Venue: “Substantial Business” and Insurance Companies

WDC Journal Edition: Spring 2016
By: Gregory S. Venker, Coyne, Schultz, Becker & Bauer, S.C.

I. Introduction

Consider the following situation. A car accident occurs in Sauk County where defendant also resides. Plaintiff, who resides in Illinois, files suit in Milwaukee County. Or how about this scenario? A motorcycle accident occurs in Ashland County. Defendant lives in Marathon County. Plaintiff, who resides in Washington County, files suit in Dane County. Although it may seem absurd for a case to be venued in a county with no connection to the facts or the parties, plaintiff's attorneys routinely attempt to venue cases in this manner, arguing that the venue is appropriate because the liability insurer does "substantial business" in the venue county.

Indeed, it seems that there is a conference every few years where someone suggests that if an insurer does "substantial business"1 in multiple counties in Wisconsin, then venue should vest in any county. However, venue rules are longstanding in Wisconsin and across the United States, and are couched in policy principles of fundamental fairness.2 The problem is, the specific venue statute in Wisconsin has changed over time, and with it, key statutory language has been removed. These changes have created an ambiguity in the statute that is sometimes exploited to absurd results, including the argument that venue is properly in any county so long as an insurer does "substantial business" there. This Article discusses how to challenge such efforts when they are encountered.

II. History of Wisconsin's Venue Statute

Venue in Wisconsin has been controlled by statute or legislative act since shortly after statehood.3 As the law matured, venue rules for the most common types of cases were consolidated into a unified venue statute, which also evolved over time.4 The first consistent numbering occurred in 1878.5 Major renumberings occurred in 1925 and 1973.6 Common factors in determining venue have always included "where the claim arose," "where the subject of the action is situated," and residence of the parties.7

Railroads and corporations were among the first classes of defendants to have venue specified by statute.8 Railroads could be sued in any county their railway ran.9 Corporations could be sued either where they had their principal place of business or where the cause of action arose.10 But in 1919, the legislature added a new paragraph to address an "action against an insurance company ... to recover on a policy of insurance." 11 Insurance companies, like corporations, were to be sued in the county in which they had their principal office but, in contrast to corporations, could also be sued in the county in which the plaintiff resided.12 These requirements persisted until the statute was significantly rewritten in 1983.13 A catch-all has existed largely unchanged since 1878, placing venue in "any other action" in the county where any defendant resides, or if no defendant resides in the state, then in any county plaintiff chooses.14

Importantly, in 1925 the legislature added a subsection to specify that "actions growing out of the negligent operation of a motor vehicle" would be tried in "the county in which the cause of action arose or where the defendant resides."15 In 1943, the legislature further clarified venue for insurance companies when they were "sued growing out of the negligent operation of a motor vehicle."16 In that scenario, venue was consistent with other actions for negligent operation of a motor vehicle: the county where the cause of action arose or the county where the insured resided.17

Venue for insurance companies was clarified once more in 1977. The legislature repealed the subsection specifically addressing automobile accidents and modified the subsection dealing with insurance companies so that any "action growing out of negligence by the insured" would be tried in the county where the cause of action arose or where the insured resided.18 This language persisted until a major revision of the venue statute for all civil cases in 1983.19

At the time of the revision, Wis. Stat. § 801.50 contained 12 different subsections dealing with specific types of actions and specific classes of parties, as well as the catch-all provision for "any other action."20 The legislature asked the Judicial Council to review the subsection and determine whether § 801.50 could be revised and streamlined.21 The Council found that Wisconsin's venue law contained archaic distinctions, which restricted plaintiff's choice of venue, and sought to liberalize plaintiff's initial choice.22 All of the subsections addressing types of action and classes of parties were eliminated and the framework now found in § 801.50(2) was created for almost all civil actions. Section 801.50(2) currently reads as follows:

(2) Except as otherwise provided by statute, venue in civil actions or special proceeding shall be as follows:
(a) In the county where the claim arose;
(b) In the county where the real or tangible personal property, or some part thereof, which is the subject of the claim, is situated;
(c) In the county where a defendant resides or does substantial business; or
(d) If the provisions under par. (a) to (c) do not apply, then venue shall be in any county designated by the plaintiff.23

The changes are significant in two ways. First, they replace "principal place of business" with "substantial business." Second, they create an arguable ambiguity in subsection (2)(c), which states that venue is proper in the county where a defendant resides or does substantial business.

