Johnson v. Cintas Corp. No. 2

• Decision Date: 14 January 2015
• Docket Number: No. 2013AP2323.,2013AP2323.
• Citation: 860 N.W.2d 515,360 Wis.2d 350
• Parties: Robert JOHNSON, Plaintiff–Respondent–Cross–Appellant, v. CINTAS CORPORATION NO. 2, Defendant–Appellant–Cross–Respondent, United Healthcare, Defendant.
• Court: Wisconsin Court of Appeals

360 Wis.2d 350

860 N.W.2d 515

Robert JOHNSON, Plaintiff–Respondent–Cross–Appellant

v. CINTAS CORPORATION NO. 2, Defendant–Appellant–Cross–Respondent^†United Healthcare, Defendant.

No. 2013AP2323.

Court of Appeals of Wisconsin.

Submitted on Briefs Oct. 27, 2014.

Opinion Filed Jan. 14, 2015.

On behalf of the defendant-appellant-cross-respondent, the cause was submitted on the briefs of Terry E. Johnson and J. Ryan Maloney of Peterson, Johnson & Murray, S.C. of Milwaukee.

On behalf of the plaintiff-respondent-cross-appellant, the cause was submitted on the brief of Kent A. Tess–Mattner of Schmidt, Rupke, Tess–Mattner & Fox, S.C. of Brookfield, and John V. O'Connor of Kenosha.

A nonparty brief was by Mark L. Thomsen and Brett A. Eckstein of Cannon & Dunphy, S.C., of Brookfield, for Wisconsin Association for Justice.

Before BROWN, C.J., REILLY and GUNDRUM, JJ.

Opinion

BROWN, C.J.

¶ 1 In this negligence case, Robert Johnson was a passenger in his own vehicle when his friend, Marvin Crandall, caused an accident that injured them both. Both Johnson and Crandall were drunk at the time of the accident. Johnson's automobile insurance was provided by his employer, Cintas Corporation No. 2, and a permissive driver like Crandall qualified as an insured under the policy. So Johnson sued Cintas 2 to recover insurance benefits for the injuries he received due to Crandall's negligent driving.

¶ 2 In 2008 Johnson filed a $300,000 offer of settlement, but the parties never settled. At the 2013 trial, the jury awarded Johnson over $400,000 in damages and found that he was twenty percent contributorily negligent. Because the award exceeded the amount of Johnson's 2008 offer of settlement, Johnson sought interest on the judgment from the time the offer of settlement was made at twelve percent, per Wis. Stat. § 807.01(4) (2007–08).¹ The court, however, applied the lower rate of interest applicable under an amended version of the statute that came into force in December 2011. See § 807.01(4) (2011–12); 2011 Wis. Act 69.

¶ 3 Cintas 2 appeals from the judgment, arguing that the jury was not “fully and fairly” instructed about negligence law and that an indirect reference to Crandall's criminal record marred the trial. Johnson cross-appeals on the issue of whether the reduced interest rate under the 2011 amendment applies when an offer of settlement was filed before the law changed.

¶ 4 We agree with Johnson that retroactive reduction of the interest rate applicable to a judgment under Wis. Stat. § 807.01(4) is unconstitutional. The court should have applied the twelve percent rate that was in force at the time the offer of settlement was made in 2008. So we reverse the judgment on that issue and write this opinion explaining our reasoning. We affirm the rest of the judgment because there were no other reversible errors.

Facts

¶ 5 In 2007, Johnson sued to recover money for personal injuries and related damages caused by a car accident that happened in July 2006. Johnson's summons and complaint incorrectly named Cintas 2's parent corporation, “Cintas Corporation,” rather than Cintas 2, as a defendant, although Johnson served the pleadings on Cintas 2. See Johnson v. Cintas Corp. No. 2, 2012 WI 31, ¶¶ 1, 5, 8, 339 Wis.2d 493, 811 N.W.2d 756. In May 2008, Johnson filed his offer of settlement for $300,000 plus costs, but no settlement was reached, and the parties continued to litigate the defective service. Id., ¶¶ 17–21.

¶ 6 An initial default judgment granted against Cintas 2 was voided on appeal due to defective service (i.e., naming the wrong corporate entity in the complaint), and the cause was remanded for further proceedings. Id., ¶¶ 1, 4. Upon remand, in May 2012 the court vacated a judgment for damages that had been issued after the default judgment, and the case proceeded to trial in April 2013.

¶ 7 Cintas 2 requested jury instructions and a special verdict form that would have told the jury to evaluate Johnson's contributory negligence in two different forms: negligence in permitting Crandall to drive his vehicle and negligence in voluntarily riding in the vehicle while Crandall drove. Cintas 2 argued that the jury must consider these two types of negligence separately so as to account for both Johnson's “active negligence” in giving Crandall the vehicle and his “passive negligence” in riding in the vehicle when he knew Crandall was intoxicated. The court denied Cintas 2's request on grounds that there was no law applying the negligent entrustment theory (i.e., Johnson's alleged “active negligence”) to a plaintiff as a form of contributory negligence. Instead, the court concluded, a verdict form that told the jury to consider “just simply negligence” on Johnson's part, whether it was in the form of giving the keys or getting in the car, would suffice.

