Court of Appeals Denies Nonprofit Medical Clinics from Claiming Property Tax Exemption

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The Wisconsin Court of Appeals recently held that a hospital owned by a non-profit entity failed to demonstrate that three medical clinics it also owns are not used as “doctor’s offices,” and therefore are not exempt under Wisconsin’s nonprofit hospital property tax exemption.  Mile Bluff Medical Center, Inc. v. Village of Necedah, City of New Lisbon and City of Elroy, No. No. 2017AP751, 2018 WL 1040203 (Wis. Ct. App. Feb. 22, 2018) (slip opinion) (unpublished.)  Mile Bluff is the most recent decision in a line of cases addressing whether medical clinics owned by a nonprofit hospitals qualify for the exemption.

Mile Bluff is a non-profit entity that owns a hospital in Mauston and the three medical clinics at issue in this case.  Mile Bluff sought an exemption from property taxation for the clinics under Wis. Stat. § 70.11(4m)(a).  Under § 70.11(4m)(a), real property owned and used exclusively for the purposes of a non-profit hospital of 10 beds or more devoted primarily to the diagnosis, treatment or care of the sick, injured or disabled is eligible for the exemption provided, among other things, that the property is not used as a doctor’s office. 

In concluding that the Mile Bluff medical clinics are used as doctor’s offices, and therefore not exempt from property taxation, the court considered seven factors previously articulated by other courts as relevant in determining whether a facility is a doctor’s office.  The seven factors the Court analyzed include whether the:

  1. physicians at the clinics owned or lease the facility or equipment;

  2. physicians at the clinics received “variable compensation,” that is, compensation based on their “productivity”;

  3. physicians at the clinics employed or supervised non-physician staff, or received extra compensation for such duties;

  4.  clinics and hospital generated separate billing statements or use separate billing software;

  5.  physicians at the clinics had office space in the clinics;

  6.  clinics provided services of the type that had been formerly performed inpatient at the hospital; and

  7. clinics were open during regular business hours during which time the physicians generally saw patients by appointment.

The Court sided with Mile Bluff on the first factor and assumed, without analysis, that the second factor also supported Mile Bluff’s position. The Court found that the fourth factor did not favor either of the parties.  The Court sided with the municipalities with respect to a majority of the factors—the third, fifth, sixth and seventh factors.  The Court further concluded that the clinics lacked typical hospital amenities, like a gift shop, and did not offer urgent care services, making the clinics more like doctor’s offices. 

The Court also rejected Mile Bluff’s argument that the fact that the clinics were “rural health clinics” and are required by federal and state law to have a certain level of integration with the non-profit hospital that owns them should be considered in determining whether the clinics were hospitals or doctor’s offices. The Court found that this status did not result in any significant change in the nature or manner of patient services, a critical element in determining whether a clinic is a doctor’s office, and therefore was not enough to tip the scales in favor of Mile Bluff’s argument.

Based on these findings, the Court held that the clinics were in fact doctor’s offices and therefore not exempt under the non-profit hospital exemption. 

The case makes clear that there is no bright line test for whether, on balance, property owned by a non-profit is a doctor’s office.  Assessors should carefully weigh the particular facts of each case against the guidelines relied upon by the Court. 

If you have questions on this case or on other property taxation related matters, contact Meg Vergeront at (608) 259-2663.

APPEALS COURT CLARIFIES APPLICABILITY OF WORKER’S COMPENSATION STATUTE TO TEMPORARY EMPLOYEE CLAIMS

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In a recent decision, the Wisconsin Court of Appeals addressed the insurance implications of a car accident made unusual because at least two of the deceased workers were employees of temporary help agencies. See Ehr et al. v. West Bend Mutual Insurance Co. et al., Case No. 2017AP142 (Wis. Ct. App. January 9, 2018) [decision].  In so doing, the Court clarified that worker’s compensation laws—and particularly the exclusive-remedy provision that prevents injured employees from bringing tort suits against their employers—apply differently to temporary workers than to permanent employees.

The accident involved a vehicle owned by the temporary employer and occurred during work-related activities, which unfortunately resulted in the death of three individuals, at least two of which were temporary employees.  It’s the last of these circumstances that complicated matters.

One of the temporary employee’s estate and two surviving minor children filed a wrongful death action in Milwaukee County Circuit Court against Alpine Insulation, the temporary employer, and Alpine’s automobile liability insurer, West Bend Mutual Insurance Company. That suit sought damages for pain and suffering as well as the minor children’s loss of society, companionship, and support.  Id., ¶¶ 3-5.

