Today, the Wisconsin Supreme Court issued a significant decision (Casper v. American Int. South Ins., 2011 WI 81) dealing with the liability of corporate officers for non-intentional torts and default judgments. The Wisconsin Civil Justice Council and the Wisconsin Insurance Alliance filed an amicus curiae brief in support of the employer and insurance company sued in the case.

The opinion was mostly positive. In particular, the court held that the corporate officer was not personally liable for approving the driving route of his employee who injured the plaintiffs. In addition, the court ruled that the trial court properly allowed the insurance company more time to answer the plaintiffs’ complaint based on the insurance company’s “excusable neglect” in failing to meet the 45-day timeline required by law.

The only negative portion of the decision was the court’s determination that a liability insurance policy need not be delivered, or issued for delivery, in Wisconsin in order to subject the insurer to direct action under Wisconsin law.

Facts and Legal Issues

Members of the Casper family and a friend were injured when their vehicle was rear-ended by a vehicle driven by Mark Wearing. At the time of the accident, Wearing was co-employed by Transport Leasing/Contract, Inc. (TLC) and Bestway Systems, Inc. (Bestway). The truck he was driving had been leased to Bestway by Ryder. Litigation ensued and three separate appeals were filed, two of which went before the Supreme Court.

The first issue presented to the court was wholly procedural and involved the question of what constitutes “excusable neglect” when failing to respond to a complaint within the 45-day requirement. The Caspers filed suit against a number of parties, including, as relevant here, National Union, as an insurer of one of the driver’s co-employers, TLC.

The Caspers served National Union with a copy of the amended complaint, on May 5, 2006. National Union failed to timely answer the amended complaint. The Caspers promptly moved for default judgment. Shortly thereafter, National Union filed an answer that was six days late and also moved to enlarge time for filing their answer.

The circuit court found that National Union’s failure to file its answer in a timely manner was “excusable neglect” under Wisconsin’s law. Accordingly, the court granted National Union’s motion to enlarge time and denied the Caspers’ motion for default judgment.

The second legal issue involves a novel question about the personal liability of a corporate officer, Jeffrey Wenham, the CEO of Bestway, one of the employers of the driver. The Caspers alleged that Wenham was personally liable in negligence for approving the route that Wearing (his employee) was driving the day of the accident, knowing that the route could not be safely completed pursuant to federal regulations. Initially, the circuit court dismissed all of the Caspers’ claims against Wenham as an individual.  On reconsideration, however, the circuit court reinstated the negligence claim against Wenham, agreeing with the Caspers that it had erred in finding that there was no evidence or testimony that Wenham personally approved the route.  Wenham appealed and the court of appeals affirmed.

The third legal issue is whether under Wisconsin law a direct action claim against an insurer can be maintained where the insurance policy was not delivered or issued for delivery in Wisconsin, but the insurance policy covers the insured “business operations” conducted in this state.

Supreme Court Decision

In a 5-2 decision by Justice David Prosser (joined by Justices Patrick Crooks, Patience Roggensack, Annette Ziegler, and Michael Gableman; Chief Justice Shirley Abrahamson and Justice Ann Walsh Bradley dissenting in part and concurring in part), the Supreme Court both affirmed and reversed the lower court.

Default Judgment — Excusable Neglect: The court held that the trial court did not erroneously exercise its discretion in finding excusable neglect and granting National Union’s motion to enlarge time by seven days to answer the amended complaint. The court found that National Union provided sufficient affidavits explaining its failure to respond to the complaint within the 45 days required by Wisconsin law.

Corporate Officer Liability for Non-Intentional Tort Liability: A corporate officer can be held personally liable for a non-intentional tort liability that occurs while he or she is performing his or her job and which is within the scope of his or her employment. However, the court ruled that in this case Wenham’s (the CEO) actions were too remote to provide a basis for liability. According to the court, “any negligence on Wenham’s part in approving a route, from his office in Ohio, to be driven entirely in other states, is simply too far removed from the injury the Caspers suffered in Wisconsin.”