III. Definition of "Substantial Business"

There is a surprising lack of case law interpreting and applying the concept of "substantial business" in Wisconsin. The first case to examine "substantial business" for venue questions was published nearly a decade after Wis. Stat. § 801.50 was rewritten, and there have been no detailed analyses since then.24

In Enpro Assessment Corp v. Enpro Plus, Inc., a Wisconsin corporation was sued by a Minnesota corporation over a trade name dispute.25 The Minnesota corporation filed in St. Croix County, conveniently located near Minneapolis. The Wisconsin corporation challenged venue on the basis that its headquarters was in Calumet County.26

The Wisconsin corporation specifically asserted that it did not do substantial business in St. Croix County, and this was the sole focus of the court of appeals' attention on appeal.27 The court determined this was a matter of first impression in Wisconsin, and looked to Wisconsin case law interpreting "substantial business" in contexts other than venue. The court also reviewed case law interpreting the language "substantial and not isolated" in the context of personal jurisdiction.28

The Enpro court found only two prior cases applying the concept of "substantial business."29 Both cases dealt with out of state insurance companies, and the court interpreted them to show that entities could carry on "substantial business" in an area "even in the absence of an office or employees."30 The first case, National Liberty Life Ins. Co. v. State, asked whether Wisconsin could tax a foreign insurer's premiums resulting from direct mail business as part of the state's regulatory scheme against unauthorized insurers.31 The National Liberty court concluded that the insurer could be taxed based on the significant increase in gross premiums in Wisconsin after the direct mailing efforts began.32 However, venue was not discussed at all in the National Liberty case, and the phrase "substantial business" appears only once in the entire decision.33

The second case, Wisconsin Area Health & Welfare Fund v. Cate, is more interesting since it actually dealt with venue and interpreted a former statute using the phrase "substantial business."34 However, Cate is the only case interpreting that use of the term "substantial business" and, unfortunately, the Enprocourt misinterpreted the holding in Cate.

In Cate, part of the issue was that the Wisconsin Area Health & Welfare Fund ("the Fund") was registered as a domestic trust company in Dane County, but was sued in a small claims action in Ashland County.35 The statute then governing venue in small claims actions, Wis. Stat. § 299.11, stated that, in contract actions, venue was "the county where the defendant resides or is personally served."36 For foreign corporations, "residence" was "any county in which a corporation carries on substantial business activity," but for domestic corporations "residence" was "the county in which the corporation has its principal office."37 The Fund moved to dismiss for incorrect venue. The trial court ultimately decided that venue was correct because the Fund was actually a foreign insurance company, not simply a Wisconsin trust.38 The Cate court recited the findings of the circuit court regarding the Fund's identity and noted that, as a foreign corporation, the Fund did substantial business in Ashland County. Thus, venue was proper.39

The Enpro court interpreted Cate to stand for the proposition that venue can be in any county where an entity does "substantial business."40 This interpretation is wrong for two reasons. First, the Cate court did not ratify the holding of the lower court; the Cate court didn't even examine the issue directly.41 Instead, it focused on whether the trial court had abused its discretion in denying dismissal—i.e., it deferentially reviewed the trial court decision.42 The Cate court held that there was "room for doubt" on the part of the lower court for it to refuse to dismiss for incorrect venue.43 The court noted that it had already remanded the same case, in a separate appeal on the same issue, and directed the lower court to hold a jurisdictional trial.44 Second, and more importantly, the statutory language the Cate court examined specifically allowed venue to be in "any county in which a [foreign] corporation carries on substantial business activity."45 Wisconsin's current venue statute neither specifies between foreign and domestic entities nor permits venue in "any" county under any subsection.46

