O'Meara, Leer, Wagner & Kohl, P.A. News

Wisconsin Supreme Court Addresses What it Takes to Properly Plead a Claim of Successor Liability in Wisconsin and How, When Properly Pled, the Fraudulent Transaction Exception to Wisconsin’s Successor Non-Liability Rule is Analyzed

June 7th, 2018

In a split decision, the Wisconsin Supreme Court recently held in Springer v. Nohl Electric Products Corp., No. 2015AP829 (May 15, 2018) that a plaintiff who pled only allegations of negligence and strict liability failed to state a claim of successor liability.  Although it did not need to reach the issue given its decision, the supreme court held in the process that the Wisconsin Uniform Fraudulent Transfer Act (“WUFTA”) does not govern the “fraudulent transaction” exception to the general rule of successor non-liability in Wisconsin.  In other words, had the plaintiff properly pled a claim of successor liability based on the fraudulent transaction exception to successor non-liability, her claim would have been governed by the common law of fraudulent conveyances, not the WUFTA.

The facts of Springer are somewhat complicated.  Plaintiff sued several companies alleging negligence and strict liability after her husband died of mesothelioma allegedly due to asbestos exposure. Two of the defendants were Fire Brick Engineers Company Inc. and Powers Holding Inc. That is where things get complicated.

Fire Brick Engineers “FBE1” was formed in the 1940s and had several successors up until 1983, when a group of investors formed a company also known as Fire Brick Engineers Company “FBE2”, for the purpose of acquiring the assets of FBE1. As part of the asset purchase, FBE2 agreed to accept some of FBE1’s liabilities but disclaimed the assumption of most of FBE1’s liabilities, including tort liabilities. Years later, FBE2 merged with Curtis Industries, and the two companies became Powers Holdings, Inc., which currently does business under the name Fire Brick Engineers Company. FBE2 no longer exists as a separate entity, and importantly, neither FBE2 nor Powers ever manufactured, distributed, or dealt with asbestos-containing products.

Plaintiff did not name FBE1 as a defendant and did not allege that Powers Holdings Inc. was liable for Fire Brick’s negligence as the successor to Fire Brick Engineers Company Inc. in her complaint.  Based on this corporate history,  Powers asserted that Plaintiff had sued the wrong company and moved for summary judgment.  In opposition, Plaintiff argued for the first time that Powers was liable as a successor to FBE1 under the “mere continuation” or “de facto merger” exceptions to Wisconsin’s general successor non-liability rule.  After additional discovery, Powers amended its motion, and Plaintiff additionally argued that the “fraudulent transaction” exception should apply.  But Plaintiff never amended her complaint to add allegations of successor liability against Powers.

The circuit court granted Powers’ motion and dismissed FBE2 and Powers from the case.  Plaintiff appealed, and the court of appeals determined that the circuit court failed to properly analyze the fraudulent transaction exception under the WUFTA.  It therefore reversed and remanded so that a jury could determine whether Powers should be held responsible for the liabilities of FBE1 under the WUFTA.

The supreme court granted further review and reversed, reinstating the circuit court’s dismissal of FBE2 and Powers.  The supreme court disagreed that the WUFTA governs the fraudulent transaction exception to the rule of successor non-liability.  But it went a step further.  Rather than remanding for further proceedings, the supreme court held sua sponte that Plaintiff had not pled a claim of successor liability so as to warrant further proceedings as to FBE2 and Powers.

The supreme court began by addressing the fraudulent transaction exception, which was the sole issue raised on appeal.  As background, a corporation which purchases the assets of another corporation generally does not succeed to the liabilities of the selling corporation. This rule protects an innocent purchaser from liabilities caused by a predecessor corporation. But there are four well-recognized exceptions to the general rule of successor non-liability, including a fraudulent transaction exception, which allows for successor liability when a transaction is entered into fraudulently to escape liability of their obligations.  The issue before the supreme court in Springer was how the exception should be analyzed.

The supreme court held that the exception remains a common-law exception and that the WUFTA has not supplanted the common law when it comes to applying the fraudulent transaction exception to the rule of successor non-liability.  Unlike the fraudulent transaction exception, which is meant to prevent successor companies from avoiding obligations incurred by their predecessors, the WUFTA is designed to assist creditors in collecting on claims that may be frustrated by recent asset transfers.  The WUFTA thus fulfills a purpose quite separate from that of the fraudulent transaction exception.

