Churchill v. WFA Econometrics Corp.

• Decision Date: 12 November 2002
• Docket Number: No. 02-0348, No. 02-0523.
• Parties: M. Susan CHURCHILL, Plaintiff-Respondent, v. WFA ECONOMETRICS CORPORATION and Wendy Drefahl, Defendants-Appellants, AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Intervenor. M. Susan CHURCHILL, Plaintiff-Respondent, v. WFA ECONOMETRICS CORPORATION and Wendy Drefahl, Defendants-Appellants, AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Intervenor-Respondent.
• Court: Wisconsin Court of Appeals

258 Wis.2d 926

2002 WI App 305

655 N.W.2d 505

M. Susan CHURCHILL, Plaintiff-Respondent, v. WFA ECONOMETRICS CORPORATION and Wendy Drefahl, Defendants-Appellants, AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Intervenor.

M. Susan CHURCHILL, Plaintiff-Respondent, v. WFA ECONOMETRICS CORPORATION and Wendy Drefahl, Defendants-Appellants, AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Intervenor-Respondent.

Nos. 02-0348, 02-0523.

Court of Appeals of Wisconsin.

Submitted on briefs October 1, 2002.

Decided November 12, 2002.

On behalf of the defendants-appellants, the cause was submitted on the briefs of Wayne M. Yankala of Mingo & Yankala, Milwaukee and Thomas J. Lonzo of Cook & Franke S.C., Milwaukee.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Robert B. Corris of Robert B. Corris, S.C., Milwaukee.

On behalf of the intervenor-respondent, the cause was submitted on the brief of Terry J. Booth of Piper & Schmidt, Milwaukee.

Before Wedemeyer, P.J., Fine and Schudson, JJ.

¶ 1. WEDEMEYER, P.J.

WFA Econometrics Corporation and Wendy Drefahl appeal from a judgment entered after a jury found in favor of M. Susan Churchill in a defamation action (case No. 02-0348). In a separate appeal (case No. 02-0523), WFA and Drefahl appeal from a decision and a judgment declaring that there was no insurance coverage for the defamation claim under a policy issued to WFA by American Family Mutual Insurance Company. Because of the interrelated issues, we consolidate these two appeals.¹

¶ 2. WFA and Drefahl claim that: (1) the alleged defamatory statements were privileged as a matter of law; and (2) on the insurance issue, there was insufficient evidence to support the verdict in that there were no damages. Because the absolute privilege applicable to statements made in the course of a judicial proceeding applies, we reverse the judgment in case No. 02-0348. Based on our decision, there is no need to address insurance coverage issues in companion case No. 02-0523 and, therefore, that appeal is dismissed.²

I. BACKGROUND

¶ 3. This case finds its genesis in an underlying divorce proceeding, In re the Marriage of Sandra Freyermuth v. James Freyermuth, (Kenosha County Circuit Court Case No. 97-FA-000233). In that case, Attorney Katherine Lingle represented Sandra Freyermuth and Attorney Thomas O'Brien represented James Freyermuth. As a part of the proceedings, Lingle hired Churchill to prepare a qualified domestic relations order (QDRO), which was pertinent to the issue involving the division of pension proceeds. Churchill prepared the QDRO and forwarded it to Lingle. Lingle forwarded it to O'Brien for his review. O'Brien hired Drefahl of WFA to review the QDRO and offer comments on it.

¶ 4. Drefahl responded to O'Brien's request by letter dated March 30, 1999. There were three specific comments in the letter, which Churchill alleged to be defamatory: (1) "An experienced and knowledgeable QDRO drafter would know this."; (2) "Paragraph 5 is yet another area that demonstrates Attorney Churchill's lack of knowledge and expertise in drafting QDROs."; and (3) "As we have seen in many other QDROs drafted by Attorney Churchill over the years, this one falls short of the requirements of a comprehensive, logical, and legal document." O'Brien forwarded this letter to Lingle so that necessary adjustments could be made to the QDRO. Lingle shared the letter with Churchill.

