Wisconsin Business and Commercial Litigation

In my last post, I talked about a case I was working on where my client’s employee stole money from my client in order to repay a previous employer from whom he had also stolen money.  My client demanded that the previous employer, to whom the stolen money was paid, return the money.  The previous employer refused, and litigation followed. 

My client sought return of the money under, among other things, a theory of unjust enrichment.  The trial court agreed that stolen money should be returned, and granted summary judgment to my client directing repayment.  The court reasoned that stolen money, if it can reasonably be identified as the stolen money, should be returned to its proper owner, much like any other type of property.  To permit a party to keep stolen money is bad public policy — for instance, it encourages serial thefts, and encourages people to “look the other way” when they knew or should have known about a crime.

This outcome is fair, even when the receiving party didn’t know at the time of receipt that the money was stolen.  After-acquired knowledge of the source of the mony is sufficient to fulfill the elements of unjust enrichment.

Photo courtesy of  CarbonNYC  under this license.

In Anderson v. Hebert, the District III Wisconsin Court of Appeals reviewed a Barron County decision regarding the application of the exclusive remedy of workers compensation to a claim alleging post-employment defamation.  The plaintiff resigned from his Barron County Highway Department post after his part in a scheme to overcharge the state by falsifying county work records came to light.   Hebert, the county administrator, made a number of statements on the topic to the local media and in an open meeting of the County Board.  Anderson sued, claiming among other things, that the statements were defamatory.

The County won summary judgment on the defamation claim, arguing that Farady-Sultze v. Aurora Medical Center, 2010 WI App 99, 327 Wis. 2d 110, 787 N.W.2d 433 “stands for the proposition that the Worker’s Compensation Act provides the exclusive remedy for defamation by an employer, even if the defamation occurs after the employee has been terminated.”  Anderson appealed, and the court of appeals reversed:

We conclude the language of the Act is plain and unambiguous. The Act’s exclusive remedy provision states that, where an injury is covered by the Act, “the right to the recovery of compensation under [the Act] shall be the exclusive remedy against the employer, any other employee of the same employer and the worker’s compensation insurance carrier.” WIS. STAT. § 102.03(2). An injury is covered by the Act where certain conditions are present. See WIS. STAT. § 102.03(1).

As relevant here, an injury is only covered if, at the time of the injury: (1) both the employer and employee are subject to the provisions of the Act; and (2) the employee is performing service growing out of and incidental to his or her employment. WIS. STAT. § 102.03(1)(b)-(c)1. It is undisputed that the injury to Anderson–the alleged defamation–did not occur until after Anderson resigned. Thus, at the time of the injury, Anderson was not the County’s employee and was not subject to the provisions of the Act. See WIS. STAT. § 102.03(1)(b). Furthermore, because he had already resigned, Anderson was not “performing service growing out of and incidental to his employment” at the time of the injury. See WIS. STAT. § 102.03(1)(c)1. Anderson’s injury therefore is not covered by the Act. Consequently, the Act’s exclusive remedy provision does not bar his defamation claim.

That’s the current state of the law.  However, stay tuned for what is likely to be a request for review by the Supreme Court. 

Highway truck photo courtesy OregonDOT’s photostream via this creative commons license.

At my recent presentation to the Muskego Area Chamber of Commerce, the issue of insurance coverage for company employees arose.  Many employees, and even owners, are understandably concerned about the existence and scope of insurance coverage for acts taken in the course of employment. 

Two events are crucial to making sure that you’ve got the coverage you want.  The first is bringing the issue up with your insurance agent, and also with your lawyer.  You can’t make a good decision if you don’t know what coverage is available, what it costs, and what potential problems you might face.  Talking with both your agent and your lawyer should cover all these bases.  By the way, if your agent isn’t bringing this issue up to you (or hasn’t brought it up to the owner/manager of the company for which you work) it might be time to find a new agent.

Second, once the decision has been made, you have to confirm that what you’ve got is what you’ve asked for.  When you get the policy, review the language.  Does it say what you think it should say?  Also, I’d take the policy back to your lawyer and find out if the language in the policy is sufficient to effectuate the decision you made earlier. 

