text:
    Hoida, Inc., Plaintiff-Appellant, v. M&I Midstate Bank and McDonald Title Company, Inc., Defendants-Respondents, William C. Herbert, Defendant-(In T.Ct.).
    Court of Appeals

      No. 03-2108.

      Submitted on briefs May 6, 2004.

    Decided September 16, 2004.

    2004 WI App 191
    (Also reported in 688 N.W.2d 691.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Scott R. Halloin of Mallery & Zimmerman, S.C., Milwaukee.

      On behalf of the defendant-respondent, McDonald Title Co., Inc., the cause was submitted on the brief of William J. Ewald of Denissen, Kranzush, Mahoney & Ewald, S.C., Green Bay.
    On behalf of the defendant-respondent, M&I Mid-state Bank, the cause was submitted on the brief of Russell T. Golla of Anderson, O'Brien, Bertz, Skrenes & Golla, Stevens Point.
    A nonparty brief was filed by John E. Knight, James E. Bartzen, Kirsten E. Spira of Boardman, Suhr, Curry & Field LLP, Madison, for Wisconsin Bankers Association.
    Before Dykman, Vergeront and Higginbotham, JJ.

       Petition to review granted 12-15-2004.

   DYKMAN, J.

¶ 1. Hoida, Inc., appeals from a summary judgment granted to McDonald Title Co., Inc., and M&I Midstate Bank. Hoida, a construction subcontractor on a Plover, Wisconsin, building project, incurred losses when the prime contractor, Packard Construction, Inc., failed to pay Hoida for materials it supplied to Packard. Hoida seeks to hold M&I, the construction lender on the project, and McDonald Title, M&I's disbursing agent, liable for these losses. It contends M&I and McDonald Title breached a duty of care owed to Hoida by failing to obtain lien waivers and by continuing to fund draw requests without securing such waivers. Hoida asserts that this breach was a cause of its loss. The circuit court granted summary judgment to M&I and McDonald because it found that they did not owe a duty to Hoida. Though we disagree with the circuit court's methodology, we affirm its judgment because we conclude that to allow Hoida to recover from M&I and McDonald for failure to obtain lien waivers would contravene public policy.

STATEMENT OF FACTS

¶ 2. In October 1996, a corporation named The Villager at Nashotah entered into a construction loan agreement with M&I to build four eight-unit apartment buildings in Plover. The agreement called for M&I to lend a total of $1,320,000.00 to The Villager, secured by four real estate mortgages. The loan agreement stated that M&I "shall not be responsible for any aspect of the [c]onstruction ... or the procurement of lien waivers." An M&I vice president, Thomas Domaszek, was the loan officer for the project. The disbursing agent on the project was McDonald Title, owned by Robert McDonald.

¶ 3. The Villager hired Packard Construction, Inc., as the general contractor. In February 1997, Packard subcontracted with Hoida for prefabricated wooden wall sections and roof trusses. Packard submitted its first draw request in October 1996 for four draws of $50,500 each, for each of the four buildings. Domaszek paid the draw requests without obtaining lien waivers, although he testified that he told the owners that M&I would ultimately have to receive such waivers. McDonald paid the remaining draw requests, also without obtaining lien waivers.

¶ 4. Domaszek testified that it was contrary to M&I's usual practice to authorize the payment of draws before receiving lien waivers on previous draws. M&I concedes for the sake of the court's analysis that its failure to obtain lien waivers was contrary to its internal procedures and standards within the lending industry. McDonald also admitted that failure to procure lien waivers was contrary to accepted practice in Portage County.

¶ 5. Domaszek and McDonald became concerned when promised lien waivers did not arrive and progress on the project lagged behind the goals set forth in Packard's draw requests. On June 6, 1997, McDonald informed Packard that no more funds would be disbursed until M&I and McDonald received lien waivers totaling $786,118.72. Domaszek and McDonald's concerns proved well founded; Packard Construction and Michael Imperl, a principal of the Villager, had misappropriated or diverted $650,000 to $700,000 of the draws, by M&I's count. Imperl was subsequently indicted on multiple counts of bank fraud. The project's architect, William Herbert, averred that his signature was forged on several of the draw requests that were honored by M&I.

¶ 6. M&I assumed a greater role in the project after Packard defaulted, taking on Packard's role of approving work and processing subcontractor draws. M&I discovered that a disproportionate amount of the alleged theft came from the draws related to two of the buildings. As a result, two of the buildings stood near completion, while the other two were unfinished. M&I combined the financing of the four buildings and used the collateral of the nearly completed buildings to finance the construction of the two unfinished units.

¶ 7. In November of 1998, M&I obtained a judgment of foreclosure on the Villager's mortgages. Hoida also obtained a judgment against the Villager and its guarantors. M&I recovered its losses, but Hoida remained unpaid. Hoida estimates that it is owed $548,175.68. In May of 2001, Hoida sued M&I and McDonald. Hoida, M&I and McDonald each filed motions for summary judgment. The parties agreed that the issue was whether M&I and McDonald, in their respective capacities on the Villager project, owed any duties to Hoida. In a bench ruling, the circuit court concluded that "there has not been a duty shown whereby Hoida could recover."

STANDARD OF REVIEW

¶ 8. We review a grant or denial of summary judgment de novo, and we use the same method as did the circuit court. Cole v. Hubanks, 2004 WI 74, ¶ 5, 272 Wis. 2d 539, 681 N.W.2d 147. This methodology requires a court to determine whether a claim has been stated, and then if a material issue has been presented. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315, 401 N.W.2d 816 (1987). We review all material facts, drawing all reasonable inferences in favor of Hoida, the nonmoving party. See Garcia v. Mazda Motor Company, 2004 WI 93 ¶ 4 n.3, 273 Wis. 2d 485, 682 N.W.2d 365.

DISCUSSION

¶ 9. By concluding that M&I and McDonald had no duty to Hoida under which Hoida could recover, the circuit court determined that Hoida failed to state a cognizable claim. When considering the sufficiency of a claim on summary judgment, "[w]e will reverse a decision granting summary judgment if the trial court incorrectly decided legal issues or if material facts were in dispute." Mrozek v. Intra Financial Corp., 2004 WI App 43, ¶ 11, 271 Wis. 2d 485, 678 N.W.2d 264.

¶ 10. Hoida's complaint states negligence claims against M&I and McDonald. A plaintiff alleging negligence must prove: (a) the existence of a duty of care on the part of a defendant; (b) a breach of that duty of care; (c) a causal connection between the defendant's breach of the duty of care and the plaintiffs injury; and (d) actual loss or damage resulting from the injury. See, e.g., Gritzner v. Michael R., 2000 WI 68, ¶ 19, 235 Wis. 2d 781, 611 N.W.2d 906. We therefore examine whether Hoida raises an issue of fact as to each of these elements, or if either party is entitled to summary judgment on the question of negligence.

¶ 11. We consider first whether M&I and McDonald owed a duty of care to Hoida. In Wisconsin, everyone owes a duty to all others to refrain from any act that will cause foreseeable harm to others. Dixson v. WI Health Organization Ins. Corp., 2000 WI 95, ¶ 22, 237 Wis. 2d 149, 612 N.W.2d 721. Duty is the obligation of any person " 'to refrain from any act which will cause foreseeable harm to others even though the nature of that harm and the identity of the harmed person or harmed interest is unknown at the time of the act.'" Rockweit v. Senecal, 197 Wis. 2d 409, 419-20, 541 N.W.2d 742 (1995) (quoting A.E. Investment Corp. v. Link Building, Inc., 62 Wis. 2d 479, 483-84, 214 N.W.2d 764 (1974)).

¶ 12. The circuit court concluded that M&I and McDonald did not owe Hoida a duty. We disagree. Wisconsin courts rarely limit liability under a duty analysis. See Gritzner, 235 Wis. 2d 781, ¶ 24 n.4. Rather, courts more often limit liability by applying public policy factors. Id. "The consistent analyses of [the Wisconsin Supreme Court] reveal that the question of duty is not an element of the court's policy determination. It is, rather, an ingredient in the determination of negligence." A.E. Investment Corp., 62 Wis.2d at 484.

¶ 13. Here, the circuit court limited liability because it did not favor "extending the law of negligence to deal with this kind of commercial environment," deciding instead "to maintain the fundamental distinction between tort and contract law." It added that the Wisconsin Statutes already "establish!] a statutory scheme that create[s] rights and obligations" for subcontractors and lenders that courts should be reluctant to venture into. These may be valid policy reasons to limit M&I and McDonald's liability. But duty is a broad concept in Wisconsin, and usually does not limit a plaintiffs recovery.