But, again, the supreme court did not stop there.  The supreme court went on to hold that Plaintiff’s claims against FBE2 and Powers were properly dismissed because Plaintiff had failed to properly plead a claim of successor liability.  The court reasoned that a claim of successor liability, as distinct from a claim based on the underlying tort, puts on the plaintiff the burden of establishing one of the exceptions to the general rule of successor non-liability in Wisconsin.  In other words, the elements of a successor liability claim are distinct from the familiar elements of duty, breach, causation, and damage that a plaintiff must plead to state a negligence claim.  Because Plaintiff pled the latter and not the former, the supreme court determined that her claims were properly dismissed.

Two justices dissented. They would have held that courts may consult the WUFTA when determining whether the fraudulent transaction exception applies. But they also took issue with the majority’s sua sponte dismissal of Plaintiff’s claims against FBE2 and Powers, expressing due process concerns.

If you have questions regarding the Wisconsin Supreme Court’s decision or any other general liability issues, please contact Lance D. Meyer or one of our Firm’s other liability attorneys at (952.831.6544).

Wisconsin Supreme Court Holds Negligent Supervision is Not an “Occurrence”

May 23rd, 2018

In a 4-3 decision, the Wisconsin Supreme Court recently held in Talley v. Mustafa, No. 2015AP2356, 2018 WI 47 (May 11, 2018) that an employer’s business-owners liability policy does not cover a negligent supervision claim arising out of an employee’s intentional act of physically punching a customer in the face.  The court reasoned, “When the negligent supervision claim pled rests solely on an employee’s intentional and unlawful act without any separate basis for a negligence claim against the employer, no coverage exists.”

The case stems from an altercation at a liquor store.  A customer claimed that he was punched in the face by a security guard while he was in the store.  The customer filed suit against the security guard, the store owner, and the store owner’s liability insurer, Auto-Owners.  The customer alleged the store owner was negligent in training and supervising the security guard.

Auto-Owners defended the store owner under a reservation of rights and sought a declaratory judgment as to insurance coverage.  The circuit court held that no coverage existed for the customer’s negligent supervision claim.  The store owner appealed, and the court of appeals reversed in a split decision.  The court of appeals held that a reasonable insured would expect coverage for the negligent supervision claim.  The supreme court granted further review and reversed, reinstating the circuit court’s decision in favor of Auto-Owners.

The supreme court began its analysis by reiterating that under Wisconsin law “it is the act that caused the harm that is important in determining whether the insurance policy provides coverage.  If the act that caused the harm was not an accident, then there was no occurrence to trigger coverage.”   The court then went on to state that when “analyzing whether a claim of negligent supervision is covered under an insurance policy, courts must compare the specific facts alleged against the employer with the language of the insurance policy to ascertain whether the incident or injury that gave rise to the claim satisfies the definition of occurrence.”  Since no specific separate acts by the store owner were alleged to have cause the customer’s injuries, the court held that the customer’s allegations against the store owner did not trigger coverage under the store owner’s liability policy.

The supreme court summed up its decision as follows:

We reverse the decision of the court of appeals and hold that there is no coverage under the Auto-Owners insurance policy.  This policy applies only to bodily injury caused by an “occurrence,” which is defined as an accident.  Intentionally punching someone in the face two times is not an accident under any definition.  Accordingly, the negligent supervision claim against [the store owner] can qualify as an occurrence only if facts exist showing that [the store owner’s] own conduct accidentally caused [the customer’s] injuries.  Because there are no facts in [the customer’s] complaint (or in any extrinsic evidence) alleging any specific separate acts by [the store owner] that caused [the customer’s] injuries, there is no occurrence triggering coverage for the negligent supervision claim.  The only specific assertion [the customer] made in this regard is that [the store owner] should have trained [the security guard] not to hit people.  We hold that when a negligent supervision claim is based entirely on an allegation that an employer should have trained an employee not to intentionally punch a customer in the face, no coverage exists.

