author: ROGGENSACK, J.

text:
    David J. Peterson, Plaintiff-Appellant, v. Pennsylvania Life Insurance Company, Defendant-Respondent.
    Court of Appeals

      No. 02-0912.

      Submitted on briefs October 11, 2002.

    — Decided June 5, 2003.

    2003 WI App 166
    (Also reported in 669 N.W.2d 151.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of William F Bauer and Amy F. Scholl of Coyne, Niess, Schultz, Becker & Bauer, S.C., of Madison.
    On behalf of the defendant-respondent, the cause was submitted on the brief of Thomas J. Lonzo of Cook & Franke S.C., of Milwaukee.
    Before Vergeront, PJ., Roggensack and Lundsten, JJ.

       Petition to review'denied 10-1-03.

   ROGGENSACK, J.

¶ 1. David Peterson appeals the circuit court's judgment that Pennsylvania Life Insurance Company did not breach the terms of its accident benefit policy when it stopped paying Peterson disability benefits. Pennsylvania Life did so because it found that Peterson was not totally disabled, as that term is defined in the policy. Because the policy definition of "totally disabled" unambiguously provides that Peterson is not totally disabled if he is or may reasonably become qualified for any occupation by reason of education, experience or training and because the finding of the circuit court is not clearly erroneous, we affirm the judgment.

BACKGROUND

¶ 2. Peterson's sole occupation has been as a roofer and rough carpenter. He learned the trade working with his father, a carpenter-contractor, starting at age eight. Peterson dropped out of school in the eleventh grade and went to work full-time for his father. In 1994, he purchased a Pennsylvania Life accident policy with a disability rider providing coverage for accidents resulting in "total disability."

¶ 3. In April 1996, Peterson fell from the frame of a home and fractured his right heel. The injury was serious and required a hone graft from his hip and a metal joint to repair. Dr. Stuart Stitgen, Peterson's treating orthopedic surgeon, concluded that Peterson had "sustained a permanent partial disability rating of 8%" and estimated a healing plateau of nine months. Dr. Stitgen also concluded that Peterson could no longer work as a roofer or rough carpenter and restricted him from all climbing, working on inclined surfaces, walking on rough or uneven terrain and lifting more than 40 pounds.

¶ 4. Pennsylvania Life made disability payments to Peterson from the date of his injury to June 1999. On July 24, 1999, Pennsylvania Life notified Peterson that it was discontinuing payments because Peterson was not "totally disabled" as defined by the policy. Peterson sued Pennsylvania Life for breach of contract, and a trial to the court was held.

¶ 5. At trial, Peterson testified that since the date of his injury, he has not returned to any type of employment. He explained that he is constantly in pain and that the pain has increased since the date of his injury. He received some counseling from the Wisconsin Department of Vocational Rehabilitation, acquired his GED and enrolled in a math course at Madison Area Technical College. Peterson said he dropped the math course, however, because the pain caused by walking from the parking lot to the classroom and sitting in class for an hour was unbearable. In terms of everyday activity, Peterson lives by himself, drives a vehicle, does his own shopping and laundry, visits with friends and neighbors and spends time with his daughter.

¶ 6. Dr. Stitgen testified that he had last seen Peterson in September 1999 for a "check up" on his heel. Stitgen opined that Peterson could not realistically return to work as a rough carpenter. However, he also opined that Peterson was not 100% disabled and that although he had limitations, he would be able to do a sedentary job with standing limited to approximately thirty minutes per hour. Stitgen also testified that he had not, to his knowledge, prescribed any pain medication to Peterson since May 1996.

¶ 7. Pennsylvania Life retained Dr. Patel, an orthopedic surgeon, to provide an independent examination of Peterson. Patel's findings substantially corroborated those of Stitgen. He also testified that in his opinion, Peterson could perform regular carpentry activities at ground level.

¶ 8. Deborah Peck, a vocation evaluator hired by Pennsylvania Life to perform a vocational rehabilitation review of Peterson, testified that Peterson possessed numerous skills learned from his work as a carpenter that, despite his injury, would qualify him for immediate employment. Those skills included precision measuring, carpentry skills, ability to follow basic blueprints, and knowledge of the general business trade. Peck further opined that because Peterson had been self-employed, he could do estimates for bids on jobs. Peck concluded that based on her survey of the Dane County job market, with Peterson's physical restrictions in mind, there existed jobs available for which Peterson could reasonably apply.

¶ 9. Last, Pennsylvania Life subpoenaed A1 Pe-dracine, a vocational specialist with the Dane County Mental Health Center, to testify. Pedracine had assessed Peterson fifteen months after his accident and completed a report identifying his work-related history and goals. The report included a list of "transferable skills" that Pedracine explained were skills that could be "utilized in a lot of different jobs, not necessarily impacted by the disability." The skills listed in the report were those skills that Peterson identified as ones he had acquired while working as a roofer and rough carpenter. Based on his assessment, Pedracine concluded there were immediate job options available to Peterson including electronics worker, engraver, industrial order clerk and sales representative in a lumberyard. Pedracine also listed numerous employers in Dane County that employed individuals in the four job classifications. Peterson did not explore the job market following the assessment.

¶ 10. The circuit court concluded that the insurance policy's definition of "totally disabled" was unambiguous. It found that although Peterson could no longer perform rough carpentry and roofing, he had many transferable job skills that qualified him for employment in at least four occupational areas. Accordingly, the court concluded that Pennsylvania Life did not breach its contractual obligation to Peterson when it stopped paying disability benefits. Peterson appeals.

DISCUSSION

Standard of Review.

¶ 11. The interpretation of an insurance contract is a question of law that we review without deference to the circuit court. Katze v. Randolph & Scott Mut. Fire Ins. Co., 116 Wis. 2d 206, 212, 341 N.W.2d 689, 691 (1984). Whether an ambiguity exists in an insurance policy is also a question of law. Kreuser v. Heritage Mut. Ins. Co., 158 Wis. 2d 166, 172, 461 N.W.2d 806, 808 (Ct. App. 1990). Additionally, we will not set aside a circuit court's findings of fact unless they are clearly erroneous. Wis. Stat. § 805.17(2) (2001-02).

¶ 12. The parties do not disagree with these basic principles. However, they dispute the standard of review we are to apply to the circuit court's final determination that Peterson was not "totally disabled." Peterson, while asserting that the policy definition of "totally disabled" is unambiguous, also equates the term "totally disabled" with a legal standard, and he cites Halverson v. River Falls Youth Hockey Ass'n, 226 Wis. 2d 105, 115, 593 N.W.2d 895, 900 (Ct. App. 1999), for the proposition that we review the application of findings of fact to a legal standard de novo.

¶ 13. Although it interprets the policy definition differently, Pennsylvania Life also contends that the policy language is unambiguous. It maintains the sole issue on appeal is whether the circuit court's finding that Peterson was not totally disabled is clearly erroneous. Because the parties' interpretations of the policy definition at issue are inconsistent, we conclude we are required to determine first, whether the policy is ambiguous; second, the meaning of the definition of "totally disabled" set forth in the policy; and third, whether the circuit court's findings are clearly erroneous.

Total Disability.

1. Policy Provisions.

¶ 14. Peterson argues that the only reasonable interpretation of "totally disabled" is if the insured "was unable to do his own occupation or other occupations for which he has, or later acquires, education, training or experience." He then adds that he is not disqualified from benefits by this definition because his current level of education, training or experience are insufficient to make him employable. For example, he would consider himself qualified to work as a lumberyard salesman only if he had had experience working as a lumberyard salesman. He relies on Harker v. Paul Revere Life Insurance Co., 28 Wis. 2d 537, 546, 137 N.W.2d 395, 400 (1965) for this argument.

¶ 15. By contrast, Pennsylvania Life argues that the determination of whether Peterson is "qualified" for a particular occupation has little to do with whether he has ever worked in such an occupation. It maintains that "qualified" refers to whether the insured has the education, training or experience to enable him to do the job. Pennsylvania Life argues, "[o]ne can be qualified to perform a job without ever having worked in the job."

¶ 16. We construe an insurance policy as it would be understood by a reasonable person in the position of an insured. Garriguenc v. Love, 67 Wis. 2d 130, 134-35, 226 N.W.2d 414, 417 (1975). We begin with the terms set out in the policy to determine whether they are ambiguous. United States Fire Ins. Co. v. Ace Baking Co., 164 Wis. 2d 499, 502-03, 476 N.W.2d 280, 282 (Ct. App. 1991). A policy term is not ambiguous merely because the parties disagree as to its meaning. Id. at 503-04, 476 N.W.2d at 282. Language of an insurance contract is to be given its common and ordinary meaning. Wisconsin Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 2000 WI26, ¶ 31, 233 Wis. 2d 314, 607 N.W.2d 276. The terms of a policy are unambiguous if they are not reasonably susceptible of more than one construction from the viewpoint of an insured of ordinary intelligence. Schroeder v. Blue Cross & Blue Shield, 153 Wis. 2d 165, 174, 450 N.W.2d 470, 473 (Ct. App. 1989). If the terms of an insurance policy are unambiguous, we will not rewrite the policy, but will simply apply it as written to the facts of the case. Continental Cas. Co. v. Homontowski, 181 Wis. 2d 129, 133, 510 N.W.2d 743, 745 (Ct. App. 1993).