¶ 14. M&I and McDonald owed Hoida the obligation "to refrain from any act which [would] cause foreseeable harm to Hoida." Rockweit, 197 Wis. 2d 419-20 (citation omitted). Here, the act (or failure to act) was the failure to procure lien waivers. M&I and McDonald witnesses stated that obtaining lien waivers was the industry standard, and that this was the usual practice of M&I and McDonald. Domaszek averred that it was inconsistent with M&I's policy to pay draws when lien waivers had not been obtained on previous draws. Robert McDonald averred that in Portage County, lien waivers are customarily obtained by disbursing agents before the funding of the next draw request. McDonald also averred that the guidelines and procedures of the insurance manual governing the title insurance issued for the project stated that "we should make every effort to obtain [lien] waivers in full wherever possible." It was foreseeable that the failure to obtain lien waivers could harm subcontractors, including Hoida. Therefore, we conclude that M&I and McDonald owed Hoida a duty of care.

¶ 15. Domaszek and McDonald admit in testimony to the second element of negligence, breach of duty; they acknowledge that lien waivers were not obtained. Hoida has also alleged the third element, causation. "A defendant's negligence is 'a cause' of a plaintiffs injury or damage if it was a substantial factor in producing the injury or damage." Alvarado v. Sersch, 2003 WI 55, ¶ 34 n.2, 262 Wis. 2d 74, 662 N.W.2d 350 (citation omitted). Had M&I and McDonald not funded draws after Packard failed to supply lien waivers, Packard and Imperl could not have diverted the draws. As a result, the project would have most likely come to a halt, and Hoida would not have furnished the material for which it was not paid. M&I and McDonald's failure to obtain lien waivers meets the substantial factor test. Finally, no one disputes that Hoida has suffered "actual loss or damage resulting from the injury," Gritzner, 235 Wis. 2d 781, ¶ 19 (citation omitted); it is out several hundred thousand dollars.

¶ 16. We conclude that Hoida has alleged each of the elements necessary to establish its negligence claim. In many cases, our analysis would end here and we would grant summary judgment to the plaintiff. However, we must consider public policy concerns. "After negligence has been found, a court may nevertheless limit liability for public policy reasons." Alvarado, 262 Wis. 2d 74, ¶ 17 (citation omitted).

¶ 17. Generally, the better practice is to submit a case to the jury before determining whether public policy considerations preclude liability. Gritzner, 235 Wis. 2d 781, ¶ 26. But Wisconsin appellate courts can, and do, decide public policy questions at summary judgment. Stephenson v. Universal Metrics, Inc., 2002 WI 30, ¶ 42, 251 Wis. 2d 171, 641 N.W.2d 158. "'[W]here the facts presented are simple and the question of public policy is fully presented by the complaint and the motion for summary judgment, this court may make the public policy determination.'" Smaxwell v. Bayard, 2004 WI 101, ¶ 41, 274 Wis. 2d 278, 682 N.W.2d 923 (quoting Sawyer v. Midelfort, 227 Wis. 2d 124, 141, 595 N.W.2d 423 (1999)).

¶ 18. Denial of recovery on public policy grounds involves a case-by-case application of one or more of six nonexclusive factors. We have recognized that public policy considerations unique to a given case may limit liability. See Mrozek, 271 Wis. 2d 485, ¶ 46; see also Hicks v. Nunnery, 2002 WI App 87, ¶ 34, 253 Wis. 2d 721, 643 N.W.2d 809, review denied, 2003 WI 16, 259 Wis. 2d 101, 657 N.W.2d 706. "Public policy is a broad, not easily defined concept. It embodies the community common sense and common conscience. Public policy is that principle of law under which freedom of contract or private dealings is restricted by law for the good of the community." Merten v. Nathan, 108 Wis. 2d 205, 213, 321 N.W.2d 173 (1982).

¶ 19. We begin our public policy analysis by considering the policies of the construction lien laws of Chapter 779 of the Wisconsin Statutes, which provide rights and remedies to construction subcontractors and material suppliers. A general purpose of these laws is to ensure the payment of construction project subcontractors and material suppliers. See Kraemer Bros. v. Pulaski State Bank, 138 Wis. 2d 395, 399-400, 406 N.W.2d 379 (1987). The legislative intent of the construction lien laws is "to protect the claims óf [tradespersons], laborers and [material suppliers] for work or materials provided in the improvement of real property." Fredrick Redi-Mix, Inc. v. Thomson, 96 Wis. 2d 715, 726, 292 N.W.2d 648 (1980).

¶ 20. To this end, a subcontractor or supplier may file a construction lien on the property on which it has performed the work. See Wis. Stat. § 779.01. " 'A construction lien is a remedy created by statute to insure payment to contractors, subcontractors, tradesmen, laborers, and materialmen who have furnished labor or materials in good faith for improvement of another's property.'" Daughtry v. MPC Systems, Inc., 2004 WI App 70, ¶ 68, 272 Wis. 2d 260, 679 N.W.2d 808 (quoting Mortgage Assocs, Inc. v. Monona Shores, Inc., 47 Wis. 2d 171, 186-87, 177 N.W.2d 340 (1970)).

¶ 21. Hoida concedes that Wisconsin law guarantees lenders priority lien status over subcontractors. Wisconsin Stat. § 779.01(4) provides that a construction lien "shall be prior to any lien which originates subsequent to the visible commencement in place of the work of improvement, except as otherwise provided by. . . [Wis. Stat. §] 706.11(1) and (lm)." The exception in § 706.11(1) establishes the priority status of certain mortgages over liens, including the priority of mortgages held by financial institutions. Paragraph (d) of § 706.11(1) gives "priority over all liens upon mortgaged premises and the buildings and improvements thereon" to "[a]ny mortgage executed to a state or national bank or to a state or federally chartered credit union."

¶ 22. Hoida asserts that this scheme creates a perverse incentive for lenders not to notify subcontractors when they encounter problems or risks with a contractor. If the lender contacts the subcontractor to inform it of potential difficulties, the subcontractor may stop working and file a lien, jeopardizing the lender's security. If the lender does nothing, the subcontractor will continue to work, thereby increasing the lender's security for repayment. Hoida observes that this increases the likelihood that the subcontractor will shoulder the loss.

¶ 23. Hoida asks us to create a remedy for its problem. We decline to do so. Under Wis. Stat. ch. 779, the legislature made a policy choice to provide protection to subcontractors and material suppliers on construction projects. It also elected, under Wis. Stat. §§ 779.01(4) and 706.11, to limit that protection in certain situations by providing priority status to lenders. Establishing for Hoida a new claim against M&I and McDonald would contravene the public policy choices of the legislature. "[T]he judiciary is limited to applying the policy the legislature has chosen to enact, and may not impose its own policy choices." Fandrey v. American Family Mut. Ins. Co., 2004 WI 62, ¶ 16, 272 Wis. 2d 46, 680 N.W.2d 345 (citation omitted).

¶ 24. A subcontractor or material supplier may attempt to protect itself by filing a lien. We recognize that construction liens do not guarantee payment, but the legislature has balanced the interests of lenders and subcontractors, and we respect that balance.

¶ 25. Because we conclude that public policy precludes tort recovery for Hoida, we need not address whether the economic loss doctrine also limits liability. We also decline to consider Hoida's assertions that M&I misrepresented certain facts to it. As the circuit court held, Hoida did not plead a claim of misrepresentation. We will not consider an issue that was not properly raised in the trial court. See Estate of Scherffius, 62 Wis.2d 687, 696-697, 215 N.W.2d 547 (1974).

By the Court. — Judgment affirmed.

       A lien waiver is a "written and signed waiver of a subcontrator's mechanic's lien rights, usu. submitted to enable the owner or general contractor to receive a draw on a construction loan." Black's Law Dictionaky 1575 (7th ed. 1999).

       Consistent with summary judgment methodology, we present material facts from the pleadings, affidavits and depositions that permit the drawing of all reasonable inferences in favor of the non-moving party. See Alvarado v. Sersch, 2002 WI App 227, ¶ 2, 257 Wis. 2d 752, 652 N.W.2d 109, rev'd on other grounds, 2003 WI 55, 262 Wis. 2d 74, 662 N.W.2d 350.

       Though this comment is consistent with the principles of the economic loss doctrine, see Tietsworth v. Harley-Davidson, Inc., 2004 WI 32, 270 Wis. 2d 146, 677 N.W.2d 233, the circuit court explicitly rejected application of the economic loss doctrine in this case.

       M&I argues that another possibility is that Packard and Imperl would have forged the lien waivers from the subcontractors, just as they forged Herbert's signature on the draw requests. M&I's argument is speculative and does not defeat Hoida's demonstration that M&I and McDonald's actions were a substantial factor in causing Hoida's injury.

