City of Milwaukee v. NL Industries

KESSLER, J.

¶ 87. 0dissenting). I respectfully dissent. In my view, the City is entitled to a new trial because errors of law in the admission of evidence and errors of law in the jury instructions render the verdict unreliable. Because these errors of law caused the jury to deliberate with substantial information it should not have had, based on instructions which misstated the law, the City is entitled to a new trial.

*500I. Collateral source evidence.

¶ 88. One of the most significant errors in this case was the admission of evidence that the Milwaukee Health Depártment received federal and state grants to help finance its abatement and prevention programs. See majority op., ¶¶ 65-70. I agree with the Majority that the trial court erroneously exercised its discretion when it denied the City's motion in limine to exclude this collateral source evidence. See id. However, I disagree with the majority's conclusion that the trial court's curative instruction rendered this error harmless. See id., ¶¶ 65, 70. Rather, I conclude that the error affected the substantial rights of the City, see Wis. Stat. § 805.18(2), because there is a "reasonable possibility that the error contributed to the outcome" of the trial. See Martindale v. Ripp, 2001 WI 113, ¶ 32, 246 Wis. 2d 67, 629 N.W.2d 698. Therefore, I conclude that the City is entitled to a new trial.

¶ 89. The admission of the collateral source evidence allowed NL Industries to argue, in effect, that the City was not a worthy plaintiff. In closing argument, NL Industries emphasized to the jury that the City did not undertake the abatement until federal funds were provided (implying the need was not important enough until the City could abate the problem for free), and that the City's other programs did not suffer any financial impact because the grants paid for the abatement project (implying there were no damages that needed to be awarded). See majority op., ¶ 70 n.17. At closing argument, NL Industries' counsel told the jury that the City's abatement program was an "experiment" that replaced windows as a means of reducing lead poisoning. Counsel then stated:

*501Now, it's unfair to NL. The City's entitled to experiment with HUD all they want, but... they chose the high-cost approach; they chose to do it by subsidies because they had a funding source to do it, where they've worked to spend all the available money from that funding source, and then try to shift all that over to my company, alone out of the whole world, just shift it over to us.

¶ 90. In making these arguments, NL Industries invited the jury to find in its favor not just on damages, but also on liability, because the City benefitted from a collateral source. This is precisely what the collateral source rule is designed to prevent. See Leitinger v. DBart, Inc., 2007 WI 84, ¶¶ 33-34, 302 Wis. 2d 110, 736 N.W.2d 1 (collateral source rule aims at deterring tortfeasor's negligent conduct and prevents "tortfeasor from escaping liability because a collateral source has compensated the injured person."). NL industries should not have been permitted to invite jury bias in its favor by talking about the grant money the City received. See Town of East Troy v. Soo Line Ry. Co., 653 F.2d 1123, 1132 (7th Cir. 1980) (analyzing application of Wisconsin's collateral source rule in public nuisance case involving funding received from the U.S. Department of Housing and Urban Development and concluding that tortfeasor "was properly prevented from possibly creating jury bias in its favor by mentioning or producing evidence of the HUD grant to the Town.").

¶ 91. The majority concludes that the trial court's curative instruction remedied the erroneous admission of the collateral source evidence. I disagree. If any curative instruction could dissipate the taint of erroneously admitted collateral source evidence, the curative instruction given in this case did not do that. The instruction told the jury that

*502any issues with respect to the distribution of any damages awarded are not a part of the jury trial in this matter, and this evidence may not affect you[r] answer to the damage question. You may not reduce your award of damages because the City may have received funds for some costs from another source.

See majority op., ¶ 68 (emphasis added).

¶ 92. Significantly, this instruction prohibited the jury from considering outside funds when it considered damages, but did not instruct the jury that it must not consider the evidence of grants in any way in its determinations. This is problematic because the collateral source rule is not merely a rule of damages, but a rule of evidence. See Leitinger, 302 Wis. 2d 110, ¶¶ 28, 30. Leitinger explained: "As a rule of evidence, the collateral source rule generally precludes introduction of evidence regarding benefits a plaintiff obtained from sources collateral to the tortfeasor." Id., ¶ 30. Application of the collateral source rule "prevents the fact-finder from learning about collateral source payments, even when offered supposedly to assist the jury in determining [some other issue], so that the existence of collateral source payments will not influence the fact-finder." Id., ¶ 54.

¶ 93. Consequently, although the jury should not have been permitted to consider the collateral source evidence for any purpose, it was allowed to consider it as evidence for any purpose other than damages. Specifically, the jury was free to improperly consider the collateral source evidence when determining liability.