¶ 17. The policy provision at issue defines "totally disabled" is as follows:

total disability: totally disabled means that you... are unable to engage in any employment or occupation for which you ... are or become qualified by reason of education, training or experience.

We first note that the definition is not limited to an insured's ability to engage in the same employment he had before the injury. Instead, we are to consider "any employment" as relevant to determining total disability. Nor does the policy definition import the contention of Peterson that he must currently have the education, training or experience to qualify for employment. Rather, it states that an insured may either be or "become qualified" to engage in employment and thereby not be totally disabled within the policy definition. "Become" looks to the future; it cannot reasonably be understood to apply only to the specific skills an insured has at a given moment. However, it does imply that the insured must be reasonably capable of acquiring the education, training or experience to be employable. See Drexler v. All American Life & Cas. Co., 72 Wis. 2d 420, 429, 241 N.W.2d 401, 406 (1976). Accordingly, we conclude that the policy definition unambiguously provides that an insured is totally disabled if: (1) he cannot engage in any employment or occupation with normal on-the-job training and with his current education, training and experience or (2) he cannot engage in any employment or occupation with education, training or experience that he can reasonably be expected to obtain. Accordingly, we review the record to determine whether the circuit court's finding that Peterson is not totally disabled is clearly erroneous.

2. Peterson's Status.

¶ 18. Peterson argues that even if we determine that we review the court's decision as a factual one, the record does not support a finding that he is qualified for any other employment or occupation that is available. He argues that the undisputed facts of record show, through the testimony of Pedracine, that he does not have the necessary skills for the occupations the court found he could do, only that he may have the ability to acquire them. This he maintains is insufficient. He relies on a discussion in Harker, where the court described what a manual laborer could do and reviewed whether the evidence was sufficient to support the jury's finding of total disability in spite of Harker's repeated attempts at employment since his accident. See Harker, 28 Wis. 2d at 549, 137 N.W.2d at 401-02.

¶ 19. Harker is not helpful to Peterson for at least three reasons. First, Harker had repeatedly tried to find suitable employment and had repeatedly failed to be able to perform the jobs that might have seemed suitable to a manual laborer. Second, the definition of disability in Harker's policy differed from what is present here in that it did not address occupations for which Harker could reasonably "become qualified," as the Pennsylvania policy does. Third, the case turned on whether Harker's attempting several jobs prevented him from coming within the policy's definition of totally disabled, not on what occupations he could or could not do. Here, Peterson has never tried to find a job, and the record shows he has many employment possibilities. It is true that the record would not support a factual finding of disability if it showed that the jobs the court found Peterson could perform required a college or graduate school education. As the supreme court explained in Harker:

Total disability is a relative concept. What may totally disable a manual laborer may not totally disable a business executive, physician, or lawyer within the scope of a total-disability clause of an insurance policy. This is particularly true where the policy employs qualifying language ... which limits the occupations the insured is disabled from engaging in to those for which he is "reasonably fitted by education, training and experience."

Id. at 547, 137 N.W.2d at 400-01. However, the types of employment the circuit court considered, here were those jobs for which Peterson already had the skills or for which he could reasonably obtain the skills through on-the-job training.

¶ 20. For example, Pedracine, a vocational specialist, testified that Peterson acquired numerous skills working as a roofer and rough carpenter that could be "utilized in a lot of different jobs." He identified four occupations that were "within his capabilities," based on his training and experience, his disability and his work restrictions. Deborah Peck's testimony substantially corroborated Pedracine's testimony. Accordingly, we conclude that the circuit court's finding that Peterson is not totally disabled is not clearly erroneous, and we affirm the judgment that Pennsylvania Life did not breach the contract.

CONCLUSION

¶ 21. We conclude that because the policy definition of "totally disabled" unambiguously provides that Peterson is not totally disabled if he is or may reasonably become qualified for any occupation by reason of education, experience or training and because the finding of the circuit court that he is not totally disabled is not clearly erroneous, we affirm the judgment.

By the Court. — Judgment affirmed.

       A rough carpenter builds the frame of a house and installs windows and doors. Therefore, the occupation term "framer" is often used interchangeably with "rough carpenter."

       The original complaint included three causes of action: (1) breach of contract, (2) bad faith and (3) statutory prejudgment interest under Wis. Stat. § 628.46 (2001-02). However, the parties entered a stipulation that the only issue to be resolved at trial was Peterson's cause of action for breach of contract. Peterson's claim for breach of contract is therefore the only issue on appeal.

       It is possible to purchase a disability policy that provides benefits if the insured is unable to pursue his current occupation or employment. See Gillen v. Life Ins. Co of North America, 199 F. Supp. 2d 900, 902 (W.D. Wis. 2001); Lewis v. Paul Revere Life Ins. Co., 80 F. Supp. 2d 978, 985 (E.D.Wis. 2000). However, Peterson did not purchase an occupational disability policy.

       We do not address whether Peterson has any obligation to complete additional education or training so he may become employable in areas of employment for which he is not now qualified.


source: Caselaw Access Project

author: VERGERONT, EJ.

license: Public Domain

text:
    Steven R. Stein, Ph.D., Petitioner-Appellant, v. State of Wisconsin Psychology Examining Board and Department of Regulation and Licensing, Respondents-Respondents.
    Court of Appeals

      No. 02-2726.

      Submitted on briefs March 10, 2003.

    — Decided June 5, 2003.

    2003 WI App 147
    (Also reported in 668 N.W.2d 112.)

      On behalf of the petitioner-appellant, the cause was submitted on the briefs of Kevin F. Milliken and Kristine A. Long of Hurley, Burish & Milliken, S.C., Madison.
    On behalf of the respondents-respondents, the cause was submitted on the brief of Maureen McGlynn Flanagan, asst, attorney general, and Peggy A. Lauten-schlager, attorney general.
    Before Vergeront, EJ., Dykman and Roggensack, JJ.

       Petition to review denied 8-13-03.

   VERGERONT, EJ.

¶ 1. Steven Stein, Ph.D., appeals the circuit court's order affirming the decision of the Wisconsin Psychology Examining Board that Stein had sexual intimacies with a client in violation of Wis. Admin. Code §§ PSY 3.02(2) and (15) (1986). The Board ordered that Stein's license to practice psychology be suspended for one year. Stein contends: (1) the doctrine of laches precludes the Board from prosecuting the action against him; (2) the constitutional guarantee of procedural due process precludes the Board from prosecuting the action because of the passage of time since the events giving rise to the complaint; (3) the Board erred in admitting incompetent and speculative testimony; and (4) the Board's finding that Stein had a sexual relationship with his client was not supported by substantial evidence.

¶ 2. We conclude: (1) the doctrine of laches does not apply because this proceeding is brought by the State in its sovereign capacity to protect a public right; (2) Stein's right to procedural due process was not violated because he has not shown that the passage of time prejudiced his ability to defend himself; (3) the Board did not err in admitting evidence; and (4) the Board's finding of a sexual relationship was supported by substantial evidence. Accordingly, we affirm.

BACKGROUND

¶ 3. The complainant, Susan L., received psychotherapy services from Stein from 1984 until 1986. In December 1996, she contacted the American Psychology Association to complain that Stein had engaged in sexual misconduct with her. The association told her that it had a ten-year limitation on investigating claims of sexual misconduct by psychologists and therefore it would not investigate her claim. Susan then contacted the Wisconsin Department of Regulation and Licensing in approximately December 1996, and filed a written complaint in January 1997. The Department issued a formal complaint against Stein in February 2000.

¶ 4. On Stein's motion, the administrative law judge issued a proposed decision dismissing the relevant counts of the complaint on the ground of laches. The Board rejected that proposed decision, concluding laches did not apply in disciplinary proceedings against licensed professionals. In the alternative, the Board concluded that, if the defense of laches were available, it would probably not apply based on the facts of this case. The Board also concluded that the delay did not violate Stein's constitutional right to due process because he had not shown prejudice. Accordingly, the Board remanded the matter to the ALJ, who conducted an evidentiary hearing.

¶ 5. At the evidentiary hearing, Susan testified that she had a sexual encounter with Stein in his office after a joint therapy session with her husband. She also described meetings that took place away from Stein's office after her therapy sessions with Stein had terminated, at least one of which included sexual intimacies. Stein denied he had a sexual relationship with Susan, although he acknowledged he had feelings toward her and that he saw her socially after her therapy sessions with him ended. According to Stein, his therapy sessions with Susan ended after she bared her breasts to him during a session.

¶ 6. The ALJ made the following findings of fact relevant to this appeal, which the Board adopted:

2. In October of 1983, [Susan] began receiving psychotherapy from Nancy Feingold, M.S.S.W.,... [t]he therapy sessions continued intermittently until March of 1994.
3. Steven R. Stein, Ph.D., began providing [Susan] with individual psychotherapy in April of 1984. The therapy sessions ended in the second half of 1986, but the two continued to see one another after that point.
4. In the second half of 1986, but prior to her therapy ending, [Susan] and her husband had a joint therapy session with Dr. Stein. Following that session, her husband left the office and [Susan] remained to speak further with Dr. Stein. Dr. Stein and [Susan] then engaged in a sexual encounter during which time he held and kissed her, and fondled her breasts and genitalia.
5. After that encounter, Dr. Stein terminated his therapeutic relationship with [Susan].
6. In December of 1986, [Susan] resumed therapy with Ms. Feingold. In March 1987, Dr. Stein was present during a therapy session with [Susan] and Ms. Fein-gold. During that session, Dr. Stein did not deny having had a sexual relationship with [Susan].

