At the close of its term in July, the Wisconsin Supreme Court issued three opinions that foreshadow significant changes in Wisconsin's strict products liability law and clarify the duties that parties have to preserve evidence when they reasonably should expect litigation to arise. This Client Update summarizes the court's opinions and their likely impact on Wisconsin law.
Wisconsin Supreme Court Issues Two Opinions That Foreshadow Significant Shift In Strict Products Liability Law
Summary
The Wisconsin Supreme Court recently issued two opinions that affirm existing Wisconsin law governing strict liability claims but foreshadow a significant shift in the law. Although the majority opinions in each opinion affirmed that the consumer contemplation test set forth in Restatement (Second) of Torts § 402A governs all strict products liability claims in Wisconsin, in concurring opinions, a majority of the Justices expressed their preference for the legal standard set forth in Restatement (Third) of Torts: Products Liability § 2b and signaled that they are prepared to adopt that standard. Therefore, although the consumer contemplation test remains the law governing strict products liability actions in Wisconsin for now, it appears that a new standard is likely to become the law in Wisconsin the next time that a case before the Supreme Court squarely presents the issue.
Kara Horst et al. v. Deere & Company, 2009 WI 75 (July 14, 2009)
In Horst, the court addressed claims brought by the parents of a two year-old boy whose feet had been severed when his father accidentally drove a riding lawnmower manufactured by Deere over the boy's feet. The father had engaged a manual override switch that disengaged a mechanism preventing the cutting blades from spinning when the mower is driven in reverse. It was while the override switch was engaged that the accident occurred. The operator's manual that accompanied the mower, which the parties agreed the father had read, contained specific warnings discouraging operators from mowing while backing up and cautioning operators to carefully check for the presence of children before backing up. The plaintiffs brought negligence and strict products liability claims, alleging that the lawnmower was unreasonably dangerous because the override switch allowed the mower blades to operate while the mower was being driven in reverse. After Deere's motion for summary judgment was denied, the negligence and strict liability claims were tried to a jury (the presiding Circuit Court judge, Annette Ziegler, subsequently was elected to the Wisconsin Supreme Court and did not participate in the opinion). Judge Ziegler instructed the jury on both the negligence and strict products liability claims, giving an instruction "substantially identical" to Wis JI-Civil 3260, which incorporates the "consumer contemplation" test for product defect based on Restatement (Second) of Torts § 402A. The jury returned a verdict for Deere, finding that the plaintiffs were negligent in causing the boy's injuries but that Deere was not. The jury also found that the mower was not defective and was not unreasonably dangerous.
On appeal, the plaintiffs challenged Judge Ziegler's instruction to the jury on the strict products liability claim. Specifically, the plaintiffs argued that the portion of the instruction addressing whether the mower was "defective" should not have asked if the mower was in a condition not contemplated by the ordinary "user or consumer" but rather if the mower was in a condition not contemplated by an ordinary "bystander." The Horsts advocated this proposed "bystander expectations test" because their son was a bystander, not a user or consumer, when he was injured. All six justices participating in the decision joined in the result stated in the majority opinion, written by recently elected Justice Gableman, rejecting the suggested "bystander expectations" standard. The opinion commented that the proposed standard would be unworkable; would not provide predictability to enable manufacturers to adopt appropriate safety precautions; would come "dangerously close" to imposing absolute liability; and would create different legal duties based on the person who is injured. The six justices therefore ruled unanimously that the consumer expectation test is the law governing all strict products liability claims in Wisconsin.
Despite their unanimity in rejecting the "bystander expectations" test and affirming the consumer expectations test as the prevailing standard, in separate opinions the justices strongly disagreed as to whether the consumer expectations test should continue to govern strict products liability actions in Wisconsin or whether the court should adopt the Restatement (Third) of Torts: Strict Liability § 2b. Justice Gableman argued in a concurring opinion, joined by Justices Prosser and Roggensack, that Wisconsin is out of step with the vast majority of states in retaining the consumer expectations test of Restatement (Second) of Torts § 402A. The Restatement (Third) of Torts § 2b is superior, Justice Gableman argued, because § 402A, which was drafted by the American Law Institute in 1965, was written to address manufacturing defects, not design defects or inadequate warning claims, whereas the Restatement (Third) § 2b, which the ALI adopted in 1997, squarely addresses all three types of claims. Moreover, Justice Gableman argued that the Restatement (Third) §2b offers more coherence, consistency, and predictability; is based on a more objective standard; and offers greater protection for bystanders. Justice Gableman expressly stated that he would adopt it and urged the court to do likewise.
