author: ANN WALSH BRADLEY, J.

text:
    Insurance Company of North America, Plaintiff-Respondent, Cold Spring Egg Farm, Inc., Involuntary-Plaintiff-Respondent, v. Cease Electric Inc., d/b/a Zillmer Electric and Pekin Insurance Company, Defendants-Appellants-Petitioners.
    Supreme Court

      No. 03-0689.

      Oral argument September 10, 2004.

    Decided November 9, 2004.

    2004 WI 139
    (Also reported in 688 N.W.2d 462.)

      For the defendants-appellants-petitioners there were briefs by Monte E. Weiss and Weiss Law Office, S.C., Milwaukee; and J.P. Fernandes and Hale & Wagner, S.C., Milwaukee, and oral argument by Monte E. Weiss.

    For the plaintiff-respondent and involuntary plaintiff-respondent there was a brief by Timothy A. Bascom, Richard E. Ceman, Jr., Amy J. Wilkinson and Bascom, Budish & Ceman, S.C., Wauwatosa, and oral argument by Timothy A. Bascom.

      An amicus curiae brief was filed by E. Campion Kersten and Kersten & McKinnon, S.C., Milwaukee; and William C. Gleisner, III, and Law Offices of William Gleisner, Milwaukee, on behalf of the Wisconsin Academy of Trial Lawyers.
    An amicus curiae brief was filed by Thomas P. Godar, John D. Finerty, Jr., and Michael Best & Friedrich, LLP, Madison; and Michele Odorizzi and Mayer, Brown, Rowe & Maw, LLP, Chicago, on behalf of Associated General Contractors of America, AGC of Wisconsin, Inc., and Associated General Contractors of Greater Milwaukee, and oral argument by Michele Odorizzi.

   ANN WALSH BRADLEY, J.

¶ 1. The petitioners, Cease Electric Inc., d/b/a Zillmer Electric and Pekin Insurance Company seek review of a court of appeals' decision affirming a circuit court judgment awarding Cold Spring Egg Farm, Inc., and its insurance carrier, Insurance Company of North America, damages for losses sustained due to the failure of a barn ventilation system. Cease Electric, a contract electrician, asserts that it was retained to manufacture a product, namely the ventilation system. Accordingly, it contends that the economic loss doctrine precludes Cold Spring's recovery under tort.

¶ 2. We agree with Cold Spring that its contract with Cease Electric was one for services and not for a product. Because we determine that the economic loss doctrine does not apply to contracts for services, we conclude that Cold Spring is entitled to its recovery under tort for the negligent performance of services. We therefore affirm the decision of the court of appeals.

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¶ 3. Cold Spring raises chickens to produce eggs. It had a long-standing business relationship with Cease Electric. In the summer of 1996, Cold Spring entered into an oral contract with Cease Electric to upgrade the ventilation system in one of its barns. Ventilation systems are required to bring fresh, cool air into the barns so that the chickens have sufficient oxygen to live.

¶ 4. Prior to installation of the new system, Cold Spring had manual ventilation systems in its barns. Under the manual system, each individual fan had its own thermostat control independent of the other fans. If one individual fan failed, the remaining fans would continue to operate.

¶ 5. The new system was designed so that a single controller would operate all fans in stages. As the temperature in the barn rose, the fan control would engage different fans to bring fresh air into the barn. Conversely, when the temperature in the barn fell, the controller would turn off fans accordingly.

¶ 6. The "brains" of the new ventilation system was the main fan control unit: the ST-4026. Cold Spring purchased this component from Aerotech, Inc. Aerotech designed the system to have a backup thermostat as a safety device in the event the primary fan control failed. It recommended wiring the backup thermostat separately from the power source for the primary fan control.

¶ 7. Included with the ST-4026 was a one-page wiring schematic. Based on this diagram, Cold Spring asked Cease Electric to wire the ventilation system's component parts, including the primary fan control and the backup thermostat. Upon completion of the job, Cold Spring terminated its relationship with Cease Electric because it believed that Cease had not completed the project correctly or in a timely fashion.

¶ 8. On January 8,1997, the ventilation system in Cold Spring's barn failed, resulting in the loss of nearly 18,000 chickens. Within a week of the loss, Cold Spring hired A1 Dittmar, an electrician with Carroll Electric, to investigate why the fans malfunctioned.

¶ 9. Dittmar concluded that Cease Electric had improperly wired the main fan control unit to the same power circuit as the backup thermostat. He also determined that Cease Electric's employees had failed to test the new system, which would have revealed that the backup thermostat was not functioning.

¶ 10. Pursuant to its insurance contract, Insurance Company of North America (INA) paid Cold Spring $118,339.20 for the loss of income and $40,704.89 for the loss of chickens. Cold Spring, meanwhile, sustained a loss of $39,761.02 due to its policy deductible. Both INA and Cold Spring commenced this action in June 1999, alleging that the failure of the ventilation system was the result of the negligence of Cease Electric in its performance of services.

¶ 11. At the conclusion of a two-day trial, a jury found that the employees of Cease Electric were negligent and that their negligence had caused the plaintiffs' loss. The circuit court inserted the stipulated amount of damages into the verdict. It then entered judgment in the total amount of $204,065.29, representing the amount of stipulated damages plus double costs awarded pursuant to Wis. Stat. § 807.01(3) (2001-02). Cease Electric appealed.

¶ 12. On appeal, Cease Electric maintained that the plaintiffs' negligence action was precluded by the economic loss doctrine. It argued that it had provided a product to Cold Spring, the ventilation system. According to Cease Electric, as the plaintiffs' case was one of disappointed expectations resulting in only economic losses to the product, the economic loss doctrine barred recovery in a tort action.

¶ 13. The court of appeals affirmed the circuit court. It concluded that the economic loss doctrine did not bar Cold Spring's recovery under tort. Insurance Co. of North America v. Cease Electric Inc., 2004 WI App 15, ¶ 1, 269 Wis. 2d 286, 674 N.W.2d 886. Specifically, the court of appeals determined that Cease Electric had provided only services to Cold Spring and that, under Wisconsin law, the economic loss doctrine did not extend to service contracts. Id. Cease Electric and its insurer, Pekin Insurance Company, petitioned this court for review.

II

¶ 14. This case provides us with an opportunity to further define the parameters of the economic loss doctrine in Wisconsin. Before doing so, however, we must first determine whether the transaction at issue was one for goods or services. Interpreting the nature of a contract presents a question of law subject to independent appellate review. See Micro-Managers, Inc. v. Gregory, 147 Wis. 2d 500, 507, 434 N.W.2d 97 (Ct. App. 1988).

¶ 15. The economic loss doctrine is a judicially created doctrine that seeks to preserve the distinction between contract and tort. Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 403-04, 573 N.W.2d 842 (1998). From its inception, the doctrine has been based on the understanding that contract law, and particularly the law of warranty, is better suited than tort law for dealing with purely economic loss in the commercial arena. Id. Its application to a set of facts also presents a question of law subject to independent appellate review. See Sunnyslope Grading, Inc. v. Miller, Bradford & Risberg, Inc., 148 Wis. 2d 910, 915, 437 N.W.2d 213 (1989).

III

¶ 16. Our discussion begins with an examination of the nature of the contract at issue. Cease Electric contends that the court` of appeals erred in characterizing its contract with Cold Spring as one for services. It asserts that it was hired to manufacture a unique ventilation system for Cold Springs barn. According to Cease Electric, it fashioned this system by providing additional component parts that Cold Spring did not have.

¶ 17. The circuit court rejected Cease Electric's claim that it provided a product to Cold Spring. Similarly, the court of appeals determined that Cease Electric had mischaracterized its role in the agreement. Insurance Co. of North America, 269 Wis. 2d 286, ¶ 20. It concluded that Cold Spring had hired Cease Electric to provide the service of installing the new ventilation system. Id.

¶ 18. Like the court of appeals, we determine that the contract at issue was for services, and not for a product. Here, it was Aerotech's ST-4026 that created the ventilation system in the barn, not Cease Electric. All Cease was required to do was to follow the one-page wiring schematic to ensure that the controller was properly wired to ventilation fans and a power source. It failed to do so, and Cold Spring brought suit, alleging negligent performance of services.