(Footnote added.)

¶ 7. The Board concluded that, based on finding No. 4, Stein had sexual intimacies with a client in violation of Wis. Admin. Code § PSY 3.02(15) (1986). It also concluded that, by engaging in sexual intimacies with the spouse of a client to whom he was providing individual psychotherapy, Stein practiced psychology in a grossly negligent manner in violation of Wis. Admin. Code § PSY 3.02(2) (1986). The Board ordered that Stein's license to practice psychology be suspended for one year.

¶ 8. Stein sought judicial review pursuant to Wis. Stat. ch. 227 and the circuit court affirmed. The court reviewed de novo the Board's decision on laches and due process and concluded that decision was correct. The court also concluded there was no erroneous exercise of discretion in admitting Feingold's testimony concerning the March 1987 therapy session and that findings Nos. 4 and 6 were supported by substantial evidence.

DISCUSSION

¶ 9. We review the decision of the Board, not that of the circuit court. Gordon v. State Med. Examining Bd., 225 Wis. 2d 552, 556, 593 N.W.2d 481 (Ct. App. 1999).

Laches

¶ 10. We first consider Stein's contention that the Board erred in deciding that the doctrine of laches was not available as a defense in this proceeding. Laches is an equitable doctrine that may bar an action if these requirements are met: (1) the plaintiff unreasonably delayed in commencing the action, (2) the defendant lacked knowledge the plaintiff would assert the right on which the suit is based, and (3) the defendant is prejudiced by the delay. Sawyer v. Midelfort, 227 Wis. 2d 124, 159, 595 N.W.2d 423 (1999). The parties agree that whether the doctrine of laches may be raised as a defense in this proceeding presents a question of law, which we review de novo. See DOR v. Hogan, 198 Wis. 2d 792, 802, 543 N.W.2d 825 (Ct. App. 1995) (application of legal principles to the facts of a case presents a question of law, which we review de novo).

¶ 11. The dispute over whether the defense of laches is available in this action arises from the parties' differing readings of State v. Josefsberg, 275 Wis. 142, 81 N.W.2d 735 (1957). In Josefsberg, the court considered whether the defendant in a medical license revocation proceeding could assert the defense of laches. The ground alleged for revocation was fraud in obtaining the license. Id. at 144-45. The court reviewed cases from other states, some of which held that laches may apply in a medical license revocation proceeding based on fraud, and some of which held that it may not. Id. at 153-54. The court then quoted from two treatises, both of which stated that laches.is not available against the government when the government is acting in a sovereign capacity, which, as one treatise explained, occurs when the government brings a suit "to enforce a public right or to protect a public interest.. . ." Id. at 154-55 (citations omitted). The court concluded that, because the license revocation proceeding was an action "brought by the state in its sovereign capacity to protect a public right, we are constrained to hold that the doctrine of laches was not applicable to the situation litigated therein." Id. at 155.

¶ 12. Stein contends that Josefsberg stands for the proposition that laches is not available when fraud in obtaining a professional license is the basis for the proceeding, while the Board and the trial court read Josefsberg to preclude the defense of laches in any proceeding brought by the state in its sovereign capacity to protect a public right. We agree with the latter reading of Josefsberg. It is true that the cases the Josefsberg court mentioned concerned fraud as a ground for license revocation — both those allowing laches and those precluding it — but the treatises the court cited were not limited to those facts. Most importantly, the court's conclusion was not so limited, but was stated in the broad terms of the treatises quoted.

¶ 13. The broader reading of Josefsberg is confirmed by State v. Chippewa Cable Co., 21 Wis. 2d 598, 124 N.W.2d 616 (1963) — a case in which the state proceeded against a company to compel it to cease violating a statute regulating the height of towers. The court had this to say about the defendant's assertion of laches: "We have held that the doctrine of laches is not applicable to an action by the state to protect a public right," and it cited to Josefsberg. Chippewa Cable Co., 21 Wis. 2d at 608 n.16.

¶ 14. More recently, without citing to Josefsberg, the supreme court has refused to permit laches as a bar to attorney disciplinary proceedings. In In re Disciplinary Proceedings Against Eisenberg, 144 Wis. 2d 284, 294, 423 N.W.2d 867 (1988), the court stated:

[W]e are not persuaded that the doctrine of laches does or should bar a proceeding the issue of which is an attorney's fitness to practice law as demonstrated by his professional conduct. However, a substantial lapse of time between professional misconduct and the initiation of disciplinary proceedings based thereon is a factor to be considered in the determination of appropriate discipline to be imposed, as it may affect the ends lawyer discipline is to achieve: protection of the public, the courts and the legal profession, rehabilitation of the attorney and deterrence of like misconduct by others.

The supreme court subsequently quoted this statement in In re Disciplinary Proceedings Against Charlton, 174 Wis. 2d 844, 498 N.W.2d 380 (1993), again refusing to permit laches to be raised as a defense in an attorney disciplinary proceeding.

¶ 15. We conclude that under Josefsberg laches is not available in any proceeding brought by the State in its sovereign capacity to protect a public right, and we see no indication in later cases that the supreme court has retreated from that holding. We also conclude that this proceeding is one brought by the State in its sovereign capacity to protect a right of the public — the right to have licensed psychologists comply with the requirements of their licenses. Accordingly, we agree with the Board and the circuit court that the defense of laches is not available to Stein.

Due Process

¶ 16. We next consider whether the passage of time between the occurrence of the events that gave rise to the complaint and the hearing on the complaint violated Stein's right to procedural due process. The parties agree that because this proceeding affects Stein's license, which is necessary to engage in his profession, he is entitled to the procedural protections of the due process clause. See Epstein v. Benson, 2000 WI App 195, ¶ 25, 238 Wis. 2d 717, 618 N.W.2d 224. They disagree, however, on what legal standard we are to apply to determine if those rights were violated, as well as on whether there was a violation given the facts of this case. These are questions of law, which we review de novo. See State v. Keith, 216 Wis. 2d 61, 69, 573 N.W. 888 (Ct. App. 1997).

¶ 17. Stein asserts that the proper legal standard is whether the passage of time between the events relevant to the complaint and the hearing on the complaint prejudiced him. His focus is primarily on Susan's delay in filing a complaint with the Department, although he points out that three more years passed before the Department issued a formal complaint and almost two more years until the hearing. He relies on the well-established proposition that procedural due process requires notice and the opportunity to be heard in a meaningful time and in a meaningful manner. See Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 546-47 (1985). Stein's position is that he did not have a meaningful hearing because the passage of time prejudiced his ability to defend himself.

¶ 18. The State, in contrast, relies on criminal cases holding that prosecutorial delay in bringing charges does not violate a defendant's right to due process unless he or she shows both actual prejudice resulting from the delay and that the delay arises from an improper motive on the part of the prosecutor, such as gaining a tactical advantage over the accused. See State v. Wilson, 149 Wis. 2d 878, 903-05, 440 N.W.2d 534 (1989) (applying United States v. Lovasco, 431 U.S. 783 (1977)). According to the State, Stein has shown neither. According to Stein, he has shown actual prejudice and he need not show improper prosecutorial motive, which he does not assert exists.

¶ 19. We find it unnecessary to decide whether Stein must show improper prosecutorial motive, as well as actual prejudice, because we conclude he has not shown prejudice. We address each of his claims of prejudice in turn.

¶ 20. First, Stein contends that the passage of time prevented him from corroborating his version of events through the testimony of Dr. Anna Laird, who, he averred, was his personal therapist and with whom he discussed in 1986 "transference issues and feelings towards Susan which arose out of the doctor/patient relationship." Stein did not call Laird as a witness, but her affidavit averred that she could not recall those discussions and that she had destroyed her patient records in the spring of 1999. The record shows that Stein learned of Susan's complaint long before then. In the Board's decision rejecting the ALJ's proposed decision on laches, it refers to an affidavit averring that Stein was informed of Susan's complaint within seven months after she filed it in January 1997. We are unable to locate that affidavit in the record, but the record does disclose that in June 1998 Stein took a polygraph test related to Susan's complaint. Stein does not dispute the assertion that he first learned of Susan's complaint in 1997, but instead argues that the Department did not initiate the action until February 2000, and before that date he had reason to believe the Department would not initiate an action because of the age of the allegations and the fact that he already had taken a polygraph test. He also argues there is no evidence he was involved with the destruction of Laird's notes. We agree there is not. However, the fact remains that, had Stein wished to obtain Laird's notes, he had ample opportunity to do so before she destroyed them.

¶ 21. Second, Stein contends that he did not have the benefit of Feingold's confidential notes on her sessions with Susan, which were destroyed at the time she moved her office in late 1996 or early 1997. Feingold testified that Susan resumed therapy with her in December 1986, and told Feingold then of her sexual relationship with Stein. This prompted Feingold to maintain both a regular file of clinical notes and a confidential file, because Stein was practicing in the same clinic and Feingold did not want to compromise Susan's confidentiality in any way. The regular clinic notes from Susan's sessions were not destroyed and are part of the record. Feingold testified that she recalled the March 27, 1987 session, and she recalled the discussions with Susan about Stein leading up to that, as well as the reasons she created a confidential set of notes. There is no basis in the record for concluding that Feingold's confidential notes would have been less damaging to Stein than was her testimony.