Justice Crooks, although joining the majority opinion, wrote a separate concurrence to voice his opinion that the issue of whether to adopt Restatement (Third) § 2b had not been presented to the court for decision and that "before deciding to make a sea change in Wisconsin law - one that could result in throwing out forty-two years of precedent," the court required briefing and oral argument on the issue.
Justice Bradley, joined by Chief Justice Abrahamson, agreed with the majority opinion in rejecting the "bystander expectations" test but dissented from the majority opinion on another aspect of the jury instructions and wrote separately to address Justice Gableman's concurrence advocating adoption of Restatement (Third) § 2b. Justice Bradley agreed with Justice Crooks that adopting § 2b would work "a sea change in Wisconsin products liability law" and that she was "uncertain whether the Restatement (Third) should be adopted." She added that considering the issue in the context of the Horst case, without either party having briefed or argued the issue, would be tantamount to "[t]ossing stare decisis to the wind" in favor of "pushing a predetermined agenda."
Ruben Baez Godoy v. E.I. duPont de Nemours and Company, et al., 2009 WI 78 (July 14, 2009)In a second case decided the same day, the court again addressed Wisconsin strict products liability law. Godoy involved claims brought on behalf of a minor child who allegedly had sustained lead poisoning by exposure to lead paint in an apartment where he lived from the time he was one year old. The plaintiff brought design defect claims in negligence and strict products liability against several manufacturers of white lead carbonate that was used as a pigment in the paint. The plaintiff chose to bring claims against the lead pigment manufacturers, rather than the paint manufacturers, to enable the claims to fall within Wisconsin's "risk-contribution" theory, which provides an exception to the default rule that a plaintiff must be able to identify the manufacturer of the product that allegedly harmed him.
The defendants successfully moved to dismiss the design defect claims, arguing that because the plaintiff's primary contention was that the design defect was the presence of lead and that lead is a characteristic ingredient of white lead carbonate pigment, if the defective ingredient were to be removed, the product would be transformed into a different product. Writing for the court in affirming the rulings below, Justice Bradley held that a design defect claim cannot be maintained as a matter of law "where the presence of lead is the alleged defect in design, and its very presence is a characteristic of the product itself." As the opinion further explained, "Without lead, there can be no white lead carbonate pigment," and that "[w]hen the [allegedly defective] ingredient cannot be designed out of the product, the Restatement (Second) instructs that although other claims may be asserted, the proper claim is not design defect."
In affirming the dismissal of Godoy's design defect claims, the court also held that the consumer contemplation test applied to strict products liability claims under Wisconsin law does not require a plaintiff to prove the feasibility of a safer alternative design, although evidence of such an alternative design may be introduced and considered. The court also rejected an argument by the defendants that incorporation of the white lead pigment into paint worked a "substantial change" of the pigment, barring the plaintiff's design defect claims. The court held that "substantial change" was not argued as a basis for dismissal before the circuit court and that it was not a basis for the circuit court's dismissal of the claims or the court of appeals' ruling affirming the dismissal, and the court refused to address the merits of the "substantial change" argument.
Although all six justices participating in the case (Justice Roggensack did not participate) agreed with the majority opinion's ruling affirming dismissal of the design defect claims, once again, several justices wrote separate concurrences. Justice Prosser (joined by Justices Zeigler and Gableman) wrote a concurrence urging the court to adopt the Restatement (Third) of Torts § 2b to replace the consumer contemplation standard for strict products liability claims that Wisconsin currently follows. Justice Prosser noted that the ALI specifically adopted Restatement (Third) § 2b because Restatement (Second) § 402A was not designed for and thus ill-equipped to govern products liability claims other than those alleging a manufacturing defect, and that Wisconsin is one of only six states that has not yet adopted Restatement (Third) § 2b.
