Author: Hamilton

U.S. DOJ Will Not Defend Affordable Care Act

Posted on by Hamilton

The U.S. Department of Justice (U.S. DOJ) announced this week it will not defend the constitutionality of the Affordable Care Act (ACA) in Texas v. United States. In a letter to Speaker Paul Ryan, U.S. DOJ said it will side with plaintiffs Wisconsin Attorney General Brad Schimel and Texas Attorney General Ken Paxton, along with 18 other states. The state attorneys general filed the brief in support of a preliminary injunction in federal district court against the federal government’s enforcement of the individual mandate of the ACA.

Congress repealed the tax penalty, yet left in place the ACA’s individual mandate, in the federal tax reform bill in December 2017. The attorneys’ general brief argues that the remaining mandate, without the tax penalty, violates the Commerce Clause of the U.S. Constitution, and Congress does not have the constitutional authority to compel citizens to purchase health insurance. The attorneys general argue further that the individual mandate makes it difficult for states to take individual actions, like Wisconsin’s reinsurance program, to regulate the insurance market.

The attorneys general brief asks the federal district court to enjoin the ACA effective Jan. 1, 2019 – the date the tax reform will officially eliminate the individual mandate. The brief comes after a February brief asking the court to rule the ACA unconstitutional and enjoin the operation of the entire law.

Justice Abrahamson Not Running for Re-election

Posted on by Hamilton

Wisconsin Supreme Court Justice Shirley Abrahamson has announced she will not run for re-election when her fourth term is up in 2019.

Abrahamson was appointed by Democratic Gov. Patrick Lucey in 1976 as the state’s first woman Supreme Court Justice. She served as Chief Justice from 1996 to 2015. Abrahamson is the longest serving Supreme Court Justice in Wisconsin history.

So far, District Attorney Susan Happ, Appeals Court Chief Judge Lisa Neubauer, Waukesha County Judge Maria Lazar, and Second District Appeals Court Judge Brian Hagedorn have expressed interest in running for Abrahamson’s seat.

Unemployment Insurance Trust Fund Balance

Posted on by Hamilton
Source: Wispolitics

Gov. Scott Walker has announced the state’s Unemployment Insurance (UI) Trust Fund reached $1.65 billion in May. The Trust Fund has been increasing since its lowest level (negative $1.68 billion) in 2011.

The UI Trust Fund is financed by approximately 140,000 Wisconsin employers that are covered under the program, which is administered by the Department of Workforce Development (DWD). Walker said employers have saved $165 million in the UI system since 2016.

Walker’s announcement follows DWD’s release of its 2018 UI Fraud Report to the UI Advisory Council. The report states UI fraud dropped 42 percent in 2017. Walker’s announcement also highlighted historically low unemployment in Wisconsin in 2018.

SCOTUS Decision: Epic Systems v. Lewis (Arbitration Agreements)

Posted on by Hamilton

The U.S. Supreme Court issued a decision this week in Epic Systems Corp. v. Lewis, holding that individualized arbitration contracts between employers and employees that waive class actions are enforceable under the Federal Arbitration Act.

Previously, courts and the National Labor Relations Board have held that individualized arbitration agreements are enforceable. However, a 2012 NLRB decision ruled otherwise, and subsequent executive and solicitor general opinions have been conflicting. The SCOTUS decision clarifies the legal uncertainty for employers in these cases.

The Court combined the Epic case with two similar disputes: Ernst & Young LLP et al. v. Morris et al. and National Labor Relations Board v. Murphy Oil USA, Inc., et al. In each of the cases, the employers and employees entered into contracts requiring individualized arbitration proceedings for employment disputes. However, the employees sought to litigate claims in class actions.

The plaintiffs in this case argued that the contracts were invalid because the “saving clause” of the Federal Arbitration Act says that arbitration agreements need not be enforced if they violate another federal law. The plaintiffs held that their contracts violated the National Labor Relations Act’s (NLRA) provision that ensures employees the right to “concerted activities.” Further, they argued the Court should give Chevron deference to the NLRB’s recent decision that employees have a right to class actions outside of the enforceability of arbitration agreements. Chevron deference is a judicially created doctrine that requires courts to defer automatically to agency interpretations of statutes.

The Court ruled in favor of the employers, holding that, since NLRA focuses on collective bargaining and there is no clear reference to employees’ rights to class actions, NLRA does not displace the Federal Arbitration Act. The opinion, written by Justice Neil Gorsuch, emphasizes that under constitutional separation of powers, courts should not pick and choose between statutes when there is no overwhelming congressional intention implying the statutes are not harmonious.