¶ 22. Third, Stein contends that Susan's recollection had faded over the years and this deprived him of an alibi defense and lessened the impact of her testimony that he had a prominent appendectomy scar, which she could not recall even though she testified they had both fully disrobed. With respect to the findings adopted by the Board, the actual date of the sexual encounter described in finding No. 4 was not significant; what was significant was whether the sexual encounter occurred while Susan was Stein's client. Since there was evidence that Stein did have joint sessions with Susan and her husband, and since her account was that the sexual encounter occurred in his office after a, joint therapy session, we do not understand how Susan's ability to recall that specific date would aid Stein in presenting his defense, which was that no such sexual encounter in his office occurred regardless of the date. Similarly, the conflict in testimony over the meetings outside the office were not over whether they occurred, but over what happened during those meetings. Susan's inability to recall exact dates and other details of her encounters with Stein were fully explored on cross-examination and used by Stein's counsel to impeach her credibility.

¶ 23. Fourth, Stein contends that the passage of time prevented him from investigating whether certain prior sexual relationships that Susan described in her deposition had actually occurred. His theory is that if she had fabricated those sexual relationships, that would be evidence that she had fabricated a sexual relationship with him. He is apparently relying on her deposition testimony when he says that one of those men is now dead and "the remaining men are out of the country and thus not available." However, the "remaining men" Stein is apparently referring to are described by Susan in her deposition as an Iraqi pilot and a man whom she met when she lived in the Middle East; it appears neither were ever available in this country. In addition, it is entirely speculative what any of these men would have said about their relationships with Susan. We conclude that the lack of the ability to pursue such speculative avenues does not constitute prejudice for purposes of our due process analysis.

¶ 24. We also observe that Stein testified he did not have notes of his sessions with Susan and is not sure if ever he made notes. The lack of his own notes as an aid in recalling has nothing to do with the passage of time.

¶ 25. In summary, we agree with both the Board and the trial court that Stein has not shown that he was prejudiced by the passage of time between the events relevant to the complaint and the hearing on the complaint.

Admissibility of Feingold's Testimony

¶ 26. Both Susan and Feingold testified that, during the course of sessions between December 11, 1986 and March 18, 1987, Susan told Feingold that she and Stein had had an extramarital affair and she had fallen in love with him. Feingold's March 18, 1987 regular clinical notes state, "Susan followed up on her decision to inform her husband about the extramarital affair and also to invite the man she has been involved with to a session to get some closure on all aspects of that relationship."

¶ 27. Susan, Stein, and Feingold each testified concerning the session that occurred on March 25, 1987, at which all three were present. Susan's and Stein's accounts of the purpose of the session were in conflict. According to Susan, she spoke to Stein prior to the session and told him that she needed closure on both their therapeutic and their sexual relationship. According to Stein, he agreed to participate in the therapy session to help Susan resolve her feelings for him. Feingold's regular clinical notes state that the "notes of this [March 25, 1987] session remain confidential." However, Feingold testified that she remembered the session, and she described it. She testified that there was no mention in that session of specific sexual acts that had occurred but, based on the discussion, there was no doubt in her mind that Stein understood they were talking about a sexual relationship, and he never indicated that a sexual relationship had not occurred. Stein objected to this testimony on the ground that Feingold was not competent to testify to Susan's or Stein's state of mind, and that her testimony was an effort to bolster Susan's credibility. The ALJ questioned Feingold on what she understood the conversation to be about and why, and, based on Feingold's explanation, the ALJ overruled the objection.

¶ 28. Admission of evidence by an administrative agency is a matter of discretion. Board of Regents v. State of Wisconsin Pers. Comm'n, 2002 WI 79, ¶ 26, 254 Wis. 2d 148, 646 N.W.2d 759. We affirm the agency's discretionary decision if it is based on facts appearing in the record and upon applicable law. Id.

¶ 29. Stein acknowledges that the ALJ is not governed by the rules of evidence but instead by Wis. Stat. § 227.45(1) (2001-02), which provides:

An agency or hearing examiner shall not be bound by common law or statutory rules of evidence. The agency or hearing examiner shall admit all testimony having reasonable probative value, but shall exclude immaterial, irrelevant or unduly repetitious testimony ....

However, Stein goes on to contend that Feingold's testimony was inadmissible based on case law applying the rules of evidence, rather than addressing the standard of "reasonable probative value." Specifically, he contends that Feingold's testimony is inadmissible because it goes to Stein!s state of mind, it is vouching for Susan's credibility, Feingold lacked personal knowledge of what Stein's thoughts were, and there was no admission by silence. Stein concedes that, even under the rules of evidence, Feingold could testify to what Stein and Susan said, and he apparently concedes that Fein-gold could also testify to what she herself said.

¶ 30. We conclude the ALJ did not erroneously exercise its discretion in admitting the challenged testimony of Feingold. Feingold's testimony that they were all talking about a sexual relationship is based on her firsthand observations of what was said and not said during that session, which she explained in detail. For example, she testified that Susan and Stein talked about "how irresistible" they found each other, about why the relationship had happened, and when Stein said "he didn't know, he just couldn't help himself," she, Feingold, told him "that's not good enough, that you couldn't help yourself." She also testified that she emphasized that Stein was "responsible for what happened between the two of them even though it was a consensual relationship that Susan very much wanted." The ALJ questioned Feingold on what she understood the conversation to be about and why. Based on Feingold's explanation and the other testimony about the session, the ALJ could reasonably decide that Feingold's testimony that the conversation was about a sexual relationship had reasonable probative value. Wis. Stat. § 227.45(1).

¶ 31. We do not agree that Feingold's testimony constituted an opinion vouching for Susan's credibility, nor do we agree that Feingold's testimony did not have reasonable probative value simply because she had not discussed with Stein whether, in fact, he had had a sexual relationship with Susan. Finally, because we have concluded that Feingold's testimony did have reasonable probative value, it is unnecessary to decide whether Stein's failure to deny he had a sexual relationship with Susan in that session was admissible as an adoptive admission by a party opponent under Wis. Stat. § 908.01(4)(b)2.

Sufficiency of the Evidence

¶ 32. Stein contends that the findings that Stein and Susan had a sexual encounter, and that Stein did not deny in the March 27, 1999 session that he had had a sexual relationship with Susan, are not supported by substantial evidence. The only evidence of the latter, he asserts, is Feingold's testimony. This is not substantial evidence in his view because Feingold acknowledged that there was no reference to specific sexual acts that actually occurred and also acknowledged that Stein did not admit he had had a sexual relationship with Susan. According to Stein, without Feingold's testimony there is simply a conflict between Susan's testimony and Stein's testimony on the nature of their relationship, and Susan's testimony is not substantial evidence.

¶ 33. Our review of an agency's findings of fact is highly deferential. Wal-Mart Stores, Inc. v. LIRC, 2000 WI App 272, ¶ 10, 240 Wis. 2d 209, 621 N.W.2d 633. The court may "not substitute its judgment for that of the agency as to the weight of the evidence on any disputed finding of fact, . . . [but] shall... set aside agency action or remand the case to the agency, if it finds that the agency's action depends on any finding of fact that is not supported by substantial evidence." Wis. Stat. § 227.57(6). Substantial evidence in this context means "relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Wal-Mart Stores, Inc., 240 Wis. 2d 209, ¶ 10 (citation omitted). The credibility of the witnesses and the persuasiveness of their testimony are for the agency to determine, L&H Wrecking Co., Inc. v. LIRC, 114 Wis. 2d 504, 509, 339 N.W.2d 344 (Ct. App. 1983), as is the determination of what inference to draw from evidence when there is more than one reasonable inference. Vocational Tech. & Adult Ed. Dist. 13 v. ILHR Dept., 76 Wis. 2d 230, 240, 251 N.W.2d 41 (1977). In short, we may set aside the Board's decision because of factual errors only if "upon an examination of the entire record, the evidence, including the inferences therefrom, is found to be such that a reasonable person, acting reasonably, could not have reached the decision from the evidence and its inferences." Wal-Mart Stores, Inc., 240 Wis. 2d -209, ¶ 10 (citations omitted).

¶ 34. Applying this standard, we conclude the challenged findings are supported by substantial evidence. The Board accepted the ALJ's judgment that Feingold's testimony was credible. That includes Feingold's testimony that Susan told her about the sexual nature of the relationship during their therapy sessions before March 25, 1987, from which the ALJ inferred that Feingold believed that the relationship had been sexual. In addition to crediting Feingold's account of the March 27, 1987 session, the ALJ drew certain inferences, which were adopted by the Board: it would have been evident to Stein that Feingold believed he had had a sexual relationship with Susan based on what Feingold testified she said to Stein in the session; if Stein had not had a sexual relationship with Susan, he would have said something to object or protest; if the extent of their sexual relationship had been that Susan had bared her breasts to him, Stein would have told Feingold that; and Stein's failure to tell Feingold that and to say anything to dispel Feingold's impression, which she had conveyed by what she said to Stein, indicates that he and Susan had had a sexual relationship.