       These factors, known as public policy or "X" factors, include: (1) the injury is too remote from the negligence; (2) the injury is too wholly out of proportion to the tortfeasor's culpability; (3) in retrospect it appears too highly extraordinary that the negligence should have resulted in the harm; (4) allowing recovery would place too unreasonable a burden on the tortfeasor; (5) allowing recovery would he too likely to open the way for fraudulent claims; and (6) allowing recovery would enter a field that has no sensible or just stopping point. Fandrey v. American Family Mut. Ins. Co., 2004 WI 62, ¶ 1 n.1, 272 Wis. 2d 46, 680 N.W.2d 345.

       This is because Wis. Stat. § 706.11(lni)(b) establishes that a draw upon a mortgage has priority status like the mortgage itself, unless prior to the payment of the draw "the mortgagee has actual knowledge of an intervening lien."


source: Caselaw Access Project

author: FINE, J. LUNDSTEN, J.

license: Public Domain

text:
    Elizabeth Freer, Plaintiff-Appellant, v. M&I Marshall & Ilsley Corporation, Defendant-Respondent.
    Court of Appeals

      No. 03-3175.

      Submitted on briefs August 24, 2004.

    Decided September 21, 2004.

    2004 WI App 201
    (Also reported in 688 N.W.2d 756.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs oí James P Brennan oí Brennan & Collins, of Milwaukee.
    On behalf of the defendant-respondent, the cause was submitted on the brief of Mary Pat Ninneman of Quarles & Brady LLP, of Milwaukee.
    Before Wedemeyer, PJ., Fine and Lundsten, JJ.

       Petition to review filed.

   FINE, J.

¶ 1. Elizabeth Freer appeals from a summary judgment dismissing her complaint against M&I Marshall & Ilsley Corporation alleging that an employee of Marshall & Ilsley had slandered her. We affirm.

I.

¶ 2. According to her complaint, Freer worked for Marshall & Ilsley Bank from 1984 until 1995, when "by mutual agreement" her "employment with [Marshall & Ilsley] was terminated." Freer's complaint also asserts that she was hired as a "trust sales representative," and "[a]t the time of the termination [she] was employed as a vice president of sales."

¶ 3. Freer's complaint alleged that after she left Marshall & Ilsley, she became "an equity partner" in Capital Investment Services of America, Inc., "as an investment counsel," and, as such, "solicited business customers in southern California." The following is the nub of Freer's defamation claim as set out in her complaint:

That [Ruth A.] Sherman then identified herself as a resident of the Los Angeles, California area, who was interested in investing with [Freer] and her employer, Capit[a]l Investment Services of America, Inc., and was seeking some information and references regarding [Freer] from [Marshall & Ilsley].
Ruth A. Sherman asked Joanne Matchette what position had been held hy [Freer] at [Marshall & Ilsley], Matchette replied that [Freer] was employed as a sales person. When Sherman stated that she thought [Freer] was an investment manager, Matchette replied, "Oh no, Elizabeth had no such position. Elizabeth was never anything other than a sales person, although she did some marketing too." Matchette further informed Ruth A. Sherman "that Freer had never been a money manager, had never been an investment manager, nor was . Freer in any type of management position at M & I." Matchette then repeated to Ruth A. Sherman "that Freer never had held a management position." Ruth A. Sherman further asked Matchette if [Freer] had ever held a position at [Marshall & Ilsley] where she managed anyone's investment portfolio and Matchette replied "Oh, absolutely not."

¶ 4. Wisconsin Stat. Rule 802.03(6) requires that: "In an action for libel or slander, the particular words complained of shall be set forth in the complaint, but their publication and their application to the plaintiff may be stated generally." Thus, Freer's slander claim is limited to Matchette's alleged conversation with Sherman, and to the specific words she contends that Matchette used. Freer's complaint asserts that those words "defamed and slandered [Freer] in that the statements were false and not privileged and harmed [Freer]'s reputation so as to lower her in the estimation of Ruth A. Sherman who subsequently withdrew from associating and dealing with [Freer] and doing business with her." Freer's complaint alleges no other damage. Thus, as explained below, her claim against Marshall & Ilsley fails unless Matchette's words were slanderous per se. We hold that they are not.

II.

A. Wisconsin Stat. Rule 802.05.

¶ 5. Before we begin our analysis of the narrow ultimate legal issue presented by this appeal, namely whether Matchette's words were slanderous per se, we are disturbed that Freer's complaint asserts things that conflict with the summary-judgment evidentiary record: That Sherman was "[o]ne of those customers" within Freer's range of business solicitation; that Sherman "was interested in personally investing with [Freer]"; and that Sherman "withdrew from associating and dealing with [Freer] and doing business with her" as a consequence of what Matchette told her. According to the evidentiary record, however, Sherman was neither an investor nor potential investor with either Capital Investment Services or Freer. Rather, as Freer conceded in her deposition and in her brief before the trial court, Sherman was retained for $200 to test what response an inquiry to Marshall & Ilsley about Freer would turn up. Although Freer's briefs on appeal assert that Sherman was a bona fide potential investor with Freer, Freer points to nothing in the evidentiary record that supports her contention, and, of course, we are bound by the record as it comes to us. State v. Pettit, 171 Wis. 2d 627, 646, 492 N.W.2d 633, 642 (Ct. App. 1992). Thus, for example, Sherman's affidavits merely aver that she told Matchette that she was seeking information about Freer in order to decide whether to do business with Freer, not that that was her actual intent in seeking Matchette's comments about Freer.

¶ 6. Wisconsin Stat. Rule 802.05(1)(a) provides, as material here:

Every pleading... of a party represented by an attorney shall contain the name ... of the attorney ... and shall be subscribed with the handwritten signature of at least one attorney of record... . The signature of an attorney.. . constitutes a certificate that the attorney ... has read the pleading...; that to the best of the attorney's... knowledge, information and belief, formed after reasonable inquiry, the pleading... is well-grounded in fact.

Rule 802.05(l)(a) also provides, as material here:

If the court determines that an attorney.. . failed to read or make the determinations required under this subsection before signing any . .. paper, the court may, upon motion, or upon its own initiative, impose an appropriate sanction on the person who signed the pleading... or on a represented party, or on both. The sanction may include an order to pay the other party the amount of reasonable expenses incurred by that party because of the filing of the pleading. .. including reasonable attorney fees.

We are not a fact-finding court. Wurtz v. Fleischman, 97 Wis. 2d 100, 107 n.3, 293 N.W.2d 155, 159 n.3 (1980). Accordingly, we remand this matter to the trial court with directions that it hold a hearing to determine: (1) Sherman's true role in this case; (2) what and when Freer and her lawyer knew of Sherman's true role in this case; and (3) whether the statements in Freer's appellate briefs about Sherman are true, even though they are not supported by the summary-judgment evidentiary record. By virtue of our superintending authority over the circuit court, Wis. Stat. § 752.02 ("[t]he court of appeals has supervisory authority over all actions and proceedings in all courts except the supreme court"), we direct the trial court to report its findings to us, and, in connection with items 1 and 2, and, depending on its findings, to impose under Rule 802.05(l)(a) any sanction that in the exercise of its reasoned discretion it believes is appropriate. We retain jurisdiction over this appeal, pending receipt of the trial court's report.

B. Slander per se.

¶ 7. As noted, this case comes to us from the trial court's grant of summary judgment to Marshall & Ilsley dismissing Freer's complaint. Our review of a trial court's grant of summary judgment is de novo. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315-317, 401 N.W.2d 816, 820-821 (1987). In order to survive summary judgment, the party with the burden of proof on an element in the case must establish that there is at least a genuine issue of fact on that element by submitting evidentiary material "set[ting] forth specific facts," Wis. Stat. Rule 802.08(3), pertinent to that element, Transportation Ins. Co. v. Hunzinger Constr. Co., 179 Wis. 2d 281, 290-292, 507 N.W.2d 136, 139-140 (Ct. App. 1993).

¶ 8. A person who claims that his or her reputation has been unlawfully damaged by something someone else has said must first establish that the words are not true and are capable of a defamatory meaning. See Martin v. Outboard Marine Corp., 15 Wis. 2d 452, 461, 113 N.W.2d 135, 140 (1962). Whether words are capable of a defamatory meaning is an issue of law for the court. Ibid. Although Marshall & Ilsley contends that what Matchette told Sherman is not defamatory, we need not reach that issue or other defenses asserted by Marshall & Ilsley because assuming without deciding that Matchette's words to Sherman as quoted in the complaint are both false and capable of a defamatory meaning, Freer has neither pled nor submitted any evidentiary material showing that she sustained any damage as a result of what Matchette is alleged to have told Sherman, and, as we show below, Matchette's words are not slanderous per se. See Gross v. Hoffman, 227 Wis. 296, 300, 277 N.W. 663, 665 (1938) (only dispositive issues need be addressed); State v. Blalock, 150 Wis. 2d 688, 703, 442 N.W.2d 514, 520 (Ct. App. 1989) (cases should be decided on the "narrowest possible ground").

