COURT OF APPEALS DECISION DATED AND RELEASED MAY 14, 1996 |
NOTICE |
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62(1), Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 95-2677
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT III
GERALD BREEN and
SHARON BREEN,
Plaintiffs-Respondents-Cross Appellants,
v.
DAVID J. WINKEL and
WISCONSIN LAWYERS
MUTUAL
INSURANCE COMPANY,
Defendants-Appellants-Cross Respondents,
CUMMINGS, SNYDER,
HANES &
WIEGRATZ, S.C., A/K/A
REMLEY
SENSENBRENNER LAW OFFICE,
Defendant.
APPEAL and CROSS-APPEAL
from a judgment of the circuit court for Outagamie County: RICHARD G. GREENWOOD, Judge. Affirmed.
Before Cane, P.J.,
LaRocque and Fine, JJ.
CANE, P.J. David Winkel and
Wisconsin Lawyers Mutual Insurance Company (collectively, Winkel) appeal a
circuit court judgment confirming an arbitration award of $135,000 to Gerald
Breen and $25,000 to Sharon Breen. The
Breens cross-appeal from the circuit court's denial of costs. We conclude that the arbitration award does
not constitute a manifest disregard of the law or violate strong public policy
and, therefore, affirm the circuit court's judgment confirming the arbitration
award. Additionally, we conclude that
the parties' arbitration agreement prohibits the awarding of costs and,
therefore, affirm the circuit court's judgment denying costs.
Although the issues on
appeal concern confirmation of the arbitration award, a brief examination of
the background and procedural facts is particularly helpful in this case. The Breens operated a retail bath boutique
and kitchen remodeling business. When
they experienced cash flow problems, they consulted Winkel for legal
advice. Ultimately, the Breens were
charged with the criminal offense of theft by contractor, contrary to §§
779.02(5) and 943.20(1)(b), Stats.,
for failing to pay subcontractors.
Gerald pled no contest to three misdemeanor counts of theft by
contractor, and the charges against Sharon were dropped.
The Breens filed suit
against Winkel, his insurer and his law firm, alleging that the criminal
prosecution was the result of negligent legal representation and seeking
damages that included compensation for Gerald's emotional trauma and
psychological injuries. The Breens also
sued for breach of contract. Winkel
moved for summary judgment on the issue of liability for emotional distress
damages in a non-traumatic economic loss claim. The circuit court denied Winkel's motion, and we denied Winkel's
petition for leave to appeal.
The parties entered into
an arbitration agreement, agreeing to submit their case to binding
arbitration. The parties agreed the
arbitrator's award would be final and binding, subject only to appeals under
ch. 788, Stats., governing
arbitration. The arbitrator concluded
Winkel had negligently provided legal services and awarded Gerald $85,000 for
loss of earning capacity and $50,000 for emotional illness and distress. The arbitrator awarded Sharon $25,000 for
attorney's fees and other expenses of defending the criminal prosecutions and
damages for loss of society, companionship and consortium of her husband.
The Breens moved the
circuit court to confirm the arbitration award. Winkel moved to vacate the award, arguing the damages award for
emotional distress in the non-traumatic economic loss claim of legal
malpractice violated strong public policy and constituted a perverse misconstruction
and manifest disregard of existing law.
Specifically, Winkel asked the circuit court to strike the award of
$50,000 to Gerald for emotional illness and to remand the case to the
arbitrator to remove that portion of Sharon's compensation the arbitrator
attributed to loss of society, companionship and consortium of her
husband. The trial court granted the
Breens' motion, denied Winkel's motion, and issued a decision confirming the
arbitrator's award and denying the Breens costs.
On appeal, Winkel raises
numerous issues, including several that ask this court to determine the law on
negligent infliction of emotional distress in Wisconsin. Other issues include whether the
arbitrator's decision constitutes a manifest disregard of existing law, whether
the facts support allegations of compensable severe emotional distress, and
whether the circuit court erroneously exercised its discretion when it
confirmed the arbitration decision without addressing public policy
concerns. Given the posture of this
case, it is appropriate that we consider only the following issues on appeal,
whether: (1) any facts support Gerald's
allegations of compensable severe emotional distress; (2) the arbitration
decision demonstrates a manifest disregard of the law; and (3) the decision
violates strong public policy. We also
consider the Breens' cross-appeal on the issue of costs.