¶ 19. A review of the record supports our conclusion. To begin, Cease Electric did not charge Cold Spring a one-time fee for the price of a "system." Rather, the electricians who did the work for Cease Electric kept time sheets and billed their time out on an hourly basis. Evidence of billing is a relevant consideration when determining the nature of a contract. Micro-Managers, 147 Wis. 2d at 508.

¶ 20. Furthermore, the testimony of Robert Cease, a principal of Cease Electric, belies Cease Electric's assertion that it "manufactured" Cold Spring's ventilation system. After discussing the manual system in place before the installation of the Aerotech system, Cease made the following observation about the new fan controller: "The unit itself is sophisticated, but the wiring of it is very simple. You bring power in, you take power out to a fan or a stage of fans. So it's basically inputs and outputs."

¶ 21. Finally, although Cease Electric claims to have furnished additional component parts for Cold Spring's system, there is no evidence in the record to support this contention. As noted above, Cold Spring had purchased the ST-4026 from Aerotech. The only clear evidence of any "product" provided by Cease Electric is contained in Exhibit 3, which references merely conduit and wiring. Accordingly, we are satisfied that the contract at issue was for services and not for a product.

IV

¶ 22. Having determined that the contract at issue was one for services, we turn next to the applicability of the economic loss doctrine here. Recently, this court described the economic loss doctrine as holding that a commercial purchaser of a product cannot recover solely economic losses from the manufacturer under negligence or strict liability theories, particularly where the warranty given by the manufacturer specifically precludes the recovery of such damages. Van Lare v. Vogt, 2004 WI 110, ¶ 18, 274 Wis. 2d 631, 683 N.W.2d 46 (citing Sunnyslope, 148 Wis. 2d at 921).

¶ 23. "Economic loss" for purposes of the doctrine is defined as "the loss in a product's value which occurs because the product is 'inferior in quality and does not work for the general purposes for which it was manufactured and sold.1" Wausau Tile, Inc. v. County Concrete Corp., 226 Wis. 2d 235, 246, 595 N.W.2d 445 (1999) (quoting Northridge Co. v. W.R. Grace & Co., 162 Wis. 2d 918, 925-26, 471 N.W.2d 179 (1991)). It includes both direct economic loss and consequential loss. Daanen, 216 Wis. 2d at 401.

¶ 24. The significance of the economic loss doctrine is that it "requires transacting parties in Wisconsin to pursue only their contractual remedies when asserting an economic loss claim, in order to preserve the distinction between contract and tort." Digicorp, Inc. v. Ameritech Corp., 2003 WI 54, ¶ 34, 262 Wis. 2d 32, 662 N.W.2d 652. In general, tort offers a broader array of damages than contract. The economic loss doctrine precludes parties under certain circumstances from eschewing the more limited contract remedies and seeking tort remedies.

¶ 25. There is a split among the jurisdictions as to whether the economic loss doctrine applies to contracts for services. As one treatise noted, "[t]he judiciary remains hopelessly divided on whether the doctrine should be extended to services . ..." Philip L. Brunner and Patrick J. O'Connor, Jr., Construction Law § 19:10, at n. 14 (May 2004). This court has not yet addressed whether the doctrine covers such claims. Indeed, in Daanen, 216 Wis. 2d at 417, we expressly reserved the issue of "whether the doctrine applies with equal force to damages resulting from the provision of services."

¶ 26. The genesis of the economic loss doctrine lies in products liability cases. The seminal case on the economic loss doctrine is Seely v. White Motor Co., 403 P.2d 145 (Cal. 1965). There, the California Supreme Court held that a plaintiff could not recover in a tort action for a defective truck that did not injure person or property, but only needed repairs after crashing due to defective brakes. Id. at 150-51. It reasoned that the losses suffered by the plaintiff were solely economic and due to the failure of the product to live up to the buyer's expectations. Id. at 151.

¶ 27. Wisconsin first recognized the economic loss doctrine in Sunnyslope, 148 Wis. 2d at 910, another products liability case. There, the plaintiff, a commercial contractor, purchased a backhoe directly from the defendant manufacturer. When the backhoe failed to properly perform, the plaintiff brought a tort action against the manufacturer for damages including the cost of replacement parts, labor charges, and lost profits. Id. at 914-15. This court denied the plaintiff relief, concluding that a commercial purchaser of a product cannot recover solely economic losses from the manufacturer under negligence or strict liability theories. Id. at 921.

¶ 28. The application of the economic loss doctrine in the abovementioned cases is not surprising given the protections afforded by the Uniform Commercial Code (U.C.C.). Adopted by the legislature in 1963, the U.C.C. sets forth the rights and remedies that govern a transaction between two commercial parties of relatively equal bargaining power. Id. at 916. It provides a " 'comprehensive system for compensating consumers for economic loss arising from the purchase of defective products.'" State Farm Mut. Auto. Ins. Co. v. Ford Motor Co., 225 Wis. 2d 305, 342, 592 N.W.2d 201 (1999) (quoting Alloway v. General Marine Ind., 695 A.2d 264, 268 (N.J. 1997)).

¶ 29. Protection against damages caused by a defective product injuring itself is the purpose of express and implied warranties provided for in the U.C.C. State Farm, 225 Wis. 2d at 342. When a product fails to operate as warranted or expected, the proper avenue for relief is a breach of warranty claim. Id. Alternatively, customers can reject the product or revoke their acceptance and sue for breach of contract. Id.

¶ 30. Under the provisions of the U.C.C., purchasers of defective products are able to recover costs and lost profits, thereby placing them in the same position as if the product had functioned properly. Id. at 343. " 'The expectation damages available in warranty for purely economic loss give a plaintiff the full benefit of its bargain by compensating for forgone business opportunities.' " Id. (quoting East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 873 (1986)).

¶ 31. Additionally, the U.C.C. provides protections for manufacturers. Through the terms of a contract, a manufacturer can restrict its liability by disclaiming warranties or limiting remedies. Id. In return, the purchaser is likely to pay a lower price. Id. " 'The limitation in a contract action comes from the agreement of the parties and the requirement that consequential damages, such as lost profits, be a foreseeable result of the breach.'" Id. (quoting East River, 476 U.S. at 874).

¶ 32. It is the existence of these rights and remedies that serves as one of the critical rationales underlying the economic loss doctrine. After all, if a commercial purchaser were allowed to sue in tort to recover solely economic loss, the U.C.C. provisions designed to govern such disputes could be circumvented entirely. In that event, the U.C.C. would be rendered meaningless and "contract law would drown in a sea of tort." East River, 476 U.S. at 866.

¶ 33. Our case law recognizes this underlying rationale. In Sunnyslope, this court observed that, "the legislative protections granted by the Uniform Commercial Code are not to be buttressed by tort principles and recovery." 148 Wis. 2d at 916. Similarly, just last term, we warned of tort law duplicating contract remedies and adding unnecessary confusion into the law. We stated:

Where there are well-developed contractual remedies, such as the remedies that the Uniform Commercial Code (in force in all U.S. states) provides for breach of the quality, fitness, or specifications of goods, there is no need to provide tort remedies .... The tort remedies would duplicate the contract remedies, adding unnecessary complexity to the law.

Tietsworth v. Harley-Davidson, Inc., 2004 WI 32, ¶ 30, 270 Wis. 2d 146, 677 N.W.2d 233 (quoting All-Tech Telecom, Inc. v. Amway Corp., 174 F.3d 862, 865 (7th Cir. 1999)). This reasoning is particularly significant in the present case.

¶ 34. Here, Cease Electric asks this court to extend the economic loss doctrine to contracts for services. It maintains that allowing Cold Spring to escape the confines of its agreement would permit a classic "end run," eviscerating the doctrine altogether. Cease Electric asserts that when a commercial party suffers a failure in the performance of a contract and the loss sustained is solely economic, the doctrine should apply.

¶ 35. The major problem with Cease Electric's argument is that it assumes that contract law is better suited than tort law for dealing with purely economic loss in the context of service agreements. It is not. Unlike contracts for products or goods, which enjoy the benefit of well-developed law under the U.C.C., no such benefit exists for contracts for services. This is because the U.C.C. does not apply to service contracts. Wis. Stat. § 402.102. Van Sistine v. Tollard, 95 Wis. 2d 678, 684, 291 N.W.2d 636 (1980). As a result, the built-in warranty provisions that the U.C.C. may provide in a contract for the sale of products or goods would not apply to a contract for services.