Justice Crooks concurred (joined by Chief Justice Abrahamson and Justice Bradley) and, as he did in Horst, noted his view that the court should not take up the issue because the parties did not brief it or invite the adoption of Restatement (Third) § 2b and that full briefing and oral argument is necessary before the court should consider the issue. Justice Bradley (joined by Chief Justice Abrahamson) wrote a separate concurrence that included many of the same arguments against adopting Restatement (Third) § 2b in Godoy as she had voiced in her dissent in Horst. In addition, Justice Bradley commented that "[s]ome jurisdictions that have adopted the Restatement (Third) are now back-tracking" - an assertion disputed by Justice Prosser in his concurrence - and she remarked that Justices Gableman and Prosser in the concurrences in both Horst and Godoy "eschew the role of an appellate court" and "appear to act like legislators, advancing a policy initiative which they favor." Finally, Justice Bradley questioned how the concurrences might be interpreted, asking "How are circuit courts and practioners to grapple with the significance of the fact that in both this case and in Horst, an equal number of justices have voted to change Wisconsin law as have voted to uphold it?"
Conclusion
Given the votes of the respective justices in both Horst and Godoy, the logical response to Justice Bradley's concluding question is that private practitioners and circuit courts likely will perceive that a majority of the Wisconsin Supreme Court intends to adopt the Restatement (Third) § 2b when the issue is next presented to them. Four of the justices have openly expressed their readiness to abandon the older standard for strict products liability claims set forth in Restatement (Second) § 402A in favor of adopting Restatement (Third) § 2b: Justices Gableman and Prosser in both Horst and Godoy; Justice Roggensack in Horst; and Justice Zeigler in Godoy. Therefore, it appears to be just a matter of time before the issue is squarely presented to the Wisconsin Supreme Court and, if such a case comes before the court before its composition changes, Wisonsin almost certainly will join the majority of states in adopting Restatement (Third) of Torts: Products Liability § 2b.
Wisconsin Supreme Court Clarifies Duty To Preserve Evidence And Standard For Dismissal As Spoilation Sanction
American Family Mutual Insurance Co. v. Golke, 2009 WI 81 (July 15, 2009)
The Wisconsin Supreme Court also recently issued an opinion clarifying the duty to preserve evidence relevant to a potential legal claim. In American Family Mutual Insurance Co. v. Golke, the court set forth a clear standard for when spoliation of evidence is considered reasonable. The court also clarified what constitutes sufficient notice of plans to destroy evidence, and under what circumstances dismissal is an appropriate sanction for spoliation of evidence.
The Fire and Investigation
A house insured by American Family was destroyed by fire on February 13, 2000. After investigating the fire, American Family determined that the fire had been caused by the negligent repair of the roof. On March 13, 2000, American Family sent letters by first-class mail, notifying the roofers of the fire damage, and of American Family's assessment that their negligence caused the loss. The letter further explained that they should notify their liability carrier of the loss, and that "to provide adequate time for yourself or your liability carrier to conduct a proper investigation, any destruction measures of the fire damaged building will not take place until April 1, 2000." Id., ¶ 9. One of the roofers admitted receiving the letter which he forwarded to his insurer, Indiana Insurance. The other two did not recall receiving the March 13 letter.
On April 6, 2000, American Family sent, by certified mail, a second letter to the roofers indicating that this was a second request for insurance information regarding the fire loss, and urging them to contact their insurance carrier as soon as possible. Although the roofers acknowledge receiving the certified letter, neither the defendants nor their liability insurance carriers ever contacted American Family to arrange for inspection of the fire damaged home. Some time after April 11, 2000, the home was razed and rebuilt. American Family took photographs of the fire scene, but no physical evidence was preserved.
American Family brought suit against the roofers and Indiana Insurance for damages arising from the fire. Defendants moved to dismiss American Family's claims, arguing the insurer had spoliated evidence. The circuit court initially denied the motions and a bench trial was held on the issues of spoliation and the roofers' insurance coverage. At the end of the trial, defendants renewed their motions, which the circuit court granted, dismissing American Family's claims as a sanction for failing to preserve any physical evidence.
The Supreme Court's Analysis and Holding
As a matter of first impression, the court grappled with the issue of whether a party or potential litigant may ever legitimately destroy evidence relevant to a claim, and if so, what preconditions must be met. It then addressed another critical question answered inconsistently by the Wisconsin Court of Appeals -- the standard for dismissal as a spoliation sanction.