After answering the complaint, Alpine and West Bend moved for summary judgment on the ground that the plaintiffs’ claims were barred by Section 102.29(6)(b)1 of the Wisconsin Worker’s Compensation statute, which states:

“[n]o employee of a temporary help agency who makes a claim for compensation may make a claim or maintain an action in tort against . . . any employer that compensates the temporary help agency for the employee’s services.”

According to Alpine and West Bend, the plaintiffs’ wrongful death tort claim was barred under this statute because the deceased had been employed by a temporary help agency and Alpine had compensated that agency for the deceased’s services.  As a result, the defendants argued that under Section 102.29(6)(b)1 the plaintiffs could not bring tort claims against Alpine as the deceased’s temporary employer.  The circuit court agreed and therefore granted summary judgment in favor of the defendants. Ehr slip op. ¶ 6.

The Wisconsin Court of Appeals reversed.  The Court noted that, by holding that Wis. Stat. 102.29(6)(b)1 completely bars tort claims a temporary employee may otherwise bring against its temporary employer under all circumstances, the circuit court ignored the qualifying phrase “who makes a claim for compensation.”  The Court held that the plain meaning of the statute governs, such that a temporary employee injured during the scope of his or her temporary employment may seek relief in either of two ways: (1) by making a worker’s compensation claim against his or her permanent employer (the temporary help agency) and be subject to the exclusive remedy provision or, alternatively, (2) by pursuing a third-party claim against his or her temporary employer and foregoing any claim under the worker’s compensation statute.  Id. ¶¶ 14-18.

The Court further rejected Alpine and West Bend’s argument that such an interpretation would unfairly place temporary employees in a more advantageous position than permanent employees.  The Court explained that the exclusive-remedy provision only limits permanent employees’ claims against their employers, and that such employees are free to pursue tort claims against third parties.  The exclusive-remedy provision, the Court continued, places the same limitation on temporary employees vis a vis their permanent employers (the temporary help agency).  The legislature’s adoption of Wis. Stat. § 102.29(6)(b)1 was a reasonable recognition of a “middle ground” for claims by a temporary employee against his or her temporary employer; rather than treat such entities as a truly independent third party and allow a temporary employee to pursue those tort claims in addition to a worker’s compensation claim against the temporary help agency, the temporary employee may only choose one avenue of recovery.  Id. ¶¶ 21-25.

An interesting factual wrinkle that was not explored in this decision is that the driver of the Alpine-owned vehicle was also a temporary Alpine employee, but had been hired through a different temporary help agency than the employee whose estate brought this lawsuit.  One wonders if the plaintiffs could have avoided any potential worker’s compensation statutory complications altogether by filing a claim against only West Bend under the theory that, as the insurer of the Alpine vehicle, West Bend was obligated to provide coverage for any liability arising from the negligent operation of that vehicle.  Additionally, given that the temporary workers were employed by different temporary help agencies, the plaintiffs presumably could have brought suit directly against the driver and possibly his personal auto liability insurer without implicating any potential worker’s compensation statutory limitations.

In any event, in light of the Ehr decision, Wisconsin employers should factor in their increased liability exposure when deciding whether to seek help on a temporary basis.  While it may be cost-effective to avoid taking on additional permanent employees in other areas of their business, the Ehr decision makes clear that businesses employing temporary workers are exposing themselves to additional liability exposure should a temporary employee be injured on the job.  At a minimum, Wisconsin businesses should ensure that all of their liability insurance provides adequate coverage for any potential tort claims brought by a temporary employee.

Court Determines Defendant’s Breach of Contract Constituted a “Wrongful Act”

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The Wisconsin Court of Appeals issued a decision that clarifies an exception to the general rule that attorneys’ fees are not recoverable damages. Talmer Bank & Trust v. Jacobsen, No. 2017AP752-FT (Wis. Ct. App. Jan. 10, 2018). The court held that a litigant may recover attorneys’ fees if he or she is forced into litigation with a third party because of another party’s breach of contract.

Background

The Gomezes entered into a land contract with the Jacobsens. The underling land was owned by the Jacobsens, subject to a mortgage. Pursuant to the contract, the Gomezes made monthly payments to the Jacobsens, and in turn the Jacobsens were supposed to continue making mortgage payments. Unbeknownst to the Gomezes, the Jacobsens missed fifteen consecutive monthly mortgage payments. Eventually the mortgage holder initiated a foreclosure action against both the Gomezes and the Jacobsens. The Gomezes reached a settlement with the bank that allowed them to stay on the property. The Gomezes then filed a cross-claim arguing that the Jacobsens must pay their attorneys’ fees that they incurred in defending the foreclosure action.