¶ 35. The essence of Stein's challenge appears to be to the inference the agency drew from Stein's failure at the March 25, 1987 therapy session to deny that the relationship was sexual. However, we conclude the agency's inference was a reasonable one. It may not have been the only reasonable one; but in our review we are to determine whether the agency could have reasonably drawn the inferences it did, not whether there are other reasonable inferences that could be drawn. Copland v. Dept. of Taxation, 16 Wis. 2d 543, 554, 114 N.W.2d 858 (1962). Finally, if Stein intends to argue that substantial evidence cannot consist of reasonable inferences from the evidence, that is not correct. See Gilbert v. Med. Examining Bd., 119 Wis. 2d 168, 195, 349 N.W.2d 68 (1984). We conclude that the inferences the agency drew from the evidence were reasonable ones and that substantial evidence supports the finding that Stein and Susan had a sexual encounter in the second half of 1986 prior to the termination of Susan's therapy with Stein.

By the Court. — Order affirmed.

       Wisconsin Admin. Code § 3.02 (1986) provided in part:
      Professional conduct. The practice of psychology is complex and varied, and therefore allows for a broad range of professional conduct. The following acts constitute unprofessional conduct by applicants for licensure and licensees of the hoard and are prohibited. Complaints regarding these acts shall be investigated and may lead to disciplinary proceedings.
      (2) Practicing of psychology in a grossly negligent manner.
      (15) Indulging in sexual intimacies with clients.

       The parties apparently agree that Susan's therapy with Feingold concluded in April 1987, but this discrepancy is not material to this appeal.

       Stem's affidavit, as well as Laird's, were submitted in support of his motion for summary judgment based on laches.

       The testimony of Feingold that Stein challenges is the following:
      THE WITNESS: Well, I knew without a shadow of a doubt that we were talking about the same thing because Dr. Stein would have argued with me or with Susan or would have said, you know, something that would have said, you know, Susan this didn't happen or I'm sorry, you know, that, you know, you believe — He didn't say anything, we were all on the same page. The issue was how to resolve it. The issue was that harm had been done. There was no question at that session about harm being done. And that's how — I didn't have to know about my judgment. I knew that I was talking to two sane people who had been in the same place at the same time and there was no —■ Dr. Stein at no time said, Susan, you know, when do you think this happened or, you know, where did you get this idea. Never a question.

       All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.

       The trial court did not address this objection because it determined that Stein had waived the objection by not making it at the hearing.


author: FINE, J. WEDEMEYER, EJ.

text:
    Harold Sampson Children's Trust, a trust maintained for the benefit of Beth Bauer, Jamie L. Sherman, and Kay Yuspeh, and each of them individually as Plaintiffs, and The Beth Bauer Trust, The Jamie L. Sherman Trust and The Kay Yuspeh Trust, Plaintiffs-Respondents, v. The Linda Gale Sampson 1979 Trust, The Steven J. Sampson 1979 Trust and The Scott A. Sampson 1979 Trust, which are the successors to the B.J. Sampson Children's Trust, a trust maintained for the benefit of Linda Gale Sampson, Scott Sampson, and Steve Sampson, and Sampson Investments, Ann Mandelman, and Nancy Simos, Defendants-Third-Party Plaintiffs-Appellants, v. Beth Bauer, Third-Party Defendant.
    Court of Appeals

      No. 02-1515.

      Oral argument May 6, 2003.

    — Decided June 10, 2003.

    2003 WI App 141
    (Also reported in 667 N.W.2d 831.)

      On behalf of the defendants-third-party plaintiffs-appellants, the cause was submitted on the briefs of Paul S. Medved, and Scott R. Halloin of Mallery & Zimmerman, S.C., Milwaukee. There was oral argument by Scott R. Halloin.

    On behalf of the plaintiffs-respondents, .the cause was submitted on the brief of Jane C. Schlicht, Steven L. Nelson, and Stephanie L. Riches of Cook & Franke, S.C., Milwaukee. There was oral argument by Jane C. Schlicht.

    Before Wedemeyer, EJ., Fine and Lundsten, JJ.

       Petition to review granted 10-1-03.

   FINE, J.

¶ 1. We granted the petition for leave to appeal filed by the defendants. They seek reversal of the trial court's non-final order directing them to return to the plaintiffs documents produced during discovery that the trial court held were protected by the attorney-client privilege. We reverse.

I.

¶ 2. This is an inter-family dispute over money, the specific details of which are not material to this appeal. During the litigation before the trial court, Robert L. Elliott, Esq., while he was the plaintiffs' attorney, turned over to the defendants documents that he determined were responsive to the defendants' discovery request. The plaintiffs later contended that some of the documents were protected from disclosure by the attorney-client privilege. The defendants asserted that the plaintiffs had waived whatever privilege there was.

¶ 3. The trial court referred the dispute over what documents were privileged and whether that privilege was waived to a referee, designated as a "discovery master," pursuant to Wis. Stat. Rule 805.06. The referee, Theodore J. Hodan, Esq., heard thirteen hours of testimony and argument and issued a comprehensive thirty-three-page report, encompassing his findings of fact and conclusions of law. See Wis. Stat. Rule 805.06(5)(a). On review, see Wis. Stat. Rule 805.06(5)(b), the trial court adopted the referee's findings of fact, but overturned the referee's conclusion that the plaintiffs had waived the attorney-client privilege. See ibid. ("In an action to be tried without a jury the court shall accept the referee's findings of fact unless clearly erroneous."). At oral argument, the plaintiffs conceded that the referee's findings of fact were not "clearly erroneous." Thus, we accept the facts material to our decision as they were found by the referee. See Wis. Stat. Rule 805.17(2) (appellate court bound by trial court's findings of fact unless they are "clearly erroneous"). We also assume, without deciding, that the documents are within the attorney-client privilege.

¶ 4. The referee found that Elliott "is a prominent, experienced, competent, well-respected, board certified civil trial lawyer, who is known to have handled many difficult complex and high-profile civil lawsuits," and that he "dealt primarily" with the plaintiff Beth Bauer as a " 'contact' person" in connection with the lawsuit during the time he was the plaintiffs' lawyer. Bauer testified that she gave the documents that are the subject of this appeal to Elliott. She also testified that the documents were produced by Elliott without her knowledge, and, as phrased by the referee, that she "did not intend, nor at any time agree that the documents in question could be or would be turned over to the defendants." She did, however, concede that Elliott had authority to respond to the discovery request.

¶ 5. Bauer helped Elliott with the discovery request, but Elliott did the " 'privileged document review' " by himself. Although he could not recall whether he had looked at the specific documents that are the subject of this appeal, Elliott testified, as found by the referee, "that it was his practice (which he believed he followed in this case) to read every page of every document and if a question (about it being privileged) came up, he would ask the clients about the document." Further, Elliott reviewed the challenged documents at the hearing before the referee and Elliott testified that he saw "no reason for him to conclude that [the documents were] privileged."

¶ 6. The referee opined however, that Elliott "should have realized that they were privileged or, at the least, realized that further information from the client regarding their creation was required prior to turning them over to the" defendants. As noted, the referee concluded that the plaintiffs had waived their attorney-client privilege in connection with the documents.

¶ 7. In reaching his decision, the referee surveyed the law dealing with the inadvertent disclosure of attorney-client privilege documents and concluded that the issue had not been addressed by an appellate court in Wisconsin. Nation-wide, he discovered, there were three approaches: lenient, strict, and intermediate. The "lenient" rule holds that "inadvertent" disclosure by an attorney of materials clothed with the attorney-client privilege does not waive the privilege. See, e.g., Mendenhall v. Barber-Greene Co., 531 E Supp. 951, 954-955 (N.D. Ill. 1982). The "strict" rule holds that disclosure, whether authorized by the client or not, is waiver because, in essence, the sounds of a bell once rung cannot be recaptured. See, e.g., International Digital Sys. v. Digital Equip. Corp., 120 F.R.D. 445, 449-450 (D. Mass. 1988) (decision by a United States Magistrate Judge). The intermediate, "totality-of-the-circumstances" approach attempts to balance such amorphous elements as: the reasonableness of safeguards in-place to prevent unauthorized disclosure of attorney-client privileged material; the extent of the document production request and the attendant burdens on the party responding to that request (for example, does the request seek a few documents or a few hundred thousand); any unreasonable delay in trying to retrieve the inadvertently produced documents; the number of times the producing party or its lawyers have disclosed protected materials before; and an overall interests-of-justice, fairness calculus. See, e.g., United States ex rel. Bagley v. TRW, Inc., 204 F.R.D. 170, 174-185 (C.D. Cal. 2001) (applying federal common law) (none of the parties "challenged the appropriateness of steering the middle course between the strict rule that disclosure always constitutes a waiver and the forgiving rule that disclosure never results in a waiver unless a waiver actually was subjectively intended") (decision by a United States Magistrate Judge).

¶ 8. The referee concluded that of the three approaches, the intermediate approach was a better way of resolving the inadvertent production of privileged documents, even though it was "cumbersome, time-consuming, expensive, and in some cases, may be impracticable." The referee, however, determined that none of the approaches was applicable to this case because the documents were not produced inadvertently. The referee found:

• "Elliott, in fact, reviewed each of the documents in question and then intentionally determined that they should be turned over to opposing counsel";
• "Attorney Elliott's actions [in producing the documents] were deliberate and intentional"; and
• "Thus, Attorney Elliott's decision to turn over the documents was not 'inadvertent,' it was 'intentional.'"