In reaching its decision, the court cited WCJC’s and WIA’s brief discussing the “business judgment rule,” which “limits judicial review of corporate decision-making when corporate directors make business decisions on an informed basis, in good faith, and in the honest belief that the action taken is in the best interest of the company.” According to the court, “the very existence of a business judgment rule reflects public policy that corporate officers are allowed some latitude to make wrong decisions without subjecting themselves to personal liability.”

Direct Action: The court ruled that a liability insurance policy need not be delivered or issued for delivery in Wisconsin in order to subject the insurer to a direct action under Wisconsin law. In reaching this decision, the Supreme Court overruled a previous court of appeals decision – Kenison v. Wellington Insurance Co. – which reached a different conclusion.

A recent article in Business Insurance noted the numerous civil liability reforms being enacted throughout the country. The article singled out Wisconsin for its significant changes contained in 2011 Wisconsin Act 2:

A lot of [Texas] Gov. Perry’s fellow governors are beginning to pick up that mantle,” said Mr. Joyce, who cited Wisconsin’s Scott Walker as a governor who has “really embraced reform as part of an economic package.”

While the article focused mainly on Texas’ recent reforms, American Tort Reform Association President Tiger Joyce noted the numerous other states, including Wisconsin, that have enacted significant reforms this year:

But while Texas received considerable attention for its reform, it was not the only state to enact changes to its civil justice system.

In fact, 2011 “by contrast to recent years, has been a very successful year for us,” said ATRA’s Mr. Joyce, citing Alabama, Arizona, Oklahoma, South Carolina, Tennessee and Wisconsin.

The Supreme Court of the United States today issued a major decision — McComish et al v. Bennett, Secretary of State of Arizona, et al. — striking down Arizona’s public campaign finance law. The 5-4 decision, authored by Chief Justice John Roberts, and joined by Justices Scalia, Kennedy, Thomas, and Alito,  is likely to impact Wisconsin’s “Impartial Justice Act,” which contains similar campaign finance restrictions as the law struck down in Bennett.

The Arizona Citizens Clean Elections Act created a public financing system for candidates for state office. Candidates who opted to participate in public financing system were granted a certain amount of public campaign funds. In addition, the candidate that accepted public financing was granted additional matching funds if a privately financed candidate exceeded the publicly financed candidate’s initial state allotment. This also applied to campaign funds spent by independent groups. Thus, if a private third party group spent campaign funds against the publicly financed candidate, or in favor of the privately financed candidate, the publicly financed candidate would receive a dollar-for-dollar match. The matching funds under Arizona’s law topped out at two times the initial grant of money to the publicly financed candidate.

The Supreme Court struck down Arizona’s law, ruling that the matching funds scheme “substantially burdens political speech and is not sufficiently justified by a compelling interest to survive First Amendment scrutiny.” The court specifically noted how the campaign finance law burdened independent groups. For example, an independent group can only avoid the matching funds going to the candidate they oppose by changing their message or choosing not to speak altogether.

Wisconsin’s Impartial Justice Act, which was signed into law in 2009, contained a similar public funding matching scheme as the Arizona law. A lawsuit was filed in federal court, but the court upheld the law. The 2011-13 budget bill recently signed into law defunded the law. Wisconsin’s law is all but dead now, with the Supreme Court’s decision finding Arizona’s law unconstitutional.

For more discussion about Wisconsin’s law, click here.

This morning the United States Supreme Court issued four decisions, including the global warming standing case American Electric Power Co. v. Connecticut and the class action certification case Wal-Mart v. Dukes.

American Electric Power Co. v. Connecticut

This is the Court’s first opinion on climate change since it ruled in 2007 in Massachusetts v. EPA that greenhouse gases are “pollutants” subject to Clean Air Act regulation.

Wisconsin (before it dropped out of the case) was one of eight states that sued defendant utilities, American Electric Power Co., Southern Co., Xcel Energy Inc., the Tennessee Valley Authority, and Cinergy Corp., for their alleged contribution to global warming. The states were asking the court to impose stricter greenhouse-gas regulations than those currently imposed by the EPA by declaring CO2 a nuisance.