¶ 9. Slander, of course, is distinguished from libel because, unlike libel, where the defamation is written, slander is oral. Bauer v. Murphy, 191 Wis. 2d 517, 524, 530 N.W.2d 1, 3 (Ct. App. 1995). Slander is not actionable unless: (1) the plaintiff either both pleads and proves "special damages," or (2) the slander is "actionable per se." Martin, 15 Wis. 2d at 459, 113 N.W.2d at 138-139. We address these two matters in turn.

1. Special damages.

¶ 10. Freer has not demonstrated in her summary judgment submissions that she sustained any damage as a result of what Matchette said to Sherman, and has not submitted any sworn statement, by affidavit or deposition, from any other person to whom employees of Marshall & Ilsley said bad things about her. Freer has attempted, however, to show special damages by submitting an elaborate "Lost Income Computation" prepared by a certified public accountant and business appraiser Freer hired. (Uppercasing omitted.) That analysis, however, is based on what the accountant says he was told by Larry Crober, who allegedly sought to steer business to Freer by virtue of his position with a California bank. This does not suffice. First, what Crober may have told the accountant is hearsay and not "evidentiary facts as would be admissible in evidence," which is required of summary judgment submissions. See Wis. Stat. Rule 802.08(3). Second, the only alleged defamatory statements set out in Freer's complaint, as required by Wis. Stat. Rule 802.03(6), are those Freer claims were made by Matchette to Sherman, and thus Freer needed to show pecuniary loss resulting from those statements. This she has not done. Indeed, in his deposition, Freer's accountant admitted that the period covered by his analysis predated Matchette's alleged statements to Sherman.

2. Actionable per se.

¶ 11. As noted, there is a type of slander that is "actionable without proof of damages" because damages are "presumed from the character of the defamatory language." Martin, 15 Wis. 2d at 459, 113 N.W.2d at 139. Such slander, slander per se, is limited to the following four narrow circumstances:

• "imputation of certain crimes" to the plaintiff; or
• "imputation ... of a loathsome disease" to the plaintiff; or
• "imputation ... of unchastity to a woman" plaintiff; or
• defamation "affecting the plaintiff in his business, trade, profession, or office."

Ibid. Whether, as the Concurrence/Dissent opines, these categories "make sense" in this era, Concurrence/Dissent at ¶ 17, they are universal in our jurisprudence. See Restatement (Second) of Torts § 570 (1977). It is into the last category, defamation "affecting the plaintiff in his business, trade, profession, or office," that Freer seeks to squeeze what Matchette told Sherman. She fails because there is nothing inherently defamatory about Matchette's statements.

¶ 12. It is settled in Wisconsin that words are not slanderous per se if anything other than the words are needed to make them defamatory. Bauer, 191 Wis. 2d at 530, 530 N.W.2d at 6; Kassowitz v. Sentinel Co., 226 Wis. 468, 472, 476, 277 N.W. 177, 179, 180-181 (1938) (The defamation must be "apparent from the words themselves"; " '[w]ords which are defamatory per se do not need an innuendo, and, conversely, words which do need an innuendo are not defamatory per se.'") (quoted source omitted), criticized on other grounds, Martin, 15 Wis. 2d at 460-461, 113 N.W.2d at 139; see Bauer, 191 Wis. 2d at 530-531 n.12, 530 N.W.2d at 6 n.12 (recognizing continued vitality of Kassowitz on what is slander per se). This is the law elsewhere as well. See Holsapple v. Smith, 599 S.E.2d 28, 33 (Ga. Ct. App. 2004) (" 'To determine whether a declaration constitutes slander per se, the court looks to 'the plain import of the words spoken' and will not enlarge their meaning by innuendo.'") (quoted source omitted) (charging that plaintiff "screwed a client" and " 'intentionally messed things up in Florida'" both "could possibly be considered a charge 'against another in reference to his trade, office, or profession, calculated to injure him therein.'"); Cook v. Winfrey, 141 F.3d 322, 329-330 (7th Cir. 1998) (" 'Slander per se means that the slander is accomplished by the very words spoken.'") (quoted source omitted) (calling someone a "liar" passes motion-to-dismiss muster because it was error, at that stage of the lawsuit, to conclude that the charge "could not have been of a type that would 'tend to injure [plaintiff] in his trade or occupation.'") (applying Ohio law). This is an inquiry limited to the words themselves without reference to history or gloss. Indeed, one of the core non-Wisconsin decisions upon which the Concurrence/Dissent relies, Anderson v. Vanden Dorpel, 667 N.E.2d 1296 (Ill. 1996), makes this clear. In Anderson, a fund-raiser seeking a job complained that her prior employer disparaged her by telling a potential employer that she " 'did not follow up on assignments' and that 'she could not get along with her coworkers.'" Id., 667 N.E.2d at 1298. Anderson declined to look beyond the words used, and held that they were not defamatory per se because those words could have been non-defamatory in reference to others. Id., 667 N.E.2d at 1301-1302. Similarly, the other core non-Wisconsin decision upon which the Concurrence/Dissent relies, Shaw Cleaners & Dyers, Inc. v. Des Moines Dress Club, 245 N.W. 231 (Iowa 1932), also recognized that "it is quite clear that, in determining the question as to whether the allegations of the petition are libelous per se, we must consider only the unambiguous language of the published advertisement hereinbefore quoted, regardless of any pleaded innuendo." Id., 245 N.W. at 234.

¶ 13. The following statements, allegedly made by Matchette to Sherman, are not slanderous per se because they need context outside of the words themselves to be perceived as defamatory: that Freer was "never an investment manager"; that Freer "was never anything other than a sales person, although she did some marketing too"; that Freer "had never been a money manager, had never been an investment manager"; and that Freer was never "in any type of management position at M & I." See Kassowitz, 226 Wis. at 471-477, 277 N.W. at 178-181 (charging that someone had an " 'arrested case of tuberculosis'" did not impute a "loathsome and a contagious" disease to that person because matters outside the words themselves are needed to convey the meaning that the charge "is understood by the general public and by the readers of the defendant's papers to mean an individual who is still tubercular and subject to the same hazards of relapse and spread of disease as is common in cases of clinical and manifest tuberculosis"); see also Restatement (Second) of Torts § 573 cmt. c, illus. 1-6 (Calling a bricklayer a "hypocrite," saying a clerk "consorts with prostitutes," and calling a university professor a "drunk," all require proof of special damages to be actionable; saying that a lawyer "is ignorant and unqualified to practice law," saying that a merchant is "insolvent," and calling a merchant "insane," are all actionable without proof of special damages.). Simply put, many business people undoubtedly fall within the ambit of employment encompassed by Matchette's alleged statements to Sherman about Freer and lead proud and productive lives. See Anderson, 667 N.E.2d at 1301-1302 (words that could be non-defamatory if ápplied to others are not defamatory per se).

¶ 14. Freer has not satisfied her summary-judgment burden to show special damages she suffered as a result of what Matchette may have told Sherman, and, additionally, Matchette's alleged statements to Sherman were not slanderous per se. Accordingly, the trial court did not err in dismissing Freer's complaint against Marshall & Ilsley.

By the Court. — Judgment affirmed and cause remanded with directions.

LUNDSTEN, J.

¶ 15. {concurringI dissenting). I join part II.A. of the majority decision in which it remands for a determination of whether sanctions should be imposed under Wis. Stat. § 802.05. I agree that it appears from the record that the "potential client" who called Marshall & Ilsley seeking reference information on Freer was not a potential client at all. Thus, further inquiry, as directed by the majority, is needed. I do not, however, join part II.B. of the opinion addressing whether the words of a Marshall & Ilsley employee were defamation per se.

¶ 16. Before tackling the merits of the majority's defamation per se discussion, I make two observations.

¶ 17. First, I question the value of the broad and ill-defined defamation per se categories set forth in Martin v. Outboard Marine Corp., 15 Wis. 2d 452, 113 N.W.2d 135 (1962). I do not question the value of having types of defamation that are defamation per se. Rather, I question whether all of the categories listed in Martin make sense and I am concerned with how poorly defined they are.