¶ 94. This error was far from harmless. This case did not involve a subtle or innocuous passing reference to collateral sources. Rather, NL Industries was allowed, over the City's objection, to emphasize the collateral sources and argue the City only abated the *503properties because it was given funds to do so. NL Industries argued vigorously that the City was an unworthy plaintiff. I conclude that the jury instruction did nothing to cure the extremely prejudicial impact on liability of the collateral source evidence and NL Industries' argument thereon which was presented to the jury. There is, at minimum, a reasonable possibility that the jury considered this improper evidence and improper argument in deciding the liability questions. Because the erroneous admission of the collateral source evidence prejudicially affected the City's substantial rights, the City is entitled to a new trial. See Wis. Stat. § 805.18(2).

II. Evidence concerning product identification.

¶ 95. The City sought to exclude evidence related to lack of product identification. See majority op., ¶¶ 74-76. The trial court denied the motion. Ultimately, NL Industries was permitted to raise and argue the issue of product identification in a way that contradicts this court's decision in City of Milwaukee v. NL Industries, Inc., 2005 WI App 7, 278 Wis. 2d 313, 691 N.W.2d 888 ("AIL Industries F). In that case, we rejected NL Industries' argument that "the City must prove, at a minimum, that NL Industries' pigment or lead paint or Mautz's lead paint is present on windows." Id., ¶ 14. We recognized the City's admission "that, because technology does not make it possible to do so, the City cannot identify the specific lead pigment or paint contained in the houses being abated." Id., ¶ 15. We concluded that it would be up to the jury to decide if NL Industries (and the other defendant) "caused this nuisance by selling lead paint in Milwaukee and promoting *504its use there" and "the extent and effect of promotion of lead paint sales by both defendants." Id., ¶¶ 18, 19.

¶ 96. Contrary to our holding that NL Industries' potential liability was not based on whether the City could prove that lead which NL Industries produced could be identified in a particular home, NL Industries was permitted to argue that because the City did not prove what we held it did not have to prove, the City should not prevail. NL Industries was allowed to ask the following questions on cross-examination:

Did the City at any time during the course of its lead program ever make any effort to determine who made the paint, whether it's lead-based paint or not, on the properties in the target area?
Did the City ever attempt to determine who made or sold the lead that may or may not have been present in the paint on homes in the target areas?

Then, during closing argument, NL Industries focused much of its argument on the theory that it was improper for the City to abate the lead poisoning using window replacement "without ever trying to find out if our product, Dutch Boy, is in any of those homes, doing very little to find out if it's really lead paint in those homes or if there are lead hazards." This argument implied that the City could have determined if it was Dutch Boy paint on a particular home, and that it should have done so. This argument contradicted our holding in NL Industries I, and flowed from the erroneous denial of the City's motion in limine concerning product identification. Permitting those questions and argument, in direct contradiction of our previous holding, justifies a new trial.

*505III. Jury instruction requiring proof both of intent and of unreasonable conduct.

¶ 97. The City argues that the trial court erroneously asked in the special verdict1 and erroneously instructed the jury "that NL Industries intentionally created the public nuisance only if its conduct was both intentional and unreasonable." See majority op., ¶ 47. The court instructed that in order to answer "yes" to this special verdict question, the jury "must be satisfied that NL industries acted intentionally and unreasonably, and that its intentional and unreasonable conduct was a cause of the public nuisance." (Emphasis added.) As the majority notes, the parties both find support for their respective positions on this issue in what may well be "conflicting law on this issue." See id., ¶ 52. The majority concludes that resolution of this conflict is unnecessary "given that the jury answered in the negative the negligence question on the special verdict." Id. I disagree.

¶ 98. If the City is correct, it is entitled to a new trial because the error was not harmless. Whether the City had to prove NL Industries' conduct was unreasonable, in addition to being intentional, is no minor issue: it had profound implications on the evidence required. Using the instructions given, NL Industries argued that the City had to prove that NL Industries knew the precise mechanism of childhood lead poisoning at the time it intentionally sold the lead-based paint in Milwaukee, thus making the conduct "unreasonable" in *506additional to intentional.2 This allowed NL Industries to argue that liability could only be premised on its foreknowledge of the exact mechanism of the injuries the affected children suffered. Because NL Industries did not know the ultimate extent to which its product would harm children, it argued, its conduct was not unreasonable. There is a reasonable possibility that this argument, based on the jury instruction, "contributed to the outcome" of the trial. See Martindale, 246 Wis. 2d 67, ¶ 32. Thus, if the instruction was erroneous, the City is entitled to a new trial.

Question two of the special verdict asked: "Did NL Industries intentionally and unreasonably engage in conduct that was a cause of the public nuisance?"

It has never been disputed that NL Industries sold lead-based paint in Milwaukee; NL Industries has never claimed that the paint got to Milwaukee accidentally, or without its knowledge. The dispute has centered on what NL Industries knew about the impact of that paint on children.