2021 First Quarter Case Roundup: A Review of Wisconsin Cases

07 Apr

2021 First Quarter Case Roundup: A Review of Wisconsin Cases

By: Attorney Isaiah M. Richie, Schloemer Law Firm, S.C.

The year started off strong with several published opinions. These cases from the Wisconsin Supreme Court and Court of Appeals involved discovery requests, waiver of lien rights, a rare trademark decision, municipal zoning and notice requirements, and of course, the mask mandate. I will address in more detail some of the more impactful decisions and then summarize some of the others. In particular, the mask mandate decision and trademark decision may directly impact your business dealings.

A Constant State of Emergency: Fabick v. Evers

It wouldn’t be 2021 without a Coronavirus case, and Fabick v. Evers, released March 31, 2021 gives us exactly that. Fabick addresses Governor Evers’ multiple Executive Orders which declared a state of emergency. Writing for the majority, Justice Hagedorn stated “The question in this case is not whether the Governor acted wisely; it is whether he acted lawfully. We conclude he did not.”

The conflict arose after Governor Evers issued a second emergency declaration, 60 days after the initial one, and without the approval of the legislature. Wisconsin law says that no state of emergency may last longer than 60 days unless it is “extended by joint resolution of the legislature.”

The Wisconsin Supreme Court described the governor’s emergency powers as existing under two types of emergencies: 1) disasters, and 2) public health emergencies. Here, the executive orders dealt with public health emergencies.

For declarations based on public health emergencies, the Court recognized a duration limitation imposed by the statute of 60 days, “unless the state of emergency is extended by joint resolution of the legislature”. The Court described the process as follows:

First, the initial duration of a state of emergency is determined by the governor, but it “shall not exceed” 60 days. Second, a state of emergency may be cut shorter than the initial duration by either the governor through executive order or by the legislature through joint resolution. Finally, a state of emergency may be extended longer than 60 days by the legislature alone.

Therefore, the governor may not declare successive states of emergency on the same basis as a prior state of emergency.

Evers’ attorneys argued that the “ups and downs of COVID-19 have created independent enabling conditions thereby renewing his power to declare a new state of emergency.” But the Court did not agree, saying:

Statutory restrictions on executive power cannot be avoided by modest updates to the “whereas” clauses of an emergency declaration.

While recognizing that it will sometimes be difficult to determine when a set of facts gives rise to a “unique enabling condition”, the Court recognized that COVID-19 has been an ongoing “illness or health condition” regardless of the ebbs and flows.

The Court declared Executive Orders # 82, 90, and 105 unlawful.

Key Takeaways:

The Governor’s successive Executive Orders regarding COVID-19 are not lawful.
The current Wisconsin state mask mandate is no longer enforceable.
Businesses can set their own policies, both for employees and for customers. And If your business has COVID policies, those should be periodically reviewed. State and federal guidelines and requirements (including OSHA requirements) continue to change.

Know What You’re Selling: Ritter v. Farrow

Our next case also comes to us from the Wisconsin Supreme Court. In Ritter v. Farrow, a dispute arose over whether the logo of a resort along with the name “Bibs Resort” and “Bibs” were transferred from the Ritters to the Farrows in the sale of the resort management business. Another twist was that, prior to the sale, the Ritters had granted the use of the names and logo to a condo association which operated on the property.

The Court noted that the offer included “goodwill” and “business personal property” which was defined as “all tangible and intangible personal property and rights in personal property owned by Seller and used in the business . . . including . . . trade names.” Additionally, in completing the state Report of Business Transfer, the Ritters checked the box title “Goodwill” in the transfer.

The Court took the position (criticized by a sharp dissent) that although Wisconsin recognizes a common law and statutory cause of action for trademark and trade name infringement, the state law is undeveloped, and federal law should be used to analyze the case.

The Court considered a trademark to be “a form of intangible property that cannot exist ‘separate from the good will of the product or service it symbolizes.’” The Court also noted that there is a presumption when a business is sold, that trademarks and the good will of the business that the trademarks symbolize are presumed to pass along with the sale.

Finally, the Court analyzed whether the rights were transferred to the condo association when the Ritters filed condo declarations. Specifically, the Court looked at the Condominium Ownership Act and noted that the legislature could have granted associations the power to own intangible property, but it did not do so. Accordingly, the Court held that the rights to the names and logo had not passed to the condo association but had instead passed to the Farrows when they purchased the business.