¶ 18. Second, I question the legal merit of this particular lawsuit, though not for the reason contained in the majority decision. As the majority points out, the record before us indicates that Freer, through an attorney, hired the person to whom the allegedly defamatory statements were made. Defamation per se is an exception to the general rule that a party alleging defamation must also allege special damages. The justification for defamation per se is that some false statements are so likely to cause pecuniary loss that " 'proof of the defamation itself is sufficient to establish the existence of some damages so that the jury may, without other evidence, estimate the amount of damages.'" Bauer v. Murphy, 191 Wis. 2d 517, 525-26, 530 N.W.2d 1 (Ct. App. 1995) (quoting Starobin v. Northridge Lakes Dev. Co., 94 Wis. 2d 1, 13, 287 N.W.2d 747 (1980)). That being the justification, it seems odd to permit a defamation per se claim in a case where it appears undisputed that the statements neither caused, nor could cause, pecuniary loss. If I were writing for the majority, I would explore whether defamation per se applies when the audience is a person hired to "test" whether a party will make a defamatory statement. But that topic was not briefed, and I will not venture forth on that path.

¶ 19. I turn now to the reasoning employed by the majority and focus in on the narrow legal reasoning it uses to dismiss Freer's defamation claim.

¶ 20. Freer argues that statements by a Marshall & Ilsley employee were defamatory per se because they constituted false statements of fact to a potential client about Freer's relevant experience while employed at Marshall & Ilsley. Freer alleged that when a prospective investment client telephoned Marshall & Ilsley to inquire about Freer's experience with managing investments, the caller was falsely told that Freer had no such experience while at Marshall & Ilsley. This allegation falls squarely into the recognized defamation per se category for false statements affecting a plaintiffs profession. See Restatement (Second) of Torts § 573 cmt. c, at 193 (1977) ("When peculiar skill or ability is necessary, an imputation that attributes a lack of skill or ability tends to harm the other in his business or profession.").

¶ 21. The majority does not say that there is a problem with Freer's claim because Sherman was only an apparent potential client, not a real potential client. And, the majority does not say that giving false information about a person's relevant professional experience to a potential client does not constitute defamation per se. Rather, the majority holds that the statements made by the Marshall & Ilsley employee must be viewed in isolation and, when so viewed, the statements are not defamatory per se because "many business people undoubtedly fall within the ambit of employment encompassed by [the Marshall & Ilsley employee's] alleged statements to Sherman about Freer and lead proud and productive lives." Majority at ¶ 13. I disagree that the law directs this context-free analysis.

¶ 22. The majority writes: "It is settled in Wisconsin that words are not slanderous per se if anything other than the words are needed to make them defamatory." Majority at ¶ 12. The majority goes on to apply this rule so strictly that it does not even take into account the immediate context in which the statements were made. The four cases relied on by the majority in paragraph 12 of its opinion do not support this context-free approach to defamation per se.

¶ 23. In Bauer, 191 Wis. 2d 517, we were asked to decide whether defamation per se occurred when basketball coach Mary Murphy called student-player Amy Bauer a "disgrace." during a team meeting. The per se category at issue in Bauer was "unchastity" of a woman. Bauer argued that Coach Murphy's "disgrace" statement — viewed in the context of things said by other people at the team meeting — was a declaration that Bauer was guilty of disgraceful sexual acts with an assistant team coach named Peckham. The majority here seems to say that Bauer informs us that we do not look at such context when determining whether a statement is defamatory per se. But we did look at context in Bauer:

[W]hile the "chastity" rule is apparently good law, Bauer has not persuaded us that Murphy's "disgrace" remark imputed "serious sexual misconduct" to her within the meaning of the Restatement rule.
As we have noted above, the only statement specifically relating to a purported "relationship" with Coach Peckham was the announcement to the group by the athletic director, Marra, that Peckham had been suspended for having formed an "inappropriate relationship" with Bauer. Beyond that, the only discussion about Bauer before she entered the meeting took place among her teammates, several of whom were discussing among themselves various occasions on which Bauer and Peckham had been seen together, and some expressing the view that Bauer was "too close" to Peckham. Bauer argues from these facts that Murphy's remark that Bauer was a "disgrace" must be considered as referring to some form of sexual misconduct with Peckham.
As Murphy points out, however, slander, unlike libel, is an individual, not a joint tort. If Marra's remarks, or the remarks of Bauer's teammates, about her purported relationship with Peckham defamed her, Bauer was free to proceed against them. There is no authority for holding Murphy liable for statements made by others at the meeting, however.
Nor do we see that the context in which Murphy's remark was made adds a sexual misconduct gloss to her words. First, as the supreme court noted in Kassowitz v. Sentinel Co., 226 Wis. 468, 476, 277 N.W. 177, 180 (1938), " '[wjords which are defamatory per se do not need an innuendo, and, conversely, words which do need an innuendo are not defamatory per se.'" (Quoted source omitted.)
... While Murphy's alleged "disgrace" remark was made during a meeting at which the athletic director and several team members were discussing Bauer's relationship with Beckham, it also came in the context of a heated discussion between Bauer and Murphy regarding Bauer's criticism of Murphy's abilities as a basketball coach and the rules Murphy imposed on the team. Indeed, it was after that exchange that Murphy's comment was allegedly made.
To be called a "disgrace" is generally disparaging in any context, as the Bander court recognized. As the court also recognized, however, it is "equally discreditable as applied to all persons," and we believe in this case that the word does not reasonably carry with it an assertion of "unchastity" or sexual misconduct, whether taken in isolation or in the context in which the remark was made.

Id. at 528-32 (emphasis added; citations and footnotes omitted). If context does not matter, we should have made quick work of the defamation per se claim in Bauer because, without the context of the team meeting, Coach Murphy's "disgrace" remark is not even arguably a reference to unchastity. But we obviously thought context did matter, and so discussed it. We certainly did not suggest that context must be ignored when the claim is defamation per se.

¶ 24. The supreme court's decision in Kassowitz v. Sentinel Co., 226 Wis. 468, 277 N.W. 177 (1938), criticized on other grounds, Martin, 15 Wis. 2d at 460-61, similarly fails to support the majority's context-free analysis. In Kassowitz, the question was whether defamation per se occurred when it was stated that a group of persons, including the plaintiff, "are so-called arrested cases of tuberculosis." Kassowitz, 226 Wis. at 471, 475-76. The Kassowitz court's analysis of whether the statement was defamation per se did not turn on whether the statement should be viewed in context. Instead, it turned both on the court’s conclusion that tuberculosis is not a "loathsome disease" and its conclusion that the "arrested case" qualifier indicated that the person was not contagious:

It may be unfortunate, but it is no disgrace to be tubercular. Contracting the disease is not due, as in some cases of disease, to any immorality.
The alleged libelous statement in the instant case refers to so-called "arrested cases of tuberculosis." The words, "arrested case," may be defined in a medical way [all "constitutional" symptoms absent], or may be interpreted in the much looser terms of the layman, to whom it may mean an individual well enough to leave a sanitarium and resume his usual existence. It may mean that the person afflicted has so far recovered that he would not communicate the disease to others.

Id. at 475.

¶ 25. I note that Bauer and Kassowitz both say that "innuendo" may not be used to show that words are defamatory per se, Bauer, 191 Wis. 2d at 528-32; Kassowitz, 226 Wis. at 476-77, but I have a hard time discerning just what is meant by this limitation. Regardless, my review of Bauer and Kassowitz, and the authorities cited in those cases, does not suggest that the "innuendo" limitation extends to stripping allegedly defamatory words of their immediate context. For example, Kassowitz relies on Shaw Cleaners & Dyers, Inc. v. Des Moines Dress Club, et al., 245 N.W. 231 (Iowa 1932), for the proposition that statements that are defamatory per se do not need an "innuendo." Kassowitz, 226 Wis. at 476. In Shaw, a dry cleaner advertised: "Garments Cleaned at Half-Price are only Half Cleaned. When you buy cleaning for half price you get just what you pay for. . . half-way cleaning and pressing." Shaw, 245 N.W. at 232. A competing dry cleaner who regularly used "half-price" advertising claimed defamation per se. Although the Shaw court ultimately determined that the challenged advertisement was not defamation per se, the court did consider context along the way. The challenged advertisement in Shaw did not name the plaintiff. Only by considering context — that the plaintiff used half-price advertising —could it be known that the target of the statement was the plaintiff. In this respect, the Shaw court stated:

It will be noted that the published advertisement does not name the plaintiff, but it is averred in the petition that the advertisement was a libel of the plaintiff in that the matter printed therein referred to the plaintiff, etc. It is not necessary that the defendant name or directly refer to the plaintiff in the published article in order to constitute libel. [In a previous case we stated]: "A person reading the entire matter said to have been taken from the 'Live Wire' might connect the discussion to and reasonably infer that it referred to ... [the plaintiff].... The characterization of a person by insinuation, allusion, imputation, or irony may be quite as certain and effective as though directly applied. ... And in the case at bar, if the jury should find that plaintiff was intended, there is no escape from the conclusion that the article constituted a libel per se."