The supreme court did recognize that coverage may exist for a negligent supervision claim if a plaintiff alleges facts independent from the intentional act giving rise to the injury.  As an example of a case in which such a claim may trigger insurance coverage, the court cited Vandenberg v. Cont’l Ins. Co., 2001 WI 85, 244 Wis. 2d 802, 628 N.W.2d 876, a case in which the court held that coverage existed for a daycare provider’s negligent supervision of her child, who placed pillows on top of a sleeping infant that caused infant to suffocate.  The court also cited QBE Ins. Corp. v. M & S Landis Corp., 915 A.2d 1222 (Pa. Super. 2007), a case in which the court held that an insurer had a duty to defend a nightclub against a claim that the night club negligently trained its bouncer employees on how to safely evict unruly patrons and render first aid.  Admittedly, the facts of these cases, and particularly the QBE Ins. case, are not as easily distinguishable from the facts of Talley as the supreme court’s holding seems to suggest.

As a collateral issue, the store owner apparently agreed with Auto-Owners’ coverage assessment, and Auto-Owners’ argued that neither the customer nor the court should be able to contest that agreement.  The supreme court rejected Auto-Owners’ position and declined to adopt a bright line rule that when the insured and insurer agree that an insurance policy does not provide coverage, their agreement controls the coverage determination.

Three Justices dissented and would have held that Auto-Owners’ policy provided coverage for the customer’s negligent supervision claim against the store owner.  In two dissents, the three Justices in the minority challenge the majority’s opinion in two respects.  First, they contend that the majority improperly analyzed the case from the standpoint of the security guard rather than the store owner, the insured.  In other words, the court should have instead focused on the store owner’s alleged negligent failure to properly supervise and train its security guard.

Second, they contend that the majority impermissibly relied on the perceived weakness of the customer’s negligent supervision claim to determine that the store owner’s insurance policy did not provide coverage for that claim.  They contend that the court should have instead focused on whether coverage was required by the language of the policy, assuming the customer’s claims were successful.

While notable, the significance of the Talley may be limited by its facts.  The majority clearly took issue with the customer’s attempt to creatively plead a covered claim against the store owner and based its decision principally on deficiencies in the customer’s complaint.  As a result, the case might have come out differently had the customer alleged specific facts separate from the assault and battery in support of its claim against the store owner.

If you have questions regarding the Wisconsin Supreme Court’s decision or any other insurance-coverage issues, please contact Dale O. ThornsjoLance D. Meyer, or one of the other members of our Firm’s Insurance Coverage Practice Group at (952.831.6544).

The Minnesota Supreme Court Interprets Minnesota’s Statutory Dram Shop Notice Requirement

April 6th, 2018

In Buskey v. Am. Legion Post # 270, ___ N.W.2d ___ (Minn. April 4, 2018), a divided Minnesota Supreme Court reversed the trial court’s and court of appeals’ interpretation of the Minnesota Civil Damages Act “dram shop” statutory notice requirement and held:

(1) the statutory notice requirement only requires the liquor licensee to possesses knowledge of “sufficient facts” to put it on actual notice of a potential dram shop claim; and

(2) the notice requirement is satisfied if a dram shop claimant provides notice to a liquor licensee’s agent or if the licensee’s agent possesses the aforementioned actual notice of a potential claim.

Read the full summary here.

Our Retail and Hospitality Group is happy to answer any questions you may have about Buskey or any other Liquor Liability-related issues.

Schools and Public Safety: Minnesota Doesn’t Have to Stoop to Arming Teachers

March 2nd, 2018

Following the school shooting tragedy in Parkland, Fla., President Donald Trump said that teachers who have “natural talent like hitting a baseball or hitting a golf ball” should be armed in schools. Rather than rushing to such extremes, there must be a meaningful dialogue about school safety. Fortunately, Minnesota schools have listened, incorporating significant federal guidance as part of their approach to emergency management.

Within an 18-month period from September 2003 to March 2005, Minnesota suffered two school shootings, with 12 dead. Minnesota school districts; federal, state and local law enforcement agencies; and the Minnesota and U.S. Departments of Education worked together to prevent further violence in our schools.

Emergency concepts used by fire and police agencies became part of emergency planning for schools. In addition, standards issued by the National Fire Protection Association, OSHA and FEMA guide how schools now approach emergency management. These important principles do not include arming teachers.