Generally in the United States, litigants may not recover attorneys’ fees as damages, but there are exceptions to this rule. The Gomezes invoked the “third-party litigation exception,” which states that a party may recover attorneys’ fees if another party’s wrongful act forces the individual into litigation. It was uncontested that the Jacobsens’ breach of the land contract forced the Gomezes into litigation with the bank, therefore the sole question before the circuit court was whether the Jacobsens’ breach constituted a wrongful act. The circuit court held that a breach could not constitute a wrongful act, and therefore the Jacobsens were not required to pay the Gomezes’ attorneys’ fees.

Court of Appeals’ Decision

On appeal, the Jacobsens argued that their breach of contract did not constitute a wrongful act because a wrongful act is limited to fraud, breach of a fiduciary duty, or “something similar.” The court of appeals rejected this argument. “Our supreme court has unequivocally declared that ‘a breach of contract as well as tort may be a basis for allowing [a] plaintiff to recover reasonable third-party litigation expenses.” ¶ 10 (quoting City of Cedarburg Light & Water Comm’n  v. Glens Falls Ins. Co., 42 Wis.2d 120, 166 N.W.2d 165 (1969)). The court explained that attorneys’ fees are recoverable when such fees are rightly considered part of the damages flowing from the defendant’s breach of contract.

The court’s decision makes clear that when a party’s breach of contract forces someone else into litigation with a third party, such breach is a wrongful action, which permits the individual to recover his or her attorneys’ fees from the breaching party.

Appeals Court Limits Pro Rata Insurance Policy Distributions To Post-Trial Liability Determinations

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In Lovelien et al. v. Austin Mutual Insurance Company et al., No. 2016AP1679 (Wis. Ct. App. Dec. 27, 2017), the Wisconsin Court of Appeals addressed an issue that often arises when multiple claimants allege damages against an insured and the total damages claims exceed the coverage limits of the relevant insurance policy: does Wisconsin law impose any restrictions or other obligations on how an insurer elects to distribute the available funds among the claimants through pre-verdict settlements?

In Lovelien, Austin Mutual had issued a $500,000 liability policy to an insured who was facing claims from multiple parties in excess of that amount arising from a multi-fatality automobile accident.  After failing to reach a global settlement, Austin Mutual settled with all but two of the claimants for $245,000.  Austin Mutual then deposited the remaining $255,000 with the court clerk and the court distributed those limited funds equitably between the remaining two claimants.  Lovelien, slip op. at ¶¶ 5-6.  The two remaining claimants appealed, arguing that Austin Mutual’s settlement and release with the other claimants violated Wisconsin’s “direct action” statute.  Id. ¶ 12. 

Wisconsin’s direct action statute states the following:

Any bond or policy of insurance covering liability to others for negligence makes the insurer liable, up to the amounts stated in the bond or policy, to the persons entitled to recover against the insured for the death of any person or for injury to persons or property, irrespective of whether the liability is presently established or is contingent and to become fixed or certain by final judgment against the insured. 

Wis. Stat. § 632.24.

According to the appellants, Austin Mutual’s partial settlement and release violated the clear intent of this statute by making payments to certain claimants without a determination of each claimant’s equitable pro rata share of the $500,000 policy limit based on the amount of damages each claimant suffered.  Lovelien, slip. op. at ¶ 12.

Writing for a unanimous Court of Appeals, Judge Seidl rejected the appellants’ argument.  Noting that courts are bound by unambiguous statutory language, Judge Seidl explained that the direct action statute merely creates an avenue for a claimant to recover directly from an insurer without having to first establish an insured’s liability.  While the statute does limit an insurer’s exposure to the relevant policy limit, it otherwise is silent as to how an insurer must distribute those funds among the claimants.  To accept the appellants’ argument, the Court held, would be tantamount to impermissibly inserting additional requirements into the statute.  Id. ¶¶ 14-19.

The Court further held that the appellants’ position was unsupported by the Wisconsin case law they cited, as those cases all addressed factually distinguishable post-verdict pro rata distributions where the respective liability of the insured to each claimant had already been established.  Placing the same pro rata burden on an insurer prior to trial would curtail both the insurers’ and claimants’ rights to settle, reasoned the Court, as it arguably would require every multi-claimant dispute to proceed to trial.  Moreover, to the extent that allowing an insurer to enter into potentially inequitable (non pro rata) partial settlements prior to trial creates valid public policy concerns, the Court concluded that it is up to the legislature to determine what public policy best serves the people of Wisconsin.  Id. ¶¶ 20-22.

Having been recommended by the Court for publication as binding Wisconsin precedent, the Lovelien decision raises a number of questions and concerns for those injured by Wisconsin insureds.  Under circumstances where an insured’s policy limits are well below the total amount of damages incurred by multiple injured parties, is an insurer free to simply pick and choose which party or parties get rewarded with the available funds?  May an insurer pay the full policy amount to one claimant and leave the other victims wholly uncompensated?  May an insurer use the threat of paying the available policy limits to other claimants as a sword during settlement negotiations to create leverage? Under the rationale applied by the Court here, the answer to all of these questions now appears to be “yes” in Wisconsin.

