Author: Hamilton

Joint Committee on Finance Approves Creation of the Office of Solicitor General

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Governor Walker’s budget recommendation provides the Attorney General authority to appoint, in the unclassified service, a Solicitor General and no more than three deputy solicitors general.  Further, the Governor’s recommendation provides the Attorney General authority to assign assistant attorneys general to assist the Solicitor General.  In executive action on Thursday, May 7, the Joint Committee on Finance approved creation of this office.  In a slight revision to the Governor’s recommendation, the committee voted to eliminate four vacant positions in the agency in exchange for creating these four new appointed positions.

The Wisconsin Civil Justice Council supported the Governor’s recommendation and argued creating a Solicitor General’s office will:

  • Allow the Attorney General to provide more direction to and supervision of litigation.
  • Allow the Attorney General to help ensure the state’s legal arguments, litigation strategy, and representation reflect his or her priorities.

Such an office is a well-established practice within the United States. The Legislative Fiscal Bureau, in its analysis of the Governor’s recommendation, noted that “[a]ttorney general offices in 42 states, as well as the District of Columbia, Puerto Rico, and the Virgin Islands, had [in March of 2014] a person appointed to oversee their offices’ civil appellate practice, and in some cases criminal appellate practice.”

Related news coverage: Committee OKs Solicitor General Office for DOJ.

Legislation Introduced to Change Interest Rates in Small Claims Court

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Under current Wisconsin law, plaintiffs who win favorable verdicts are usually entitled to recover interest on the monetary judgments awarded to them. There are two types of interest. There is post-judgment interest, which is meant to compensate the plaintiff for loss of the use of the money while a defendant appeals an unfavorable judgment. Post-judgment interest accrues from the time the judgment is made until the time the judgment is paid. There is also pre-judgment interest, which accrues from the time the plaintiff makes an offer of settlement until the settlement is paid.

Past Reform

Prior to 2011, pre- and post- judgment interest rates were set at 12 percent. Because appeals or settlement agreements and payment can take time, plaintiffs could receive a significant windfall due to the high interest rate. 2011 Senate Bill 14 signed into law as 2011 Act 69 changed the interest formula from 12 percent to the prime rate set by the Federal Reserve Board plus one percent. This ensures that plaintiffs do not receive a windfall while also ensuring that defendants pay a reasonable interest rate.

2015 Assembly Bill 95

Assembly Bill 95 (AB 95) seeks to change the interest rate for pre- and post –judgment interest for verdicts in small claims court from the formula created in Act 69 back to the 12 percent rate. The primary author of AB 95 is Representative Thiesfeldt. The bill was introduced on March 12 and was referred to the Assembly Committee on Judiciary. A public hearing on the bill was held on April 7. The primary author AB 95’s companion in the Senate, 2015 SB 76, is Senator Nass. SB 76 was introduced on March 23 and referred to the Senate Committee on the Judiciary and Public Safety.

Wisconsin Chiropractic Association Seeks New Cause of Action Against Insurance Companies

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Background:

In 1987 the state legislature passed the “Chiropractic Insurance Equality Statute” (Wis. Stat. § 632.87(3)) in the 1987-89 state budget. Prior to this law, insurers could treat chiropractors and chiropractic services differently from physicians and their services. Many insurance companies did not cover diagnosis and treatment of a patient by a chiropractor. This law was an attempt to remedy the situation by requiring that insurance companies treat chiropractors and physicians equally in a series of enumerated areas.

The Wisconsin Chiropractic Association (WCA) reports that its members have experienced a lack of compliance by the insurance industry and a lack of enforcement by the Wisconsin Office of the Commissioner of Insurance. Therefore the WCA has called for a modernization of Wis. Stat. § 632.87(3).

The Chiropractic Insurance Equality Modernization Act of 2015

State Senator Roger Roth (R-Appleton) and Representative Kathleen Bernier (R-Chippewa Falls) have agreed to author WCA’s Chiropractic Insurance Equality Modernization Act of 2015. The bill has yet to be introduced, but the WCA seeks to modernize various definitions in Wis. Stat. § 632.87(3) in order to modernize the language of the law to reflect current practices. However, the WCA also seek substantive changes to the law in order to correct the perceived lack of enforcement and compliance.

To attempt to secure compliance with the Office of the Commissioner of Insurance (OCI) the WCA is seeking to require insurers to submit an annual report to the OCI that demonstrates compliance with the law.

To attempt to stop violations by insurance companies the WCA proposes a new private right of action against insurance companies by parties with standing that do not comply with the law to recover “actual loses” resulting from the violations. Without the bill draft, the WCJC is unable to elaborate on the cause of action further at this time. We will keep you up-to-date as this bill moves forward.