(Emphasis by the referee.) Accordingly, the referee concluded that Elliott's production of the documents waived his clients' attorney-client privilege as to those documents. As an alternative ground for his decision, the referee applied the totality-of-the-circumstances test and determined that the defendants prevailed under it as well.

¶ 9. The trial court disagreed with the referee's conclusion, and held that "Elliott could not waive the Plaintiffs' attorney/client privilege," as to the documents because, in its view, "the law in Wisconsin is only the client can waive attorney/client communications."

II.

¶ 10. This appeal presents a very narrow issue: whether a lawyer's intentional discovery-request production to opposing counsel of documents covered by the attorney-client privilege waives that privilege when the lawyer does not recognize the privileged character of the documents. Although an excursion through the various rules courts and ethics committees have adopted in connection with the "inadvertent" production of privileged material might make an interesting journey, we agree with the referee that, based on his finding of fact, Elliott's transmission of the documents to the defendants was deliberate, intentional and not inadvertent; the rules applicable to "inadvertent" disclosure do not apply here. Rather, our decision turns on the nature of the attorney-client relationship, and what constitutes waiver under Wis. Stat. Rule 905.II.

¶ 11. Our decision is based on two common precepts. First, under ordinary attorney-client agency principles, compliance with discovery requests is something that the client delegates to the attorney. The referee found that this was done here. Second, as recognized by the Federal Advisory Committee note to proposed Fed. R. Evid. 511, which was adopted in Wisconsin as Wis. Stat. Rule 905.11, the formulation of waiver by Johnson v. Zerbst, 304 U.S. 458, 464 (1938), as the intentional relinquishment of a known right, does not apply to waiver of evidentiary privileges. The Federal Advisory Committee observed that "once confidentiality is destroyed through voluntary disclosure, no subsequent claim of privilege can restore it, and knowledge or lack of knowledge of the existence of the privilege appears to be irrelevant." Wisconsin Rules of Evidence 59 Wis. 2d at Rp. 151.

A. The attorney-client agency relationship.

¶ 12. A lawyer has actual authority to act on behalf of the client, and the client is bound by what the lawyer does, where "the client has expressly or impliedly authorized the act." Restatement (Third) of The Law Governing Lawyers § 26 (1998). The Restatement observes: "The word 'act' includes failures to act, for example when a lawyer does not object to something done in court." Id. at cmt. a. "Likewise, the client is bound by authorized lawyer action or inaction during litigation, for example when the lawyer asks a question that elicits an answer harmful to the client or files a frivolous motion." Id. at cmt. d. These comments recognize that the lawyer has actual authority to conduct litigation and does not need a specific delegation of authority with respect to each thing done or not done.

¶ 13. Closely related to the actual authority of the lawyer to bind the client is the lawyer's apparent authority to do so. These twin concepts "often lead to similar results." Restatement (Third) of The Law Governing Lawyers § 27 cmt. b (1998). The black-letter rule on apparent authority is:

A lawyer's act is considered to be that of the client in proceedings before a tribunal or in dealings with a third person if the tribunal or third person reasonably assumes that the lawyer is authorized to do the act on the basis of the client's (and not the lawyer's) manifestations of such authorization.

Id. at § 27. Manifestation of authorization is generally the attorney-client relationship itself. "[Sjimply retaining a lawyer confers broad apparent authority on the lawyer unless other facts apparent to the third person show that the lawyer's authority is narrower." Id. at cmt. a. The Restatement explains: "By retaining a lawyer, a client implies that the lawyer is authorized to act for the client in matters relating to the representation and reasonably appropriate in the circumstances to carry it out." Id. at cmt. c. Although this "creates a risk that a client will be bound by an act the client never intended to authorize," id. at cmt. b, the rule is necessary if the gears of the law are not to be embedded in the intractable sand of continual second-guessing and the attendant evidentiary hearings that, as the referee here recognized, would inevitably follow.

¶ 14. The attorney-client agency rule in Wisconsin mirrors that recognized by the Restatement. Thus, a client is responsible for the acts of his or her lawyer, even if that means suffering the harsh result of dismissal. Johnson v. Allis Chalmers Corp., 162 Wis. 2d 261, 283-284, 470 N.W.2d 859, 867-868 (1991):

"There is certainly no merit to the contention that dismissal of petitioner's claim because of his counsel's unexcused conduct imposes an unjust penalty on the client. Petitioner voluntarily chose this attorney as his representative in the action, and he cannot now avoid the consequences of the acts or omissions of this freely selected agent. Any other notion would be wholly inconsistent with our system of representative litigation, in which each party is deemed bound by the acts of his lawyer-agent and is considered to have 'notice of all facts, notice of which can be charged upon the attorney.' "

(Quoting Link v. Wabash R.R. Co., 370 U.S. 626, 633-634 (1962); internal quoted source omitted by Johnson, 162 Wis. 2d at 284, 470 N.W.2d at 868.) Thus, in the context of whether a medical-malpractice case is barred by the statute of limitations or is saved by the "discovery rule" adopted by Hansen v. A.H. Robbins Co., 113 Wis. 2d 550, 560, 335 N.W.2d 578, 583 (1983), "what a lawyer retained by a plaintiff knows is imputed to that plaintiff." Estate of Hegarty v. Beauchaine, 2001 WI App 300, ¶ 84, 249 Wis. 2d 142, 189-190, 638 N.W.2d 355, 378 (Fine, J., dissenting, but writing the opinion of the court on that issue, see id., 249 Wis. 2d 142, ¶ 79); see also Groom v. Professionals Ins. Co., 179 Wis. 2d 241, 250 n.3, 507 N.W.2d 121, 125 n.3 (Ct. App. 1993) ("A party is bound by the acts of her lawyer-agent and has notice of all the facts in the possession of her attorney.").

¶ 15. We now turn to how the attorney-client agency relationship affects the intentional — albeit allegedly erroneous — production of claimed attorney-client-privilege documents pursuant to a discovery request.

B. Waiver.

¶ 16. The attorney-client privilege is set out in Wis. Stat. Rule 905.03(2):

GENERAL Rule of PRIVILEGE. A client has a privilege to refuse to disclose and to prevent any other person from disclosing confidential communications made for the purpose of facilitating the rendition of professional legal services to the client: between the client or the client's representative and the client's lawyer or the lawyer's representative; or between the client's lawyer and the lawyer's representative; or by the client or the client's lawyer to a lawyer representing another in a matter of common interest; or between representatives of the client or between the client and a representative of the client; or between lawyers representing the client.

The privilege belongs to the client, State ex rel. Dudek v. Circuit Court, 34 Wis. 2d 559, 605, 150 N.W.2d 387, 412 (1967); Swan Sales Corp. v. Jos. Schlitz Brewing Co., 126 Wis. 2d 16, 31-32, 374 N.W.2d 640, 648 (Ct. App. 1985), and may be claimed by the client or, among others, by the attorney who was the client's lawyer when the client made the communication. Wis. Stat. Rule 905.03(3).

¶ 17. The attorney-client privilege, as with all privileges recognized by Wis. Stat. ch. 905, may be waived. The general rule of waiver is in Wis. Stat. Rule 905.11:

A person upon whom this chapter confers a privilege against disclosure of the confidential matter or communication waives the privilege if the person or his or her predecessor, while holder of the privilege, voluntarily discloses or consents to disclosure of any significant part of the matter or communication. This section does not apply if the disclosure is itself a privileged communication.

At oral argument, the plaintiffs contended that the word "voluntary" was qualified by the requirement that it be both volitional and knowing — that there could be no waiver without the intentional relinquishment of a known right, referencing and adopting, in response to the court's question, Johnson v. Zerbst. But as we have seen, the Federal Advisory Committee's Note to proposed Fed. R. Evid. 511, from which Wis. Stat. Rule 905.11 was copied, recognized that the Johnson v. Zerbst standard does not apply to waiver of evidentiary privileges. Thus, if the "holder of the privilege," namely the client, "voluntarily discloses" a communication shielded by the attorney-client privilege, that disclosure need only be volitional. Given the attorney-client agency relationship, the same rule applies to disclosure by the client's attorney.

¶ 18. The black-letter rule is found in Restatement (Third) of The Law Governing Lawyers. Section 79 recognizes:

The attorney-client privilege is waived if the client, the client's lawyer, or another authorized agent of the client voluntarily discloses the communication in a non-privileged communication.

As with the Federal Advisory Committee's Note to proposed Fed. R. Evan 511, whether the disclosure is done "voluntarily" is a matter of volition only: "The disclosing person need not be aware that the communication was privileged, nor specifically intend to waive the privilege." Restatement (Third) of The Law Governing Lawyers § 79 cmt. g. Similarly, "disclosure through a voluntary act constitutes a waiver even though not intended to have that effect." Id. at cmt. h. This is true because "[i]t would, after all, be an unusual case in which any person released a document for the purpose of surrendering a recognized right." Liggett Group, Inc. v. Brown & Williamson Tobacco Corp., 116 F.R.D. 205, 208 (M.D.N.C. 1986) (inadvertent disclosure) (emphasis in Liggett) (decision by a United States Magistrate Judge).

¶ 19. In re Grand Jury Investigation of Ocean Transportation, 604 F.2d 672 (D.C. Cir. 1979) (per curiam), cert. denied sub nom. Sea-Land Services, Inc. v. United States, 444 U.S. 915, is helpful to our analysis because the facts there are similar to the facts here. In that case, Sea-Land Services sought return of documents produced by its lawyer to the United States Department of Justice pursuant to a subpoena duces tecum. Id., 604 F.2d at 673. Two groups of documents were produced, and we discuss the group that is most analogous to the situation here.