Following the Minnesota school shootings, I served on a legislative school safety task force. We recommended creating a Minnesota School Safety Center as a centralized resource for planning. Over the years, this center provided best-practice recommendations for crisis teams, lockdown protocols, security technology, suspected threats and programs to improve school culture as a violence deterrent.

The task force also recommended using the federal “all hazards” approach to prepare schools for any emergency, whether a natural disaster, pandemic flu or an act of violence. We suggested that student safety teams evaluate student behavior to prevent violence. Many schools now partner with local law enforcement agencies, health professionals, students and families to share information.

The task force also recommended that schools be given additional school safety levy authority. Remarkably, years later, Minnesota school districts still can’t use that authority to improve the security of their buildings. The Legislature should act to correct this and provide sufficient funding for school security infrastructure costs.

After Sandy Hook, the security of school buildings became a focus within school communities. School leaders sought the guidance of architects and security experts to assess building designs for protection against intruders. Design professionals now use a federally recommended process termed Crime Prevention Through Environmental Design (CPTED).

Rather than concentrating on single-source security measures, such as cameras or arming teachers, CPTED focuses on changes to the physical and social environment to reinforce positive behavior. Design teams evaluate the relocation of offices, improved sight lines, bulletproof glass, integrated cameras and lighting, vestibule protection, and reconfigured traffic patterns. Schools also quickly remove graffiti and repair vandalism to promote a culture of responsibility.

The presence of law enforcement officers has become an important part of school emergency plans. However, many school districts cannot afford to pay for a school resource officer or security presence despite an identified need. In such situations, our federal and state governments should support funding for trained police officers, either serving as school resource officers or through local law enforcement agencies under a joint powers or mutual aid arrangement.

After the Minnesota tragedies, the U.S. Department of Education, in coordination with the Secret Service, worked with the U.S. Attorney’s Office and the Minnesota Department of Public Safety on a well-received publication for school administrators and law enforcement officials. It focused on identifying threats and responding to potential violence within schools, based on national studies of school shootings and the behavior of students who carried them out, and why other students with information about an attack did not tell authorities.

Importantly, the message was not to arm teachers, but to help build a positive school climate to establish trust and respect among students and staff and to encourage sharing information about threatening behavior before an incident occurs.

Working together, our schools and community partners have focused their emergency planning using time-tested national guidance. The clear message from our shared experience is that arming teachers has no place in any emergency management plan.

This article was written by O’Meara leer Wagner & Kohl shareholder Shamus O’Meara. It was originally published in the Opinion section ( page 7A) of the Star Tribune Friday, March 2nd, 2018.

 

Mens Rea of Unidentified Driver Irrelevant for “Hit-and-Run Motor Vehicle” Coverage under UM Policy

January 12th, 2018

In Minnesota, mandatory “uninsured motorist coverage” includes coverage for bodily injury caused by “hit-and-run motor vehicles.”  But until this past week, it wasn’t clear exactly what constitutes a “hit-and-run motor vehicle.”

A worker power washing the interior of a parking ramp was injured when an SUV caught and drug the hose of the power washer, which then struck and knocked the worker to the ground.  The SUV did not stop, and its driver was never identified.  The injured work made a claim for uninsured-motorist (UM) benefits, but her insurer denied coverage, arguing the insured could not prove the SUV was a “hit-and-run vehicle” because she could not show that the driver fled the scene to avoid liability.  The insurer also argued that the insured failed to produce evidence that the SUV driver was negligent.

The district court granted summary judgment for the insurer, and the insured appealed.  The court of appeals reversed.  Russell v. Sentinel Ins. Co., Ltd., ___ N.W.2d ___, 2018 WL 256728 (Minn. App.).  Because neither the insured’s policy nor the Minnesota No-Fault Automobile Insurance Act defined “hit-and-run vehicle,” the court turned to dictionary definitions and case law to determine the ordinary meaning of the term.  Relying on Halseth v. State Farm Mut. Auto. Ins. Co., 268 N.W.2d 730 (Minn. 1978), in which the supreme court announced that for hit-and-run UM coverage, the phrase hit-and-run is more expansive than the literal meaning of “hit,” the court of appeals held that the phrase hit-and-run was also more expansive than the literal meaning of “run.”  In so holding, the court of appeals declined to follow the Halseth court’s interpretation of “run” in dictum to mean “flee” and determined that the mens rea of the unidentified driver was irrelevant.