If you’re an employer, I can tell you now that this issue is important to your employees.  If you’re an employee, let your employer know that the issue is important to you, and find out what you can about how (and if) you’re protected.

My firm regularly publishes an employment law update, filled with summaries of the latest cases.  Have a look at the most recent edition:

http://www.hinshawlaw.com/employment-practices-alert-05-03-2010/#Employer

A new bill in the Wisconsin Legislature would make employers liable for “workplace bullying.”  Jack Zemlicka of the Wisconsin Law Journal describes the legislation:

Currently, workers’ compensation is typically the exclusive remedy for an employee with a claim against an employer. But Assembly Bill 894 provides that an employee can sue over an abusive work environment and potentially recover medical expenses, back pay, front pay, compensation for emotional distress, punitive damages and attorney fees.

This bill even has its own website, which describes the bill as part of a “movement.”  Thankfully, none of the states to which the “movement” has spread have gone so far as to accept the proposal.

Since 2003, 17 states have introduced similar proposals, but none have passed, according to the office of Rep. Kelda Roys, a sponsor of the Wisconsin legislation.

If you’re an employer, keep your eyes on this one.  This could be full-time employment for plaintiff and defense lawyers alike.

Argument image courtesy Francis Carnauba’s flickr gallery through this creative commons license.

In Gillitzer v. Andersen, the court of appeals once again addressed the divisibility of various employment-related covenants.  Employees signed a contract agreeing that: 1)  if the employer paid for their electric apprenticeship training, and the employee left the company’s employ within four years, the employee would repay the training costs;  and 2) the employee would, for four years after leaving the company, not solicit present or past customers, employees, or disclose price or customer lists.  The employee defendants, of course, left before the four years was up and Gillitzer wanted its money back.

The employees claimed that the unreasonable non-compete provision, under Streiff v. American Family Mutual Insurance Co., 118 Wis. 2d 602, 348 N.W.2d 505 (1984), was indivisible from the admittedly reasonable repayment provision, and should therefore be struck down.  Gillitzer claimed that admittedly unreasonable non-compete provision, under Star Direct, Inc. v. Dal Pra, 2009 WI 76, 319 Wis. 2d 274, 767 N.W.2d 898, was divisible from the reasonable and enforceable repayment provision.

The court ducked the decision, finding the provisions divisible under both cases:

Both cases describe the divisibility test in terms of whether the provisions must be read together to determine the meaning of either. See Streiff, 118 Wis. 2d at 612; Star Direct, 319 Wis. 2d 274, ¶78. Both acknowledge the fact-intensive nature of the divisibility analysis. See id. We do not decide, because it is not essential to our resolution of this appeal, whether the Star Direct test for divisibility is new and different from the test set forth in Streiff. We conclude that under the court’s language in either Streiff or Star Direct, the training reimbursement provision is divisible from the non-compete provision.

Whether viewed under the Streiff or Star Direct language, the training reimbursement provision here is clearly divisible from the non-compete clauses.

For those involved in drafting, enforcing, or challenging non-compete or comparable provisions, take note of the court’s comments about both Streiff and Star Direct.

Contract picture courtesy ol slambert flickr gallery under this creative commons license.

In Cape & Sons v. Streu Construction (Sept. 9, 2009), the District II Court of Appeals addressed a creative twist on employer liability for employee actions.  Cape sued Beaudoin, one of Cape’s employees, and two other companies that colluded with Beaudoin in a bid-rigging scheme that allocated bids to each of the three companies in turn.  The defendants argued that the doctrine of respondeat superior (which imputes an employee’s actions within the scope of its employment to its employer) applied to constructively make Cape & Sons part of the bid-rigging process, thereby preventing liability (although the scheme was one of the reasons that Cape & Sons eventually sought bankruptcy protection).

To reverse the trial court’s conclusion that the doctrine applied and prevented Cape & Sons from recovering, the appellate court dusted off an 1866 case (Zulkee v. Wing, 20 Wis. 429) in which the Supreme Court concluded that respondeat superior applies “only as between the master or principal and third persons,” and was not applicable in a suit between an employer and employee. 