The Court also held that Chevron deference to agencies does not apply here because Congress has statutorily given NLRB authority to administer the NLRA but not the Federal Arbitration Act. Furthermore, Chevron deference is due only when traditional tools for statutory construction leave ambiguity. The Court held that the statutes are clear enough in this case to dismiss Chevron deference to NLRA.

In a concurring opinion, Justice Clarence Thomas added that, under the Federal Arbitration Act’s “saving clause,” courts may revoke contracts under the grounds of improper formation but cannot refuse to enforce contracts for public policy reasons. The concurring opinion states the contracts in this case were not formed improperly, so they must be enforced.

In her dissent, Justice Ruth Bader Ginsburg argues that collective proceedings do fall under the scope of the “concerted activities” provision of the NLRA and that the NLRA’s specificity prevails over the more general Federal Arbitration Act. The dissent argues that employees should always have the right to address disputes with their employers collectively instead of on an individual basis.

Following Wisconsin’s Lead, U.S. Senators Introduce TPLF Transparency Bill

Posted on by Hamilton

Earlier this month, several U.S. Senators introduced a bill that would require disclosure of third party litigation financing in class action lawsuits. The introduction of the U.S. Senate bill comes after Wisconsin enacted groundbreaking reforms in Act 235 to require notice of third party litigation financing at the state level.

The Litigation Funding Transparency Act, by Sens. Chuck Grassley (R-Iowa), John Cornyn (R-Texas), and Thom Tillis (R-North Carolina), would require disclosure within 10 days of any agreements for commercial enterprises to receive payments contingent upon the monetary outcome of an action. The bill aims to provide transparency of such third party litigation financing arrangements that can increase the cost of litigation and cause suits to be brought that would not otherwise have been financially justified.

U.S. DOJ Announces New Policy to Reduce “Piling On”

Posted on by Hamilton

In a speech to the New York City Bar on May 9, Deputy Attorney General Rod Rosenstein announced a new U.S. Department of Justice (DOJ) policy that encourages coordination within DOJ and between law enforcement agencies in parallel and/or joint proceedings in order to avoid duplicative penalties. The new policy aims to reduce the practice of “piling on,” or imposing multiple penalties for the same crime, which can lead to unfair settlements and uncertainty for businesses involved in investigations under the authority of multiple regulatory agencies.

The policy:

  1. Reinforces that DOJ attorneys should not use criminal enforcement authority as a threat to incentivize larger settlements.
  2. Directs DOJ attorneys to coordinate with one another in resolving cases with multiple department components to avoid duplicative and inequitable penalties.
  3. Similarly, directs DOJ to coordinate with other law enforcement agencies to avoid “piling on.”
  4. Directs DOJ to consider all relevant factors in coordinating multiple-component cases, taking into account, for example, the egregiousness of misconduct, statutory mandates, timeliness, and the company’s cooperation with the investigation.
  5. Stipulates that multiple penalties are appropriate in some circumstances, such as when penalties are designed for victim restitution.

In his speech, Rosenstein also highlighted several other recent DOJ policy changes, including ending third-party settlement payments to entities that are not harmed by a defendant’s conduct and prohibiting reliance on agency guidance documents.

Supreme Court Decision: Springer v. Nohl Electric Products Corporation (Successor Non-Liability)

Posted on by Hamilton

On May 15, the Wisconsin Supreme Court held 5-2 in Springer v. Nohl Electric Products Corporation that the Wisconsin Uniform Fraudulent Transfer Act (WUFTA) does not govern the “fraudulent transaction” exception of successor non-liability. Traditionally, when a company buys another’s assets, it does not incur responsibility for liabilities attached to those assets. This rule exists to protect buyers from unexpected liability. However, certain exceptions apply, including if the transaction took place to fraudulently escape responsibility for the liabilities.

The case arose from an asbestos exposure lawsuit. Penny Springer sued multiple companies for her husband’s death from mesothelioma. Powers Holdings moved for summary judgment under the successor non-liability law because it was a successor to the previous business that dealt with asbestos-containing products. There was no evidence that Powers Holdings dealt with asbestos-containing products.

Springer claimed that Powers Holdings was liable under the fraudulent transaction exception of successor non-liability. The lower court concluded that WUFTA governs how courts decide whether transactions are entered into fraudulently. However, the Supreme Court held that WUFTA does not apply because it exists to assist creditors unable to collect because of recent asset transfers. As an asset-focused act, WUFTA does not encompass the fraudulent transaction exception since it fails to address the nuances afforded in successor non-liability. Thus, the court concluded that Powers Holdings was not liable in this case.