¶ 36. Given the inapplicability of the U.C.C. to service contracts, we decline to extend the economic loss doctrine in this case. We note that we are not alone in this regard. See, e.g., Cargill, Inc. v. Boag Cold Storage Warehouse, 71 F.3d 545, 550 (6th Cir. 1995) (citing the U.C.C. and stating that the economic loss doctrine "is associated with 'transactions in goods,' and not with transactions in services"); McCarthy Well Co., Inc. v. St. Peter Creamery, Inc., 410 N.W.2d 312, 315 (Minn. 1987) (explaining that the rationale behind the economic loss rule is that "a recognition of tort actions in cases under the U.C.C. would upset the remedies contained in the U.C.C.; when the rationale is not applicable, i.e., when the U.C.C. does not apply, there is no reason for the [economic loss] rule to apply").

¶ 37. The inapplicability of the U.C.C. and its warranties is particularly troubling in light of the facts of this case. Like many agreements between purchasers and providers of services, the agreement between Cold Spring and Cease Electric was oral rather than written. Because of the informal circumstances surrounding most oral contracts for services, the policy provisions underpinning the application of the economic loss doctrine do not readily apply.

¶ 38. In Daanen this court identified three policies as a basis for application of the economic loss doctrine to tort actions: (1) to maintain the fundamental distinction between tort and contract law; (2) to protect commercial parties' freedom to allocate economic risk by contract; and (3) to encourage the party best situated to assess the risk of economic loss to assume, allocate, or insure against that risk. 216 Wis. 2d at 403. We address each in turn.

¶ 39. Even though the distinctions between tort and contract law at times may seem blurred, they differ in the interests that each protects. Tort principles protect not only the individuals harmed but also demonstrate a public policy to protect society against the unreasonable risk of harm from accidental and unexpected injury. Christopher J. Faricelli, Wading Into The "Morass": An Inquiry Into the Application of New Jersey's Economic Loss Rule To Fraud Claims, 35 Rutgers L.J. 717, 723 (Winter 2004).

¶ 40. On the other hand, an operating principle behind contract law is that bargaining parties to a contract will allocate the risks of non-performance. Id. at 722. The disappointed party to the contract is protected against non-performance by the benefit of the bargain. Id. at 722-23. Thus, when a contract is broken, the breaching party is hable for restoring the non-breaching party to the position he or she would have been in, regardless of negligence or intent. Michelle Kristin Hart, Tort or Contract?: New Jersey's Simulta neous Expansion and Dilution of Contract Theory, 26 Rutgers L.J. 495, 496 (1995).

¶ 41. As noted above, contract law is not better suited than tort law for dealing with negligently provided services. Tort law provides an incentive generally to guard against negligent conduct in the provision of services. If tort law is avoided, the ability to deter certain activity is impaired because contract remedies and warranties may be easily disclaimed. Tort principles address more than merely a private interest between two commercial companies; they also address society's interest in minimizing harm by deterring negligent conduct.

¶ 42. Admittedly, contract law also advances a societal interest in seeing that bargained for promises are performed. The fundamental premise in the application of contract law is that the bargaining parties will allocate the risks and remedies. As the facts demonstrate in this case, however, this fundamental premise simply is not at work with many service contracts.

¶ 43. Often the circumstances surrounding service contracts are simple and informal (e.g., electricians, plumbers, lawn care providers, etc.). In light of the societal interests behind the application of tort principles, and the inapplicability of the fundamental premise supporting contract law, the policy of maintaining the distinction between tort and contract law does not warrant the invocation of the economic loss doctrine here.

¶ 44. Likewise, the second policy consideration of protecting the parties' freedom to allocate economic risk by contract is not implicated. Certainly, parties to service contracts, oral or written, can by means of contractual provisions allocate risk and limit remedies. Yet given the informality of such agreements, few parties actually address the allocation of risk or the limitation of remedies. They neither discuss it themselves nor hire attorneys to draft written agreements.

¶ 45. Once again the concept of the parties engaging in discussions of pre-negotiated liability in the event of breach seems to fly in the face of the reality of routine service contract relationships. Although the freedom to allocate economic risk by contract should not he impinged, applying the economic loss doctrine to limit recovery based on the premise that the parties have indeed exercised that freedom simply makes no sense.

¶ 46. Finally, we examine the third policy that the party in the best position to assess the risk of economic loss should be encouraged to assume, allocate, or insure against the risk. The requirement of pre-negotiated agreements seems to presuppose that each party to the service contract can negotiate the terms with an identical level of bargaining power. In many service contract relationships, the information disparities between the parties do not support such a presupposition.

¶ 47. Here, Cold Spring argues that a contractor has more knowledge than the buyer concerning the service that is provided. Cease Electric responds that Cold Spring is in the better position to assess what economic loss will occur to their business if the service fails. Who can better assess the risk of economic loss seems to fall to a case-by-case application. Thus, the third policy consideration, as a general rule, neither supports nor negates the application of the economic loss doctrine to service contracts.

¶ 48. On balance, we conclude that the policy considerations underlying the economic loss doctrine do not support its extension here. Instead, they buttress our decision not to extend the doctrine given the inapplicability of the U.C.C.

¶ 49. In reaching this result, we are mindful of the ramifications that would accompany a decision to extend the doctrine to such agreements. Wisconsin courts have previously held that claims for professional malpractice lie both in tort and contract. See, e.g., Milwaukee County v. Schmidt, Garden & Erikson, 43 Wis. 2d 445, 453, 168 N.W.2d 559 (1969) (architects); Smith v. Long, 178 Wis. 2d 797, 803, 505 N.W.2d 429 (Ct. App. 1993) (attorneys); Milwaukee Partners v. Collins Engineers, Inc., 169 Wis. 2d 355, 363, 485 N.W.2d 274 (Ct. App. 1992) (engineers). Because actions against professionals often involve purely economic loss without personal injury or property damage, the economic loss doctrine could be used to effectively extinguish such causes of action in tort.

¶ 50. Inevitably, this court would find itself on a slippery slope of having to decide whether an exception should be made for some or all professional groups. For an illustration of this problem, we need look no further than what is occurring in Illinois, where the state supreme court has exempted some professions from the economic loss doctrine, Congregation of the Passion v. Touche Ross & Co., 636 N.E.2d 503, 515 (Ill. 1994) (accountants), Collins v. Reynard, 607 N.E.2d 1185, 1187 (Ill. 1992) (attorneys), but not others, Fireman's Fund Ins. Co. v. SEC Donohue, Inc., 679 N.E.2d 1197, 1201 (Ill. 1997) (engineers), 2314 Lincoln Park West Condominium Ass'n v. Mann, Gin, Ebel & Frazier Ltd., 555 N.E.2d 346, 353 (Ill. 1990) (architects).

¶ 51. This inconsistency in application has led one justice to criticize the decision-making process as creating an "exception of the month." Congregation of the Passion, 636 N.E.2d at 525 (Heiple, J., dissenting). That justice further lamented that such a case-by-case approach "[fails] to coherently differentiate between these professional groups," and therefore "[places] trial judges and litigants in the unenviable position of guessing which additional professions will receive protection under [the state's] economic loss doctrine." Fireman's Fund Ins., 697 N.E.2d at 1202 (Heiple, J., dissenting).

¶ 52. Today, we choose to avoid those ends by avoiding this beginning. Accordingly, we determine that the economic loss doctrine is inapplicable to claims for the negligent provision of services. This bright line rule will limit the uncertainty and increased litigation that would accompany any other decision.

V

¶ 53. In sum, we agree with Cold Spring that its contract with Cease Electric was one for services and not for a product. Because we determine that the economic loss doctrine does not apply to contracts for services, we conclude that Cold Spring is entitled to its recovery under tort for the negligent performance of services. We therefore affirm the decision of the court of appeals.

By the Court. — The decision of the court of appeals is affirmed.

         Insurance Co. of North America v. Cease Electric, Inc., 2004 WI App 15, 269 Wis. 2d 286, 674 N.W.2d 886 (affirming a decision of the circuit court for Walworth County, John R. Race, Judge).