The court of appeals in Enpro also examined cases dealing with "substantial and not isolated" connections for jurisdictional questions under Wis. Stat. § 801.05(1)(d).47 The most relevant of those cases for this discussion is Milwaukee County v. Hartford Casualty Company, where the court concluded that a Texas insurance company was engaged in "substantial and not isolated activities" within Wisconsin because the company was licensed to sell in Wisconsin and maintained a Wisconsin business office.48

The Enpro court ultimately found that the Wisconsin corporation did not do substantial business in St. Croix County, and reversed with direction to the trial court to transfer venue to Calumet County.49 One reading of Enpro would indicate an insurer can be sued in any county where it has issued or delivered a policy, which quickly produces absurd results. However, a closer reading shows that the Enpro court was aware of this potential absurdity. Buried in an endnote, the court stated:

[W]hen looking to cases construing long-arm jurisdiction statutes as persuasive authority for venue cases, it must be remembered that some inferences given to jurisdictional cases do not apply to venue cases. For example, statutes regulating long-arm jurisdiction are to be given a liberal construction in favor of the exercise of jurisdiction. The venue statutes are not to be given a similar liberal construction in favor of finding that venue is proper.50

At the close of its opinion, the court observed that the liberal reading of "substantial business" the Minnesota corporation was calling for would render the term superfluous.51 The Enpro court continued: "[I]f St Croix County were to be a proper venue in this action, then any county in the state would be a proper venue for this action."52

IV. Venue Based Solely on "Substantial Business" of the Insurer

There is a crucial, often overlooked element in the language of Wis. Stat. § 801.50(2)(c). The statute does not place venue in "any county" or "a county" where a defendant resides or does substantial business, yet plaintiffs often interpret it that way. Instead, subsection (2)(c) describes one of the three options for venue as "the county where a defendant ... does substantial business."53 The difference between this language and the language reviewed in Cates and Enpro, which might suggest venue could be in any county where an insurer has an insured, is significant, especially for domestic insurance companies. The legislature easily could have specified for venue to be in "any county" where a defendant does substantial business. It did not.

To the extent the statute is logically applied to a standard negligence claim, there will nearly always be a valid option for venue other than a county plaintiff chooses where the insurer just happens to have issued a policy. For example, the county where the alleged act or failure to act occurred or the county where the insured defendant resides are options that immediately come to mind. These options have been among the principal venue considerations since Wisconsin began publishing statutes. Ignoring these options in favor of some other county of plaintiff's choosing goes directly against the intent and purpose of the venue statute.

The basic function of the venue statute is to set a fair and convenient location for trial.54 Venue statutes are not to be given a liberal construction in favor of finding that venue is proper.55 Fairness considerations are best laid out in cases applying forum non conveniens principles when parties move for a discretionary change of venue pursuant to statute.56 The doctrine of forum non conveniens has long been advocated by judicial scholars to avoid forum-shopping and to encourage the disposition of cases with economy, expedition, and convenience at the place where justice can reasonably be done.57 The factors which must be considered in applying the doctrine include "the ease of access to proof, the availability and cost of obtaining witnesses, the possibility of harassment of the defendant in litigating in an inconvenient forum, the enforceability of the judgment, the burden on the community of litigating matters not of local concern, and the desirability of litigating local matters in local courts."58

Permitting a plaintiff to choose a county other than one where the claim arose, or one where the natural defendant resides, permits plaintiff to avoid the restrictions of venue altogether and simply forum shop. Many of the above factors come immediately into play, especially ease of access to proof, the burden on community and judicial resources of litigating matters not of local concern, and the fundamental desirability of litigating matters in local courts.