The Court unanimously ruled that the Clean Air Act and EPA action authorized by the Act displaced any right under federal common law to sue for reduction of carbon dioxide emissions from these companies.

Opinion author Justice Ruth Bader Ginsburg emphasized the role of the EPA compared to the courts. “The critical point is that Congress delegated to EPA the decision whether and how to regulate carbon-dioxide emissions from power plants; the delegation displaces federal common law,” and “[i]t is altogether fitting that Congress designated an expert agency, here, EPA, as best suited to serve as primary regulator of greenhouse gas emissions. The expert agency is surely better equipped to do the job than individual district judges issuing ad hoc, case-by-case injunctions. Federal judges lack the scientific, economic, and technological resources an agency can utilize in coping with issues of this order.”

The Supreme Court split 4-4 on the issue of whether the U.S. Court of Appeals for the Second Circuit had jurisdiction to hear this case in the first place, questioning the states’ standing to sue. Justice Sotomayor abstained from the entire case since she sat on the lower court whose opinion was being reviewed.

Justice Alito, joined by Justice Thomas, wrote a short concurrence. Justice Alito made clear that he agreed with the Court only on the assumption that Massachusetts v. EPA interpreted the Clean Air Act correctly since the merits of that opinion were not at issue. This could be a signal that Alito and Thomas would reconsider the holding in Massachusetts v. EPA if the issue were before them.

The outcome is viewed as a win for the Obama administration and industry, both of which would rather regulate climate change through the EPA (if at all), and a defeat for environmentalists who had previously been successful at advancing their goals in the courts. However, the courts may not be completely off limits. The Court remanded the questions of whether parties can take action against utilities under certain state laws to the U.S. Court of Appeals for the Second Circuit.

Wal-Mart v. Dukes

The 5-4 majority in Wal-Mart reversed the decision of the Ninth Circuit which certified a class of hundreds of thousands of female employees of Wal-Mart who claimed they were discriminated against through pay and promotion policies.

Justice Scalia authored the majority opinion, which was joined in full by Chief Justice Roberts and Justices Kennedy, Thomas, and Alito. The opinion held that the certification of the class violated Federal Rule of Civil Procedure 23(a)’s requirement that a party seeking certification prove that the class has common “questions of law or fact.”

“Here respondents wish to sue about literally millions of employment decisions at once. Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.”

Justice Ginsburg filed an opinion concurring in part and dissenting in part, which was joined by Justices Breyer, Sotomayor, and Kagan. Ginsburg agreed that the class “should not have been certified under Federal Rule of Civil Procedure 23(b)(2),” but would have remanded the case since “[a] putative class of this type may be certifiable under Rule 23(b)(3) if the plaintiffs show that common class questions ‘predominate’ over issues affecting individuals— e.g., qualification for, and the amount of, backpay or compensatory damages—and that a class action is ‘superior’ to other modes of adjudication.”

This ruling means that the thousands of plaintiffs must pursue their claims individually. The ruling could affect other class-action lawsuits, such as those against tobacco companies and Costco, and is considered to be the most important employment case of the last decade.

The other two cases released today are Borough of Duryea v. Guarnieri, on the right of a public employee to petition for grievances under the U.S. Constitution, and Turner v. Rogers, on an individual’s right to counsel in a civil contempt hearing.

This post was authored by Hamilton Consulting Group’s intern Emily Kelchen, a recent graduate of the University of Wisconsin Law School.

Government Accountability Board (GAB) has approved recall elections for Wisconsin Republican Senators Robert Cowles (Allouez), Alberta Darling (River Hills), and Sheila Harsdorf (River Falls).

Six Wisconsin GOP senators are almost certain to face recall elections this summer.

The consideration of petitions against Democratic Senators Robert Wirch (Pleasant Prairie), Jim Holperin (Conover) and Dave Hansen (Green Bay) may be delayed because election staff need more time to review the Democratic challenges to the petitions, according to GAB.

The six GOP senators will likely be scheduled for a recall vote on July 12th, however this date may change given legal challenges and an extension request. It is likely that the elections for targeted Democrats would be held later if an extension is approved.