       Because we determine that Cease Electric's contract with Cold Spring was one for services, we do not address the proper test for distinguishing mixed contracts that involve both products and services. Similarly, because we conclude that the economic loss doctrine does not apply to contracts for services, we do not reach the issue of whether Cold Spring's chickens constituted "other property."

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

       Additionally, Cease Electric asserted that the circuit court erred in (1) refusing to impose sanctions against Cold Spring for its alleged spoliation of evidence and (2) exacting the penalty provisions of Wis. Stat. § 807.01(3). The court of appeals rejected both arguments. Insurance Co. of North America, 269 Wis. 2d 286, ¶¶ 1, 24. Because we did not grant review of these issues, we do not address them here.

       It is unclear from the record which party furnished the backup thermostat in this case.

       In accordance with our decision, we withdraw the language in Vogel v. Russo, 2000 WI 85, ¶ 15, 236 Wis. 2d 504, 613 N.W.2d 177, suggesting that the economic loss doctrine pre-eludes recovery in tort of purely economic losses for the failure of a service to live up to contractual expectations.

       Prior to oral argument, Cold Spring and Insurance Company of North America filed a motion asking this court to reconsider its granting of the petition for review. That motion was held in abeyance pending the court's decision on the merits of this case. The court now denies Cold Spring's motion.


source: Caselaw Access Project

license: Public Domain

text:
    In the Matter of Disciplinary Proceedings Against John A. Krueger, Attorney at Law: Office of Lawyer Regulation, Complainant, v. John A. Krueger, Respondent.
    Supreme Court

      No. 04-2496-D.

      Decided November 17, 2004.

    2004 WI 141
    (Also reported in 689 N.W.2d 45.)
   The Court entered the following order on this date:

On September 22, 2004, the Office of Lawyer Regulation (OLR) filed a disciplinary complaint against Attorney John A. Krueger asking this court to impose reciprocal discipline identical to that imposed on Attorney Krueger by the Minnesota Supreme Court. That court suspended Attorney Krueger's Minnesota law license for 30 days, effective July 26, 2004. On September 23, 2004, this court issued an order to show cause directing Attorney Krueger to show cause in writing by October 13, 2004 why the imposition of the identical discipline imposed by the Minnesota Supreme Court would be unwarranted. Attorney Krueger failed to respond to the order to show cause.

Attorney Krueger was admitted to practice law in Wisconsin in 1991 and he became licensed to practice law in Minnesota in 1990.

The 30-day suspension in Minnesota resulted from misconduct involving: notarizing a client release that contained a forged client signature; endorsing settlement checks that contained a forged client signature and withdrawing attorney's fees from the settlement proceeds; failure to supervise a non-lawyer employee thus enabling the employee to negotiate and settle personal injury claims on behalf of a deceased client and to secure the forged client signatures on the release and settlement checks; and failure to timely-file state and federal income tax returns in 1996 and 1997.

SCR 22.22(3) provides that this court shall impose the identical discipline or license suspension unless the procedure in the other jurisdiction was so lacking in notice or opportunity to be heard as to constitute a due process violation; there was such an infirmity of proof establishing the misconduct that this court should not accept as final the misconduct finding; or the misconduct justifies substantially different discipline here. Neither OLR nor Attorney Krueger contend, nor does this court find, that any of these three exceptions exist.

Accordingly,

IT IS ORDERED that the license of John A. Krue-ger to practice law in the State of Wisconsin be suspended for 30 days, effective the date of this order;

IT IS FURTHER ORDERED that Attorney Krueger shall comply, if he has not already done so, with the requirements of SCR 22.26 pertaining to activities following suspension.


author: PER CURIAM.

text:
    In the Matter of Disciplinary Proceedings Against John A. Birdsall, Attorney at Law: Office of Lawyer Regulation, Complainant, v. John A. Birdsall, Respondent.
    Supreme Court

      No. 03-0086-D.

      Decided November 23, 2004.

    2004 WI 143
    (Also reported in 689 N.W.2d 46.)
   PER CURIAM.

¶ 1. We review the recommendation of the referee that Attorney John A. Birdsall be publicly reprimanded for having committed two counts of professional misconduct. As alleged in the complaint filed by the Office of Lawyer Regulation (OLR) in this court on January 10, 2003, Birdsall's misconduct included committing a criminal act that reflects adversely on Birdsall's honesty, trustworthiness or fitness as a lawyer, in violation of SCR 20:8.4(b) and counseling a client to engage, or assisting a client, in conduct that Birdsall knew was criminal or fraudulent, in violation of SCR 20:1.2(d).

¶ 2. In addition to recommending that Birdsall be publicly reprimanded for these acts of professional misconduct, the referee also recommended that Birdsall be required to pay the costs of the disciplinary proceeding now totaling $19,540.82.

¶ 3. We determine that the clear and convincing evidence presented to the referee established that Bird-sall committed the two counts of professional misconduct as alleged in the OLR's complaint, and we agree with the referee's recommendation that Attorney Bird-sall be publicly reprimanded for this misconduct. We also determine that Birdsall shall pay the costs of these proceedings as referenced above.

¶ 4. Attorney John A. Birdsall was admitted to practice law in this state on June 20, 1989; his practice is limited to criminal defense litigation in both state and federal courts. His license was suspended in 1991 for nonpayment of dues but then reinstated upon payment.

¶ 5. The complaint OLR filed in this court specifically alleged that Birdsall had represented N.A. who had been charged with various felonies arising from domestic abuse incidents involving N.A. and his estranged wife, D.A. D.A. reported to the police that N.A. had repeatedly choked her and hit her head against the steering wheel of her car and that N.A. had pointed a gun at her head and pulled the trigger hut that the gun had not fired. As a result of his actions N.A. was charged with, among other crimes, one count of attempted first-degree intentional homicide.

¶ 6. With Birdsall representing him, N.A. was released on a $10,000 cash bond in Brown county and a $1000 signature bond in Calumet county; both bonds specifically contained "no contact" provisions precluding any contact between N.A. and his estranged wife, D.A.

¶ 7. The OLR complaint alleged that despite his knowledge of the no contact provisions, Birdsall arranged to meet with D.A. at a local restaurant and without her knowledge, Birdsall had arranged to have N.A. appear at the restaurant too. At that meeting, which Birdsall had surreptitiously videotaped and recorded, Birdsall encouraged D.A. to change or recant her statements to the police about N.A.'s actions. When D.A. informed Birdsall that the district attorney had advised her that she could not change her story because that would be perjury, Birdsall said:

Perjury is virtually never charged except under the most bizarre and dire circumstances....
The most that I would see is him trying to conjure up some obstructing thing. Even that could be easily avoided, easily avoided. There is no reason in my view for any of this to reap repercussions on you. There's I don't know how many different cases I've seen where the quote unquote victim comes in and says, I made the whole thing up....

¶ 8. During the meeting in the restaurant, D.A. signed a statement written by the investigator who had accompanied Birdsall and had videotaped the meeting. In that statement, D.A. recanted her earlier report to the police that N.A. had pointed a gun at her and pulled the trigger. Later D.A. gave another statement to the sheriff and apparently recanted the written statement she had signed at the restaurant meeting.

¶ 9. The OLR complaint further alleged that because of his involvement in this meeting between N.A. and D.A., Birdsall was subsequently disqualified and withdrew from further representation of N.A. N.A.'s successor counsel, however, was later allowed to show the videotape of that meeting to the jury and N.A. was acquitted on the attempted first-degree intentional homicide charge.

¶ 10. N.A., however, was subsequently charged and convicted of felony bail jumping for violating the "no contact" provisions of his bail. He was sentenced to five years in prison.

¶ 11. Birdsall also was subsequently charged with two counts of being a party to the crime of violating court orders contrary to Wis. Stat. § 940.48(1). Those charges were subsequently amended to allege that Birdsall had violated the court's orders, contrary to Wis. Stat. § 940.48(2) (i.e., contempt of court).

¶ 12. After Birdsall filed his answer to the OLR complaint, Attorney Lance Grady was appointed as referee in the matter. Referee Grady subsequently conducted an evidentiary hearing and then filed his report in this court which included findings of fact, conclusions of law, and recommended discipline. Initially. Birdsall appealed from the referee's report but then voluntarily dismissed that appeal. Accordingly, this matter is now before this court for review pursuant to SCR 22.17(2).