Supreme Court Decision: Talley v. Mustafa (Coverage in Negligent Supervision Claim)

Posted on by Hamilton

On May 11, the Wisconsin Supreme Court held in Talley v. Mustafa that there was no coverage under a business owner’s liability insurance policy for an employee’s actions, despite the plaintiff’s claim of negligent supervision.

The case arises from an incident in which Mustafa Mustafa’s employee punched customer Archie Talley in Mustafa’s store. Talley sued Mustafa and his insurer, Auto-Owners Insurance Company. Talley’s complaint alleged that Mustafa was negligent in failing to properly train and supervise his employees.

In a 4-3 decision authored by Justice Rebecca Bradley (joined by Justices Gableman, Ziegler, and Chief Justice Roggensack), the court held that Talley had no separate negligence claim against the employer Mustafa, and his claim rested solely on the intentional action of Mustafa’s employee. The Auto-Owners policy specifically stated it covers bodily injury only when caused by an “occurrence,” defined as “an accident.” Punching someone in the face is not an “accident,” and the plaintiff failed to show that Mustafa’s actions accidentally led to Talley’s injuries, so the damages are not covered by the policy.

The decision clarifies statements from Doyle v. Engelke that said coverage is based on policy as applied to plaintiffs’ complaints and courts must stay within the “four corners of the complaint” when determining coverage. The court also clarified that, unlike the court’s analysis in Doyle, in claims of negligent supervision, “negligence” does not necessarily constitute an “accident” or covered “occurrence.”

Despite a request for a bright line rule from Auto-Owners, the court also determined that an agreement between an insured and insurer on whether their contract provides coverage does not control a court’s coverage determination.

Wisconsin Insurance Alliance wrote an amicus brief in the case stating that policies generally do not cover intentional assault, and injured parties cannot obtain coverage by pleading negligent supervision against employers.

In her dissent, Justice Walsh Bradley (joined by Justices Abrahamson and Kelly) argued that the majority did not properly make a decision regarding the coverage phase of this bifurcated case. The dissent argued the court should not have based its decision on the merits of Talley’s negligent supervision claim and instead should have decided whether Mustafa would be covered assuming Talley’s claims succeed in the liability phase of the case.

In a second dissent, Justice Kelly (joined by Justices Abrahamson and Walsh Bradley) also distinguished the coverage phase of the case and argued the court should have solely addressed whether Auto-Owners would have covered damages if Talley’s negligence claim prevailed in the merits phase. Kelly’s dissent noted that because Wisconsin is notice-pleading state, Talley did not have to prove Mustafa’s negligence in his complaint to the extent the majority court required. The dissent further disagreed with the court’s ruling that Talley should have showed a direct link from Mustafa’s actions to Talley’s injuries.

Wisconsin Supreme Court Hears Oral Argument in Significant Tort Reform Case

Posted on by Hamilton

On Thursday, April 19, the Supreme Court of Wisconsin will hear oral arguments in one of the most important cases of the term, and one of the most important civil justice cases in the past decade. The case is Mayo v. Wisconsin Injured Patients and Families Compensation Fund, 2014 AP2812.

The issue is whether Wisconsin’s $750,000 statutory limit on noneconomic damages in medical malpractice cases is unconstitutional. Wisconsin Civil Justice Council, along with National Federation of Independent Business, Wisconsin Insurance Alliance, United States Chamber of Commerce, and American Tort Reform Association, filed an amicus brief supporting the law enacted by the legislature.

Below is a discussion of the history of the statutes and cases pertaining to limits on noneconomic damages in medical malpractice cases. A decision by the Wisconsin Supreme Court is expected later this summer.

 

Wisconsin Court of Appeals Strikes Down Noneconomic Damages Cap

Wisconsin’s statutory cap on noneconomic damages for medical malpractice cases has taken many twists and turns over the past 20 years. A recent state court of appeals decision (Mayo v. Wis. Injured Patients & Families Comp. Fund, 2017 Wisc. App. LEXIS 494) has added to this seemingly never-ending saga by striking down the legislatively enacted $750,000 cap on noneconomic damages.

 

History of Wisconsin Medical Malpractice Statute

The first Wisconsin statute limiting medical malpractice awards to $500,000 was enacted in 1975. The amount was later increased to $1 million in 1986, only to be reduced by the legislature to $350,000 in 1995. The $350,000 limit twice was judicially challenged by opponents – in 2000 and 2001 – and upheld both times by the court of appeals.