In the wake of Lovelien, therefore, parties involved in multi-victim accidents in Wisconsin should attempt to identify as early as possible whether any potentially responsible party may be underinsured and, if discovered, alter their settlement negotiation strategy accordingly.  Under such circumstances, failing to engage in prompt settlement discussions with Wisconsin insurer(s) could result in the policy limits being distributed to other claimants, leaving a party to have to pursue an insured directly to seek redress.

WI COURT OF APPEALS CONFIRMS LIMITED LIABILITY EXPOSURE FOR BANKS UPON EMBEZZLEMENT BY EMPLOYEES

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On December 12, 2017, the Wisconsin Court of Appeals addressed a civil dispute arising from the high-profile criminal embezzlement scheme committed by Koss Corporation Vice President of Finance, Sujata (“Sue”) Sachdeva.  At issue were allegations Koss made against its bank seeking recovery on the theory that the bank committed bad faith in not detecting the embezzlement scheme. See Koss Corp. v. Park Bank, No. 2016AP636 (Wis. Ct. App. Dec. 12, 2017).

Koss’s complaint alleged that Park Bank of Milwaukee, Wisconsin, violated Wisconsin’s Uniform Fiduciaries Act (“UFA”) by allowing Ms. Sachdeva to embezzle about $34 million from Koss accounts for personal use. Ms. Sachdeva used a variety of ways to embezzle the $34 million, including requesting cashier’s checks and cashing checks made out to “petty cash,” as well executing wire transfers to pay personal credit card bills.  Koss alleged the bank’s failure to discern Ms. Sachdeva’s embezzlement scheme amounted to a violation of Wis. Stat. § 112.01(9), which exposes a bank to liability if it permits transactions “with knowledge of such facts that [the Bank’s] action in paying the check amounts to bad faith.”

The bank moved for summary judgment, asserting that no material facts established it had intentionally or deliberately allowed the transactions to occur in bad faith.  At the circuit court, the court held that Koss had failed to cite any evidence that the bank “intentionally ignored Sachdeva’s embezzlement,” without which there was no way to show the bank acted in bad faith.  The court further noted that the circumstances established only the bank may have been negligent in failing to uncover the fraudulent conduct, but that one of the purposes in adopting the UFA was to eliminate negligence claims against banks arising from transactions where employees or other persons acting as an agent of a depositor commit an act causing a loss to the depositor. 

On appeal, Koss took the position that, although the bank lacked actual knowledge of Ms. Sachdeva’s embezzlement scheme, the circumstances raised enough red flags that a factfinder could conclude that the bank’s failure to detect the fraudulent transactions amounted to bad faith under the UFA.  In support of its position, Koss cited to (1) the large volume of improper checks—adding up to millions of dollars—Sachdeva requested, (2) the bank allowing unauthorized Koss representatives to request, endorse, and pick up checks, (3) the bank’s acceptance of checks payable to companies with cryptic initials (e.g., “N.M., Inc.” for Neiman Marcus and “S.F.A., Inc.” for Saks Fifth Avenue), (4) after-the-fact deposition testimony from a bank employee that the large number of cashier’s checks requested were “strange,” (5) Ms. Sachdeva’s testimony that she chose the bank at issue because of the ease in which she could conduct her fraudulent transactions, and (6) the bank’s failure to implement and/or enforce proper fraud-detection policies and procedures.

Despite this evidence, the Court of Appeals affirmed the circuit court by dismissing Koss’ claim of bad-faith.  Consistent with cases from other jurisdictions interpreting the UFA, our Court of Appeals concluded that to effectively bring a claim of bad faith under the UFA a depositor needs “proof of two elements: (1) circumstances that are suspicious enough to place a bank on notice of improper conduct by the [employee embezzling the depositor’s money on deposit]; and (2) a deliberate failure [by the bank] to investigate the suspicious circumstances because of a belief or fear that such inquiry would disclose a defect in the transaction at issue.”  Id., ¶ 27.

While the Appeals Court acknowledged that Koss cited ample evidence to establish the bank’s negligent failure to investigate and discover Ms. Sachdeva’s embezzlement scheme, it concluded that Koss failed to adduce facts sufficient to allow a factfinder to determine that the elements of proof for bad faith under the UFA were satisfied:

Although the transactions Sachdeva engaged in may appear suspicious or odd in hindsight, Koss has not cited any evidence to indicate that, in the larger context of Koss’s banking practices and the banking practices of Park Bank’s other corporate clients, the transactions were suspicious enough to put Park Bank on notice of Sachdeva’s misconduct.  Koss also fails to cite any evidence indicating that Park Bank deliberately declined to investigate Sachdeva’s transactions due to a fear that further inquiry would disclose defects in them.