For more information about the proposed bill click here.

JFC Takes First Executive Action on State Budget

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The Joint Finance Committee (JFC) held its first executive session this week on Governor Walker’s proposed 2015-2017 state budget. The committee took action in a number of areas, including the Secretary of State, the Public Service Commission (PSC), State Treasurer, Department of Revenue-Lottery Administration, Department of Administration – Division of Gaming, the Supreme Court, Circuit Courts, Court of Appeals, Judicial Council, Judicial Commission and Employment Relations Commission.

Read a summary of the proposals made by Governor Walker the state judiciary.

In the state judiciary budget, JFC rejected a number of Governor Walker’s proposals this week, including his proposal to eliminate the Judicial Council and reallocating appropriations of the Judicial Commission. In addition, the JFC took action on proposed block grants for the Supreme Court and Circuit Court.

Supreme Court Block Grant: JFC approved the governor’s proposal, on a party line vote, to consolidate GPR appropriations for the director of state courts and the state law library under the Director of State Courts and Law Library general program operations appropriation, funded at $10.3 million general purpose revenue (GPR) each fiscal year. The governor recommends these appropriations be changed from annual to biennial. However, the proposed consolidation of these appropriations does not include a decrease in revenue to these programs. Furthermore, the governor recommends transferring the appropriation for library collections and services to the Director of State Courts and Law Library general program operations appropriation. The block grant system is designed to give supreme court justices more flexibility to determine how to spend its appropriation.

Circuit Court Block Grant: JFC voted to approve the governor’s recommendation to create a circuit court block grant that would create individual appropriations from court interpreter fees, circuit court support payments and guardian ad litem costs. JFC modified the governor’s proposal slightly by delaying the consolidation of the appropriations until the second year of the biennium in order to provide the Director of State Courts time to determine how to implement the changes.

Also, following the governor’s initial budget recommendations it was revealed the budget did not include full funding increases and related costs provided for 278 court reporter positions. JFC resolved the error unanimously, and deleted the governor’s recommendation and maintained current law to provide funding for the court reporters.

Elimination of Surcharge Exemptions: Currently there are various exemptions from the civil clerk fee and justice information fee for failure to wear a seatbelt, smoking in a public place, failure to carry proof of motor vehicle insurance and failure to carry a handicap permit. The governor’s budget proposes to eliminate these exemptions in order to generate more revenue. JFC voted unanimously to delete the governor’s proposal from the budget.

Judicial Council: JFC voted 15-1 to reject the governor’s proposal to eliminate the Judicial Council. The JFC did change the council’s funding source.  The council is funded jointly through GPR and the supreme court’s program revenue (PR) appropriation.  The JFC voted instead to fund the council through the court’s PR appropriation. 

Judicial Commission: JFC unanimously approved rejecting the governor’s proposal to move the appropriations of the Judicial Commission under the Supreme Court’s purview.

Broadband Expansion Grants: The governor’s budget proposes to change the broadband expansion grants appropriation from a continuing appropriation to a biennial appropriation and authorizes the use of the universal serve fund revenues to fund the grant program. Currently, grant expenditures of up to $500,000 annually from a continuing appropriation, but the governor’s proposal would set the appropriation amount at $6 million biennially.

A motion put forward by Representative Amy Loudenbeck (R-Clinton) and Senator Alberta Darling (R-River Hills) modified the governor’s proposal by providing $1.5 million each year for four years, until 2018-19, instead of providing $6 million SEG in 2015-16 and an ongoing amount beginning in 2016-17. The motion was passed by JFC 16-0.

Funding for State Broadband Office: The governor’s budget proposed to increase expenditure authority of the PSC’s appropriation of the state broadband office by $250,000 PR annually. JFC passed a motion 15-1, put forward by Rep. John Nygren (R-Marinette), which increases expenditure authority by $125,000, instead of the governor’s proposed $250,000 increase.

Wind Energy Health Study: The governor’s budget included a proposal to allocate no more than $250,000 PR in 2015-16 to study health issues related to wind energy systems. The PSC would be required to submit its report a little over one year after the biennial budget goes into effect. JFC voted to approve a motion that would require the PSC to review studies previously conducted to ascertain the health effects of industrial wind turbines on people residing near a wind turbine. Unlike the governor’s provision, the motion did not include an increase of any appropriations to the PSC.