Id. at 234 (emphasis added; citations omitted). In addition, without saying so, the Shaw court necessarily considered the context that the plaintiff is a dry cleaner. Without that backdrop, there was no possible defamation.

¶ 26. The remaining two cases the majority cites are Holsapple v. Smith, 599 S.E.2d 28, 33 (Ga. Ct. App. 2004), and Cook v. Winfrey, 141 F.3d 322, 329-30 (7th Cir. 1998). As with Bauer and Kassowitz, neither case, discusses whether the context in which a statement is made should be considered. For example, although the Cook court quotes an Ohio decision for the proposition that slander per se must be "accomplished by the very words spoken," neither Cook, nor the Ohio case quoted, King v. Bogner, 624 N.E.2d 364, 366 (Ohio Ct. App. 1993), contains any suggestion that the "very words spoken" must be divorced from the context in which they were spoken.

¶ 27. I also think the majority's reliance on examples in Restatement (Second) of Torts § 573, comment c, illustrations 1-6, is misplaced. Majority at ¶ 13. Saying that a bricklayer is a hypocrite is not actionable because a perfectly competent bricklayer might also be a hypocrite. In contrast, saying that a lawyer is unqualified to practice law is actionable because it disparages the lawyer's ability as a lawyer. None of the examples from the Restatement address the context issue.

¶ 28. In addition to a lack of legal support, I do not see the common sense in the majority's context-free analysis. If a former employer provides false information about a person's relevant work experience to a prospective client, why not take into account the reason the prospective client called? I wonder whether the majority would ignore context if it provided an innocent interpretation for words that, viewed in isolation, are defamation per se. See Anderson v. Vanden Dorpel, 667 N.E.2d 1296, 1301-02 (Ill. 1996) (" 'We therefore hold that a written or oral statement is to be considered in context, with the words and the implications therefrom given their natural and obvious meaning; if, as so construed, the statement may reasonably be innocently interpreted or reasonably be interpreted as referring to someone other than the plaintiff it cannot be actionable per se.'")(quoting Chapski v. Copley Press, 442 N.E.2d 195, 199 (Ill. 1982)); see also Babb v. Minder, 806 F.2d 749, 757 (7th Cir. 1986) (under Illinois' innocent construction rule, "a written or oral statement is to be considered in context").

¶ 29. I cannot join the majority's defamation per se discussion because I believe it will be used to defeat defamation per se claims that our supreme court intended to cover when it adopted the per se categories. Meaning is commonly derived from context, and I am unable to come up with a good reason to ignore context when deciding whether a statement is defamation per se.

       Although Freer filed an affidavit with the trial court in July of 2003 that seems to contradict her affirmation in her April 2003 deposition that her prior lawyers had hired Sherman "to do what [the prior lawyer] called a test reference check with M&I regarding" Freer, that affidavit, which avers that "a customer named Ruth A. Sherman was interested in personally investing with" Freer, is not only hearsay as to what Sherman's intentions were and thus is not part of the summary-judgment evidentiary record, see Wis. Stat. Rule 802.08(3) ("[supporting and opposing affidavits shall be made on personal knowledge and shall set forth such evidentiary facts as would be admissible in evidence"), but, also, cannot contradict Freer's earlier deposition testimony, see Yahnke v. Carson, 2000 WI 74, ¶ 21, 236 Wis. 2d 257, 270, 613 N.W.2d 102, 108-109.

       The Restatement (Seoond) of Torts § 570 (1977), recognizes:
      One who publishes matter defamatory to another in such a manner as to make the publication a slander is subject to liability to the other although no special harm results if the publication imputes to the other
      (a) a criminal offense, as stated in § 571, or
      (b) a loathsome disease, as stated in § 572, or

        (c) matter incompatible with his business, trade, profession, or office, as stated in § 573, or
      (d) serious sexual misconduct, as stated in § 574.

       We respectfully disagree with the Concurrence/Dissent's reading of both Kassowitz v. Sentinel Co., 226 Wis. 468, 277 N.W. 177 (1938), and Bauer v. Murphy, 191 Wis. 2d 517, 530 N.W.2d 1 (Ct. App. 1995). First, Bauer adhered to Kassowitz's recognition that "[w]ords which are defamatory per se do not need an innuendo, and, conversely, words which do need an innuendo are not defamatory per se." Bauer, 191 Wis. 2d at 530, 530 N.W.2d at 6 (quoting Kassowitz, 226 Wis. at 476, 277 N.W. at 180) (footnote and internal quotation marks omitted). Thus, Bauer held that calling a female former member of the university basketball team a "disgrace" was not slander per se "in the context in which the remark was made" even though the discussion that preceded the "disgrace" charge implicated her in an "inappropriate relationship" with an assistant coach who was suspended as a result of that alleged relationship. Bauer, 191 Wis. 2d at 520-521, 532, 530 N.W.2d at 2, 6. If the context of that discussion was material, there were, as Bauer noted, arguably other things to which the "disgrace" remark might have referred, including insubordination, id., 191 Wis. 2d at 522 n.1, 530 N.W.2d at 2 n.1, and a dispute whether the "disgrace" remark referred to those other matters or, as the plaintiff argued, the "inappropriate relationship" discussion, would have required a trial, id., 191 Wis. 2d at 523 n.2, 530 N.W.2d at 3 n.2. Accordingly, the "context" discussed by Bauer in the part quoted hy the Concurrence/Dissent is clearly limited to the word "disgrace" only and did not encompass the roiling finger-pointing session that preceded use of that word. Stated another way, given the no-extraneous-information rule recognized by both Kassowitz and Bauer, and Bauer's failure to remand for trial to ascertain to what the "disgrace" comment referred, Bauer would not have concluded that the "disgrace" comment was slander per se even if the preceding discussion only concerned the plaintiffs alleged "inappropriate relationship" with the assistant coach. Second, contrary to the Concurrence/ Dissent, Kassowitz did not opine that a person with tuberculosis would not be shunned, but, rather, held that saying that someone had an "arrested case" of the disease did not, focusing on the words only, charge that the person either was currently afflicted with a loathsome disease or had engaged in any immoral conduct. Kassowitz, 226 Wis. at 475, 277 N.W. at 180.

       The majority reasons that the Bauer court must not have considered the context of the "disgrace" remark because, if consideration of context is permitted to interpret a remark, then a trial in Bauer would have been necessary. The majority states: "If the context of that discussion was material, there were, as Bauer noted, arguably other things to which the 'disgrace' remark might have referred, including insubordination, and a dispute whether the 'disgrace' remark referred to those other matters or, as the plaintiff argued, the 'inappropriate relationship' discussion, would have required a trial...." Majority at n.3 (citations omitted). I agree that my reading of the Bauer decision suggests that a trial should have been ordered. I do not agree that, in Bauer, we ignored the meeting when discussing the meaning of "disgrace" or suggested that a defamation per se analysis should ignore the context in which a statement is made. In effect, in Bauer, we correctly discussed and considered context, but then failed to follow through with the logical next step: ordering factual resolution of what Coach Murphy was referring to when she called Bauer a "disgrace."


author: ANDERSON, PJ.

text:
    Caroline L. Peterson, Plaintiff-Appellant, v. Arlington Hospitality Staffing, Inc., f/k/a Amerihost Staffing, Inc., Defendant-Respondent.
    Court of Appeals

      No. 03-2811.

      Submitted on briefs August 11, 2004.

    Decided September 22, 2004.

    2004 WI App 199
    (Also reported in 689 N.W.2d 61.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Leonard W. Schulz of Law Offices of Leonard W. Schulz, Big Bend.
    On behalf of the defendant-respondent, the cause was submitted on the brief of David J. Farley and Patrick D. McNally of Bor gelt, Powell, Peterson & Frauen, S.C., Milwaukee.
    Before Anderson, PJ., Brown and Nettesheim, JJ.

       Petition to review denied 12-17-2004.

   ANDERSON, PJ.

¶ 1. The sole issue on appeal is whether we should create an exception to Wis. Stat. § 102.03(2) (2001-02), the exclusive remedy provision of the Worker's Compensation Act (WCA), for a claim by an employee against an employer for negligent hiring, training and supervision when the injury is a sexual assault committed by a coemployee. We hold that the WCA's purpose, history and application do not support the judicial fashioning of such an exception and, therefore, the exclusive remedy provision bars Caroline L. Peterson's claim. We also reject Peterson's constitutional challenge to the WCA. Accordingly, we affirm the circuit court's order for judgment granting Arlington Hospitality Staffing, Inc., f/k/a Amerihost Staffing, Inc.'s motion for summary judgment.