Notice to Interested Parties and the Duty to Preserve
The court's examination of cases from other jurisdictions addressing the issue of proper notice revealed a general consensus that "a party or potential litigant may discharge its duty by giving the other side notice of a potential claim and a full and fair opportunity to inspect relevant evidence." Id., ¶ 28. Adopting this principle, the court set forth the standard that "the duty to preserve relevant evidence is discharged when a party or potential litigant with a legitimate reason to destroy evidence provides reasonable notice of a possible claim, the basis for the claim, the existence of evidence relevant to the claim, and a reasonable opportunity to inspect that evidence." Id., ¶ 19. Writing for the court, Justice Gableman explained that the sufficiency of the notice should be left to the circuit court's discretion in light of the totality of the circumstances, including the length of time evidence can be preserved, the prejudice posed by destruction, the form of the notice, the sophistication of the parties, and the ability of the party in possession to effectively preserve it. Id.,¶ 29.
Reasoning that the legislature has long recognized first-class mail as an efficient and effective mechanism to provide actual notice of possible or pending litigation, the court further concluded that notice of the existence of evidence "can be effectuated by first-class mail." Id., ¶ 37. Furthermore, the court held that "evidence of mailing raises a rebuttable presumption that the addressee received the letter." Id., ¶ 36.
Chief Justice Abrahamson wrote a concurrence, joined by Justice Bradley, disputing the majority's conclusion that American Family's actions were reasonable as a matter of law, and thus had discharged its duty to preserve evidence. Id., ¶ 60. The Chief Justice took issue with the fact that the majority ignored both the circuit court's "finding of fact that American Family could have preserved crucial evidence from the fire scene with minimal burden or expense," and its discretionary determination that American Family acted unreasonably in failing to do so. Id., ¶ 67.
Dismissal As Spoliation Sanction
Finally, the court clarified the standard for when dismissal for spoliation is an appropriate sanction. In Milwaukee Constructors II v. Milwaukee Metro. Sewerage Dist., 177 Wis. 2d 523, 529, 502 N.W.2d 881 (Ct. App. 1993), the court of appeals considered whether the circuit court had abused its discretion in dismissing a case after concluding that the claimant had intentionally destroyed evidence. The Milwaukee Constructors II court concluded that dismissal was only appropriate in the case of egregious conduct, which it defined as "a conscious attempt to affect the outcome of litigation, or a flagrant, knowing disregard of the judicial process." Id. (citation omitted). Two years later, however, the court of appeals, considering a similar claim, appeared to allow dismissal even in the absence of egregious conduct. Sentry Ins. v. Royal Ins. Co. of Am., 196 Wis. 2d 907, 917-918, 539 N.W.2d 911 (Ct. App. 1995). In 1999, the court of appeals attempted to harmonize the two cases, and reaffirmed the requirement of egregious conduct. Garfoot v. Firemans Fund Ins. Co., 228, Wis. 2d 707, 723-24, 599 N.W.2d 411 (Ct. App. 1999).
The Golke court affirmed the holding in Milwaukee Constructors II, that dismissal as a sanction is "appropriate only when the party in control of the evidence acted egregiously in destroying that evidence," further defining egregious behavior as "'a conscious attempt to affect the outcome of the litigation or a flagrant, knowing disregard of the judicial process.'" Id., ¶ 42.
While agreeing that dismissal was not an appropriate sanction in the absence of egregious conduct, the Chief Justice, in her concurrence, would have remanded the case to determine whether another sanction was appropriate under the circumstances. Id., ¶ 61.
Impact of the Golke decision
The court's decision provides potential litigants some reassurance that the duty to preserve relevant evidence can be discharged under circumstances in which it is impossible or impracticable to maintain evidence, so long as sufficient notice of the claim and a full and fair opportunity to inspect the evidence had been given to potential litigants. Furthermore, the court's affirmation that dismissal for spoliation is only appropriate for cases of egregious conduct clarifies the law that good faith efforts to preserve relevant evidence will not result in claims being dismissed for spoliation.
Golke provides an important reminder of the duty and the necessity to preserve all evidence that may be relevant to a claim. While dismissal for spoliation is reserved for only the most egregious conduct, the court left open the question of other possible sanctions - short of spoliation - a circuit court may impose for spoliation of evidence. Prudence dictates that potential litigants take every possible precaution to ensure that relevant evidence is preserved and available to all parties in litigation.