Cape & Sons victory was not the only September 9 setback for the corporate defendants, who also lost the coverage fight with their insurance companies, leaving payments of about $1.15 million on the table.  This second decision is an important lesson for plaintiffs that the language of the complaint is crucial to triggering coverage for defense and/or indemnity purposes.

As most of you know, if you’ve read my previous postings (see June 12, 2009), the City of Milwaukee passed, through so-called direct legislation, an ordinance requiring employers to provide paid sick leave for all workers.  The legislation was later found unconstitutional because, among other things, the phrasing of the issue on the ballot was overly vague. 

Proponents of the legislation appealed the ruling.  Last week, the City of Milwaukee announced that it was not joining in the appeal.  Naturally, the private groups supporting the legislation and the appeal (in all other instances known as special interest groups) argue that by not joining the appeal, the City is turning its back on all those who voted in favor of the legislation.

This argument ignores the finding of the court that the phrasing of the issue on the ballot left the voters without a real understanding of what they were voting on.   However illogical, the argument is typical of that used to support this and similar issues that require business owners (including stockholders) to subsidize services provided to the community at large.

This article in the Wisconsin Law Journal discusses the issues in greater detail.

In Maypark v. Securitas Security Services USA, Inc. (Sep. 1, 2009), the District III court of appeals was presented with a unique (to be charitable) fact pattern.  Security Manager Schmidt, employed by Securitas, which was the security services subcontrator for Polaris, was responsible for creating photo ID badges for Polaris employees.  One lonely night, Schmidt copied the photographs of about thirty female Polaris employees, took them home, printed them out, ejaculated on them, and posted pictures of the sullied photos on a number of websites. 

Upon learning of the website contents, Polaris notified Securitas, which immediately terminated Schmidt’s employment.  Schmidt removed the offending photos from the websites.  Nevertheless, at a trial brought by ten of the women in the pictures, Securitas was found liable for negligent training and supervision.

District III confessed some confusion arising from recent Supreme Court precedent:

However, given recent guidance from our supreme court, it is unclear how we are to set forth our analysis.  Depending on the cases we review, we should either (1) evaluate whether Securitas had a duty under the circumstances of this case, see Hocking v. City of Dodgeville, 2009 WI 70, PP10-13 . . . , or (2) consider whether Securitas’s actions constituted a breach of the duty of ordinary care, see Behrendt v. Gulf Underwriters Insurance Co, 2009 WI 71, PP15-31 . . . .

Ultimately, the court determined that its confusion didn’t really prevent a reasoned conclusion.

We conclude it does not matter which approach we employ because, in the end, they are one and the same.  A conclusion of no negligence under the first approach requires that we determine the defendant was not required to act, while under the second it requires that we determine there was no breach for failing to act because the defendant was not required to act.  . . .  Without explicitly employing either approach in this case, we simply conclude Securitas was not negligent, as a matter of law.

The court ended up relying on another negligent supervision case to determine that Schmidt’s acts were, in something of a judicial understatement, not reasonably foreseeable.  Maypark should bring some comfort to employers who fret about the seemingly endless limits of their liability for the acts of employees.

Brilliance Business Solutions, Milwaukee-based website design and search engine optimization firm, has invited me to post on the Brilliance blog.  I will briefly discuss the use of social networking sites by lawyers and employers.  The information that’s available on any one person has multiplied astronomically in the last few years. 

Some information is put out on the web in first-person format (facebook, myspace, etc.) and some is put out there by others (check out Sorry I Missed Your Party and the facebook open group 30 Reasons Girls Should Call It a Night ).  Regardless of how it gets there, the information can come back to haunt you. 

These sorts of sites provide fertile ground for lawyers seeking to obtain information about a plaintiff or witness.  Employers doing due diligence before hiring may run across all sorts of things that should not impact the hiring decision, but why take the chance?  That applies equally to either – it’s no good for the potential employee, and creates the possibility of litigation for an employer who misuses the information. 

For lawyers, doing a quick search on the deponent or party is always a good idea.  You  never know what might be behind the next mouse click.