¶ 20. The Department served its subpoena on Sea-Land, which told its original lawyer to comply but also "to withhold from production all documents which were felt might be covered by the attorney-client privilege." Id., 604 F.2d at 674. As to the group of documents pertinent to our inquiry, the lawyer, for an unknown reason deemed irrelevant by the court, "did not mark these papers as potentially privileged and voluntarily turned them over." Ibid. Ocean Transportation opined as to the effect of this volitional transmission:

This must be deemed a complete waiver. Original counsel's responsibility was to determine the privileged status of Sea-Land's documents. Its decisions in this regard were binding on its client. Privilege claims cannot be reopened by retaining new counsel who read the privilege rules more broadly than did their predecessor.

Ibid.

¶ 21. Plaintiffs contend that what the referee found to be Elliott's volitional transmission of the documents to the defendants could not waive the attorney-client privilege because of language in Dudek and Swan Sales that only the client may waive the attorney-client privilege. But the cases are inapposite.

¶ 22. In Dudek, an insurance-policy holder sued the insurance company, and subpoenaed the company's lawyer, Edward A. Dudek, Esq., to give testimony at a deposition. Dudek, 34 Wis. 2d at 568-569, 150 N.W.2d at 392-393. Although responding to some questions, Dudek refused to answer questions that in his view sought answers that invaded both the attorney-client privilege and the work-product doctrine. Id., 34 Wis. 2d at 570, 150 N.W2d at 393. The trial court directed Dudek to answer all but "28 inquiries in the transcript of the deposition." Id., 34 Wis. 2d at 571, 150 N.W.2d at 394.

¶ 23. Although dealing mainly with the work-product doctrine, id., 34 Wis. 2d at 583-605,150 N.W.2d at 400-412, Dudek also addressed the attorney-client privilege, id., 34 Wis. 2d at 578-583, 150 N.W.2d at 398-400. The policy holder contended that because Dudek had verified the company's answer and amended answer, Dudek had, as paraphrased by Dudek, "placed himself in the position of a party" and thus had waived the client's attorney-client privilege. Id., 34 Wis. 2d at 605, 150 N.W2d at 412. Dudek disagreed, noting only that "as an attorney Mr. Dudek may not waive any objections to discovery which are based upon the attorney-client privilege. Only the client can waive these objections." Ibid.

¶ 24. In Swan Sales, an in-house lawyer for one of the parties testified at a deposition in the case and submitted an affidavit in support of the party's motion for summary judgment. Swan Sales, 126 Wis. 2d at 30-31, 374 N.W.2d at 648. Swan argued that this waived both the attorney-client privilege and the work-product doctrine in connection with materials the lawyer used to prepare himself for the deposition and to draft the affidavit. Id., 126 Wis. 2d at 30-31, 374 N.W.2d at 648. Holding to the contrary, Swan Sales opined: "[T]he mere fact that an attorney offers him- or herself as a witness does not automatically waive the attorney-client privilege or work product doctrine as to documents reviewed by the attorney in preparing to testify. We note that these privileges are owned by the attorney's client and can only be waived voluntarily at the client's direction." Id., 126 Wis. 2d at 31-32, 374 N.W.2d at 648 (citing, in a footnote, Wis. Stat. Rules 905.03 and 905.11).

¶ 25. Neither Dudek nor Swan Sales dealt with the situation presented here: the volitional transmission of documents by a lawyer, pursuant to a discovery request, who was authorized by his client to deal with discovery matters. Moreover, in both Dudek and Swan Sales, the lawyers asserted the attorney-client privilege the moment the other side sought to invade the privilege; neither lawyer transmitted or disclosed confidential attorney-client-privilege material. Plaintiffs' attempt to morph the language from Dudek and Swan Sales into a hook with which to retrieve documents produced volitionally by their lawyer would transform that language from a "holding" (because the language was clearly pertinent to the issues decided by those cases) into dictum. As we pointed out in State v. Leitner, 2001 WI App 172, ¶ 50, 247 Wis. 2d 195, 216-217, 633 N.W.2d 207, 217, aff'd, 2002 WI 77, ¶ 22, 253 Wis. 2d 449, 463-464, 646 N.W.2d 341, 348, a statement in a judicial decision is dictum if the issue argued to be controlled by that statement was not before the court making the statement, unless the statement is a" 'judicial act'" by a " 'court of last resort,'" which intends to lay down a rule to govern future cases, 253 Wis. 2d 449, ¶ 22 n.16 (quoted source omitted). The statements in Dudek and Swan Sales are not "judicial acts," and to apply them to an issue that was not even on the horizon for either court would violate the fundamental principle that has long been the spine of the judicial-decision process. As Chief Justice John Marshall observed:

It is a maxim not to be disregarded, that general expressions, in every opinion, are to be taken in connection with the case in which those expressions are used. If they go beyond the case, they may be respected, but ought not to control the judgment in a subsequent suit when the very point is presented for decision. The reason of this maxim is obvious. The question actually before the Court is investigated with care and considered in its full extent. Other principles which may serve to illustrate it, are considered in their relation to the case decided, but their possible bearing on all other cases is seldom completely investigated.

Cohens v. Virginia, 6 Wheat. (19 U.S.) 264, 399-400 (1821) (emphasis added). In short, observations that are neither essential to the opinion in which they appear nor "judicial acts" by a "court of last resort" should not be allowed to leak from the container of matters actually decided and affect issues not envisioned by the authors of that dicta.

¶ 26. To let the words that the plaintiffs quote from Dudek and Swan Sales, rather than the concepts or principles encompassed by those words in the context in which they were uttered, control the issue presented here, would, in our view, be akin letting the words of the Fourth Amendment protecting "[t]he right of the people to be secure in their persons, houses, papers, and effects" exclude telephone booths. That, of course, is not the law. Katz v. United States, 389 U.S. 347, 351-353 (1967).

III.

¶ 27. In sum, we conclude that what the referee found to be Elliott's volitional act of transmitting the documents to the defendants pursuant to a discovery request, waived whatever attorney-client privilege the plaintiffs had in connection with those documents. Accordingly, we reverse and remand this matter to the trial court for further proceedings consistent with this decision.

By the Court. — Order reversed and cause remanded with directions.

WEDEMEYER, EJ.

¶ 28. (dissenting). I respectfully dissent from the majority opinion for the following reasons.

A. The Wisconsin Court of Appeals Standard of Review and Limited Power of Authority.

¶ 29. This court reviews questions of law de novo. Reyes v. Greatway Ins. Co., 227 Wis. 2d 357, 364-65, 597 N.W.2d 687 (1999). However, we must still adhere to the applicable supreme court precedent regardless of our disagreement with it. Professional Office Bldgs., Inc. v. Royal Indem. Co., 145 Wis. 2d 573, 581, 427 N.W.2d 427 (Ct. App. 1988). In addition to being obligated to follow the applicable supreme court precedent, this court is precluded from adopting and/or applying rules from foreign jurisdictions that contradict the Wisconsin Supreme Court precedent. Wolski v. Wilson, 174 Wis. 2d 533, 497 N.W.2d 794 (Ct. App. 1993).

¶ 30. Our supreme court is the only state court that has been granted the authority and power to create and modify principles of law. Cook v. Cook, 208 Wis. 2d 166, 189, 560 N.W.2d 246 (1977). Unlike this court, it has been designated by the constitution of this state and the legislature as the sole "law-declaring" state court. State ex rel. La Crosse Tribune v. Circuit Court, 115 Wis. 2d 220, 229-30, 340 N.W.2d 460 (1983). This court does not have the same authority or power. Rather, our primary function is to act as an error correcting court. State v. Schumacher, 144 Wis. 2d 388, 398, 424 N.W.2d 672 (1988); State v. Mosley, 102 Wis. 2d 636, 665-66, 307 N.W.2d 200 (1981); State v. Grawien, 123 Wis. 2d 428, 432, 367 N.W.2d 816 (Ct. App. 1985). The Wisconsin Supreme Court, in State ex rel. Swan v. Board of Elections, 133 Wis. 2d 87, 93-94, 394 N.W.2d 732 (1986) summarized the role of this court best in stating:

The court of appeals is intended to be a high-volume, error-correcting court, having a close relationship to the circuit courts in respect to the superintending control of circuit court functions.... The supreme court is primarily concerned with the institutional functions of our judicial system, while the court of appeals is charged primarily with error correcting in the individual case.

B. Wisconsin Attorney-Client Privilege Standard.

¶ 31. An attorney-client communication is privileged if it is "not intended to be disclosed to 3rd persons other than those to whom disclosure is in furtherance of the rendition of professional legal services to the client or those reasonably necessary for the transmission of the communication." Wis. Stat. § 905.03(l)(d). The attorney-client privilege belongs to, and is for the benefit of, the client; accordingly, only the client can "refuse to disclose and to prevent any other person from disclosing confidential communications made for the purpose of facilitating the rendition of professional legal services to the client. . . ." Wis. Stat. § 905.03(2).