Id., ¶ 51.  The Appeals Court then concluded that allowing Koss’ claim to proceed would be contrary to the UFA’s purpose of insulating banks from the misconduct of a depositor’s employees.  Id., ¶ 52.

This decision highlights how important it is for businesses to adopt and enforce internal monitoring protocols for financial activities by their employees and agents.  By adopting the UFA, Wisconsin has allocated the risk of loss stemming from fraudulent financial transactions to businesses rather than banks in all but the most egregious circumstances.  Businesses failing to take notice of suspicious financial activities (1) not only expose themselves to the risk of severe financial losses, but also (2) if the business has publicly traded securities then they may expose themselves to possible violations of federal securities law for failing to properly ensure the accuracy of their financial reporting.  See id., ¶ 12 n.4 (noting an adverse judgment entered against Koss pursuant to SEC lawsuit).

Please feel free to contact Greg Jacobs or Rich Latta if you would like to discuss any of the matters discussed above.

While a law firm with which Mr. Latta was previously affiliated may have provided legal representation of a party mentioned in Koss Corporation v. Park Bank, Mr. Latta did not represent any party involved and the thoughts expressed herein are strictly his own.

Circuit Court Ordered to Enforce Option-to-Purchase Provision in Commercial Real Estate Lease

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District II of the Wisconsin Court of Appeals recently remanded a commercial lease dispute back to the Waukesha County Circuit Court, directing the court to enforce the parties’ agreed-upon option-to-purchase provision as written.  See Headstart Building, LLC v. National Centers for Learning Excellence, Inc., No. 2016AP434 (Wis. Ct. App. Nov. 8, 2017).

The dispute originated from a 2002 commercial lease in which Headstart Building, Inc. (“Headstart”) agreed to lease real estate property in Waukesha to National Centers for Learning Excellence, Inc. (“NCLE”).  Id. ¶ 5.  The lease included a provision allowing NCLE to invoke an option to purchase the property at any time.  The following language in the option-to-purchase provision is the focus of the parties’ dispute:

In the event Tenant shall elect to exercise Tenant’s option to purchase the Premises, Landlord and Tenant shall each choose an appraiser to appraise the Premises which appraisals must be completed within forty-five (45) days of the date Tenant notifies Landlord that it intends to exercise its option to purchase.  In the event the fair market value of the Premises in the two appraisals differs by no more than five percent (5%), the Appraised Value shall be the average of the two appraisals.  In the event the appraised value of the Premises in the two appraisals differs by more than five percent (5%), the two appraisers shall agree upon a third appraiser and the result of such third appraisal shall be the Appraised Value.

Id. ¶ 6.

In December 2012, NCLE invoked its right to purchase the property, and the two parties commissioned their respective appraisals.  Headstart’s appraiser valued the property at $6.88 million dollars while NCLE’s appraiser issued a $4.075 million valuation.  Upon comparing the two appraisals, it became clear that the cause of such a wide discrepancy was the differing methodologies employed by the appraisers.  Headstart’s appraiser determined the fair market value with consideration of the current NCLE lease encumbrance, while NCLE’s appraiser calculated the fair market value of the property free and clear of the current lease.  Id. ¶¶ 7-8.

Rather than following the terms of the option-to-purchase provision and have their respective appraisers seek a third party to resolve the conflict, the parties instead engaged in written correspondence disputing the proper methodology to calculate the fair market value of the property.  Once those communications broke down, Headstart filed suit in Waukesha County Circuit Court requesting specific performance of the option-to-purchase (at $6.88 million) and damages arising from NCLE’s bad faith breach of the lease.  NCLE filed a declaratory judgment counterclaim, requesting the court to declare the proper appraisal methodology.  Id. ¶ 9.

After a two-day bench trial, Judge Haughney issued an oral ruling rejecting Headstart’s breach of contract and bad faith claims, though it was unclear from the record whether the grounds for the dismissal was based on Headstart’s failure to follow the option’s procedure of seeking a third appraisal or because the court concluded that the parties’ differing appraisal methodology positions represented a failure to reach a meeting of the minds, rendering the entire provision unenforceable.  Judge Haughney requested supplemental briefing regarding the fate of NCLE’s declaratory judgment counterclaim, and ultimately dismissed that claim as moot on the ground that the option provision was unenforceable and must be stricken from the lease in its entirety.  Id. ¶¶ 10-11.

