Bakkestuen v. Lepke Holdings LLC (Wages)

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In Bakkestuen v. Lepke Holdings LLC (2017AP2500), the Court of Appeals District IV held that employer Lepke owed dump truck drivers compensation for preparation time before and after actual loading time.

Citing the 2016 Wisconsin Supreme Court decision United Food & Com. Workers Union v. Hormel Foods Corp., which held that donning and doffing of required clothing was compensable work time, the appeals court ruled in this case that preparing trucks before and after loading was similarly compensable. The court stated that the preparation time was “integral and indispensable” to the drivers’ primary loading activity.

The court rejected Lepke’s argument that it did not owe the drivers the unpaid wages because it paid them more than the minimum wage for the primary hours worked. Citing the recent Tetra Tech v. DOR decision, the court did not, as Lepke requested, accord great weight deference to a prior Department of Workforce Development (DWD) decision, which stated that employers are required to pay employees only so that the total amount paid during a pay period divided by the total number of hours worked is at least the statutory minimum wage. Instead, the court held that DWD rules (Wis. Admin. Code §§ DWD 272.025 and 272.12(1)) require Lepke to pay employees the agreed-upon wage for all hours worked.

Finally, the court held that Lepke was required to pay the drivers overtime. Although the motor carrier exemption to federal and state overtime laws applied, Lepke owed the employees overtime because Lepke had contractually agreed to pay them overtime. Furthermore, Lepke owed the drivers the higher prevailing wage for overtime work they did on municipal and state works projects, according to the now repealed prevailing wage statute (2013-14 Wis. Stat. §§ 103.49 and 103.50).

Federal Litigation Funding Transparency Legislation Introduced

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Federal litigation funding transparency legislation has been introduced in the U.S. Senate. The bill would require the disclosure of third party litigation funding arrangements in class action and multidistrict litigation at the outset of federal cases. Judiciary Committee members Sens. Chuck Grassley (R-Iowa), Thom Tillis (R-North Carolina), John Cornyn (R-Texas), and Ben Sasse (R-Nebraska) reintroduced the bill, which stalled in the 2017-18 Congress.

Wisconsin led the nation on litigation funding transparency by passing 2017 Act 235 last session. The legislation provided that that, unless stipulated or ordered by the court, a party shall provide to the other parties any agreement under which any person, other than an attorney permitted to charge a contingent fee for representing a party, has a right to receive compensation that is contingent on and sourced from any proceeds of the civil action, by settlement, judgement, or otherwise. Read more about Act 235 here: https://www.wisciviljusticecouncil.org/policy-project/civil-litigation-reform-bill-2017-18/.