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Damage Caps Analysis

The decision has the potential to become a trap for Wisconsin defense attorneys who don’t spend much time in federal court, because damage caps need not be pleaded in Wisconsin state courts, but dicta in this case suggests they should be in federal court.

The Wisconsin Supreme Court considered the issue in Anderson v. City of Milwaukee, 208 Wis.2d 18, 559 N.W.2d 563 (1997). In Anderson, the plaintiff sued the City for the alleged negligent design of a walkway.

In its answer, the City failed to assert the applicable $50,000 municipal liability limitation provided by sec. 893.80(3), either in its answer, or even within the 90 day period for motions after verdict. It was not until months later that the City finally asserted the cap as a defense.

The Wisconsin Supreme Court held that the City did not waive the limitation for several reasons. First, the court noted that a damage limitation is not listed as an affirmative defense that must be asserted in sec. 803.02(3).

Second, the court concluded that the purposes of fairness and avoiding surprise would not be served by requiring that it be asserted. Citing a Minnesota case, Snyder v. City of Minneapolis, 441 N.W.2d 781, 788 (Minn.1989), the court quoted, “as the cap also does not bar plaintiff’s action completely it would appear [the surprise factor, noted in Charles Wright & Arthur Miller, Federal Practice and Procedure sec. 1271] does dictate the cap need not be pled as an affirmative defense. The other factor considered by Wright and Miller is fairness, ‘a short-hand expression reflecting the judgment that all or most of the relevant information on a particular element of a claim is within the control of one party or that one party has a unique nexus with the issue in question and therefore that party should bear the burden of affirmatively raising the matter.’ Evidence adduced at trial, or control of that evidence is unaffected by a failure to plead the cap and the plaintiff is, or ought to be, well aware of the special nexus between the municipality and the damage cap.”


Seventh Circuit Court of Appeals

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Damage caps may need to be pled

As noted, the Seventh Circuit’s decision in the case at bar does not decide the issue conclusively one way or the other. However, what dicta is in the decision is directly contrary to the rule in Wisconsin state courts.

The court found it irrelevant that the cap is only a partial defense, likening it to comparative negligence, which is also only a partial defense, but must, nevertheless, be asserted in the pleadings.

The court also stated, “if knowledge that noneconomic damages were unavailable would have induced her to devote less effort to proving up such damages and more to proving her economic damages,” and called this argument “powerful.”

Exactly why a plaintiff should not be assumed to have just as much knowledge of the relevant statutory law as a defendant, including any applicable damage caps, the Seventh Circuit did not explain.

Given the ease with which a damage cap can be asserted in an answer, and the potential liability for not doing so, defense attorneys need to be aware of this dicta, and not be the one to find out the hard way that the law is different in federal court.

– David Ziemer

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David Ziemer can be reached by email.

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