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State Supreme Court to take on four new cases

The Wisconsin Supreme Court has accepted four new cases. They are Brenner v. City of New Richmond, WPS v. Arby Construction, State v. Sutton, and the Estate of Kriefall v. Sizzler USA Franchise. (Staff photo by Kevin Harnack)

The Wisconsin Supreme Court has voted to accept four new cases.

2010AP342 Brenner v. City of New Richmond

This case examines the proper legal standard for determining whether a constitutional taking has occurred in an inverse condemnation case involving a runway extension at a municipal airport.

The city argues that the Court of Appeals created a new conceptual category relating to airplane overflight inverse condemnation cases, holding that if the overflights have a direct, immediate and substantial effect on the use and enjoyment of the land a constitutional taking occurs.

The city says that historically there have been only three conceptual categories that are applied when an owner of real estate seeks compensation from the government because the government’s action has claimed to have resulted in a constitutional taking. Those three categories are physical occupation, regulatory action, and consequential damages.

The city also argues that when determining if a taking has occurred, the owner’s property must be considered as a whole, rather than being segmented into subparts for the purpose of analyzing if a subpart of the property has been taken. From St. Croix County.

2010AP878 WPS v. Arby Construction

This case involves a dispute over insurance coverage following a propane gas pipeline explosion that killed two people and injured others.

The Supreme Court examines the scope and application of the claim preclusion doctrine, which forecloses the opportunity for claims actions under certain circumstances. Here, the court examines whether the “functional equivalent” of a counterclaim is sufficient to warrant claim preclusion.

Arby Construction provided excavation and boring services under a contract with Wisconsin Public Service Corp. (WPS). Under the terms of that contract, Arby was required to defend and indemnify WPS and its insurers for certain losses. While performing services under the contract with WPS, Arby struck and damaged a portion of an underground propane gas line, causing explosions that resulted in the deaths of two people and injury to several others.

A personal injury action ensued on behalf of those victims, (collectively, Brooks) naming WPS, Arby, Associated Electric & Gas Insurance Services Limited (AEGIS), and a number of other entities as defendants in Brooks v. Old Republic Ins. Co., Case No. 06-C-996 (E.D. Wis.). AEGIS was named because, as Brooks’ amended complaint alleged and AEGIS admitted, it had issued an excess indemnity policy that provided coverage to WPS for the alleged negligence of WPS.

AEGIS claims that it is entitled to indemnification under an indemnification contract between Arby and AEGIS’ insured, WPS.

The circuit court, however, concluded that AEGIS was barred from seeking indemnification against Arby based on claim preclusion, because there was a stipulated judgment in a prior case in which AEGIS, Arby, and WPS were defendants.

The Court of Appeals affirmed, concluding that AEGIS’ affirmative defense in the prior action asserting Arby’s contractual obligation to indemnify AEGIS as WPS’s insurer was the “functional equivalent” of a cross-claim for purposes of claim preclusion.

AEGIS’ petition followed, contending that the requirements for claim preclusion were not met on the theory that AEGIS did not file a cross-claim against Arby for indemnification under the contract between WPS and Arby in the Brooks action. According to AEGIS, without this cross-claim (which, AEGIS points out, was not compelled), the requirements for claim preclusion were not met.

Arby contends that the dispute is whether the affirmative defense in the prior action — asserting Arby’s obligation under the contract to indemnify AEGIS as WPS’s insurer — had the same effect as a cross-claim for purposes of applying the doctrine of claim preclusion in the current action.

The Court of Appeals concluded that considering the substance of AEGIS’ affirmative defense, it is, effectively, a claim against Arby and its insurers for indemnification for any damages for which WPS and its insurers are liable to Brooks. It stated:

Thus, the substance of AEGIS’ affirmative defense in the prior action asserts the same claim against Arby that AEGIS now asserts in this action.

AEGIS specifically asks the Supreme Court to review several questions:

* Can a functional claim based on the substance of an affirmative defense be considered a prior claim for the purposes of claim preclusion?

* Can a “Functional Claim” create adversity between parties for purposes of applying the doctrine of claim preclusion?

* Where “all claims set forth in the pleadings” are the subject of an order of dismissal, can claims not set forth in the pleadings be the subject of claim preclusion?

* Do inter-jurisdictional claim preclusion concerns require that Wisconsin apply Federal Rules of Civil Procedure in this case

* Should the Court of Appeals apply inferences regarding the parties’ intentions when only pleadings were before the court?

2010AP1391-CRNM State v. Sutton

This criminal case examines the proper procedural mechanism for raising a claim of ineffective assistance of post-conviction or appellate counsel when the defendant has finished serving his or her sentence and the direct appeal is concluded or expired.