After NCLE filed an appeal seeking to revive its declaratory judgment counterclaim, the Wisconsin Court of Appeals overruled the Circuit Court’s order striking the option from the lease.  Writing for the Court, Judge Hagerdorn noted that, while essential contractual terms (such as the purchase price in a real estate transaction) must be definite in order to be enforceable, it is well-settled under Wisconsin law that the terms need not be 100% certain so long as they are “capable of being ascertained from the agreement itself.”  Id. ¶ 17.  The Court referenced a long line of Wisconsin precedent upholding real property contracts setting a “fair market value” price to be determined by appraisement, and concluded that the parties’ dispute was one of differing interpretations of agreed-upon contractual terms.  Id. ¶¶ 17-22.   In conclusion, the Court found that the provision provided a simple, straightforward and definite means of determining the purchase price: either the average of the parties’ respective appraisals or, if the difference between those values was too great, the third appraised value of the property.  Id. ¶ 22.

Despite this conclusion, however, the Court found that substantive questions regarding the meaning of the option-to-purchase provision were not before it on appeal and remanded the case to the Circuit Court to address NCLE’s declaratory judgment counterclaim regarding whether the parties must appraise the property with consideration of the NCLE lease encumbrance.  Id. ¶¶ 24-25.  In a concurring opinion, Presiding Judge Reilly disagreed with these remand instructions, concluding that the proper methodology for determining the fair market value of commercial real estate is not a question of law for the courts to decide and that the provision here provides a dispute resolution procedure (i.e., a third appraisal) that should be enforced.  Id. ¶¶ 26-29.

While exercising restraint in only addressing the narrow question presented to it on appeal (whether NCLE’s declaratory judgment claim was properly dismissed), the Court of Appeals’ analysis leaves little doubt in the enforceability of the entirety of the parties’ option-to-purchase provision, including their agreed-upon means of resolving any valuation disputes through the use of a third appraiser.  It will be interesting to see if the Circuit Court follows the Court of Appeals’ lead on remand or instead elects to resolve the substance of the parties’ “fair market value” appraisal methodology dispute, which is one of first impression in Wisconsin.  See id. ¶ 24 n.7

Court of Appeals Decides Wis. Stat., Ch. 90, Applies Equally to Cities, Villages, and Towns

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Over 150 years ago, the Wisconsin legislature passed a law, now codified in Chapter 90 of the Wisconsin Statutes, to resolve conflicts over fences separating neighboring agricultural lands.  Chapter 90 requires fences partitioning farmland from neighboring properties. Chapter 90 also provides detailed requirements for what constitutes a sufficient partition fence and provides cost sharing and dispute-resolution procedures. Chapter 90 assigns towns to assist in resolving disputes between property owners regarding partition fences on land located within their borders.  Chapter 90 also references cities and villages, but it makes no similar assignment to such municipalities. The law therefore is ambiguous about whether cities and villages are obligated to resolve fence disputes.  

In White v. City of Watertown, No. 2016AP2259 (Oct. 12, 2017), the Wisconsin Court of Appeals resolved this ambiguity and clarified that Chapter 90 applies to cities, villages, and towns alike.

The Whites owned and farmed land in the City of Watertown on which they maintained a partition fence. The cost and maintenance of the fence resulted in a dispute between the Whites and their neighbors. Invoking the procedures of Chapter 90, the Whites asked the City to assist in resolving this dispute. When the City refused, the Whites filed suit, asking the circuit court to clarify that the City was legally obligated to help. The circuit court observed that Chapter 90 is ambiguous but held that Chapter 90 applies to cities and villages, the same as it does to towns.

The City appealed, and the Court of Appeals affirmed. The appellate court agreed with the circuit court that the text of Chapter 90 is ambiguous. On the one hand, the statute requires “fence viewers” to carry out specified governmental duties, which include resolving disputes between property owners. And the statutory definition of fence viewers includes town supervisors, city alderpersons, and village trustees. On the other hand, most of Chapter 90’s references to “fence viewers” include only “town fence viewers.” Further, additional provisions in Chapter 90 appear to contemplate administration and enforcement only by towns.

To resolve this ambiguity, the Court of Appeals looked to the Chapter’s legislative history. The Court found that, prior to 1875, the Chapter contained no references to cities or villages. However, in 1875 the legislature amended Chapter 90 to apply to cities, villages, and towns alike. In 1878, the legislature revised the Wisconsin Statutes. Without reason, most of the language added in the 1875 amendments—language clarifying that the Act applied to cities and villages, as well as to towns—was omitted from the 1878 revised publication. Concluding that the omission “must have been inadvertent,” the Court of Appeals held that, when farmland is in a city or village, that municipality must administer and enforce Chapter 90’s requirements just as a town would if the land were within the town’s boundaries. As a result, the Whites prevailed and the City of Watertown will have to assume Chapter 90 duties with respect to the Whites’ land.