Again, there are few published cases providing guidance for how trial courts should proceed on motions for discretionary change of venue. One case in particular, however, State ex rel. Carl v. Charles, is especially enlightening and suggests that, under the above contemplated circumstances, change of venue is appropriate.59 Carl involves interpretation of the former venue scheme, which was more rigid, as explained above. In Carl, a resident of Ashland County was involved in a motor vehicle collision in Dodge County.60 Suit was filed in Ashland County.61 The defendant subsequently moved the trial court to transfer the action to Dodge County, where the accident occurred.62 The trial court granted the motion as a matter of right and the plaintiff appealed.63 On review, the Wisconsin Supreme Court determined that the defendant was not entitled to change of venue as a matter of right due to the venue statutes at that time, and that the trial court should instead have exercised its discretion to move venue based on forum non conveniens principles.64 The supreme court then noted that the case was "especially appropriate for consideration of a discretionary change of venue" since the accident happened in Dodge County, recovery depended upon proof that the Dodge County accident was caused by the negligence of the defendant, and Dodge County was a more appropriate and convenient forum than Ashland County.65 With this direction, the supreme court remanded the action back to the trial court to decide whether the convenience of the witnesses and the ends of justice would be promoted by transferring the case to Dodge County.66

If the "substantial business" test, when applied to insurance companies, permits plaintiff to choose nearly any county in the state, the venue statute becomes meaningless. The statute already provides the necessary circumstances for plaintiff to choose any county—when none of the other provisions apply. Wisconsin requires insurance of its citizens. Surely the legislature did not intend venue for cases with defendants who comply with insurance mandates to be equated with cases involving entirely foreign defendants or circumstances occurring entirely outside of the state. Clearly, "the county where a defendant ... does substantial business" has to have a much narrower meaning than many plaintiff's attorneys would like to suggest.

V. Conclusion

Venue is often pleaded correctly and plaintiffs have an interest in keeping cases in the county where the claim arose or where a natural defendant resides. This is precisely why it should raise concerns when such an obvious venue is not chosen, and why a venue supported only by unrelated connections of a defendant insurance company must be challenged. Based on the above discussion, defense counsel have a number of strong arguments to advance in order to ensure that actions against their clients are properly venued in the county where they should be.

Gregory S. Venker is an associate with Coyne, Schultz, Becker & Bauer, S.C. His practice focuses on personal injury, employment law, professional responsibility, and insurance coverage issues. Mr. Venker is admitted to practice in Wisconsin state courts. Mr. Venker is a 2008 graduate of Washington University in St. Louis School of Law. While in law school, he served as Executive Articles Editor for the Journal of Law & Policy. Mr. Venker received his undergraduate degree, magna cum laude, from the University of Arizona in 2004.