BACKGROUND

¶ 2. The facts are undisputed and brief. On March 20, 2000, Peterson was an employee at a hotel in Whitewater that was owned and operated by Arlington. While working at the hotel, she was sexually assaulted by Victor Murph, another Arlington employee at the same hotel. Murph had a lengthy history of criminal behavior.

¶ 3. In the spring of 2003, Peterson commenced an action against Arlington, alleging that Arlington knew or should have known that Murph "had previous incidents of sexual assaults and despite [his] past experiences, employed him without advising [Peterson] or other employees of his past history." She claimed that Arlington "was negligent in not advising [her] of [Murph's] propensities and past experiences when [Arlington] and its agents, servants and employees knew, or should have known, of his past history." Peterson further alleged that as a result of the sexual assault, she sustained mental anguish and harm requiring medical treatment and causing wage loss and permanent injury.

¶ 4. On July 23, 2003, Arlington moved for summary judgment, arguing that Wis. Stat. § 102.03(2), the exclusive remedy provision of the WCA, barred Peterson's claims. Peterson filed a brief in opposition to the motion for summary judgment and a motion to amend her complaint to add a claim of negligent hiring, training and supervision against Arlington. The court granted Arlington's motion for summary judgment, concluding that Peterson's claim was covered by the WCA and therefore precluded by the WCA's exclusive remedy provision. Peterson now appeals.

STANDARD OF REVIEW

¶ 5. We review summary judgment decisions de novo, applying the same methodology as the circuit court. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315-17, 401 N.W.2d 816 (1987). That methodology is well established and need not be repeated here. See, e.g., Lambrecht v. Estate of Kaczmarczyk, 2001 WI 25, ¶¶ 20-24, 241 Wis. 2d 804, 623 N.W.2d 751. It is sufficient to say that summary judgment is appropriate if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Green Spring Farms, 136 Wis. 2d at 315. Additionally, we note that whether a claim is subject to the exclusive remedy provision of the WCA is a question of law which is reviewed de novo. Lentz v. Young, 195 Wis. 2d 457, 468, 536 N.W.2d 451 (Ct. App. 1995). Finally, the constitutionality of a statute is also a question of law that we review de novo. State v. Borrell, 167 Wis. 2d 749, 762, 482 N.W.2d 883 (1992).

DISCUSSION

¶ 6. Peterson contends that the WCA's exclusive remedy provision, Wis. Stat. § 102.03(2), should not preclude a claim by an employee against an employer for negligent hiring, training and supervision when the injury is a sexual assault committed by a coemployee. Peterson recognizes that, by its plain language, § 102.03(2) bars her negligent hiring, training and supervision action, and, therefore, urges this court to create a public policy exception to the clause. She asserts that sound public policy and our decision in Lentz demand that we judicially fashion an exception to the clause for a negligence claim involving a sexual assault by a coemployee. She also contends that the application of § 102.03(2) to her claim violates her rights to due process and equal protection. We address each argument in turn.

Public Policy Exception

¶ 7. For her part, Peterson presents seven public policy reasons in favor of the creation of an exception to Wis. Stat. § 102.03(2) for sexual assault by a coem-ployee. We list them here to provide the context for our discussion.

¶ 8. First, she argues that the WCA does not afford her an adequate remedy because it is not designed to deal with the emotional damage and mental anguish caused by sexual assault. Second, Peterson submits that the WCA is a legislative compromise intended to benefit both the employer and the employee, but if she is not permitted to pursue her negligence claim, then "all of the benefits would flow toward the employer." In other words, Arlington is insulated from a substantial tort award, while Peterson receives only nominal compensation. Third, Peterson argues that allowing the exclusivity provision to shield Arlington from tort liability for her injuries will effectively permit Arlington and other employers to carelessly hire with impunity any employee regardless of his or her background.

¶ 9. Fourth, application of the exclusive remedy provision in this matter disrupts the legislature's intention to place the ultimate financial burden for an employee's injury on the employer or consumer. Fifth, she argues that her action arises not out of the employment relationship, but rather out of Arlington's independent duty to use reasonable care in the hiring and screening process. Sixth, she maintains that the positional risk doctrine should not apply to bar negligence claims by an employee in cases where the employer "actually create[s] the risk itself." Finally, Peterson suggests a compromise. She maintains that while her damages for her physical trauma and wage loss should be kept within the worker's compensation system, she should be permitted to seek damages for her emotional trauma and mental anguish.

¶ 10. While each of Peterson's enumerated policy considerations may be valid, we are not in a position to write an exception into the WCA. The WCA's history, purpose and application demonstrate that the decision to create an exception to the statute is best reserved for the legislature.

¶ 11. The WCA was passed in 1911. Byers v. LIRC, 208 Wis. 2d 388, 395, 561 N.W.2d 678 (1997). The WCA represents the legislative compromise between the interests of employers, employees and the public in resolving compensation disputes regarding work-related physical or mental harms arising in our industrial society. Henning v. Gen. Motors Assembly Div., 143 Wis. 2d 1, 11, 419 N.W.2d 551 (1988); State v. LIRC, 136 Wis. 2d 281, 286-87, 401 N.W.2d 585 (1987); Jenkins v. Sabourin, 104 Wis. 2d 309, 322, 311 N.W.2d 600 (1981). When it enacted the WCA and the exclusivity provision, the legislature had the ability through research facilities and public hearings to determine the facts that were relevant to the competing interests that may be implicated when an employee is injured in the course of his or her employment. Mulder v. Acme-Cleveland Corp., 95 Wis. 2d 173, 188, 290 N.W.2d 276 (1980).

¶ 12. The legislature resolved the conflict among these interests by establishing a system under which workers, in exchange for compensation for work-related injuries regardless of fault, would relinquish the right to sue employers and would accept smaller but more certain recoveries than might be available in a tort action. County of La Crosse v. WERC, 182 Wis. 2d 15, 30, 513 N.W.2d 579 (1994). As an alternative to liability in tort, employers would pay a fixed amount and would relinquish their common-law defenses to tort actions for work-related personal injuries. Id.; see also Guse v. A. O. Smith Corp., 260 Wis. 403, 406-07, 51 N.W.2d 24 (1952) ("In enacting the act, the legislature intended to impose upon employers an absolute liability, regardless of fault; and in return for this burden, intended to grant employers immunity from all tort liability on account of injuries to employees."); Vick v. Brown, 255 Wis. 147, 153, 38 N.W.2d 716 (1949) ("[The employer's liability] is solely under the Workmen's Compensation Law. There is no liability in tort."). The exclusive remedy provision was part of the original enactment and is an integral feature of the compromise between the interests of the employer and the interests of the worker. County of La Crosse, 182 Wis. 2d at 30.

¶ 13. Pursuant to Wis. Stat. § 102.14(2), amendments to the WCA are proposed by the Worker's Compensation Advisory Council. The advisory council consists of representatives of each of the competing interests implicated by the WCA: five labor representatives, five industry representatives, three nonvoting insurance representatives, and a Department of Workforce Development employee designated to serve as chairperson. See Wis. Stat. § 15.227(4); Wis. Stat. § 102.03(2).

¶ 14. Thus, the WCA stands as an evolving public policy decision arrived at by the legislature after weighing the competing policy considerations now presented by the representatives on the advisory council. We have repeatedly stated that the provisions of the WCA must be liberally construed to effectuate the statute's goal of compensating injured workers. UFE Inc. v. LIRC, 201 Wis. 2d 274, 288, 548 N.W.2d 57 (1996); Nigbor v. DILHR, 120 Wis. 2d 375, 382, 355 N.W.2d 532 (1984); Cruz v. DILHR, 81 Wis. 2d 442, 450, 260 N.W.2d 692 (1978). However, more importantly, we must also exercise care to avoid upsetting the balance of interests achieved by the WCA. Weiss v. City of Milwaukee, 208 Wis. 2d 95, 102, 559 N.W.2d 588 (1997).

¶ 15. As evidenced by our discussion, the balance of policy considerations embodied in the WCA centers on the relinquishment of rights of action in tort. See County of La Crosse, 182 Wis. 2d at 31; see, e.g., Coleman v. Am. Universal Ins. Co., 86 Wis. 2d 615, 621, 273 N.W.2d 220 (1979); Guse, 260 Wis. at 408. Indeed, the compromises obtained would not have been possible if employers could still face tort actions from an injured employee. Were we to adopt a public policy exception for Peterson's claim against Arlington, we would potentially upset the delicate balance of interests the legislature and members of the advisory council have striven to achieve. This we are instructed not to do. See Weiss, 208 Wis. 2d at 102 (stressing that courts are not to disrupt the balance achieved by the WCA). See also Pollack v. Calimag, 157 Wis. 2d 222, 235, 458 N.W.2d 591 (Ct. App. 1990) (where the statutory language is clear, "[W]e are bound by it and changes in it are for the legislature, not this court."). The legislature with its input from the experts on the advisory council and the public is in a far better position than this court to fashion a public policy exception to the exclusivity provision. Accordingly, we decline Peterson's invitation to carve out an exception to the exclusivity provision in the WCA for her claim of negligent hiring, training and supervision of a coemployee who committed sexual assault.