¶ 32. It is the law in Wisconsin that only the client can waive the attorney-client privilege. State ex rel. Dudek v. Circuit Court, 34 Wis. 2d 559, 605, 150 N.W.2d 387 (1967); Swan Sales Corp. v. Joseph Schlitz Brewing Co., 126 Wis. 2d 16, 31-32, 374 N.W.2d 640 (Ct. App. 1985); Borgwardt v. Redlin, 196 Wis. 2d 342, 352-53, 355, 538 N.W.2d 581 (Ct. App. 1995). Only the client has the authority to direct the attorney to waive the attorney-client privilege. Dudek, 34 Wis. 2d at 605; Swan Sales Corp., 126 Wis. 2d at 31-32.

¶ 33. The Majority sets forth the three different tests used nationwide to determine the admissibility of previously disclosed attorney-client privileged documents: (1) the lenient test; (2) the strict test; and (3) the intermediate test. Majority slip op. at ¶ 8. In surveying the law, the referee discovered these three approaches.

¶ 34. Regardless of the tests being used by foreign jurisdictions across the nation, however, the circuit court here was bound to follow Wisconsin law. Any deviation from applying the law of this state will be corrected through an error of law analysis by this court.

¶ 35. The appellants contend that the circuit court incorrectly applied the leniency test to the instant case. They turn to the referee's opinion for support of their claim, pointing to the following excerpt:

However, even though I have found [Attorney] Elliott's actions do not allow plaintiffs to qualify for the "totality of the circumstances" test, if it is ultimately determined that Elliott's actions do not, as a matter of law, disqualify plaintiffs from the applicability of this rule, I will also apply the five factors making up the totality of the circumstances test to the facts in this case ...[.]
I have weighed all of the legal factors, and applied them to the testimony and evidence submitted in this case. I hold and conclude that plaintiffs have failed to meet their burden of proof. I find that plaintiffs' attorney-client privilege in the documents, exhibits 1-25, has been waived. Therefore, plaintiffs' motion must be denied.

¶ 36. A referee, however, must apply the law that exists in this state, and does not have the authority to make or speculate what law the Wisconsin Supreme Court may apply. In reaching his decision, it is my opinion that the referee did not follow precedent and arbitrarily applied his own conclusion. The referee came to the above-referenced conclusion despite finding that the documents in question were clearly privileged communication, as defined by Wis. Stat. § 905.03. He further found that the documents were made for the purposes of rendering legal services, that Ms. Bauer told Attorney Elliott the documents were prepared for counsel and constituted her thoughts, and that Ms. Bauer never intended or agreed that the documents in question could be disclosed to the defendants. Clearly, Ms. Bauer, as the client, never consented to waiving her attorney-client privilege; therefore, such privilege, under the laws of the State of Wisconsin, could not have been waived. The circuit court, although agreeing with the referee's findings of fact, correctly reversed its conclusion that the respondents waived their right to assert the attorney-client privilege, stating:

But I'm going to say that even though I think the world of Mr. Hodan as a lawyer and as a good human being and as a friend, our professional responsibilities are our professional responsibilities. Though I feel that way about Mr. Hodan, he's not on the court of appeals or on the Wisconsin State Supreme Court. And myself as a lowly, subservient trial judge is not on the court of appeals or on the supreme court, and we're not supposed to be making law. That's not our function. I tried that. I tried that gap in the past and did a dance with three of them up there and seven on another occasion. I think there's a distinction between applying legal consents recognized in Wisconsin which fall within a judge's discretion, exploring a whole new area of law that hasn't been addressed in Wisconsin but has been addressed by other states. So it's not within my province to make new law.
But the law in Wisconsin is only the client can waive attorney/client communications. The lawyers for the client is there to zealously protect, and the lawyer is not supposed to allow a waiver. You generally find a lot of this dialogue in criminal proceedings, the divorce arena or the family court arena, and civil court arena are a little bit different. The cases cited by plaintiffs' counsel are correct.

¶ 37. In reversing the referee's decision, the circuit court applied the standard currently espoused by the Wisconsin Supreme Court. The circuit court correctly concluded that it is bound to follow and apply Wisconsin law. As a result, the circuit court was forced to amend the referee's conclusions of law to accurately reflect proper Wisconsin precedent. In my opinion, we are bound to follow the existing precedent until the Wisconsin Supreme Court concludes otherwise. Accordingly, I would affirm.

       The plaintiffs in the trial court are: the Harold Sampson Children's Trust, the Beth Bauer Trust, the Jamie L. Sherman Trust, and the Kay Yuspeh Trust. The defendants in the trial court are: Ann Mandelman, Nancy Simos, and Sampson Investments, as well as the Linda Gale Sampson 1979 Trust, the Steven J. Sampson 1979 Trust, and the Scott A. Sampson 1979 Trust — all successors to the B.J. Sampson Children's Trust.

       The referee found that "Elliott indicated that he believed he had authority to disclose all non-privileged documents," and that this was "consistent with the testimony submitted by Beth Bauer."

       The referee insightfully observed that, in contrast to the facts of this case, "[m]ost of the cases [he] reviewed outline occurrences where privileged documents were clearly turned over 'inadvertently.' Factual situations that have been litigated include: Confidential documents that were supposed to be removed from a file or box were not removed; post-it notes that were supposed to identify confidential documents were inadvertently removed or fell off the privileged materials; [and] confidential materials were attached and sent to opposing counsel due to failures by clerical personnel."

       For example, we would find in Pennsylvania an opinion by the Philadelphia Bar Association's Professional Guidance Committee that it does not violate the Pennsylvania Rules of Professional Conduct for a lawyer to keep and seek to use an inadvertently faxed privileged document (Opinion 94-3, found online at: http://www.philabar.org/public/ethics/displayethics .asp?id=21622212000), and an informal opinion by the Pennsylvania Bar Association Committee on Legal Ethics and Professional Responsibility (Informal Opinion No. 95-57) disapproving the Philadelphia view.

       The Dissent ignores the referee's findings of fact, especially the finding of fact that Elliott deliberately gave the documents to the defendants, and discusses what we respectfully submit is a red herring- — -whether the referee's alternate conclusion that the intermediate approach in assessing whether the inadvertent production of privileged documents is a waiver of that privilege. Given the referee's governing findings of fact, which no one suggests are clearly erroneous, the Dissent's extensive discussion in paragraphs thirty-four through thirty-six of what may or what may not (or should or should not) be the law of privilege in the face of inadvertent disclosure is immaterial.

       As submitted by the United States Supreme Court to Congress for its approval pursuant to 1973 Public Law 93-12, the Federal Rules of Evidence included an Article Y, dealing with privileges. Stephen A. Saltzbubg, Michael M. Mahtin, & Daniel J. Capra, 1 Federal Rules of Evidence Manual 3-4; 2 FedeRAL Rules of Evidence Manual 587 (6th ed. 1994). Congress removed a listing of specific privileges from Article V from the Federal Rules of Evidence. 2 Federal Rules of Evidence Manual at 585-588.

        Johnson v. Zerbst, 304 U.S. 458 (1938), concerned whether a criminal defendant had waived his constitutional right to counsel. Id., 304 U.S. at 464. Johnson determined that the defendant's decision to go to trial without a lawyer might not have been an effective "waiver": "A waiver is ordinarily an intentional relinquishment or abandonment of a known right or privilege. The determination of whether there has been an intelligent waiver of the right to Counsel must depend, in each case, upon the particular facts and circumstances surrounding that case, including the background, experience, and conduct of the accused." Ibid. Johnson remanded the case to the district court for such an evaluation. Id., 304 U.S. at 469.

       Wisconsin Stat. Rule 905.03(3) provides:
      The privilege may be claimed by the client, the client's guardian or conservator, the personal representative of a deceased client, or the successor, trustee, or similar representative of a corporation, association, or other organization, whether or not in existence. The person who was the lawyer at the time of the communication may claim the privilege but only on behalf of the client. The lawyer’s authority to do so is presumed in the absence of evidence to the contrary.

       Plaintiffs also rely on In re Grand Jury Subpoena Dated July 13, 1979, 478 F. Supp. 368, 372-373 (E.D. Wis. 1979), which held that the voluntary disclosure to the Securities and Exchange Commission, a grand jury, and the Internal Revenue Service of a report prepared by a law firm hired to assess its client's potential civil and criminal liability did not waive the attorney-client privilege with respect to notes of the underlying interviews. The district court opined that voluntary cooperation with the named agencies "should be encouraged," and not "substantially curtailed" by a rule that treated such cooperation as a waiver. Ibid. The district court did not even discuss, however, whether the privilege was waived with respect to those to whom the report was given, which, of course, is what we have here.

       We have borrowed this analogy, applied in a different context, from Silveira v. Lockyer, 328 F.3d 567, 568 (9th Cir. 2003) (order denying petition for rehearing era banc) (Kozinski, J., dissenting).

       1n some circumstances, we perform a second function, "that of law defining and law development, as [we] adapt[ ] the common law and interpret ] the statutes and federal and state constitutions in the cases [we] decide[ ]." Cook v. Cook, 208 Wis. 2d 166, 188, 560 N.W.2d 246 (1977).

       The Majority concludes that the existing law does not control the issue presented in this case because the waiver here was intentional and the existing case law addresses solely inadvertent disclosures. I disagree. In my opinion, we are bound to apply the general law applying to the attorney-client privilege until the Wisconsin Supreme Court, or our legislature, determines otherwise.