References
1 Wis. Stat. § 801.50(2)(b) (2013-14).
2 See Voit v. Madison Newspapers, Inc., 116 Wis. 2d 217, 341 N.W.2d 693 (1984); see also Littmann v. Littmann, 57 Wis. 2d 238, 245-46, 203 N.W.2d 901 (1973).
3 See Wis. Rev. Stat. ch. 90, §§ 3-5 (1849) (concerning where defendants may be sued).
4 See, e.g., Wis. Stat. § 2619 (1878); Wis. Stat. § 261.01 (1941); Wis. Stat. § 801.50 (1975); Wis. Stat. § 801.50 (1983-85).
5 Wis. Stat. § 2619 (1878).
6 See 1925 Wisconsin Act 4 (changing § 2619 to § 261.01); 1973 Wisconsin Act 189 (changing § 261.01 to § 801.50).
7 See supra note 4.
8 Wis. Stat. § 2619 (1878).
9 Id.
10 Id.
11 1919 Wisconsin Act 334.
12 Id. Compare Wis. Stat. § 2619 (1921) "Against Domestic Insurance Company" with "Against Other Corporations."
13 See Wis. Stat. § 801.50(2) (1981-82); cf. Wis. Stat. § 801.50(2) (1983-85).
14 See supra note 4. The 1983 rewrite, discussed infra, maintained this but in slightly different form. Compare Wis. Stat. § 801.50(12) (1981-82) with Wis. Stat. § 801.50(2)(c)-(d) (2013-14).
15 1925 Wisconsin Act 383 (creating Wis. Stat. § 261.01(11)).
16 1943 Wisconsin Act 394.
17 Wis. Stat. § 261.01(5), (11) (1943).
18 1977 Wisconsin Act 404; Wis. Stat. § 801.50(5).
19 See 1983 Wisconsin Act 228.
20 Wis. Stat. § 801.50(1)-(12) (1981-82).
21 See 1981 Senate Joint Resolution 58.
22 83 Wisconsin Act 228, Judicial Council Prefatory Note.
23 83 Wisconsin Act 228, § 10. For a listing of many specialized venue provisions not found in chapter 801, see Wis. Stat. § 801.50, Judicial Council Note, 1983, ¶ 3 (2013-14).
24 Enpro Assessment Corp. v. Enpro Plus, Inc., 171 Wis. 2d 542, 492 N.W.2d 325 (Ct. App. 1992). There have been other cases addressing venue, but none directly addresses the application of "substantial business" as the only tie to a county. There is a recent, unpublished, per curium decision from the court of appeals, Teske v. Wisconsin Mut. Ins. Co., 2015 WI App 75, 365 Wis. 2d 196, 870 N.W.2d 248. The court correctly affirmed the trial court's discretion to move a case from Milwaukee County to Sheboygan County, where Wisconsin Mutual was headquartered, after the only dispute was contractual interpretation of plaintiff's policy for UIM coverage. However, the case cannot be cited per Wis. Stat. § 809.23(3).
25 Id. at 544.
26 Id.
27 Id.
28 Id. at 547.
29 Id. at 547-48 (citing National Liberty Life Ins. Co. v. State, 62 Wis. 2d 347, 215 N.W.2d 26 (1974); Wisconsin Area Health & Welfare Fund v. Cate, 71 Wis. 2d 375, 380-81, 238 N.W.2d 107 (1976)).
30 Id.
31 National Liberty Life Ins. Co., 62 Wis. 2d 347.
32 Id. at 364-65.
33 See generally id.; id. at 365 (stating that gross premium payments from 1963 to 1969 of $1,432,479.00 "indicates a substantial business and establishes a sufficient contact with the state to justify the imposition of a tax").
34 Cate, 71 Wis. 2d 375.
35 Id. at 377.
36 Wis. Stat. § 299.11(1)(b) (1967).
37 Wis. Stat. § 299.11(3) (1967) (emphasis added).
38 Cate, 71 Wis. 2d at 380-81.
39 Id.
40 Enpro, 171 Wis. 2d at 548.
41 Cate, 71 Wis. 2d at 380-82.
42 Id.
43 Id. at 381.
44 Id. at 377-78, 381; see also Grage v. Wisconsin Area Health & Welfare Fund, 60 Wis. 2d 761, 211 N.W.2d 509 (1973).
45 Wis. Stat. § 299.11(3) (1967) (emphasis added).
46 Wis. Stat. § 801.50(2)(c).
47 Enpro, 171 Wis. 2d at 549-551.
48 151 Wis. 2d 463, 474, 444 N.W.2d 455 (Ct. App. 1989).
49 Enpro, 171 Wis. 2d at 552.
50 Id. at 549 n.4.
51 Id.
52 Id. (emphasis added).
53 Wis. Stat. § 801.50(2)(c) (2013-14).
54 Voit, 116 Wis. 2d at 224.
55 Enpro, 171 Wis. 2d at 549 n.4.
56 Wis. Stat. § 801.52, entitled "Discretionary change of venue," states as follows: "The court may at any time, upon its own motion, the motion of a party or the stipulation of the parties, change the venue to any county in the interest of justice or for the convenience of the parties or witnesses."
57 See Littmann, 57 Wis. 2d at 245-46; see also Wis. Stat. § 801.52, Judicial Council Note, 1983 ("This section authorizes grounds for changing venue beyond the failure to comply with s. 801.50. It permits the court to apply traditional forum non conveniens principles to requests for discretionary change of venue. The court has discretion to change venue to any county in the state.").
58 Littman, 57 Wis. 2d at 246 (internal citations omitted).
59 71 Wis. 2d 85, 237 N.W.2d 29 (1976).
60 Id. at 85-88.
61 Id. at 87.
62 Id.
63 Id.
64 Id. at 92.
65 Id. at 92-93.
66 Id. at 93.