An arbitrator's award is
presumptively valid and will be disturbed only when its invalidity is
demonstrated by clear and convincing evidence.
Milwaukee Bd. v. Milwaukee Teachers' Educ. Ass'n, 93
Wis.2d 415, 422, 287 N.W.2d 131, 135 (1980).
We review the arbitrator's award without deference to the circuit
court's decision. See Lukowski v.
Dankert, 184 Wis.2d 142, 149, 515 N.W.2d 883, 886 (1994).
When reviewing an
arbitration award the function of the courts is essentially supervisory,
ensuring that the parties received the arbitration for which they
bargained. Id. Courts are guided by the general statutory
standard listed in §§ 788.10 and 788.11, Stats.,[1]
and by the standards developed at common law.
Id. at 150-51, 515 N.W.2d at 886. If these general standards are not violated,
the arbitrator's award should be confirmed by the circuit court. Id. at 151, 515 N.W.2d at
886. Courts will overturn an
arbitration award only if there is a perverse misconstruction or if there is
positive misconduct plainly established, or if there is a manifest disregard of
the law, or if the award is illegal or violates strong public policy. Id. at 149, 515 N.W.2d at 886;
see Whitewater Educ. Ass'n v. Whitewater Unified Sch. Dist.,
113 Wis.2d 151, 157, 335 N.W.2d 408, 411 (Ct. App. 1983) (decisions of an
arbitrator cannot be interfered with for mere errors of judgment as to law or
fact).
First, Winkel argues the
facts do not support the Breens' allegations of compensable emotional distress,
referring to medical records and depositions in his appendix in support of his
argument. We need not consider Winkel's
argument because he has failed to provide us with adequate legal authority
identifying the appropriate standard of review of an arbitrator's factual
findings. See State v.
Shaffer, 96 Wis.2d 531, 545-46, 292 N.W.2d 370, 378 (Ct. App. 1980)
(arguments unsupported by references to legal authority will not be
considered). Moreover, we have no means
of reviewing the information presented to the arbitrator because Winkel did not
take the opportunity to have the arbitration hearing recorded. For these reasons, we conclude Winkel's
first argument must fail.
Second, Winkel argues
that by awarding emotional distress damages, the arbitrator acted with manifest
disregard of existing law. Manifest
disregard of the law means that the arbitrator understood and correctly stated
the law but ignored it. City of
Madison v. Local 311, Int'l Ass'n of Firefighters, 133 Wis.2d 186, 191,
394 N.W.2d 766, 769 (Ct. App. 1986). In
his written decision, the arbitrator simply awarded Gerald damages for
emotional illness and distress, without discussing the basis for his conclusion
that the damages were appropriate or the law of negligent infliction of
emotional distress.[2] However, we know that the legal issue was
raised before the arbitrator because counsel for Winkel acknowledged at a
circuit court hearing on the motion to vacate that he argued to the arbitrator
that emotional damages cannot be awarded in this case.
We conclude the
arbitrator's conclusion does not constitute a manifest disregard of the
law. We note that many cases involving
negligent infliction of emotional distress are bystander cases, where a
plaintiff alleges emotional distress arising from a tortfeasor's negligent
infliction of physical harm on a third person.
See Bowen v. Lumbermens Mut. Cas. Co., 183 Wis.2d 627,
632-33, 517 N.W.2d 432, 434-35 (1994) (defining bystander cases). However, the tort has also arisen in
non-bystander cases. In Ver Hagen
v. Gibbons, 47 Wis.2d 220, 177 N.W.2d 83 (1970), the plaintiff claimed
he suffered shock, mental anguish and great anxiety when his
negligently-constructed fireplace and home were consumed by fire. Our supreme court held that in order to
recover, a plaintiff's emotional stress must be manifested by physical injuries
in actions based on negligence rather than intentional conduct. Id. at 227, 177 N.W.2d at 86.
In La Fleur v.
Mosher, 109 Wis.2d 112, 325 N.W.2d 314 (1982), a fourteen-year-old girl
sued the City of LaCrosse for negligent infliction of emotional distress
because she was held in a jail cell for over thirteen hours without food, water
and blankets. Our supreme court held
that under the appropriate and limited circumstances, a plaintiff may maintain
an action for emotional distress caused by negligent confinement in the absence
of physical injuries. Id.
at 15, 325 N.W.2d at 315.