In sum, an insured is not required to show that an unidentified driver fled, or left, with the intent to escape liability.  The insured must simply prove that the driver did not stop and cannot be identified.

The court of appeals also determined there was a genuine issue of material fact as to whether the unidentified driver was negligent and remanded the case back to district court.

If you have questions regarding the court of appeals’ decision or any other UM or other motor vehicle insurance issues, please contact Dale O. Thornsjo, Lance D. Meyer, Michael M. Skram, or one of the other members of our Firm’s Insurance Coverage and Motor Vehicle Practice Groups at (952.831.6544).

 

Come Visit OLWK at Booth 404 Tomorrow at the MSBA 97th Annual Leadership Conference!

January 10th, 2018

We’ll be at the Minneapolis Convention Center from 8am-5pm January 12th and from 7:30am- 10:30am January 12th. Stop by and say hello!

Please Join OLWK at the 2018 Minnesota School Boards Association 97th Annual Leadership Conference in Minneapolis on January 11-12, 2018

January 5th, 2018

O’Meara, Leer, Wagner & Kohl is proud to participate in the 2018 Minnesota School Boards Association 97th Annual Leadership Conference at the Minneapolis Convention Center on January 11-12, 2018.

Please be sure to stop by Exhibit Hall A and visit us at Booth 404 on January 11 all day, and on January 12 until noon.  We are also proud to announce that we will be conducting two seminars this year:

January 11, at 3:45 p.m. (Room L100F) – “Investigation of Employee Complaints of Discrimination; Essentials for Districts” presented by Morgan Godfrey.

January 12, at 9:15 a.m. (Rom L100F) – “Transportation of Students – What You Need to Know” presented by Mark Azman.

Hope to see you there!

OLWK Attorney Rachael Hafdahl Interviews Judge Thomas Conley

January 2nd, 2018

OLWK Attorney Rachael Hafdahl Interviews Judge Thomas Conley in the January / February edition of Hennepin Lawyer.  Read the article here.

Happy Holidays from O’Meara Leer Wagner & Kohl, P.A.

January 2nd, 2018

As 2017 Comes to a Close, Minnesota’s Appellate Courts Continue to Grapple with the Issue of Foreseeability in Tort Cases

December 27th, 2017

In 2017, the Minnesota Supreme Court has grappled with the issue of foreseeability in a variety of tort cases.  In particular, the supreme court has been asked in product- and premises-liability cases to determine whether the issue of foreseeability should be decided by the court as a matter of law or submitted to the jury.  While acknowledging that if clear the issue of foreseeability should be decided by the court as a matter of law, the supreme court has consistently favored submitting foreseeability issues to the jury in recent cases, citing misleading “close case” language from the court’s foreseeability jurisprudence.

In Montemayor v. Sebright Products, Inc., 898 N.W.2d 623 (2017) (previously discussed here), a product-liability case, the Minnesota Supreme Court held that there was a genuine issue of material fact as to whether it was reasonably foreseeable to the manufacturer of a high-density food extruder that a person would physically enter the extruder while another person activated it from the control panel, making the issue of foreseeability “close” and thus an issue for the jury.  The dissenting justices in Montemayor rightfully took issue with the “inartful” “close case” language applied by the majority, noting that it was inconsistent with the court’s well-established summary judgment standard.  Nevertheless, the supreme court concluded a few months later that the issue of foreseeability was again “close” and thus an issue for the jury in Senogles v. Carlson, 902 N.W.2d 38 (2017), a premises-liability case in which a premises owner argued that it was unforeseeable that a four year old would enter a river to swim unaccompanied by an adult.  Together, the court’s decisions in Montemayor and Senogles signal a shift in the court’s approach to foreseeability issues in tort cases in favor of submitting foreseeability issues to a jury for determination.