¶ 5. As a result of the three statements referenced above, Churchill filed this action against WFA and Drefahl. WFA and Drefahl answered Churchill's complaint by asserting that the statements were expressions of opinion, that they were substantially true, and that the defendants were entitled to a conditional or absolute privilege because the statements were made in the course of a judicial proceeding.

¶ 6. WFA and Drefahl moved for summary judgment on the basis that an absolute privilege applied to the statements. They argued that because the statements were made in the course of a judicial proceeding and because they were relevant to the proceeding, the defamation claim should be dismissed. The trial court concluded that the absolute privilege asserted by WFA and Drefahl did not exist under Wisconsin law.

¶ 7. The case proceeded to trial in October 2001. In a 10-2 verdict, the jury found in favor of Churchill and awarded damages in the sum of $500. The trial court denied the defendants' post-verdict motions, and judgment was entered. The trial court also ruled that the American Family Insurance policy did not provide coverage to WFA or Drefahl for any of the claims alleged in the underlying lawsuit. WFA and Drefahl now appeal.

II. DISCUSSION

¶ 8. The dispositive issue in this case is whether the statements Drefahl made in her March 30, 2001 letter are protected by the absolute privilege. Whether the absolute privilege applies is a question of law that we review independently. Rady v. Lutz, 150 Wis.2d 643, 647, 444 N.W.2d 58 (Ct. App. 1989). We conclude that the absolute privilege applies to the statements made by Drefahl.

¶ 9. Judicial proceedings are protected by an absolute privilege. Id. at 647-48. The absolute privilege rule was established to provide litigants with the freedom to access the courts, "to preserve and defend their rights and to protect attorneys during the course of their representation of clients." Id. at 648. The rule is not limited to protecting attorneys, but also extends to witnesses and experts who are involved in the judicial proceedings. See Bromund v. Holt, 24 Wis.2d 336, 341-42, 129 N.W.2d 149 (1964)

.

¶ 10. In order for the privilege to apply, the statements must satisfy two requirements: (1) the statement "must be made in a procedural context that is recognized as affording absolute privilege"; and (2) the statement "must be relevant to the matter under consideration." Rady, 150 Wis.2d at 648. Thus, we must determine whether the statements made by Drefahl satisfy these two requirements.

¶ 11. The trial court in this case failed to address these factors. It overlooked the precedential case law altogether. It erroneously stated that no absolute privilege exists in this state. Instead, it concluded that the qualified privilege involved here was the work-product privilege. It ruled that the statements were not protected by the qualified privilege because Drefahl admitted that she was retained by O'Brien as a consultant and potential witness. The trial court incorrectly reasoned that if Drefahl had agreed only to a consultation and clearly stated that she did not want to be a witness or testify during the proceeding, her statements would not have been actionable in a defamation case. In other words, the trial court concluded that the further a witness distanced herself or himself from the potential of actually having to testify in a case, the greater probability that a privilege would apply. The trial court was mistaken because the opposite is true.

¶ 12. As noted, the correct analysis under the circumstances in this case is to apply the two-part absolute privilege test set forth in Rady: "It must be made in a procedural context that is recognized as affording absolute privilege, and it must be relevant to the matter under consideration." Id. at 648. The first part indicates that for the absolute privilege to apply, the statements must be made in a procedural context that is recognized as affording the absolute privilege. Id. We conclude that the statements made by Drefahl satisfy this requirement. The undisputed facts demonstrate that Drefahl was retained by O'Brien to review the QDRO drafted by opposing counsel's consultant. O'Brien advised Drefahl that the divorce case ended with a devastating result for his client and that he wanted to make sure that the QDRO did not create any further problems. O'Brien asked Drefahl to be exceptionally careful in reviewing the terms of the QDRO to prevent any further "significant hardship" for his client. Drefahl responded by criticizing several parts of the QDRO that may create ambiguity, which could have further hurt O'Brien's client. Drefahl knew that she may have to testify...