Our supreme court held
in Bowen, a bystander case, that although a plaintiff in a cause
of action for negligent infliction of emotional distress must prove severe
emotional distress, the plaintiff need not prove physical manifestation of that
distress. Id. at 632, 517
N.W.2d at 434.
Although there has been
no previous case dealing with a claim of negligent infliction of emotional
distress claim in a legal malpractice case,[3]
we conclude the arbitrator's conclusion that Gerald could recover damages for
emotional injuries does not constitute a manifest disregard of the law. First, there is precedent for allowing
plaintiffs to maintain claims for negligent infliction of emotional distress in
non-bystander cases. See e.g., La
Fleur, 109 Wis.2d at 115, 325 N.W.2d at 315.
Second, the arbitrator
could have concluded that Gerald satisfied the standard established in Ver
Hagen if he introduced evidence, which he claims he did, that he
suffered physical manifestations of severe emotional distress. See id., 47 Wis.2d
at 227, 177 N.W.2d at 86 (plaintiff's emotional distress must be manifested by
physical injuries). Alternatively, even
if the arbitrator concluded Gerald had suffered no physical injuries, he could
have concluded that applying the rationale of Bowen to this
non-bystander case, physical manifestation of emotional distress is no longer
required where the plaintiff proves severe emotional distress. Although this court expresses no opinion on
the validity of these legal hypotheses, we conclude that in light of case law
in this area, the arbitrator's conclusion that Gerald could recover damages for
emotional injuries in a legal malpractice case does not constitute a manifest
disregard of the law.
Next, we address
Winkel's argument that the arbitrator's award should be vacated because the
arbitrator did not address public policy considerations and because the award
violates strong public policy. First,
Winkel argues "Bowen mandates that all trial courts and
arbitrators examine the issue of negligent emotional distress and address the
following six public policy considerations." We reject this argument for several reasons. We observe that Bowen did not
even mention the word arbitration and, thus, should not be read as mandating
that arbitrators explicitly address specific considerations. Moreover, we have no way of knowing if the
arbitrator addressed public policy or other considerations, because Winkel did
not have the arbitration transcribed.
Finally, the arbitrator's lack of legal analysis in his decision is not
a basis to vacate the award. See McKenzie
v. Warmka, 81 Wis.2d 591, 601, 260 N.W.2d 752, 757 (1978) (arbitrator need
not render an account of the reasons for his award).
Also, we are not
convinced that the award violates strong public policy. When a court bars enforcement of an
arbitration award on the basis of public policy, that public policy must be
clearly defined. Local No. P-1236
v. Jones Dairy Farm, 680 F.2d 1142, 1145 (7th Cir. 1982). As we have already noted, our supreme court
has allowed plaintiffs to recover for emotional injuries in non-bystander
cases, see La Fleur, 109 Wis.2d at 115, 325 N.W.2d at
315, and in cases where there is no physical manifestation of emotional injury,
see Bowen, 183 Wis.2d at 632-33, 517 N.W.2d at 434. We cannot conclude, given the state of the
law at this time, that the arbitrator's decision violates strong public
policy.
Because we conclude
awarding Gerald damages for emotional injuries does not constitute a manifest
disregard of the law or a violation of strong public policy, we affirm the
circuit court's confirmation of Gerald's award. Additionally, we affirm the circuit court's confirmation of
Sharon's award. The only basis Winkel
offers to reverse Sharon's award is that Sharon's claim derives from Gerald's
claim. Because we have affirmed
Gerald's award, we affirm Sharon's derivative claim as well.
Finally, we consider the
Breens' cross-appeal concerning the issue of costs, which the circuit court
denied based on the parties' arbitration agreement. The Breens argue that pursuant to § 814.01, Stats., "costs shall be allowed of
course to the plaintiff upon a recovery," and, therefore, the question is
not whether costs are awardable but whether the Breens contracted away their
right to claim an award of costs at the circuit court level.
Arbitration matters are
subject to the law of contracts, and the court's role is to assure that the
parties receive the arbitration for which they contracted. City of Madison v. Madison
Professional Police Officers Ass'n, 144 Wis.2d 576, 585-86, 425 N.W.2d
8, 11 (1988). Absent an ambiguity, the
interpretation of a contract is a question of law. Schlosser v. Allis-Chalmers Corp., 86
Wis.2d 226, 244, 271 N.W.2d 879, 887 (1978).