And it is likely the trend will continue as the supreme court has accepted further review of the court of appeals’ determination that an automobile accident was unforeseeable in Fenrich v. Blake Sch., 901 N.W.2d 223 (2017).  In Fenrich, the court of appeals conceded that in “close cases” the issue of foreseeability should be submitted to the jury but concluded that the case before it was not a “close case.”  Specifically, the court concluded that a school did not assume a duty of reasonable care to the general public by agreeing that one of its students could drive himself and other students to an out-of-town, extra-curricular activity in his family’s vehicle because the risk of an automobile accident was not foreseeable.  In petitioning for further review (Petition available here), the appellant relied heavily on the supreme court’s decisions in Montemayor and Senogles, suggesting that the supreme court may be poised to continue the trend of deferring foreseeability issues to the jury in “close cases.”

As it closes out 2017, the court of appeals again grappled with the issue of foreseeability in a published decision in Cashman v. Uptown Drink, ___ N.W.2d ___ (2017), a dram-shop case.  The supreme court may thus have a second opportunity in 2018, in addition to Fenrich, to further solidify its recent approach to the issue of foreseeability.

In Cashman, co-trustees for the estate of a bar patron sued the bar after the decedent fell and fatally hit his head while helping an employee of the bar escort another patron out of the bar following a fight.  The co-trustees claimed the bar was negligent and violated Minnesota’s dram-shop statute—Minn. Stat. § 340A.502—by providing liquor to an obviously intoxicated person.  The bar moved for summary judgment, and the district court dismissed the co-trustees’ claims, concluding that the negligence claim was barred by the decedent’s primary assumption of the risk and the dram-shop claim was barred because the intoxication of the patron the decedent was escorting out of the bar was not the proximate cause of the decedent’s injuries.

The court of appeals reversed.  With respect to the negligence claim, the court determined that the foreseeability of the decedent’s injuries and applicability of primary assumption of the risk presented questions of fact that precluded the court from resolving such issues as a matter of law.  Following the supreme court’s lead, the Cashman court employed “close case” language in discussing the issue of foreseeability and determined the issue of foreseeability was an issue for the jury.  In terms of primary assumption of the risk, the court observed that application of the doctrine is uncommon and concluded that genuine issues of material fact existed as to whether the decedent had actual knowledge of the particular risks or dangers of assisting with another patron’s removal from the bar and also whether the bar’s conduct enlarged the inherent risk assumed by the decedent, which would preclude application of primary assumption of the risk.

The court of appeals also reversed the district court’s dismissal of the co-trustees’ dram-shop claim, concluding that a genuine issue of material fact remained as to whether the intoxication of the patron the decedent was escorting out of the bar was a proximate cause of the decedent’s injuries.  Consistent with its reasoning as to the foreseeability of the decedent’s injuries, the court of appeals determined that there was sufficient evidence of a direct link between the patron’s intoxication and the decedent’s injuries to submit the issue of proximate cause to the jury.  In so holding, the court observed that the lack of proximate cause may be decided by the court as a matter of law in cases in which “intoxication is entirely unrelated to the injury”—i.e., cases in which the intoxicated party’s impaired faculties could not have directly caused an injury because it resulted from the actions and choices of another person.  The court further observed that there is no requirement that “intoxication must be the sole proximate cause of injury in the dram shop context” and that “a defendant is liable under the dram shop act when the allegation is that intoxication was only a contributing cause of the injury.”  Quoting Osborne v. Twin Town Bowl, Inc., 749 N.W.2d 367, 374-75 (Minn. 2008).  “Intoxication need only be a substantial factor in bringing about the injury.”  Citing id.

If the bar appeals and the supreme court grants further review, the supreme court will have another opportunity to further solidify its recent approach to the issue of foreseeability.  But it will also have the opportunity to address the primary assumption of the risk and proximate cause issues that were the primary focus of the court of appeals’ decision.  Notably, if accepted by the supreme court, the Cashman case would join Buskey v. Am. Legion Post #270, 2016 WL 7338739 (Minn. App. 2016), rev. granted (Mar. 14, 2017) (previously discussed here), a dram-shop case involving the 240-day notice-of-claim provision of Minn. Stat. § 340A.802 that is currently pending before the supreme court.

If you have questions regarding the Minnesota supreme court’s recent handling of the issue of foreseeability, the dram-shop issues at play in Buskey and Cashman, or any other general or liquor liability issues, please contact Dale O. ThornsjoBrian M. McSherry, Lance D. Meyer, or one of the other members of our Firm’s General Liability and Liquor Liability Practice Groups at (952.831.6544).