¶ 13. Because there is now no challenge to the referee's findings of fact, we will not discuss the referee's 58 separate findings in detail. Based on those findings of fact, the referee reached the following conclusions of law:

1. The evidence supports a finding that Birdsall, as a party to a crime, aided and abetted [N.A.] in the act of bail jumping. Birdsall was well aware of the no contact provisions of the Circuit Court orders. [N.A.] informed him that he wanted to attend the meeting with his estranged wife. Birdsall then scheduled the meeting with [N.A.] which, from a practical standpoint, could not be concluded prior to [D.A.'s] arrival. Furthermore, the meeting with [N.A.] took place in a venue where [D.A.] was expected to arrive. By these actions, Birdsall committed a criminal act that reflects adversely on his honesty, trustworthiness or fitness as a lawyer in other respects; in violation of SCR 20:8.4(b).
2. The evidence further supports a finding that Birdsall assisted [N.A.] in conduct Birdsall knew was criminal. Birdsall was aware of the no contact provisions of the Circuit Court orders since he represented [N.A.] in these proceedings. [N.A.] informed Birdsall he wanted to attend the meeting with his estranged wife. Birdsall then scheduled the meeting with [N.A.] which, from a practical standpoint, could not be concluded prior to [D.A.'s] arrival. Finally, Birdsall, in effect, invited [N.A.] to participate in the meeting when he stated, "I think it is clearly more useful for you to be here." It is by these actions that Birdsall assisted [N.A.] in conduct that he knew was criminal in violation of SCR 20:1.2(d).

¶ 14. The record supports the referee's findings of fact and conclusions of law and we adopt them. And, as noted, Birdsall does not challenge them having voluntarily withdrawn his appeal.

¶ 15. With respect to the appropriate discipline to be recommended for Birdsall's professional misconduct, the referee rejected Birdsall's position that none was warranted or that at most, a private reprimand should be imposed. The referee rejected Birdsall's position writing: "Although a lawyer may have the duty to zealously defend his client and meet with a recanting witness, this duty cannot be elevated over the lawyer’s duty to abide by the Rules of Professional Conduct."

¶ 16. The referee asserted that he would be inclined to recommend a 30-day license suspension as the appropriate discipline but he recognized that the minimum period for which an attorney's license may be suspended as discipline for misconduct is 60 days. See In re Disciplinary Proceedings Against Schnitzler, 140 Wis. 2d 574, 575, 412 N.W.2d 124 (1987). Because the referee was "uncomfortable" with suggesting a 60-day period of license suspension, he instead recommended that Attorney Birdsall be publicly reprimanded for his misconduct and that Birdsall pay all costs associated with this proceeding.

¶ 17. Although we are greatly troubled by Birdsall's misconduct in this matter and condemn it in the strongest terms possible, we nevertheless accept the referee's recommendation to publicly reprimand Bird-sall for this misconduct. We caution him that engaging in similar behavior in the future on the theory that he is simply "zealously" representing his client, will result in more stringent sanctions.

¶ 18. The lawyer regulation system in this state has been established to, among other things, "protect the public from misconduct by persons practicing law in Wisconsin." See Preamble to SCR Chapter 1. In imposing discipline for professional misconduct, this court considers several factors including: (1) the seriousness, nature and extent of the misconduct; (2) the level of discipline needed to protect the public, the courts and the legal system from repetition of the attorney's misconduct; (3) the need to impress upon the attorney the seriousness of the misconduct; and (4) the need to deter other attorneys from committing similar misconduct. In re Disciplinary Proceedings Against Carroll, 2001 WI 130, ¶ 40, 248 Wis. 2d 662, 636 N.W.2d 718.

¶ 19. Under all the circumstances of this case, including the fact that this is the first time Attorney Birdsall has been disciplined for professional misconduct, and the fact that only two counts of misconduct are involved, we conclude a public reprimand is the appropriate sanction to be imposed. We reiterate, however, our warning that this kind of misconduct cannot and will not be condoned.

¶ 20. IT IS ORDERED that Attorney John A. Birdsall is publicly reprimanded for his professional misconduct as determined in this matter.

¶ 21. IT IS FURTHER ORDERED that within 60 days of the date of this order Attorney John A. Birdsall pay to the Office of Lawyer Regulation the costs of this proceeding as referenced above, provided that if the costs are not paid within the time specified and absent a showing to this court of his inability to pay those costs within that time, the license of Attorney John A. Birdsall to practice law in Wisconsin shall be suspended until further order of this court.

¶ 22.

SHIRLEY S. ABRAHAMSON, C.J., and LOUIS B. BUTLER, JR., J, did not participate.

       SCR 20:8.4(b) provides: "It is professional misconduct for a lawyer to: (b) commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects."

       SCR 20:1.2(d) provides:
      (d) A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.

       All subsequent references to the Wisconsin Statutes are to the 1999-2000 version unless otherwise indicated.

       Birdsall subsequently pled no contest to the amended charges and admitted to contempt of a court order under chapter 785, a non-criminal violation proscribed in Wis. Stat. § 940.48(2). Birdsall was sentenced to pay forfeitures totaling $2136 in order to make charitable contributions of $930 to separate domestic abuse programs. Pursuant to his plea agreement, after two years the case against Birdsall was reopened and on June 21, 2001, the charges against Birdsall were dismissed because he had committed no further violations during that two-year period.

       The criminal act the referee has referred to is the act of being a party to the crime of bail jumping, the offense for which Birdsall's client, N.A., was convicted. Birdsall himself was not specifically charged with that criminal offense but this court has in the past agreed with findings of referees that attorneys have committed criminal acts proscribed in SCR 20:8.4 even though the attorney has not been charged or convicted of a specific offense. See e.g., In re Disciplinary Proceedings Against Broadnax, 225 Wis. 2d 440, 591 N.W.2d 855 (1999) (use of cocaine construed as a criminal act); In re Disciplinary Proceedings Against Sandy, 200 Wis. 2d 529, 546 N.W.2d 876 (1996) (this court adopted referee's conclusion that attorney's use of cocaine with client constituted a criminal act under SCR 20:8.4(b)); In re Disciplinary Proceedings Against Woodward, 183 Wis. 2d 575, 515 N.W.2d 700 (1994) (attorney who gave client hacksaw blades was charged with aiding client in violation of her probation but the charges were later dismissed).


text:
    In the Matter of Disciplinary Proceedings Against William J. Gilbert, Attorney at Law: Office of Lawyer Regulation, Complainant, v. William J. Gilbert, Respondent.
    Supreme Court

      No. 04-1285-D.

      Decided November 24, 2004.

    2004 WI 144
    (Also reported in 689 N.W.2d 50.)
   PER CURIAM.

¶ 1. We review the referee's recommendation, which was made following a stipulation entered into between the Office of Lawyer Regulation (OLR) and Attorney William J. Gilbert, that Attorney Gilbert's license to practice law in Wisconsin be suspended for six months for professional misconduct. The misconduct at issue consisted of entering into an unfair and unreasonable business transaction with a client, without affording the client the opportunity to seek the advice of independent counsel and without obtaining the client's written consent to the transaction; engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation; upon termination of representation of a client, failing to take steps to the extent reasonably practicable to protect a client's interests, such as surrendering papers and property to which the client is entitled; and failing to fully and fairly disclose to the OLR all facts and circumstances pertaining to the alleged misconduct within 20 days after being served with a request for a response to a grievance. The referee recommended that the six-month suspension be made retroactive to April 7, 2004, the date Attorney Gilbert was eligible to apply for reinstatement of his license under an earlier disciplinary proceeding, and the referee recommended that Attorney Gilbert be required to make restitution to the client and that he be required to pay the costs of the proceeding.

¶ 2. We determine that the seriousness of Attorney Gilbert's professional misconduct warrants a suspension of his license to practice law for six months. We also agree that the suspension should be made retroactive to April 7, 2004. We further agree that Attorney Gilbert should make restitution to the client and pay the costs of the proceeding.