Key Takeaways:

Always understand what you are selling before you sign an offer or contract. A lot of boilerplate terms and presumptions can include something you may not intend to convey.
Condominium associations cannot, unless specified in the declarations, own intangible property.
Wisconsin trademark law is mostly unsettled (but a little bit more settled now).
Use of a trademark in a commercial sense is key to preserving rights to it.

Waiver of Lien Rights: Great Lakes Excavating, Inc. v. Dollar Tree Stores, et al.

Our third case involves the specificity requirements for a partial lien waiver — in other words, if you agree to release the customer from liens on part of the work but still want to retain lien rights on the remainder.

In Great Lakes, a subcontractor did extensive work beyond the initial agreement, using change orders (signed and unsigned) for the additional projects. The initial contract was for $37,165, and the final bill was $222,238. When the subcontractor went to collect payment from the general contractor, the general told them they didn’t have the money to pay for the full amount but could pay $33,448. The subcontractor agreed to grant a partial lien waiver for partial payment, but instead of drafting a new partial waiver, it simply took the full waiver form, crossed out the words “to date” and wrote in “partial”.

“Big mistake” said the Wisconsin Court of Appeals. When the subcontractor went to enforce its lien rights on the remaining $188,000, the circuit court held, and the Court of Appeals affirmed, that the subcontractor had waived its entire lien rights because it had failed to “specifically and expressly limit the waiver to apply to a particular portion of such labor, services, martials, plans, or specifications.”

The Court of Appeals held that, even assuming “that the parties intended to limit the waiver”, they failed to comply with the statutory requirements.

So even though Great Lakes maintained some other breach of contract claims against the defendants, they lost one of their greatest leverages in waiving the entire lien.

Key Takeways:

Partial lien waivers must be very specific in the scope of work they are releasing.
Don’t cross out and write in new language; the “convenience” of doing so in this case cost the subcontractor over $180,000 in lien rights.
DON’T CROSS OUT AND WRITE IN NEW LANGUAGE. Just don’t.

Play the Shell Game, Get the Hammer: Mohns Inc. v. BMO Harris Bank National Association

The exchange of documents and information during litigation is known as discovery. In Mohns, the discovery process looked a little like this (abridged):

Mohns: Hey BMO, please provide us with all the documents related to this case.

BMO: No, we already gave it to someone else.

Mohns: Judge, please make BMO give us all the documents related to this case.

Judge: Give them the documents.

BMO: Here’s a few things.

Judge: You have to give them everything.

BMO [six days before a deposition]: Oh hey, we found several thousand documents.

Mohns [one day before the deposition]: We are still on for this deposition tomorrow, be ready.

BMO: Oh hey, we found 4,185 additional documents that our representative needs to review before the deposition!

BMO Representative [at deposition]: I’ve only reviewed about twenty of these documents.

Court: This is bad, really bad. I have had root canals that were less painful than reading the transcript of that deposition. I’m going to use words like “disingenuous” and “egregious” to describe BMO’s conduct, and I’m going to go ahead and say BMO is liable.

The court then entered a verdict against BMO, and the only jury participation was in deciding damages.

So Mohns, at its core, discourages attorneys from playing shell games or hiding the ball during discovery. During litigation between Mohns and BMO Harris, the BMO attorneys repeatedly avoided providing Mohns with the requested discovery. After repeated warnings from the circuit court, BMO produced some documents at the 11^th hour, and the provided a representative to explain those documents at deposition. However, the representative provided had reviewed only twenty of the roughly 4,000 documents that had recently been provided.

The circuit court found that BMO’s discovery actions were “disingenuous” and “egregious”, that BMO attorneys had given the court and other attorneys “the runaround”, and that BMO “blatantly disregarded” the court orders and “egregiously ignored” BMO’s obligations in discovery.

Accordingly, the circuit court granted a rarely used discovery sanction: summary judgment on the merits of the case in favor of Mohns. In other words, the circuit court determined that BMO’s actions during discovery were so bad, that no trial was needed to determine its liability.

The Wisconsin Supreme Court upheld the sanction, affirming it over BMO’s argument that Mohns was not prejudiced. The Court determined that prejudice was not a necessary showing. The Court contrasted this case with a prior case — Split Rock Hardwoods, Inc. v. Lumber Liquidators, Inc. — relied on by BMO. In Split Rock, the Court held that prejudice should be considered when granting default judgment for the failure of a party to file an answer promptly. But here, the Supreme Court confirmed that a circuit court can order summary judgment as a discovery sanction if it makes a finding of “egregious conduct” or “bad faith” without a “clear and justifiable excuse.”