JFC is meeting on Friday, April 17 to take hold another executive session on the budget. The agenda includes:

  • Department of Health Services – Medical Assistance – Administration
  • Office of the Commissioner of Insurance
  • Wisconsin Technical College System
  • Department of Military Affairs
  • Department of Veterans Affairs
  • Board on Aging and Long Term Care
  • Board for People with Developmental Disabilities

Chief Justice Abrahamson Sues to Keep Her Position as Chief Administrator

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On April 7, Wisconsin voters chose to amend Art. VII §4(2) of the Wisconsin Constitution to allow state supreme court justices to elect the chief justice among themselves. The elected chief justice would have a two-year term. The amendment passed with 53% of the vote. The next morning Chief Justice Abrahamson sued her fellow justices and several other statewide elected officials in order to keep her position on the court.

In her complaint, Chief Justice Abrahamson is seeking a declaratory judgment from the court to determine when the new constitutional amendment will come into effect. She argues that the amendment is prospective only and therefore does not apply until the end of her elected term in 2019. Alternatively, she argues that a retroactive application of the amendment would change the terms of her office, which would violate the Due Process and Equal Protection clauses of the 14th Amendment of the U.S. Constitution. The Chief Justice argues that she has a property interest in her office and it is being taken without due process of law. She further argues that retroactive application of the amendment violates the Equal Protection Clause because no other elected official elected to a full term and still able to hold office would be “prematurely ousted from office on that basis.”

Chief Justice Abrahamson also filed a motion for a temporary restraining order to stop the amendment from taking effect prior to this litigation being resolved. District Court Judge (Wis. W.D.) James Peterson denied the motion because the Chief Justice did not show imminent harm.

Marquette University Law School Professor Rick Esenberg responded in a column in the Milwaukee Journal Sentinel where he rebuts the Chief Justice’s arguments. First, Professor Esenberg argues that the amendment does not apply retroactively because it goes into effect on the day the election results are certified, not prior to that and therefore it applies prospectively. Second, he contends that if applying the amendment after the election results are certified is considered retrospective, then it is not clear why applying the results at the chief justice’s term would not still be retrospective. This, according to Esenberg, is because “if a prospective application requires the existence of a vacancy in the office of the Chief Justice, there will be none until the incumbent either relinquishes the office or leaves the Court.” In replying to the Chief Justice’s alternative argument, Professor Esenberg explains that there is U.S. Supreme Court precedent that states that elected officials do not have a vested property interest in their office.

On Monday, April 13, several Wisconsin voters submitted a motion to intervene in the case arguing that if Chief Justice Abraham’s lawsuit succeeds that it will undermine the voters’ ability to direct democracy in Wisconsin. See the motion here and the supporting brief here. There motion to intervene was denied because the court found the voters’ interests are already adequately represented by the Department of Justice. You can read the ruling here.

A status conference for the case will be held on April 21.

2015 Senate Bill 69 – Amending Wisconsin’s Non-Compete Agreement Statute

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A bill that would amend Wisconsin’s current statute governing non-compete agreements has been introduced in the legislature and if passed would preemptively override the Wisconsin Supreme Court decision in Runzheimer Int’l v. Friedlen (2013AP1392), a case which the Wisconsin Civil Justice Council (WCJC) filed an amicus curiae brief in last fall.

Current Law

Wis. Stat. § 103.465 is Wisconsin’s current statute governing non-compete agreements. Current law allows employers to restrict the ability of employees to compete within a certain geographic area, in a certain professional field, for a limited amount of time after the termination of employment. These restraints are only enforceable if they are reasonably necessary for the protection of the employer. If one portion of the agreement is found unreasonable by the courts, then the entire agreement is unreasonable unless the clauses are separate enough that one can be struck down and others upheld and the non-compete can still work (this is a judicial innovation).

Recent Wisconsin Supreme Court Case

Last October, the state supreme court heard the case Runzheimer Int’l v. Friedlen (2013AP1392) dealing with non-compete agreements last October. In that case Runzheimer Int’l, Ltd. updated its non-compete agreement with its employees. Each at-will employee was informed that in order to continue employment at Runzheimer he or she had to sign a new non-compete agreement. David Friedlen signed the new non-compete agreement in exchange for continued employment and continued access to the Runzheimer incentive plan. Two years later Friedlen’s employment was terminated. He then went to work for a Runzheimer competitor.

Runzheimer argued that by working for a competitor Friedlen violated the non-compete agreement. Friedlen asserted that because he was an at-will employee, and therefore could have been terminated at any time, that the offer of continued employment and continued access to the incentive package is illusory.

The trial court agreed with Friedlen holding that continued employment and continued access to the benefits plan was not sufficient consideration to support a non-compete agreement.

The WCJC’s amicus curiae brief filed in the case argues that if the trial court was not overturned, then it will be harder for employers to protect their proprietary processes and information.