The Court of Appeals in White clarified that cities, villages, and towns must now assume the duties of fence viewers under Chapter 90. The main duty for fence viewers under Chapter 90 is to resolve disputes between adjoining property owners with lands divided by partition fence. For example, under Wis. Stat. § 90.10, fence viewers can direct property owners to repair or rebuild partition fences. Further, under § 90.07, fence viewers, under certain circumstances, may locate the line upon which a partition fence between adjoining lands must be built.

Multi-Month Medical Leave Not A Reasonable Accommodation Under the ADA

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The Court of Appeals for the Seventh Circuit recently held in Severson v. Heartland Woodcraft, Inc., 2017 U.S. App. LEXIS 181197*, 872 F.3d 476 (7th Cir. 2017) that a leave for medical purposes of two months or more is not a reasonable accommodation under the federal Americans with Disabilities Act (ADA).  In so doing, however, the Court left open the possibility that shorter or intermittent leaves might be, under appropriate circumstances.    

In Severson, the plaintiff took the full 12-week allotment of medical leave under the federal Family and Medical Leave Act (FMLA) due to back pain.  During his leave, he scheduled back surgery for day his FMLA leave expired.  Severson told the employer that he would not be able to work for two-to-three months after the surgery and requested non-FMLA medical leave for the recovery time.  The employer denied the request, given that Severson would be unable to perform any part of his job for several months.    

The court held that the employer’s decision did not violate the ADA.  The ADA, the court explained, is an anti-discrimination statute, not a medical-leave entitlement.  Id. at *3.  According to the court, the ADA is designed to prevent discrimination against a “qualified” individual, defined as a person who, “with or without reasonable accommodation, can perform the essential functions of the employment position.”  Id.  Thus, protection under the ADA is “expressly limited to those measures that will enable the employee to work.  An employee who needs long-term medical leave cannot work and thus is not a ‘qualified individual’ under the ADA.”  Id. (citing Byrne v. Avon Prods., Inc., 328 F.3d 379, 381 (7th Cir. 2003)).  Based on these considerations, the court determined that Severson was not a qualified individual under the ADA because the requested accommodation—a leave of two-to-three months—would not allow him to perform the essential duties of his job and thus was not reasonable.   

Employer Takeaway

Severson provides definitive guidance to employers in the Seventh Circuit with respect to employee requests for medical leave for two or more months, but only if the leave is not mandated by a medical leave statute like the federal FMLA or any state law counterparts.  While Severson also suggests that even a leave of more than a couple of weeks may not be a reasonable accommodation, employers should still proceed with caution in responding to requests for leave of less than two months because the reasonableness of the leave will turn on the particular circumstances of each request.  Employers also should keep in mind that Severson does not permit employers to deny extended leave mandated by another statute.  In such cases, of course, employers must provide the leave whether or not it would be considered a reasonable accommodation under the ADA. 

For additional guidance or questions related to employers’ responsibilities under the ADA, contact Meg Vergeront at (608) 256-0226.    

Management Policies Generally Will Not Abrogate Employment-At-Will

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The Wisconsin Court of Appeals recently reversed a circuit court decision that awarded a physician-employee $2.2 million against his employer, Dean Health Systems (Dean). Bukstein, M.D. v. Dean Health Systems, Inc., No. 2016AP920 (Wis. Ct. App. July 20, 2017) (recommended for publication). The dispute revolved around whether Bukstein was an employee at-will who Dean could terminate for any reason, with or without cause, without being subject to a breach-of-employment contract claim.

Background

Bukstein initially signed an employment agreement with Dean that confirmed that Buckstein was an at-will employee.  After an investigation into allegations of inappropriate touching of patients, Dean fired Buckstein “without cause,” pursuant to the at-will provision in the initial agreement.  Bukstein sued, arguing that one of Dean’s management policies modified his at-will employment status, and afforded him greater employment protection from termination. Buckstein argued that the policy “‘change[d] the employment relationship by creating a ‘contract separate from or supplemental to the [employment agreement].’”  The decision did not identify relevant content of the policy at issue.    

Court’s Decision

The court of appeals rejected Bukstein’s argument in one fell swoop, stating that “[t]he problem with Bukstein’s reliance on the [management] policy is that, under controlling case law, the policy does not modify Dean’s right to terminate Bukstein under the at-will provision in the employment contract.”  The court explained that a policy such as the one in this case “does not modify or take precedence over an at-will employment agreement” unless the “only when” rule applies.