Ultimately, the case was sent back down to clear up some issues with damages — because the trial court had awarded damages for both breach of the contract and a claim for unjust enrichment — but the sanction was affirmed.

Key Takeaways:

Discovery is not a game of hide the ball, and judges don’t like it when you treat it like one.
You can only have damages for either breach of contract or unjust enrichment, but not both, for the same underlying conduct.

Applegate-Bader Farm, LLC v. Wisconsin Department of Revenue

Applegate-Bader challenged the Wisconsin Department of Revenue’s (DOR’s) rule making procedure which changed the tax classification for some environmental easements and programs, despite the initial representation that all of the programs would be allowed to utilize standard agricultural use value taxation. The legal arguments went a little like this:

Applegate-Bader: The Wisconsin Environmental Policy Act requires a department to consider the environmental impact of a rule before they pass it, which the DOR failed to do.

DOR: But look at all these documents, over 800 pages, so we must have considered it!

Wisconsin Supreme Court: None of these documents say anything about the environmental impact, which you are quite clearly required to consider. Reversed and remanded.

The Supreme Court concluded that administrative agencies must consider indirect, as well as direct, environmental effects of their proposed rules when deciding to prepare an environmental impact study. Because the DOR did not do that, the Court kicked the rule back down to the circuit court with instructions to remand the environmental issue back to the Department to consider.

The dissent, interestingly, took the following position:

Dissent: I don’t totally agree with your conclusion, but if I did, the remedy is to strike down the entire rule, not to remand it to the DOR for further investigation.

[Full disclosure, the author of this article assisted in the drafting of portions of the lower cases prior to Supreme Court review.]

Takeaways:

For now, the State’s treatment of land placed in a number of conservation easements is still agricultural use value, but that may change if the Department makes specific findings in the future.

Cincinnati Insurance Company v. Leightfuss

Cincinnati Insurance hired a third party, Infratek, to conduct a post-loss claim investigation of home property damage to assess property damage and make coverage decisions. Cincinnati Insurance then denied a large portion of the homeowner’s claim and the homeowners sued both Cincinnati Insurance and Infratek. Infratek claimed immunity under a Wisconsin statute that says agents who provide advisory services “intended to reduce the likelihood of injury, death or loss” are exempt from liability.

No dice, said the court, because the exemption doesn’t apply when the advisory services are provided to limit the potential loss of the insurance company. Therefore, Infratek was not exempt and the suit against them could go forward.

Takeaways:

Agents on behalf of insurance companies are not immune from liability if they fail to assess certain damages and you suffer damages because of that.

Lakeland Area Property Owners Association, U.A. v. Oneida County

In a mineral interest case, the Court of Appeals reviewed whether 1) the County decision to rezone the property violated state law and 2) whether the Property Owner’s Association owned the mineral rights of the property. On both questions, the Court said “no”.

For rezoning, the Court concluded that even though the County changed its comprehensive plan between the initial date when the petition to rezone was filed and when it was approved, the new plan could still apply to the petition to rezone as it was clearly the intent of the County and the petitioner to apply the new plan.

For mineral interests, the Court confirmed long standing precedent that a mineral interest must be used in some way or it will lapse after twenty years. That precedent applies even to interests recorded during the initial three-year grace period.

Key Takeaways:

Municipalities must always remember to keep an updated comprehensive plan aligned with their goals.
Mineral interests must be “used” or they will be lost after twenty years. Recording a statement of claim counts as “use”, so an owner of mineral rights needs to at least record a statement of claim within 20 years to prevent their interest of lapsing.

Clark v. League of Wisconsin Municipalities Mutual Insurance Company

Clark deals with notice requirements when someone intends to file a claim against a municipality. The purpose of the statute is to give the municipality the ability to investigate the claim while the facts and evidence are still fresh. The case can be summarized as follows:

Circuit Court: Case dismissed because Plaintiff didn’t provide to the City a notice of the claim as required under statute.

Plaintiff: But I submitted a form detailing the injury, and the City investigated it, so there is no prejudice to the City.

Court of Appeals: Possibly, so we remand for factual finding on prejudice to the City.

Takeaways:

If you think you have a claim against a municipality, follow the formalities required by law to ensure your case isn’t thrown out on a technicality.

Conclusion

As can be seen, the law changes quickly, and our courts are always issuing new opinions which could have a direct impact on your business or other interests. For more information about how any of these decisions affects you, please contact the author of this article at [email protected] or contact our office at 262-334-3471 or email us at [email protected].

Originally published: April 7, 2021