Congratulations to our very own Erica N. Reib who has been elected to the Board of the Labor and Employment Section of the State Bar.

Erica is a member of O’Neil Cannon’s Employment Law Practice Group. She assists clients with employment discrimination litigation, non-competition and trade secret litigation, OSHA matters, wage and hour issues, NLRB and unfair labor practice matters, employment policy and agreement drafting and review, unemployment compensation, investigations and proper employment practices to avoid litigation. She volunteers her time at Marquette Volunteer Legal Clinic and Milwaukee Justice Center, is part of the Legal Action of Wisconsin Volunteer Lawyers Project, and is a board member and legal committee chair at the Audio and Braille Literacy Enhancement, Inc.

The State Bar of Wisconsin provides opportunities for lawyers to work on issues that matter to them and the public they serve. The Labor and Employment Section includes new and experienced attorneys who practice labor and employment law. The section keeps members up-to-date on recent developments in the law. The section also allows members to exchange information and opinions on various labor topics and legal issues in the workplace.

If you would like to contact Erica, she can be reached at 414-276-5000 or erica.reib@wilaw.com.

Please RSVP to Julie Dietz at julie.dietz@wilaw.com or 414-291-4667.

Joseph E. Gumina is a contributing author for the 2016 Edition of the Illinois Institute for Continuing Legal Education’s treatise titled “Illinois Contract Law.” Attorney Gumina has authored Chapter 8 entitled Guidelines for Drafting Specific Contract Clauses in Employment Agreements. This chapter provides a detailed analysis of the anatomy of an effective employment agreement under Illinois law. Attorney Gumina provides practical insight and examples on how to properly draft specific contract clauses in employment agreements. Attorney Gumina also provides an extensive analysis of the developing law with regard to the enforceability of arbitration provisions in employment agreements both under the Federal Arbitration Act and the Illinois Uniform Arbitration Act.

Attorney Gumina leads O’Neil Cannon’s labor and employment practice. Attorney Gumina has extensive experience representing management in a vast array of employment and labor matters. Attorney Gumina has authored articles on various employment law topics in InsideCounsel Magazine, Illinois Bar Journal and the Wisconsin Law Journal. He is also a frequent speaker on the latest topics facing employers. Attorney Gumina is licensed to practice in Illinois and Wisconsin and has represented clients in litigation matters in both state and federal courts in Illinois and Wisconsin.

Newsletter Article Highlights:

• Firm Obtains Big Win in Koss Litigation
• “The judgment is affirmed by an equally divided Court”
• Undue Influence in Wisconsin Part 1: Inheritance Disputes and Claims of Undue Influence
• Whether Website Presence Exposes Publisher to Lawsuits in Wisconsin Analyzed in Recent Case
• How Wisconsin’s Knife Law Reform Impact Employers
• Building a Great Plan: It All Starts With Vision
• Proud to Be a Member of Meritas, A Multi-National Network of Business Law Firms

Pleased to Announce:

• Attorney Joe D. Newbold Elected as Shareholder
• Attorney Trevor C. Lippman Selected for Leadership Development Summit

Today, the U.S. Department of Labor, Wage and Hour Division, issued an updated guide for employers on the Family and Medical Leave Act. The guide is designed to provide essential information about the FMLA for employers, including the obligations under the law and the options available to employers in administering FMLA leave. The updated guide contains flowcharts, helpful hints, and other information to explain the FMLA process and regulations. The  Employer’s Guide to The Family and Medical Leave Act can be found here.

O’Neil, Cannon, Hollman, DeJong and Laing is pleased to announce that Joe Newbold was recently elected a shareholder of the firm. Mr. Newbold has been with the firm since 2011 and is a member of the Litigation Practice Group. Joe concentrates his practice in commercial litigation in both state and federal court. He manages a variety of complex cases involving class actions, commercial real estate, franchise litigation, and intellectual property matters. Joe has extensive experience representing plaintiffs and defendants in challenging civil litigation.

Learn more about Mr. Newbold by visiting his full profile.

This week, the Wisconsin Court of Appeals issued an important ruling on what “substantial fault” means in the context of unemployment compensation. In 2013, the Wisconsin legislature amended the unemployment insurance statutes to state that, in addition to discharge for misconduct and voluntary termination of work, employees would be denied unemployment benefits if they were terminated by the employer for “substantial fault by the employee connected with the employee’s work.” The statute defines “substantial fault” as “those acts or omissions of an employee over which the employee exercised reasonable control and which violate reasonable requirements of the employee’s employer but does not include any of the following: 1. One or more minor infractions of rules unless an infraction is repeated after the employer warns the employee about the infraction. 2. One or more inadvertent errors made by the employee. 3. Any failure of the employee to perform work because of insufficient skill, ability, or equipment.” Wis. Stat. 108.04(5g)(a).