As an appellate court, we are not bound by the circuit court's
conclusions of law and decide the matter de novo. First Nat'l Leasing Corp. v. Madison, 81 Wis.2d
205, 208, 260 N.W.2d 251, 253 (1977).
Whether a contract is ambiguous is also a question of law. See Lamb v. Manning,
145 Wis.2d 619, 627, 427 N.W.2d 437, 441 (Ct. App. 1988). A contract provision that is reasonably
susceptible to more than one construction is ambiguous. Garriguenc v. Love, 67 Wis.2d
130, 135, 226 N.W.2d 414, 417 (1975).
The arbitration
agreement provides in relevant part:
"[N]either party shall seek, nor shall the arbitrator award, any
taxable costs which, in accordance with Wisconsin law, might otherwise be
properly taxable." Additionally,
several paragraphs later, the agreement provides that either party may have any
award confirmed by the appropriate circuit court, that judgment may be entered
accordingly and that appeal from the judgment may be taken pursuant to
ch. 788, Stats.
We conclude this
language is not reasonably susceptible to more than one construction and,
therefore, it is not ambiguous. See
Garriguenc, 67 Wis.2d at 135, 226 N.W.2d at 417. The unambiguous meaning is that neither
party shall seek costs that might otherwise be properly taxable. Although the agreement contemplates
confirmation proceedings in the circuit court, as well as appeals to this
court, no attempt is made to distinguish the parties' clear statement that
neither party may seek costs.
Therefore, we conclude the Breens are not entitled to costs and affirm
the circuit court's judgment denying them costs.
For the foregoing
reasons, we affirm the circuit court's judgment confirming the arbitration
award and rejecting the Breens' claim for costs. We also note that we do not intend our conclusions affirming the
arbitration award to represent new law on negligent infliction of emotional
distress. Given the limited standard of
review of arbitration awards, we conclude only that the award in this case does
not constitute a manifest disregard of the existing law or violate strong
public policy. See Lukowski,
184 Wis.2d at 154, 515 N.W.2d at 888 ("We emphasize that our holding is
limited to the standard of review question applicable in this
arbitration.").
By the Court.—Judgment
affirmed. No costs on appeal.
Not recommended for
publication in the official reports.
[1]
Section 788.10, Stats.,
provides:
Vacation of award, rehearing by
arbitrators. (1)
In either of the following cases the court in and for the county wherein the
award was made must make an order vacating the award upon the application of
any party to the arbitration:
(a) Where the award was procured by corruption, fraud or undue means;
(b) Where there was evident partiality or corruption on the part of the
arbitrators, or either of them;
(c) Where the arbitrators were guilty of misconduct in refusing to
postpone the hearing, upon sufficient cause shown, or in refusing to hear
evidence pertinent and material to the controversy; or of any other misbehavior
by which the rights of any party have been prejudiced;
(d) Where the arbitrators exceeded their powers, or so imperfectly
executed them that a mutual, final and definite award upon the subject matter
submitted was not made.
(2) Where an award is vacated and the time within which the agreement
required the award to be made has not expired, the court may, in its
discretion, direct a rehearing by the arbitrators.
Section 788.11, Stats., provides:
Modification of award. (1) In either of the following
cases the court in and for the county wherein the award was made must make an
order modifying or correcting the award upon the application of any party to
the arbitration:
(a) Where there was an evident material miscalculation of figures or an
evident material mistake in the description of any person, thing or property referred
to in the award;
(b) Where the arbitrators have awarded upon a matter not submitted to
them unless it is a matter not affecting the merits of the decision upon the
matters submitted;
(c) Where the award is imperfect in matter of form not affecting the
merits of the controversy.
(2) The order must modify and correct the award, so as to effect the
intent thereof and promote justice between the parties.
[2] The arbitrator's lack of legal analysis in his decision is not a basis to vacate the award. See McKenzie v. Warmka, 81 Wis.2d 591, 601, 260 N.W.2d 752, 757 (1978) (arbitrator need not render an account of the reasons for his award).
[3] The lack of prior cases directly on point does not prohibit the arbitrator from applying the law. See Lukowski v. Dankert, 178 Wis.2d 110, 116, 503 N.W.2d 15, 18 (Ct. App. 1993) ("In resolving the dispute in arbitration, the arbitration panel was free to fill in the interstices in the existing relevant law."), aff'd, 184 Wis.2d 142, 515 N.W.2d 883 (1994).