Author: Hamilton

SCOTUS Decision: Gill v. Whitford (Redistricting)

In a long-awaited decision of this term, the U.S. Supreme Court decided the plaintiffs in Gill v. Whitford, the legal challenge to Wisconsin Republicans’ 2010 redistricting map, lack standing to challenge the statewide map. The Court remanded the case to district court, giving the plaintiffs another opportunity to demonstrate concrete injuries to their individual votes. The opinion was unanimous, with Chief Justice Roberts writing the lead opinion, and each justice writing or joining a concurring opinion.

The plaintiffs, all Democratic voters from Wisconsin, argued that the map violated their rights to association and equal protection because it unfairly diminished their chances to achieve a majority and resultant legislative outcomes. The map, they said, unfairly gave Republicans a better chance of “translating their votes into seats.”

In defense, the state of Wisconsin argued the plaintiffs lack standing to challenge the entire map. The Court agreed that plaintiffs can only challenge their own voting districts and thus lacked standing for their statewide gerrymandering claim.

Justice Kagan, joined by Justices Ginsburg, Breyer, and Sotomayor agreed that the plaintiffs did not have standing, and suggested the plaintiffs expand on the theory that the redistricting infringed upon their First Amendment rights of association. Kagan also suggested if enough plaintiffs allege the map diluted their votes in their individual districts, the aggregate claims could force the statewide map to be redrawn.

Justice Thomas, joined by Justice Gorsuch, agreed the plaintiffs lacked standing, but did not agree with the Court’s decision to remand the case to district court because remanding is not the standard practice of the Supreme Court in such cases.

Supreme Court Decision: Forshee v. Neuschwander (Restrictive Covenants on Short-Term Rentals)

In a 6-1 decision, the Supreme Court ruled in Forshee v. Neuschwander that a restriction on “commercial activity” in a restrictive covenant did not preclude short-term and long-term rentals.

Lee and Mary Jo Neuschwander own property on a subdivision on Hayward Lake. The subdivision is under a restrictive covenant that provides: “There shall be no commercial activity allowed on any of said lots.” The Neuschwanders engage in short-term and long-term rentals of the house on their property. Their neighbors complained that these rentals constituted “commercial activity” forbidden by the restrictive covenant.

The Court ruled in favor of the Neuschwanders. The lead opinion (written by Chief Justice Roggensack, joined by Justices Gableman and Ziegler) stated that “commercial activity” is an ambiguous term that cannot be enforced under the covenant.

Two concurring opinions agreed with the majority ruling but differed on the reasoning behind it. Justice Abrahamson argued “commercial activity” is not ambiguous, and short-term rentals do qualify as a commercial activity. However, since the restrictive covenant governs what the occupants do on the property rather than how it is used by the owners, the restrictive covenant does not govern the Neuschwanders’ rentals.

In a grammatical analysis of the covenant’s language, Justice Kelly’s concurrence (joined by Justice R. Bradley) argued that the covenant is location specific, so the Court need not go further than the plain language that says commercial activity can’t take place on the land. The rental transaction takes place off the land, so it is not governed by the restrictive covenant.

Justice Walsh Bradley dissented, reasoning that the clear definition of “commercial activity” is an activity “having profit as a chief aim.” Walsh Bradley cites the Neuschwanders’ acquisition of property via a tax exchange, records of profits, and room tax paid to Hayward as evidence that the Neuschwanders rent the property with profit as a “chief aim.” Additionally, Justice Walsh Bradley expressed concerns similar to the lead opinion about the breadth of the covenant but criticized the majority’s broad ruling in the context of the growing issues surrounding short-term rentals.

Supreme Court Decision: Adams Outdoor Advertising v. City of Madison (Property Rights)

In a 4-3 decision, the Court held that an outdoor advertising company is not entitled to compensation from the City of Madison after the City constructed a bridge blocking visibility of a billboard. Justice Walsh Bradley wrote the decision, joined by Justices Abrahamson, Gableman, and Ziegler.

The City of Madison constructed a pedestrian bridge that blocked visibility from the Beltline Highway of the west-facing side of Adams Outdoor Advertising’s billboard. The billboard is nonconforming to a Madison City Ordinance stating that new outdoor advertising signs are prohibited, so Adams may keep but not modify the billboard.

Adams argued they were entitled to just compensation for private property taken for public use, under the Fifth Amendment of the U.S. Constitution and Art. 1 § 3 of the Wisconsin Constitution. According to Adams, the property interest in this case is the right to the legal nonconforming use of its property, which was taken when the bridge diminished the property’s sole use – visibility. The Court said that Adams still retains the right to legal nonconforming use of the billboard, despite the bridge placement, because the City did not physically alter Adams’ property.

The Court agreed with the City that the property interest in this case is Adams’ right to visibility of his property from a public road, which is not a recognized property right. Thus, a property interest does not exist for the purpose of just compensation under the U.S. and Wisconsin Constitutions. Since Adams failed to demonstrate a recognized property interest, the Court affirmed the summary judgement in favor of the City of Madison.

Justices R. Bradley, Kelly, and Chief Justice Roggensack dissented, writing that an unconstitutional taking occurs when government denies all economically viable use of a person’s property. In contrast to the majority, the dissent defined the property interest as the billboard permit. The dissent determined that the value of the property was in the permit for nonconforming use and the visibility of the billboard for advertisers wishing to rent space. Because the bridge eliminated the entire value of the permit for the west-facing side of the billboard, the bridge construction was a compensable taking.

U.S. DOJ Will Not Defend Affordable Care Act

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

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

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)

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

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”

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)

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.