¶ 3. Attorney Gilbert was admitted to practice law in Wisconsin in 1971 and practiced in Hudson. On June 12, 2003, this court suspended his license after he failed to respond to an order to show cause relating to his willful failure to respond or cooperate in the OLR's investigation of his conduct. The conduct at issue was the same as involved in the instant proceeding. On October 7, 2003, this court suspended Attorney Gilbert's license for an additional six months for failing to act with reasonable diligence and promptness in representing a client; failing to keep a client reasonably informed about the status of a matter; failing to hold property of a client or property in which both lawyer and client claim an interest in trust separate from a lawyer's own property until there is an accounting and severing of their interest; failing to surrender papers and property to which the client was entitled upon termination of representation; and failing to cooperate with the OLR in investigation of grievances. See Disciplinary Proceedings Against Gilbert, 2003 WI 131, 266 Wis. 2d 5, 669 N.W.2d 725. Attorney Gilbert's license remains suspended.

¶ 4. The complaint filed by the OLR in this action alleged that in 1997 Attorney Gilbert represented a husband and wife in the sale of a parcel of real estate. After the sale Attorney Gilbert continued to represent the couple regarding some clean up work related to a small parcel of the real estate retained by them.

¶ 5. In May 1997 Attorney Gilbert requested that the husband loan him $10,500. The loan was documented by a promissory note. Attorney Gilbert failed to obtain the client's written consent to either the loan transaction or any conflicts related to it. Prior to borrowing the money and executing the promissory note, Attorney Gilbert failed to offer collateral and failed to offer the client the opportunity to seek advice of independent counsel. He also failed to fully disclose to the client the extent of Attorney Gilbert's financial difficulties, including the fact he was delinquent on his home mortgage payments, that a mortgage foreclosure action had been filed against him, and that a collection action had been filed against him. After making a total of $600 in payments, Attorney Gilbert defaulted on the loan.

¶ 6. In December 2000 the clients, now represented by new counsel, filed a lawsuit against Attorney Gilbert for his default under the promissory note. The clients' new attorney requested that all of their file materials be furnished to him. Attorney Gilbert failed to respond to several requests from the attorney, but in April 2001 he finally delivered the clients' file to their new counsel. On January 24, 2002, the clients obtained a judgment against Attorney Gilbert in the amount of $15,797.37. The clients have received no payments from Attorney Gilbert to date.

¶ 7. In January 2003 the OLR staff forwarded correspondence to Attorney Gilbert concerning a grievance filed by the clients and requested a written response on or before February 5, 2003. On February 6, 2003, OLR staff granted Attorney Gilbert an extension of time to respond to the grievance, but he failed to respond by that date and also failed to respond to two additional requests from the OLR. As noted above, on June 12, 2003, Attorney Gilbert's license was temporarily suspended for his failure to cooperate with the OLR's investigation into the clients' grievance.

¶ 8. The OLR's complaint alleged that by borrowing money from a client, where the terms were unfair and unreasonable, based on Attorney Gilbert's failure to offer collateral and to disclose his financial circumstances to the client, where Attorney Gilbert failed to offer the client the opportunity to seek independent counsel, and where Attorney Gilbert failed to obtain the client's written consent, he violated SCR 20:l.8(a).

¶ 9. The OLR's complaint also alleged that by borrowing money from a client, while failing to disclose the extent of his financial difficulties, despite knowing he was an extremely poor credit risk, Attorney Gilbert violated SCR 20:8.4(c).

¶ 10. The OLR's complaint further alleged that by failing to promptly forward the clients' files to their new attorney, upon termination of his representation, Attorney Gilbert violated SCR 20:1.16(d).

¶ 11. Finally, the OLR's complaint alleged that by failing to submit a written response to the clients' grievance, Attorney Gilbert violated SCR 20:8.4(f) and SCR 22.03(2).

¶ 12. Attorney Konrad T. Tuchscherer was appointed as referee. On August 6, 2004, Attorney Gilbert and the OLR entered into a stipulation which was subsequently submitted to the referee. On August 17, 2004, the referee issued his report in which he adopted the recitation of facts set forth in the stipulation and concluded that Attorney Gilbert violated the Supreme Court Rules discussed above. The referee recommended that Attorney Gilbert's license be suspended for six months, retroactive to April 7, 2004, the date he was eligible to petition for reinstatement of his license pursuant to the October 7, 2003 suspension. The referee also recommended that Attorney Gilbert be ordered to provide restitution to the clients in the amount of $15,797.37, plus post-judgment interest, and he recommended that Attorney Gilbert be assessed all costs of this proceeding.

¶ 13. A referee's findings of fact on a disciplinary matter will not be set aside unless they are clearly erroneous. In re Disciplinary Proceedings Against Sosnay, 209 Wis. 2d 241, 243, 562 N.W.2d 137 (1997). Conclusions of law are reviewed de novo. In re Disciplinary Proceedings Against Carroll, 2000 WI 130, ¶ 29, 248 Wis. 2d 662, 636 N.W.2d 718. Since the referee's findings of fact have not been shown to be clearly erroneous, we adopt them.

¶ 14. We also conclude, as did the referee, that the seriousness of Attorney Gilbert's misconduct warrants the suspension of his license to practice law in Wisconsin for six months. We note that the stipulation points out that Attorney Gilbert's wife was very ill at the time he failed to respond to the OLR's requests for information and that following his wife's surgeries Attorney Gilbert did cooperate with the OLR in this matter. We further agree with the referee that it is appropriate to make the six-month suspension retroactive to April 7, 2004. Finally, we agree with the referee that Attorney Gilbert should be required to make restitution to his clients and that he should be required to pay the costs of this proceeding.

¶ 15. IT IS ORDERED that the license of Attorney William J. Gilbert to practice law in Wisconsin is suspended for six months, retroactive to April 7, 2004.

¶ 16. IT IS FURTHER ORDERED that Attorney William J. Gilbert make restitution to his clients in the amount of $15,797.37, plus post-judgment interest.

¶ 17. IT IS FURTHER ORDERED that within 60 days of the date of this order, Attorney William J. Gilbert pay to the Office of Lawyer Regulation the costs of this proceeding. If the costs are not paid within the time specified and absent a showing to this court of his inability to pay the costs within that time, the license of Attorney William J. Gilbert to practice law in Wisconsin shall remain suspended until further order of the court.

       SCR 20:1.8(a) provides:
      (a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:
      (1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which can be reasonably understood by the client;
      (2) the client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and
      (3) the client consents in writing thereto.

       SCR 20:8.4(c) provides: "It is professional misconduct for a lawyer to: (c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation."

       SCR 20:1.16(d) provides:
      (d) Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee that has not been earned. The lawyer may retain papers relating to the client to the extent permitted by other law.

       SCR 20:8.4(f) provides: "It is professional misconduct for a lawyer to: (f) violate a statute, supreme court rule, supreme court order or supreme court decision regulating the conduct of lawyers."

       SCR 22.03(2) provides:
      (2) Upon commencing an investigation, the director shall notify the respondent of the matter being investigated unless in the opinion of the director the investigation of the matter requires otherwise. The respondent shall fully and fairly disclose all facts and circumstances pertaining to the alleged misconduct within 20 days after being served by ordinary mail a request for a written response. The director may allow additional time to respond. Following receipt of the response, the director may conduct further investigation and may compel the respondent to answer questions, furnish documents, and present any information deemed relevant to the investigation.


author: VERGERONT, J.

text:
    In re the Marriage of: Luann M. Lawrence, Petitioner-Appellant, v. Wayman C. Lawrence, Respondent-Respondent.
    Court of Appeals

      No. 03-1699.

      Submitted on briefs December 5, 2003.

    Decided August 19, 2004.

    2004 WI App 170
    (Also reported in 687 N.W.2d 748.)

      On behalf of the petitioner-appellant, the cause was submitted on the briefs of Mark F. Borns, Relies, Borns & Long, LLP, Madison.
    On behalf of the respondent-respondent, the cause was submitted on the brief oí Daniel W. Hildebrand and Nancy C. Wettersten, DeWitt Ross & Stevens, S.C., Madison.
    Before Dykman, Vergeront and Lundsten, JJ.
   VERGERONT, J.

