Gustafson v. Physicians Ins. Co. of Wisconsin, Inc.
| Decision Date | 18 November 1998 |
| Docket Number | No. 97-3832,97-3832 |
| Citation | 588 N.W.2d 363,223 Wis.2d 164 |
| Parties | Virgil F. GUSTAFSON and Margaret F. Gustafson, Plaintiffs-Respondents, v. PHYSICIANS INSURANCE COMPANY OF WISCONSIN, INC., a Wisconsin corporation, Peter A. Beatty, M.D., Martin A. Rammer, M.D., and Wisconsin Patients Compensation Fund, Defendants-Respondents, Midwestern National Insurance Corporation, n/k/a Midwest Security Life Insurance Company, a Wisconsin corporation, Defendant-Appellant. |
| Court | Wisconsin Court of Appeals |
On behalf of the defendant-appellant, the cause was submitted on the briefs of Michael E. Engel and Elizabeth Kiefer of Midwest Security Insurance Company of Onalaska.
On behalf of the plaintiffs-respondents and the defendants-respondents, the cause was submitted on the briefs of Dean M. Horwitz and Hope K. Olson of Previant, Goldberg, Uelmen, Gratz, Miller & Brueggeman, S.C. of Milwaukee and Mary Lee Ratzel and Molly C. Feldbruegge of Peterson, Johnson & Murray, S.C. of Milwaukee, respectively.
Before BROWN, NETTESHEIM and ANDERSON, JJ.
Midwestern National Insurance Corporation (MNIC), the plaintiffs'--the Gustafsons--subrogated insurer, appeals from a judgment granting the prevailing defendants, Physicians Insurance Company of Wisconsin, Inc. and others (PIC), their costs for defending the lawsuit and an order denying reconsideration of this issue. MNIC contends that this is an inequitable result. It asserts that it had a representation agreement in effect with the Gustafsons' counsel, Dean Horwitz, when he negotiated the settlement agreement with PIC. After losing at trial, the Gustafsons settled with PIC: they agreed not to appeal the case if PIC would not tax costs against them. The settlement agreement included, however, the right for PIC to still pursue costs against MNIC. MNIC argues that during the settlement negotiations Horwitz disregarded his duty to MNIC and instead negotiated a more favorable deal for the Gustafsons. We agree. Because the settlement was unfair to MNIC, it would be unjust to allow PIC to tax costs against it. Accordingly, we reverse.
After being diagnosed and treated for cancer when he was actually suffering from an infection caused by an abscessed tooth, Virgil F. Gustafson, who was joined by his wife, Margaret, filed a medical malpractice claim against his doctors--Peter A. Beatty, M.D. and Martin A. Rammer, M.D.--and the doctors' malpractice insurance carriers--Physicians Insurance Company and Wisconsin Patients Compensation Fund. Because it provided Gustafson's health insurance and had paid his medical expenses, MNIC was joined in the lawsuit as a subrogated party pursuant to § 803.03(2), STATS. 1
During the preliminary stages of the lawsuit, MNIC was represented by its own counsel, Lee Fehr. It is uncontested that on March 1, 1996, Fehr telephoned Horwitz and left a recorded message for him. Horwitz memorialized his understanding of Fehr's telephone message in a letter to Fehr dated March 5, 1996. In this letter Horwitz stated:
If this case is settled out of court, Midwestern National will agree to accept $16,000.00 in lieu of whatever lien it may have in this case.
On the other hand, should this case go to trial, Midwestern National agrees to pay this law firm a 33 1/3 percent fee on any past medical expenses which are awarded to Mr. Gustafson. If I have misstated any portion of our agreement, please contact me.
MNIC did not respond to Horwitz' letter; in fact, there were no further communications between MNIC and Horwitz until after the trial.
MNIC's counsel did not participate in the trial. On June 18, 1997, the jury delivered a verdict in favor of the defendants. Soon thereafter, Gustafson and PIC negotiated a settlement agreement. In this agreement, Gustafson agreed not to appeal the judgment if PIC would waive the right to tax costs against him.
Horwitz alleges that a conversation occurred between Fehr and him on June 24, 1997, in which he notified Fehr of the jury's verdict. The parties dispute whether this conversation did indeed occur. Evidence was presented that on July 3, 1997, Horwitz sent MNIC a letter to update it about the case. The July 3 letter to MNIC's new counsel read:
This will confirm my telephone conversation with your predecessor, Lee Fehr on June 24, 1997. On June 18, 1997 a Sheboygan County Circuit Court jury found on behalf of the defendants in this case. At the time I spoke with Mr. Fehr I informed him that we were very strongly leaning toward dismissing all claims against the defendants in return for a waiver of taxable costs because there were no appellate issues. Mr. and Mrs. Gustafson have now decided to dismiss any and Should you have any questions, please do not hesitate to contact me.
all claims against the defendants in return for a waiver of taxable costs. The defense has agreed to waive taxable costs against Mr. and Mrs. Gustafson. Accordingly, the Gustafsons will not be bringing any motions after the verdict on their own behalf.