Lentz

¶ 16. Peterson asks us to pattern this opinion after Lentz, a case in which we purportedly created an exception to the exclusivity clause for claims of sexual harassment. Lentz, however, is a unique case that must be confined to its facts.

¶ 17. In Lentz, we addressed the application of the exclusivity provision of the WCA to an employee's claim of intentional infliction of emotional distress caused by the sexual harassment of an employer. Lentz, 195 Wis. 2d at 468-73. The employee claimed that because her injuries resulted from her employer's intentional conduct, her injuries were not an "accident" within the purview of the WCA and therefore the exclusivity clause did not preclude her tort claim. Id. at 468. We held that "where an employer injures an employee through his or her intentional conduct, the injury is not an 'accident' under the WCA, at least to the extent that such intentional conduct involves sexual harassment." Id. at 472.

¶ 18. In reaching our conclusion, we rejected the employer's claim that Jenson v. Employers Mutual Casualty Co., 161 Wis. 2d 253, 276, 468 N.W.2d 1 (1991) (concluding that the term "accident" included injuries that an employee sustains from intentional conduct by another coemployee), militated against creating an exception to exclusivity. Lentz, 195 Wis. 2d at 469-72. We distinguished Jenson on the ground that Jenson involved intentional conduct by a coemployee and not an employer. Lentz, 195 Wis. 2d at 470. We explained:

Further, we note that allowing employers to use the WCA to shield themselves from liability for intentional acts would exceed the purpose of the WCA.... When an employer intentionally injures an employee, it is not appropriate to allocate the financial burden associated with that injury to the public. Rather, the burden of compensating the employee for the consequences of the intentional act should he exclusively with the employer. This is particularly true with regard to sexual harassment cases. In such cases, the physical injuries and medical costs arising from the conduct are frequently nominal. Therefore, to adequately compensate the employee for his or her injuries, it is necessary that the employee be able to pursue damages, including puni-tives, through a civil action. Without such recourse, there is no effective means of protecting employees from their employer's intentional conduct.

Id. at 472 (citation omitted).

¶ 19. Recently, in Hibben v. Nardone, 137 F.3d 480 (7th Cir. 1998), the Seventh Circuit had the opportunity to interpret Lentz. There, the court refused to apply the Lentz exclusivity exception to an employee's claim against her supervisor for intentional infliction of emotional distress caused by a coemployee. Hibben, 137 F.3d at 480, 484. The court distinguished its decision from Lentz by underscoring the fact that in Lentz the offender was the sole proprietor and therefore the employer. Hibben, 137 F.3d at 484. The court determined that where a coemployee commits the intentional act, rather than a sole proprietor, Jenson controls and the exclusivity provision applies. See Hibben, 137 F.3d at 484.

¶ 20. The Hibben court's conclusion is logical. Lentz presented a unique situation because the offender was a sole proprietor, and therefore, the employer. Our holding simply conveyed our concern that a sole proprietor would be able to use the WCA as a shield to protect himself or herself from liability for intentional acts against an employee. This concern, however, is not present when, as here and in Hibben, it is a coemployee who has committed the intentional tort. While employers are protected from liability in tort, the exclusivity provisions specifically permit injured employees to pursue tort actions against coemployees whose intentional conduct causes their injuries. Wis. Stat. § 102.03(2). Lentz, therefore, must be limited to its facts. It is simply a narrow exception that applies when the employer is a sole proprietor and has intentionally caused the employee's injury.

¶ 21. In this case, we are not dealing with an employer's intentional acts of sexual assault. Rather, Murph, a coemployee, committed the intentional act. Accordingly, Lentz's narrow exception is inapplicable. Because we otherwise reject Peterson's entreaty to fashion a public policy exception, the exclusivity provision controls and bars her negligence claim against Arlington.

Constitutional Claims

¶ 22. Finally, Peterson intimates that the application of the exclusive remedy provision violates her due process and equal protection rights. She claims that the application of the exclusive remedy provision creates an arbitrary and unequal situation: a third party sexually assaulted by Murph would have access to a tort action. When statutes are challenged on grounds of due process, the "test is whether the means chosen have a reasonable and rational relationship to the purpose or object of the enactment; if it has, and the object is a real and proper one, the exercise of the police power is valid." Kahn v. McCormack, 99 Wis. 2d 382, 385, 299 N.W.2d 279 (Ct. App. 1980) (citation omitted). A similar test is applied to an equal protection challenge. A challenged classification

will be sustained if there is a reasonable and practical ground for the classification, even though some other classification might appear to be more in accord with general welfare. If the classification is reasonable and practical in relation to the objective, that is sufficient and doubts must be resolved in favor of the reasonableness of the classification.

Id. at 385-86 (citation omitted).

¶ 23. By challenging the statute on a constitutional basis, the burden upon Peterson is to establish beyond a reasonable doubt that the WCA, and our asserted construction of it, is unconstitutional. See Mulder, 95 Wis. 2d at 187. The nature of that burden was explained in State ex rel. Hammermill Paper Co. v. La Plante, 58 Wis. 2d 32, 46, 205 N.W.2d 784 (1973). Therein our supreme court stated:

It is not enough that respondent establish doubt as to the act's constitutionality nor is it sufficient that respondent establish the unconstitutionality of the act as a probability. Unconstitutionality of the act must be demonstrated beyond a reasonable doubt. Every presumption must be indulged to sustain the law if at all possible and, wherever doubt exists as to a legislative enactment's constitutionality, it must be resolved in favor of constitutionality. This court has often affirmed the well-established presumption of constitutionality that attaches itself to all legislative acts.

Id.

¶ 24. Peterson has not met her heavy burden of proving the statute unconstitutional beyond a reasonable doubt. The constitutionality of the WCA, including its exclusivity provision, has long been established and has been repeatedly upheld. Messner v. Briggs & Stratton Corp., 120 Wis. 2d 127, 132, 353 N.W.2d 363 (Ct. App. 1984); see also Oliver v. Travelers Ins. Co., 103 Wis. 2d 644, 651-53, 309 N.W.2d 383 (Ct. App. 1981); Borgnis v. Falk Co., 147 Wis. 327, 367, 133 N.W. 209 (1911). Put simply, the rational basis for the legislature's enactment of Wis. Stat. § 102.03(2) is that it preserves the previously explained quid pro quo nature of the worker's compensation scheme. See Oliver, 103 Wis. 2d at 653. The multiple and protracted lawsuits in circuit courts which would ensue if employers were exposed to tort claims for the intentional conduct of other employees would emasculate the WCA and adversely affect employers, employees and the public. We therefore hold that the exclusivity provision comports with the essentials of due process and equal protection; it furthers a long-established, comprehensive legislative scheme, and it is reasonable.

CONCLUSION

¶ 25. In sum, we hold that Peterson's claim of negligent hiring, training and supervision against Arlington for injuries caused by the sexual assault of her coemployee is precluded by the exclusivity provision in Wis. Stat. § 102.03(2). The WCA's purpose, history and application demonstrate that we are not the proper authority to create a public policy exception to the WCA's exclusivity provision. We also conclude that § 102.03(2) does not violate Peterson's rights to equal protection and due process. Accordingly, we affirm the circuit court's order granting summary judgment in favor of Arlington.

By the Court. — Order affirmed.

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

       Peterson initially filed a complaint on March 19, 2003, naming Amerihost as the defendant. On April 8, 2003, she filed an amended complaint, which noted that Amerihost was now doing business as Arlington.

       Wisconsin Stat. § 102.03(2) provides:
      (2) Where such conditions exist the right to the recovery of compensation under this chapter shall be the exclusive remedy against the employer, any other employee of the same employer and the worker's compensation insurance carrier. This section does not limit the right of an employee to bring action against any coemployee for an assault intended to cause bodily harm, or against a coemployee for negligent operation of a motor vehicle not owned or leased by the employer, or against a coemployee of the same employer to the extent that there would be liability of a governmental unit to pay judgments against employees under a collective bargaining agreement or a local ordinance.

       As Peterson correctly observes, we are not bound by the Seventh Circuit's analysis. However, we may, as we do here, seek guidance in the persuasive authority of other jurisdictions. See Alberte v. Anew Health Care Servs., Inc., 2000 WI 7, ¶ 7, 232 Wis. 2d 587, 605 N.W.2d 515.