¶ 1. The issue on this appeal concerns an agreement between parents, incorporated into the divorce judgment, on the impasse-breaking authority for the choice of their child's school. The terms of this provision are that the guardian ad litem (GAL) and the family court counselor "shall have the right to break any impasse between the parties as to where Desmond should attend school." Luann appeals the circuit court's order denying her motion for review of the decision on Desmond's school made pursuant to this provision by the GAL and family court counselor. The circuit court viewed the provision as not contemplating court review of the impasse-breaking decision and denied the motion. We agree with the circuit court that the provision does not contemplate court review of the impasse-breaking decision and we conclude it does not violate applicable statutes or public policy. We therefore affirm.

BACKGROUND

¶ 2. Luann and Wayman were divorced on November 27, 2002, when Desmond was almost five. They entered into stipulations on many issues regarding Desmond and these were contained in the "Partial Marital Settlement Agreement and Order Regarding Legal Custody and Physical Placement." The court found this agreement to be fair and reasonable, approved it entirely, and incorporated it into the judgment of divorce. Under the terms of this agreement, Luann and Wayman have joint legal custody of Desmond and each has periods of physical placement. The agreement provides that the parties are to consult and attempt to reach an agreement on all major decisions affecting Desmond's life, with major decisions defined in Wis. Stat. § 767.001(2m). The term that is the subject of this appeal provides that "Attorney David Joanis [the GAL] and Ms. Kathleen Jeffords [the family court counselor] shall have the right to break any impasse between the parties as to where Desmond should attend school."

¶ 3. In March 2003, Luann moved the court to enter an order regarding where Desmond should attend school. Attached to the motion was the written decision of the GAL and the family court counselor that Desmond should attend Queen of Peace in Madison, the school Wayman wanted him to attend. Luann's accompanying affidavit listed reasons why it was not in Desmond's best interests to attend Queen of Peace, but was in his best interests to attend school in Oregon, Wisconsin, where she resided.

¶ 4. The court denied the motion. It observed there was no provision for court review of the decision of the GAL and the family court counselor on Desmond's school. The court reasoned that giving the GAL and family court counselor impasse-breaking authority had no meaning if the party disagreeing with the decision could have the court make its own decision. The court added its view that any change in this provision would have to be made pursuant to a motion for modification under Wis. Stat. § 767.325. Luann apparently decided not to file a motion to modify the provision. She appeals the court's denial of her motion for the court to make a decision on Desmond's school.

DISCUSSION

¶ 5. Luann argues that the provision giving the GAL and the family court counselor impasse-breaking authority on Desmond's school is invalid because it transfers to third parties the court's authority to decide custody disputes. This, she asserts, is not authorized by statute and is against public policy. She does not disagree with the circuit court's construction of the provision itself — that it does not contemplate court review of the impasse-breaking decision. She also makes clear that the question of which school is better for Desmond is not before this court — only the question of the validity of the provision giving the GAL and the family court counselor impasse-breaking authority on Desmond's school.

¶ 6. As both Luann and Wayman recognize, parties to a divorce action may, generally speaking, stipulate to a provision in a divorce judgment even if the court would not otherwise have the statutory authority to order that provision absent the parties' consent. Rintelman v. Rintelman, 118 Wis. 2d 587, 594-96, 348 N.W.2d 498 (1984). When the court approves such a stipulation and incorporates it into the divorce judgment, the doctrine of equitable estoppel is applied against the party seeking relief from the provision. Id. at 594-95. One of the criteria for equitable estoppel in this context is that the stipulation is not against public policy. Id. at 596. Luann's position is that she is not equitably estopped from seeking relief from the provision on choice of school because it is against public policy.

¶ 7. Resolution of this issue involves the construction of statutes and the determination of public policy, both of which present questions of law where, as here, the relevant facts are not disputed. See Nichols v. Nichols, 162 Wis. 2d 96, 103, 469 N.W. 2d 619 (1991). We review questions of law de novo. Id.

¶ 8. The public policy analysis in this case begins with the sections in Wis. Stat. ch. 767 that define the role of the circuit court in decisions that affect children. Wisconsin Stat. § 767.24(1) provides that the "court shall make such provisions as it deems just and reasonable concerning the legal custody and physical placement of any minor child of the parties, as provided in this section." "Legal custody" is defined as "the right and responsibility to make major decisions concerning the child, except with respect to specified decisions as set forth by the court or the parties in the final judgment or order." Wis. Stat. § 767.001(2)(a). Major decisions include "choice of school." Section 767.001(2m). Joint legal custody, which the parties have in this case, incorporates the definition of legal custody and is "the condition under which both parties share legal custody and neither party's legal custody rights are superior, except with respect to specified decisions as set forth by the court or the parties in the final judgment or order." Section 767.001(ls). In making an order of joint legal custody, the court may give to one of the parents the sole power to make specified decisions, notwithstanding § 767.001(ls). Section 767.24(6)(b).

¶ 9. Luann's position is that the above statutes authorize either the court or one or both parties to make the choice of a school, but not a third party. A stipulation between the parents that a third party is to make the choice is, she contends, a restraint on the authority of the court to protect the interests of children in custody matters, which is not permissible. She relies on these cases in support of her position: Herrell v. Herrell, 144 Wis. 2d 479, 488, 424 N.W.2d 403 (1988); Biel v. Biel, 114 Wis. 2d 191, 194, 336 N.W.2d 404 (Ct. App. 1983); and Ondrasek v. Tenneson, 158 Wis. 2d 690, 692, 462 N.W.2d 915 (Ct. App. 1990). While these cases establish some general principles that are applicable, none resolve the question of the validity of the provision at issue in this case.

¶ 10. In Herrell, 144 Wis. 2d at 484, the stipulation incorporated into the divorce judgment was construed by the circuit court as providing for use of a "best interests" standard in reevaluating custody when the children became of school age. The modification statute in effect at that time, Wis. Stat. § 767.32(2) (1985-86), authorized the court to modify a custody order removing a child from the care of a parent having custody upon a finding that the removal was "necessary to the child's best interest." The supreme court stated that the legislature had explicitly prescribed a stricter standard than "best interests" in order to promote stability for the child, encourage private resolution of disputes, and minimize custody litigation after divorce. Id. at 487-88. The supreme court concluded that the protection for children embodied in the higher standard would be defeated if parents could determine that a lesser showing was adequate for modification. Id. at 488.

¶ 11. Luann asserts that the effect of the disputed provision here is to empower the GAL and the family court counselor to give one parent or the other the authority over choice of school without specifying any legal standard for the GAL and the family court counselor to employ and without any judicial review. Thus, she concludes, Desmond is deprived of the protections afforded by statute, an impermissible result under Herrell.

¶ 12. We do not agree with Luann that Herrell supports her position. First, the disputed provision does not give third parties authority to decide which party is responsible for making a major decision. The agreement incorporated into the judgment makes it clear that both parties have the right and responsibility to make major decisions, which includes choice of school, and they are to consult and attempt to agree; if they cannot agree, the GAL and family court counselor decide which of the two schools Desmond is to attend. But that particular decision on which school, made only if an impasse occurs, does not mean that in the future the party whose choice of school is selected becomes solely responsible for future major decisions on education.

¶ 13. It is true that there is no legal standard specified in the provision for the GAL and the family court counselor to employ in breaking the impasse on the choice of school. However, there is no standard specified by statute for the parent who is given the sole power to make a decision under Wis. Stat. § 767.24(6) (b). Moreover, because the GAL's statutorily defined duties include being an advocate for the best interests of the child regarding legal custody, Wis. Stat. § 767.045(4), the provision at issue necessarily implies the choice will be made according to the best interests of the child as viewed by the GAL.

¶ 14. As for the absence of judicial review, Luann does not explain what statutory procedure is available when a divorce judgment gives to one parent having joint custody, the sole power to make a particular type of decision, such as choice of school, and the other parent does not like the specific choice. The only statutory mechanism we are aware of is that in Wis. Stat. § 767.325, which provides for a modification of the judgment or order giving one parent that power. That same option was and is available to Luann, as the circuit court made clear. In short, we do not see how the disputed provision deprives Desmond of the protections he would have if one parent, rather than the GAL and the family court counselor, had impasse-breaking authority for choice of his school.