Horwitz also maintains that during the June 24 telephone conversation with Fehr, he advised Fehr that opposing counsel made a comment during trial indicating that PIC would seek taxable costs against MNIC. Again, this fact is disputed.
On July 17, 1997, PIC submitted a proposed order for the defendants' taxable costs and attorney's fees. MNIC asserts that this was the first notice it had of PIC reserving the right to tax costs against it. The next day MNIC objected to the order and requested a thirty-day briefing period and a hearing on the issue. The court granted these requests and scheduled a hearing for October 6, 1997.
Meanwhile, a dispute developed between Horwitz and MNIC over whether the March 5 letter solidified an attorney-client agreement for Horwitz to represent MNIC's interests in this case. For example, on August 19, 1997, Horwitz wrote to the trial court that:
At no time did th[is] law firm ... ever agree to represent Midwestern National Insurance Corporation at trial or otherwise. My letter to Attorney Fehr of March 5, 1996 is clear on its face and speaks for itself. As a courtesy to Attorney Fehr and Midwestern National, our law firm agreed to prove up Mr. Gustafson's medical expenses at trial. If the plaintiffs had been successful at trial, Midwestern National would have been the beneficiaries of our law firm's work, and therefore we felt entitled to some compensation.
In opposition of the motion to tax costs, MNIC argued to the court that pursuant to § 803.03(2)(b), STATS., it, being a subrogated party, opted to allow Horwitz to represent its interests in the case. It further asserted that Horwitz agreed to represent MNIC in his March 5 letter. Additionally, it argued that it did not have a claim against PIC in the first place; rather, according to the insurance policy, in MNIC's role as a subrogated party, the "only possible claim Midwest could have in this case is for reimbursement from the plaintiffs after they were successful in settlement or trial." Therefore, since MNIC could not pursue a claim against PIC, it asserts that it also could not be a losing party. Accordingly, if MNIC was not a losing party, costs could not be taxed against it.
After the October 6 hearing, the trial court granted the order for judgment for costs against MNIC. The court reasoned that MNIC had not met its burden of showing that Horwitz would be representing it in this matter. It found persuasive the fact that the court lacked proper notice of the representation required by § 803.03(2)(b), STATS. According to the statute, MNIC should have signed a "written waiver of the right to participate [in the trial] which shall express consent to be bound by the judgment in the action." Id. Moreover, the court relied on Sampson v. Logue, 184 Wis.2d 20, 515 N.W.2d 917 (Ct.App.1994), to find that PIC was entitled to tax costs against a subrogated party.
On October 28, 1997, PIC notified the court of a recently released decision, Fakler v. Nathan, 214 Wis.2d 458, 571 N.W.2d 465 (Ct.App.1997), that had remarkably similar facts. PIC stated that it wanted to bring this case to the court's attention because "it disallows costs to be paid to a defendant by a subrogated party when the defendant waives its right to collect costs from the plaintiff." On October 31, 1997, MNIC filed a motion to reconsider the order allowing the taxation of costs. It argued that "[l]ike in Fakler it would be inequitable to tax costs in a situation where plaintiffs and defendants make a deal regarding costs at a point in the litigation when Midwest had no real opportunity to protect its interests."
Despite MNIC's Fakler arguments, the trial court denied the motion to reconsider. Again, the court found that MNIC did not have an attorney-client representation agreement with Horwitz, but rather "some agreement to pay monies." It further held that the notice requirement of § 803.03(2)(b),
STATS., was not absolutely necessary. However, it found that the inequities[223 Wis.2d 172] in Fakler were not present in this case. MNIC appeals.
The issue in this appeal is whether a defendant, after waiving its right to tax costs against the losing plaintiff, may then pursue its costs against the subrogated party, who did not take part in the plaintiff's settlement agreement despite being represented at that time by the same counsel. Before deciding this ultimate issue, we must first examine the communications and actions between Horwitz and MNIC to ascertain whether these acts satisfy the requirements for an attorney-client contract. Next, we consider the scope or range of the contractual agreement and its possible termination. Lastly, we discuss MNIC's failure to give proper notice to the court of its intent to be represented by Horwitz pursuant to § 803.03(2)(b), STATS.
We first consider...
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