¶ 8 At trial, Crandall testified that he and Johnson spent the whole day together before the accident, driving to Crandall's mother's house in the morning and to some bars later in the day. They were drinking throughout the entire day, including while driving. Johnson did the driving earlier in the day, but Crandall drove when they left the last bar, and he was the driver at 10:20 p.m. that evening when the accident occurred. One of the sheriff deputies who responded to the accident testified that both Crandall and Johnson smelled of intoxicants at the scene and that he found two open cans of intoxicants in the car, still cold to the touch, which led him to believe both men were drinking alcohol in the vehicle.

¶ 9 Before Crandall testified, Johnson's attorney disclaimed any intention of asking Crandall about his criminal record, but said he did intend to ask Crandall if he had used cocaine that day. During his testimony, when Crandall denied having taken cocaine or prescription drugs during the twenty-four hours preceding the accident, Johnson's attorney asked, “[W]ere you charged with having done that?” Before Crandall had a chance to answer, Cintas 2 objected, and after a sidebar Johnson's attorney asked a new question. In both the opening and the closing instructions the jury was instructed not to draw any inferences from unanswered questions. SeeWis JI—Civil 50, 115.

¶ 10 The jury returned a verdict in favor of Johnson in the amount of $412,372, reduced to $329,897.60 due to Johnson's twenty percent contributory negligence. Cintas 2 moved for a new trial on the grounds that (1) the negligence instructions were wrong and (2) the unanswered question about a criminal charge against Crandall prejudiced the defense, but the circuit court rejected both arguments.

¶ 11 Johnson sought twelve percent interest on the judgment from the time of the 2008 offer of settlement until payment of the judgment, per Wis. Stat. § 807.01(4) (2007–08). Johnson argued that the applicable interest rate was the one in effect at the time of the offer rather than the lower rate in effect at the time of the verdict and judgment. The circuit court rejected Johnson's argument, concluding that the right to the interest was not “vested” until “the time judgment is entered” and that therefore the reduced interest rate under the current law was applicable.

¶ 12 Both parties appeal.

Retroactivity of Reduced Rate of Interest Under Wis. Stat. § 807.01(4)

¶ 13 We begin with the most important issue: whether the 2011 reduction in the interest rate on judgments that exceed offers of settlement under Wis. Stat. § 807.01(4) applies if a statutory offer of settlement was filed before the amendment took effect. Interpretation of a statute is a question of law reviewed independently in the appellate court. Local 321, Int'l Ass'n of Fire Fighters v. City of Racine, 2013 WI App 149, ¶ 6, 352 Wis.2d 163, 841 N.W.2d 830.

¶ 14 While we usually presume the law has prospective application only, id., ¶ 9, there are two exceptions. The first exception is if the text of the law itself, or necessary implication from the text, expresses the clear legislative intent to apply the law retroactively. Snopek v. Lakeland Med. Ctr., 223 Wis.2d 288, 294, 588 N.W.2d 19 (1999). The second exception is for a statute that is remedial or procedural rather than substantive in effect; such statutes will be applied retroactively unless (1) the legislature clearly intended only prospective application or (2) retroactive application would upset vested rights. Id.

¶ 15 If our consideration of a new law leads us to conclude that the law applies retroactively, then we must go on to consider whether retroactive application is constitutional in the case at hand.See Matthies v. Positive Safety Mfg. Co., 2001 WI 82, ¶ 25, 244 Wis.2d 720, 628 N.W.2d 842. If retroactive legislation causes “substantial impairment of a vested right,” it is unconstitutional unless justified by a significant and legitimate public interest. Id., ¶ 31. We review the constitutionality of a law's retroactive effect de novo. Id., ¶ 26 n. 14.

¶ 16 With these guidelines in mind, we turn to Wis. Stat. § 807.01(4). The statute provides that when a party has filed a settlement offer “which is not accepted and the party recovers a judgment which is greater than or equal to the amount [of that offer], the party is entitled to interest ... on the amount recovered.” Id. The interest accrues “from the date of the offer of settlement until the amount is paid.” Id.¶ 17 At the time when Johnson made his offer of settlement, the applicable rate of interest was twelve percent. Wis. Stat. § 807.01(4) (2007–08). The 2011 amendment reduced the rate to one percent over prime. 2011 Wis. Act 69. That amendment's “initial applicability” section states that the new rate “first applies to an execution on a judgment entered on the effective date of this subsection,” 2011 Wis. Act 69, § 4, which was December 2, 2011.²

¶ 18 Cintas 2 argues, and the circuit court accepted, that this amendment has no retroactive effect, because Johnson had no vested right to interest until he “recover[ed] a judgment.” Wis. Stat. § 807.01(4). At the time...