¶ 15. In Biel, 114 Wis. 2d at 192, the circuit court ordered the parties to arbitrate their custody and visitation disputes before a social worker. This court concluded that Wis. Stat. § 767.24(1) required the court to make these determinations itself and the court had no authority to delegate them to another person. Id. at 194. (The specific disputes in Biel were not described.) Luann equates impasse-breaking authority on choice of school to a determination of legal custody and argues that neither the court nor the parties can delegate the court's authority to a third person.

¶ 16. We do not agree that impasse-breaking authority on choice of school is equivalent to the determination of legal custody. While Wis. Stat. § 767.24(1) imposes on the court the obligation to make provisions on legal custody and physical placement that are "just and reasonable... as provided in this section," no statute obligates the court to make the decisions specified as major decisions in Wis. Stat. § 767.001(2m). Rather, making these decisions is the responsibility of one or both of the parents. The court's obligation is to determine how to allocate the responsibility for major decisions and other decisions when awarding joint custody, see § 767.24(6) (am) and (b), and this obligation entails determining whether to approve any agreement between parents on that allocation. The court may of course make a particular decision that falls into the category of "major decisions" when there is a dispute between the parties and the dispute is properly before the court. However, the entire statutory scheme makes clear that, in general, the legislature intends that one or both parents are responsible for making the particular decisions on an ongoing basis.

¶ 17. In Ondrasek, 158 Wis. 2d at 692-93, the parties stipulated that payments that included child support would not be modifiable in the future by either party, and this was incorporated into the judgment. This court reversed the circuit court's application of equitable estoppel to prevent the payee from moving for an increase because, we concluded, an unmodifiable ceiling on support was against public policy. Id. at 694, 697. We reasoned that the goal of child support was to promote the best interests of the child and avoid financial hardship for children of divorced parents. Id. at 695. To that end, the legislature expressly provided that the court retains jurisdiction over child support and did not limit the court's authority to modify child support, as it chose to do with maintenance waivers and property divisions in Wis. Stat. § 767.32(1). Id. We concluded that the public policy of protecting children would be defeated if a party were precluded from showing that changed circumstances warranted a change in child support. Id. at 697.

¶ 18. While we agree with Luann that Ondrasek establishes the principle that "a child's best interests transcend an agreement or stipulation of the parties," id. at 695, there are significant distinctions between a ceiling on child support and giving impasse-breaking authority on choice of school to the GAL and family court counselor. The former deprives the court of the statutory authority it would otherwise have to determine whether there has been a substantial change in circumstances necessitating an increase in child support for the best interests of the child. The latter does not take away from the court any authority it would otherwise have but instead allows the parties to agree that third parties, who have already been involved in resolving issues concerning the child, have impasse-breaking authority on a particular topic rather than one or the other parent.

¶ 19. We conclude the disputed provision here does not deprive the court of any authority it would otherwise have if, under a divorce judgment, one of two parents with joint custody had impasse-breaking authority on choice of school. Therefore, the public policy concerns have to do with the difference between one parent having that authority and two parents agreeing to give that authority to the GAL and family court counselor. Luann has not articulated a policy favoring the former over the latter, but she perhaps implies that it is better policy for a parent to have that authority than third parties.

¶ 20. We do not find this a persuasive argument in the context of this case. The parties here were able to agree on many issues regarding their child, for which they are to be commended. However, as is implicit from the disputed provision itself, and as articulated in the written decision choosing Queen of Peace, the parties anticipated they would disagree on which school Desmond should attend and anticipated they might not be able to resolve that disagreement. They could have submitted this dispute to the court for resolution, along with other contested issues in the divorce. That likely would have resulted in the court making a decision either as to which school Desmond should attend or which parent should have the authority to make the decision if an impasse were to occur. In the first situation, the court, not a parent, would be making the decision on the school; in the second case, if an impasse occurred, one parent would decide on the school. We can see no policy reason why either of these two mechanisms for resolving the parties' differences on their child's school is preferable to the one they agreed upon.

¶ 21. There is a strong public policy in Wisconsin of encouraging settlement of divorce cases. Patrickus v. Patrickus, 2000 WI App 255, ¶ 11, 239 Wis. 2d 340, 620 N.W.2d 205 (citing Nichols, 162 Wis. 2d at 115). Where children are involved, they benefit from private resolution of disputes by their parents and from reduction in litigation. See Herrell, 144 Wis. 2d at 487-88. Of course, the obligation of the courts to decide whether to approve agreements between the parties concerning their children and incorporate them into the divorce judgment is critical to making sure that the best interests of the children are served by those agreements. See Wis. Stat. § 767.10(1) (parties may stipulate for legal custody and physical placement subject to the court's approval); see also King v. King, 25 Wis. 2d 550, 555, 131 N.W.2d 357 (1964) (while parents may stipulate as to custody, the agreement should not be approved by the court unless it insures and promotes the best interest of the children). In this case, the agreement approved by the court avoided a contested hearing on the issue of the choice of Desmond's school and avoided one parent having the final decision. Instead, the agréement gave impasse-breaking authority to the GAL, who by statute advocates for the best interests of the child, Wis. Stat. § 767.045(4), and to the family court counselor, whose office is charged with providing mediation and other services connected with legal custody and physical placement disputes. Wis. Stat. § 767.11. Both persons had been involved in this case on issues relating to the legal custody and physical placement of Desmond.

¶ 22. We conclude that the agreement approved by the court and incorporated into the judgment is not against public policy. It is consistent with the public policy favoring settlement in divorce cases. It does not limit the statutory authority of the court to review the impasse-breaking decision: like a decision made by the parent given sole power or impasse-breaking authority, there is no review by the court of the particular decision made, but the other parent may move to modify the grant of power under Wis. Stat. § 767.325 upon the requisite showing. Finally, the third parties who are given the impasse-breaking authority here are the GAL and the family court counselor. Accordingly, we affirm the decision of the circuit court denying Luann's motion.

By the Court. — Order affirmed.

       We certified this appeal to the supreme court under Wis. Stat. § 808.05(2) (2001-02) but the supreme court refused certification. The appeal is therefore before this court for decision.
      All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.

       Wisconsin Stat. § 767.325 provides in part:
      Revision of legal custody and physical placement orders ....
      (1) Substantial modifications, (a) Within 2 years after initial order. Except as provided under sub. (2), a court may not modify any of the following orders before 2 years after the initial order is entered under s. 767.24, unless a party seeking the modification, upon petition, motion, or order to show cause shows by substantial evidence that the modification is necessary because the current custodial conditions are physically or emotionally harmful to the best interest of the child:
      1. An order of legal custody.
      2. An order of physical placement if the modification would substantially alter the time a parent may spend with his or her child.
      (b) After 2-year period. 1. Except as provided under par. (a) and sub. (2), upon petition, motion or order to show cause by a party, a court may modify an order of legal custody or an order of physical placement where the modification would substantially alter the time a parent may spend with his or her child if the court finds all of the following:
      a. The modification is in the best interest of the child.
      b. There has been a substantial change of circumstances since the entry of the last order affecting legal custody or the last order substantially affecting physical placement.
      2. With respect to subd. 1., there is a rebuttable presumption that:
      a. Continuing the current allocation of decision making under a legal custody order is in the best interest of the child.
      b. Continuing the child's physical placement with the parent with whom the child resides for the greater period of time is in the best interest of the child.
      3.A change in the economic circumstances or marital status of either party is not sufficient to meet the standards for modification under subd. 1.

       Of course, the standard for prevailing on a motion to modify when it is brought within two years of the judgment or order, as was Luann's motion, is the stricter one — the current custodial conditions must be physically or emotionally harmful to the best interest of the child. Wis. Stat. § 767.325(l)(a).

       Luann observes that there is an exception in Wis. Stat. § 802.12 for alternative dispute resolutions, but she argues that is not applicable here. Wayman implicitly concedes this.

       Wayman contends that Luann's motion is precluded under Wis. Stat. § 767.325(l)(a) because the affidavit on its face did not assert grounds that met the standard for modifying a judgment within two years — current custodial conditions that are physically or emotionally harmful to the best interest of the child. Luann replies that Wayman did not make this argument in the trial court and, alternatively, that § 767.325 does not apply when a provision in a judgment or order is challenged as invalid because it violates public policy. Because we have concluded the disputed provision does not violate public policy, it is unnecessary for us to address these arguments.