Proposed Changes

On March 5th Senator Paul Farrow introduced 2015 Senate Bill 69, which if passed, will amend Wis. Stat. § 103.456 in multiple significant ways:

  1. Including At-will Employment: First SB 69 would include continued at-will employment as valid consideration for a non-compete agreement provided that the employee’s pay and benefits are equal before and after entering the agreement. Continued employment is only valid consideration if it is contingent on the execution of the non-compete agreement (meaning the employer actually terminates the employment of those employees who refuse to sign the agreement). This would preemptively override the state supreme court decision in Runzheimer.
  2. Defining “Legitimate Business Interests”: The bill defines “legitimate business interests” as: (1) a trade secret, (2) substantial relationships with specific existing or prospective customers, (3) customer, patient, or client goodwill associated with a specific geographic area, (4) unique, extraordinary, or specialized training provided by the business or obtained as a result of employment.
  3. Time Restriction: The bill creates a rebuttal presumption that a time restriction on being employed in the same field as they previously worked of six months or less on the employee is presumed reasonable while a time restriction of more than two years is presumed unreasonable.
  4. Revisions by the Court: Changes made by the bill would enable Wisconsin courts to revise a non-compete agreement by amending sections that are considered unreasonable (known as “blue-penciling”) when necessary to protect the employer’s legitimate business interest(s).
  5. Prohibiting “Individualized Economic Hardship”: The changes also prohibit a court from considering “individualized economic hardship” of the former employee when determining whether the non-compete should be enforced or not. The changes also limit the ability of a court to use statutory interpretation to interpret the scope of the non-compete narrowly or to invalidate the non-compete on public policy rationales.

CAFTA Celebrates 10 Years

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The Class Action Reform Act (CAFTA) turned ten years old a month ago.  Introduced by Senator Chuck Grassley (R-Iowa) in early 2005, it passed overwhelmingly in both houses of Congress, and was signed into law on February 18, 2005.  This Act reformed two problem areas associated with class action lawsuits.

Review

First, CAFTA loosened diversity jurisdiction for certain class action lawsuits to reduce forum-shopping by plaintiffs.  Federal diversity jurisdiction was expanded to allow out-of-state defendants to remove a class action lawsuit filed in state court to federal court if: (1) at least $5 million aggregate amount-in-controversy, and (2) at least one member of the class is a citizen of a different state than one defendant, or (3) any member of the class is a foreign resident and any defendant is a domestic resident (or vice-versa).    Furthermore neither of the following requirements can apply: (1) 2/3 of the plaintiffs are from the state in which the lawsuit was originally filed, or (2) there are less than 100 plaintiffs in the lawsuit.  The effect of this innovation alleviated the burden for out-of-state defendants from litigating in “magnet states” where courts apply loose class certification standards which make class action lawsuits easier to initiate and settle.

Second, CAFTA changed the way “coupon settlements” are audited and redeined in plaintiffs’ lawyer fees in conjunction with these settlements.  A coupon settlement is when a defendant offers class members coupons or promises for products or services instead of a monetary settlement.   The problem with coupon settlements is that their value could not always be gauged by class members or judges, which led to concerns that the settlement may be of no value to class members.  CAFTA reformed this process by providing that an independent expert may audit coupon settlements prior to judicial approval of the settlement.  The Act also requires greater scrutiny by federal judges of attorney’s fees to determine if they are excessive in a coupon settlement.  The judge can reduce excessive fees.

Looking Forward

The U.S. Chamber of Commerce’s Institute for Legal Reform recently offered a series of proposals to strengthen CAFTA.   They include:

  1. Tying plaintiffs’ attorney fees to actual class member recovery in all class actions. This will protect plaintiffs against excessive fees.
  2. Expand federal jurisdiction to include class actions filed in state court that overlap with federal multidistrict proceedings (MDL proceedings). Federal law allows federal cases involving identical questions of fact pending in separate jurisdictions to be transferred to an MDL proceeding in order to coordinate and consolidate pretrial proceedings. Currently plaintiffs’ attorneys circumvent virtually identical MDL proceedings by keeping class actions in state court.  The Institute for Legal Reform suggests the creation of a mechanism to allow non-diverse state court class action claims to benefit from MDL proceedings similar to how CAFTA eliminated the need for complete diversity in class actions (See 28 U.S.C. 1332(2)(2)(A)-(C)).
  3. Change the standard of review that Federal District Courts use to determine if the $5 million minimum amount in controversy has been met when a party seeks removal of a class action lawsuit from state to federal court. Currently there is a circuit spit as to whether the correct standard of review for the amount in controversy requirement is the “legal certainty” standard or the “preponderance of the evidence” standard.  The Institute for Legal Reform suggests that Congress make it clear that the “preponderance of the evidence” standard was the correct test under CAFTA.
  4. Federal Rule of Civil Procedure 23(f) allows a party to appeal an order granting or denying class-action certification within 14 days after the order was entered. In recent years the federal appellate courts have only granted 1/4 of the petitions seeking interlocutory review.  The Institute for Legal Reform has found that the federal circuits vary widely on the percentage of petitions they grant interlocutory review.  This decline can be devastating to defendants who are often forced to settle after class certification even if the claims against them are meritless.  The Institute for Legal Reform recommends that Congress consider establish a uniform standard for Rule 23(f) or make interlocutory review mandatory.