In Operton v. Labor and Indus. Review Comm’n et al., 2015AP1055 (Wis. Ct. App. April 14, 2016) an employee who worked as a cashier had made eight cash handling errors over twenty months, including not requesting to see identification for a credit card purchase of $399 on what turned out to be a stolen credit card. The employer issued her multiple written warnings, and she was warned that further errors could result in termination. After she failed to get identification related to the stolen credit card, she was terminated for her cash handling errors.

Both the Department of Workforce Development and the Labor and Industry Review Commission (LIRC) found that the employee was ineligible for unemployment benefits because her discharge was for substantial fault based on the fact that she continued to make cash handling errors after receiving multiple warnings. Despite LIRC’s arguments that the court should defer to its experience and judgment in employment issues, the Court of Appeals took a very narrow view of what constitutes “substantial fault.” The Court of Appeals found that there had been no evidence presented that the cash handling errors were “infractions” that violated any specific rule of the employer. The Court of Appeals then went on to determine that the employee’s cash handling errors fell into the second category of what is not substantial fault because they were “inadvertent,” and it did not matter that warnings had been given because that is not a part of the “inadvertent error” analysis.

The important takeaway for Wisconsin employers is the fact that inadvertent errors, even if repeated after a warning, do not constitute substantial fault under the unemployment statutes. Therefore, in issuing warnings for performance related deficiencies, employers need to cite specific policies and rules that the employee has violated. This will give employers a better chance of showing that the employee has committed an infraction, rather than an inadvertent error, and should be denied unemployment benefits if such an infraction is repeated. At this point in time, it is not certain as to whether this matter will be taken to the Wisconsin Supreme Court. We will keep you updated on any further developments.

This is the third and final article in a series on undue influence in Wisconsin. 

The second method of challenging a will or gift made during a lifetime on grounds of undue influence, a so-called inter vivos conveyance requires that the party establish only two elements. Doing so raises a rebuttable presumption of undue influence. 

Moving forward with such evidence shifts the burden from the person raising the issue of undue influence to the proponent of the will or the recipient of the conveyance.[1]  If rebutting testimony is introduced, the trier of fact does not need to accept the presumption and may reject it and accept the rebutting evidence.[2]

Existence of Confidential or Fiduciary Relationship

The first element of the second method requires a finding that a confidential or fiduciary relationship exists between the testator/grantor and the favored beneficiary. The basis for the presumption is not merely the existence of a personal relationship between the testator or grantor and the beneficiary. Instead, it’s the ease with which a confidant can dictate the contents or influence the drafting of a will or particular conveyance, or it’s the ease with which such an individual can control or influence the draftsman of such a document.[3] 

If the person charged with undue influence is not the actual draftsman or the procurer of the draftsman, evidence must be presented which shows that the testator or the grantor depends upon the advice of the confidant in relation to the subject of the will or conveyance. Establishment of this element requires more than showing that a confidential relationship exists between the parties. It requires proof.

The proof offered will be circumstantial because “if a beneficiary has either instructed the draftsman as to the contents of the will or has unduly influenced the testator as to the disposition of his property, he would not testify that he had done so.”[4]

Suspicious Circumstances

The final element of the second method requires that suspicious circumstances surround the execution of the will or conveyance. This element requires a detailed review of factual circumstances.

To prove this element, the Supreme Court has found it sufficient to provide:

• Evidence that proves the conveyance was hastily drafted by a layman or drafted with the active participation of the influencer either in the actual drafting of the document or in the procurement of an individual to draft the document.

• Evidence of a weakened condition, be it physical or mental, of the testator or grantor, all of which culminate in sudden and unexplained changes in the attitude of the testator towards the disposition of his or her property.[5]

As was discussed in our prior article in relation to the fourth element of the classic undue influence case, proof of this element requires more than simply suspicious results. The suspiciousness must be judged in light of the totality of the circumstances.

This is the second in a series of three articles on undue influence in Wisconsin.

In Wisconsin, the four elements of classic undue influence cases are susceptibility, opportunity, disposition and a coveted result. In addition to classic undue influence in Wisconsin, there is a second method of challenging a will or gift made during lifetime, a so-called inter vivos conveyance, which will be discussed in the third and final article in this series.

Susceptibility

The first element of classic undue influence is a finding that the person charged with exercising undue influence unduly influenced a susceptible testator or grantor.

The Wisconsin Supreme Court, in numerous cases, has stated that the key factors regarding the issue of a testator or grantor’s susceptibility to undue influence are:

• Age
• Personality
• Physical and mental health
• Ability to handle business affairs[1]

Opinions about the general state of mind of the testator or grantor from third parties with whom he or she may have had contact are given much credence by the court. 