In 2005, the Supreme Court of Wisconsin struck down the statute ruling that the $350,000 limit on noneconomic damages violated the equal protection clause of the Wisconsin Constitution. Ferdon ex. rel. Petrucelli v. Wisconsin Patients Comp. Fund, 284 Wis. 2d, 701 N.W.2d 440 (Wis. 2005). According to the Ferdon Court the cap created two classifications of victims: 1) the most severely injured who are denied the full award for their injuries, i.e. noneconomic damages in excess of the cap; and 2) the less severely injured victims who are fully compensated because their noneconomic damages are not reduced.

Shortly after the Ferdon decision in 2005, the Wisconsin Legislature enacted yet another statute limiting noneconomic damages at $450,000. This bill was vetoed by then Gov. Jim Doyle. A year later the Wisconsin Legislature enacted compromise legislation limiting noneconomic damages at $750,000, which was signed by Gov. Doyle. That statute remained intact until the latest court of appeals decision.

 

Noneconomic Damages Cap Struck Down by Wisconsin Court of Appeals

The $750,000 cap was challenged by a patient who tragically lost all of her limbs when her physician failed to properly diagnosis a septic infection. The jury awarded the patient $16.5 million in noneconomic damages, which was to be reduced to $750,000 under the statutory limitation. However, the trial court struck down the statute as-applied to the plaintiff.

A three-judge panel of the Wisconsin Court of Appeals (Dist. I) upheld the trial court’s decision. The court of appeals, however, determined the law was unconstitutional on its face, rather than as-applied.

Citing Ferdon, the court held that statutory caps must be “reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation in order to satisfy State equal protection guarantees.” The court further stated that not “all caps on noneconomic damages are unconstitutional,” but that the current limit was “arbitrarily selected.”

 

Wisconsin Supreme Court Oral Argument

The Supreme Court heard oral argument Thursday, April 19. Although it is difficult to decipher how the court will decide a case based on oral argument questions, it appears that a majority of the court will likely overturn the lower court’s decision and uphold the cap. The main question is whether the court will overturn the Ferdon decision, as urged by the Fund and State of Wisconsin.

The Justices had very few questions for the attorneys representing the Fund and instead aimed most of their questions at the plaintiff attorney during his oral argument. Specifically, some of the Justices pressed the plaintiff on whether he thought any cap on noneconomic damages would meet constitutional muster. In addition, the Justices asked whether it would be constitutional to set the cap at zero dollars since that would take away the argument that the cap treats two categories of people differently – those whose noneconomic damages fall under the cap and those who are severely injured whose noneconomic damages would be above the $750,000 cap. In addition, the Justices asked where Wisconsin’s cap compares with other states with similar caps on noneconomic damages.

SCOTUS Case: Wisconsin Central Ltd. v. United States (Agency Deference)

Posted on by Hamilton

On April 16, the U.S. Supreme Court heard arguments for Wisconsin Central Ltd. v. United States, a case involving the definition of “compensation” and the Internal Revenue Service’s (IRS) right to tax the stock options of railroad employees. The IRS levies special taxes on the compensation received by railroads and their employees. In this case, the Court looks at whether exercising stock options falls under compensation for taxing purposes.

This case emerges from Wisconsin and touches upon the scope of deference given to agency interpretations using Chevron deference. Chevron deference is a judicially created doctrine that requires courts to defer automatically to agency interpretations of statutes, even if a more reasonable interpretation exists creating a systematic disadvantage to the other party in the dispute.

Seven years ago, the Supreme Court upheld Chevron deference for tax cases in Mayo Foundation for Medical Education & Research v. United States. However, subsequent Court decisions reject the Chevron deference argument in the tax context. While the primary impact of this case will be on private-sector railroad employees, the Supreme Court’s decision could affect the doctrine of agency deference in future tax cases.

Meanwhile, the Wisconsin Supreme Court will also address agency deference in Tetra Tech Inc. v. Wisconsin Department of Revenue this year. The Supreme Court specifically requested parties brief the constitutionality of courts providing deference to agencies on questions of law. An amicus brief filed on behalf of 11 Wisconsin associations argues that, under the Constitution, judges, not unelected agency officials, hold the exclusive duty of saying what the law is. The Court held oral arguments in Tetra Tech this summer and is expected to issue a decision in the coming months.