Sutton asks the Supreme Court to review whether Wis. Stat. ß 809.32(1)(g) requires the Court of Appeals to remand a case to the circuit court for an evidentiary hearing where, during the course of a no-merit proceeding, an arguably meritorious claim for ineffective assistance of post-conviction counsel becomes apparent. From Milwaukee County.

2009AP1212/2010AP491 Estate of Kriefall v. Sizzler USA Franchise

This appeal stems from a group of consolidated lawsuits arising out of the consumption of food contaminated with the E. coli bacterium at two Milwaukee-area Sizzler restaurants.

The case now before the Supreme Court does not directly relate to the claims of those injured by ingesting contaminated food. Rather, it deals solely with cross claims among the defendants, including the restaurant franchisor, franchisee, meat supplier and their respective insurers. The Court is asked to examine a series of somewhat intricate legal issues related to damage/lost profit limitations for breaches of express and implied warranties, indemnification and attorney fees.

According to the Court of Appeals’ decision, the jury made the following findings that are relevant to the parties’ petitions for review:

* Excel breached “an implied warranty of merchantability or implied warranty for the sale of food”;

* Excel’s breach was “a cause of damage” to Sizzler USA;

* As a result of the breach, Sizzler USA was awarded $6.5 million for lost profits from the corporate restaurants, $350,000 for lost franchise fees, and $311,000 for out-of-pocket expenses (the jury refused to award Sizzler USA the $1.5 million it had paid to the Kriefalls as an out-of-pocket expense);

* Excel was negligent in selling meat adulterated with the E. coli bacterium;

* Excel’s negligence was a cause of injury to the customers of E&B’s two Sizzler restaurants;

* E&B was negligent at the time of the E. coli outbreak;

* E&B’s negligence was a cause of injury to the customers of its Sizzler restaurants;

* Sizzler USA was not negligent as a franchisor;

* Causal negligence was apportioned as follows: Excel: 80% and E&B: 20%.

Excel asks the Supreme Court to review Court of Appeals’ rulings that (1) affirmed the circuit court’s judgment awarding lost profit damages to Sizzler USA; (2) reversed a circuit court’s ruling and awarded an additional $1.5 million in damages to Sizzler USA to reimburse it for a payment that Sizzler USA made to the Kriefalls; and (3) affirmed a circuit court judgment that required Excel and American Home to reimburse E&B for settlement payments E&B and Secura had made to the non-Kriefall plaintiffs in exchange for Pierringer releases. Pierringer v. Hoger, 21 Wis. 2d 183, 124 N.W.2d 106 (1963). According to the Court of Appeals, “[A] Pierringer release operates to impute to the settling plaintiff whatever liability in contribution the settling defendant may have to non-settling defendants and to bar subsequent contribution actions the non-settling defendants might assert against the settling defendants.” Van Cleve v. City of Marinette, 2003 WI 2, ∂39, 258 Wis. 2d 80, 655 N.W.2d 113.

More specifically, Excel has asked the Supreme Court to review three issues:

1. When an express guarantee that was a negotiated and agreed upon term of the parties’ sales contract states: “This guaranty shall not render seller liable for any incidental or consequential damages of whatsoever nature … ” is Sizzler [USA] barred from recovering lost profits and incidental costs as damages for a breach of the express warranty, but entitled to recover the same damages under a theory of implied warranty?

2. Is Sizzler USA entitled to recover from Excel the $1.5 million Sizzler USA paid the Kriefall plaintiffs on a theory of equitable indemnity under the series of circumstances presented in this case?

3. Is E&B entitled to recover contractual indemnity for the non-Kriefall Pierringer release settlements under the circumstances in this case?

There are two petitions for cross-review. Sizzler USA’s cross-petition asks the Supreme Court to review the lower courts’ decisions rejecting Sizzler USA’s claim for recovery of the $1.7 million in attorney fees and costs that it incurred in defending against the plaintiffs’ personal injury claims. Its cross-petition frames the issue to be reviewed as follows:

Should the Weinhagen v. Hayes, 179 Wis. 2d 62, 66, 190 N.W.2d 1002 (1922)(third-party litigation) exception to the American Rule apply to reimburse Sizzler the attorney fees it incurred defending against third-party, personal-injury litigation spawned by Excel’s tortious conduct and breach of contract where the third parties (the Kriefall plaintiffs) were connected with the event that gave rise to liability?

E&B has also filed a petition for cross-review. Its petition frames its issue as follows:

Is a contractual indemnitor, whose wrongful conduct caused claims against its indemnitee and who refused to participate in the settlement of claims against its indemnitee, permitted to offset its contractual obligation to indemnify where its indemnitee’s insurer contributed to settlements?

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