For example, the court will consider whether or not a person is considered to be strong-willed, independent, self-reliant, dominant, stubborn, dependent, capable of making decisions, and taking care of ordinary day-to-day management of their affairs. 

Age, in and of itself, is of little significance unless it is coupled with a deteriorating physical or mental condition.[2] 

If consideration of the factors set forth above demonstrates that the testator or grantor was unusually receptive to the suggestions of others and consistently deferred to others on matters of utmost personal importance, then the element is established.[3]

Opportunity to Influence

This element requires a showing that the person charged with exercising such influence on the susceptible person had the opportunity to procure the improver favor. 

As a general rule, this is the easiest of the four elements to prove. To justify a finding of the opportunity to influence, the court must find repeated close contact with the testator.[4] Close personal relationships whether because of familial ties, living conditions, working conditions, or other social conditions have been found sufficient.

However, opportunity to influence does not mean mere physical propinquity or personal contact. It requires that interviews or personal transactions between the parties exist and that they were followed by the accomplishment of a desired end.[5] It is not necessary, nor is it often the case, that opportunities to influence are accomplished in secret or that they culminate in one particular act that represents the attempt to unduly influence. However, the opportunities to influence must exist at or about the time the will or conveyance is effected.[6]

Disposition to Influence

The third element requires proof of more than a desire on the part of the person charged with undue influence to obtain a share of the estate. It necessitates a showing of a willingness to do something wrong or unfair to obtain a share. It requires proof of grasping or overreaching affirmative steps on the part of the person charged.[7] 

Evidence must be submitted of conduct designed to take an unfair advantage. Proof of this element requires evidence of the personality traits of the person charged with committing the act of undue influence. 

For example, evidence shows a willingness to take advantage of the kindness and generosity of the testator or grantor. Alternatively, evidence shows that the influencer misled or kept a secret from natural beneficiaries.[8] The court has specifically indicated that there is nothing wrong with aiding and comforting a failing testator and that such activity should be encouraged.[9] 

Coveted Result

The last element required in order to present a case of classic undue influence is the showing of a result caused by, or the effect of, such undue influence. Two compounds of this element exist. 

First, the result must be an “unnatural,” raising “a red flag of warning.”[10] The essential question is whether the person was favored to be excluded from the natural or expected recipients of the testator’s bounty. However, more than a result favorable to the alleged person is required. 

The second component is whether the result obtained was caused by or was the effect of undue influence. What is under scrutiny is that a particular recipient benefits for no apparent reason and that the disposition is, in fact, unnatural and, therefore, the bequest or conveyance is unjust[11]

The mere provision in a will that benefits the influencer does not, by that fact alone, prove the element. Evidence may make what appears unnatural natural given the circumstances of the individual case. The mere fact that the testator makes bequests to his close friends rather than to relatives does not necessarily render the disposition unnatural. Whether a will or conveyance is unnatural or not must be determined from a consideration of all the surrounding circumstances.[12]

From 1997 to 2009 Sujata Sachdeva embezzled over $36 million from her employer, Koss Corporation, in one of the Top 10 Largest Embezzlements in U.S. history. The embezzlement was reported all over the world, including on the cover of The National Enquirer.

Ms. Sachdeva was criminally convicted of embezzlement and is currently serving a prison term. In an attempt to recoup its loses, Koss sued its auditor, credit card company, and banks. Its auditor, Grant Thornton, settled the claim for $8.5 million, and its credit card company American Express, settled the claim for $3 million. Those lawsuits were filed in Illinois and Arizona, respectively. 

Koss also sued its local bank, Park Bank, in Milwaukee, arguing that Park Bank acted in bad faith under the Uniform Fiduciaries Act by failing to discover and report the embezzlement. In the lawsuit, Koss sought damages of $43,749,400 from Park Bank. After five years of litigation, on March 11, 2016, the trial court dismissed the case in a 24–page written decision, finding that “Park Bank did not act in bad faith.” The court held that, under the Uniform Fiduciaries Act, bad faith “requires a showing of some indicia of dishonest conduct or a showing of facts and circumstances so cogent and obvious that to remain passive would amount to a deliberate desire to evade knowledge because of a belief or fear that inquiry would disclose a defect in the transaction,” and “there must be some factual basis—whether an allegation of monetary self-interest or compelling evidence of wrongdoing—to suggest the bank acted intentionally to avoid knowledge of the fiduciary’s wrongdoing.” Here, the court held, “Koss has not provided any evidence that Park Bank intentionally ignored Sachdeva’s embezzlement,” and it “declines to require banks to act as detectives, whether they be Sherlock Holmes, Columbo, or Andy Sipowicz.”

Dean Laing of our firm was Park Bank’s lead attorney. Also working on the case were Greg Lyons and Joe Newbold.