The “only when” rule provides that policies “alter an established at-will employment relationship ‘only when’ the policy ‘contains express provisions from which it can reasonably be inferred that the parties intended to bind each other to a different employment relationship’ than the established at-will relationship.’” The court stated that Bukstein failed to point to any language in Dean’s management policy that could support a reasonable inference that the parties intended to change their at-will employment relationship.  Therefore, the court held that Dean did not breach its contract with Bukstein when it relied on the at-will provision in the employment agreement to terminate Bukstein “without cause.”

Employer Take-Away

Employers that issue policies governing the employment relationship, such as policies setting the duration of employment or conditions upon which it may terminate employees, should carefully examine the policy language to determine whether that language could trigger the “only when” rule. A decision from the Wisconsin Supreme Court, Ferraro v. Koelsch, 124 Wis.2d 154, 163-65, 368 N.W.2d 666 (1985), gives a few examples of the kinds of polices that might trigger the “only when” rule.  Such policies include those that (1) govern employees in exchange for “continued employment,” (2) establish a layoff procedure based on seniority, and (3) provide that “discharge [will] only be for ‘just cause.’”

Associate Olivia Pietrantoni assisted in researching and writing this post.

The Not-So-Scenic Pit: Court Reaffirms Limited Local Control Over Certain Solid Waste Facilities

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The issue of local control is once again front and center in a recent Wisconsin Court of Appeals decision, Scenic Pit LLC v. Village of Richfield, No. 2015AP2291 (June 28, 2017) (recommended for publication).

Scenic Pit LLC sought to open a clean fill solid waste facility in the Village of Richfield. Such facilities accept disposal of only certain low hazard wastes. The Village took the position that Scenic needed to obtain several local approvals, including for rezoning the property, for a conditional use permit, and for a construction storm water and erosion control permit. Id., ¶4. Scenic applied for construction permits from the Village, but it did not attempt to acquire the storm water and erosion control permit or the rezoning of the property. Id., ¶4. The Village denied Scenic’s application for construction permits. Id.

Scenic also applied for and obtained a Wisconsin Pollution Discharge Elimination System (WPDES) general permit from the Wisconsin Department of Natural Resources (DNR) for construction site storm water runoff and erosion control. Id.

When the Village denied the construction permits, Scenic sued seeking a declaratory judgment that it was not required to comply with local approvals and an injunction ending the Village’s interference with its proposed plan. Id., ¶5. Both Scenic and the Village moved for summary judgment. Id.

The circuit court granted summary judgment to the Village, on the ground that under the authority of Willow Creek Ranch, LLC v. Town of Shelby, 2000 WI 56, 235 Wis. 2d 409, 611 N.W.2d 693, Scenic was required to comply with all local ordinances unless “‘state and local interests are diametrically opposed,’” which the court found they were not. Id.

On appeal, Scenic argued that the DNR had exempted clean fill facilities from needing to obtain the kind of local approvals the Village was requiring. The court of appeals agreed with Scenic. The court explained that the legislature has designated the regulation of solid waste facilities as a matter of statewide concern. Id., ¶8. While a municipality may regulate matters of statewide concern, it may only do so as long as local ordinances do not conflict with state law. Id.

The court relied heavily on DeRosso Landfill Co. v. City of Oak Creek, 200 Wis. 2d 642, 547 N.W.2d 770 (Wis. 1996), which it explained was directly on point. The DeRosso court had previously determined that the statutory and regulatory scheme allowed DNR to exempt low hazard waste facilities from local requirements that applied to most other waste facilities and that this scheme amounted to an express withdrawal of municipal power to require local approvals. Id., ¶11. 

The Village attempted to distinguish DeRosso on the ground that the precedent does not apply to local zoning. That, the Village argued, placed its dispute with Scenic beyond the scope of DeRosso decision. Id., ¶14-19. The court disagreed, explaining that the precedent on which the Village was relying, Willow Creek Ranch, LLC v. Town of Shelby, 2000 WI 56, 235 Wis. 2d 409, 611 N.W.2d 693, was inapposite and simply did not address the issue raised here, nor did it conflict with the rationale in DeRosso. Id., ¶¶14-19.

After holding that DeRosso controlled and that any local approvals required to construct Scenic’s facility were preempted, the court went on to examine whether the Village’s zoning ordinance and construction storm water and erosion control regulations were local approvals. Id., ¶19. The court concluded that they were, based on the very broad definition of “local approval” found at Wis. Stat. § 289.33(3)(d). Id., ¶29.

The takeaway from this case is that municipalities have limited control over the siting of certain solid waste facilities such as low-hazard clean fill facilities. However, the court was careful to point out that DNR regulations still control siting of such facilities. As the court explained, “[l]eaving the regulation of clean fill facilities to DNR may or may not be good policy, but it is what the legislature and DNR have done through statute and administrative rule (as interpreted by the supreme court.)” Id., ¶24.

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