For a more detailed analysis see the Institute for Legal Reform’s informational paper on the subject.

Right to Work Law in Litigation

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On March 10, 2015, the International Association of Machinists Local 1061 and two other unions filed a complaint against the State of Wisconsin alleging that the “Right to Work” bill passed by the legislature (2015 Act 1) constitutes an unconstitutional taking of the plaintiffs’ property which violates Wisconsin Constitution Art. I, § 13. The plaintiffs argue that they have a property interest in their collective bargaining agreement with their private sector employers because they include security clauses (mandatory dues payments) which are a monetary interest. The plaintiffs then argue that 2015 Act 1 deprives them of their property without just compensation by prohibiting unions from charging non-members for its bargaining services which the unions are still obligated to provide. They contend that they are obligated to continue to provide these services to non-members because minority unions (unions that represent less than half of eligible employees) are prohibited under Wis. Stat. § 111.06(1)(e) and because the NLRA § 9 requires representatives designated by a majority of employees in a bargaining unit be the exclusive representative of all of the employees in the unit for collective bargaining purposes. Local 1061 asked the court to find Act 1 unconstitutional and permanently enjoin the implementation and enforcement of the law.

On March 19, Dane County Circuit Court Judge William Foust rejected Local 1061’s request to grant a temporary injunction blocking Act 1 from taking effect. Judge Foust rejected the request because even though there is “some chance that the plaintiffs would succeed on the merits . . . irreparable harm is speculative.” Therefore the law will remain in effect as the case continues.

After Judge Foust’s announcement Attorney General Brad Schimel released a statement that said, “We remain confident the Right-to-Work law ultimately will be upheld as constitutional.”

Wisconsin AFL-CIO President Phil Neuenfeldt issued a statement that said, “Today’s ruling is another injustice for working people. A temporary injunction is intended to halt immediate irreparable harm. Make no mistake, Right to Work will harm all of Wisconsin’s workers by driving down wages and weakening safety standards across all industries and workplaces. Despite this ruling, workers will continue to organize and mobilize, through their unions, to speak out for better wages and workplace conditions for all of Wisconsin’s working people.”

The Wisconsin Department of Justice has 45 days from March 19 to respond to the complaint or file a motion to dismiss the case.

Assembly Passes Bill to Create Procedures to Repeal Invalid Rules

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By a partisan 63-36 vote, the Assembly passed AB 80, introduced by Representative Joan Ballweg (R-Markesan), which would establish “expedited” procedures for an agency to repeal a rule that the agency no longer has the authority to promulgate. Such rules can be rendered invalid because of the repeal or amendment of the law that previously authorized its promulgation. The bill as drafted, however, requires the agency to make the determination if a rule in no longer valid.

The process is considered expedited as it circumvents the statutory administrative rulemaking procedures set forth in Chapter 227. Under the bill, the agency submits a repeal petition to the Legislative Council staff. Then, the petition goes to the legislature’s Joint Committee for Review of Administrative Rules (JCRAR) for approval or rejection. If JCRAR approves, the agency may promulgate the proposed repealing rule.

The bill would also require agencies to submit a report to JCRAR each year that identifies rules for the following:

  • For which the authority to promulgate has been eliminated or restricted;
  • That are obsolete or that have been rendered unnecessary; or,
  • That are duplicative of, superseded by, or in conflict with another rule, a state statute, a federal statute or regulation, or a court ruling.

Finally, the bill requires the Department of Administration (DOA) to review new laws and assign the act for review by each agency that DOA determines may be affected by the act. The agencies in turn must determine if the act limits their authority, renders the existing rules invalid, or otherwise affects the agencies rules. The agency review could then start the process for repealing invalid rules.

Bill Eliminates At-will Employment; Requiring Employers Prove Compliance with Seven-Part Termination Test

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Democratic legislators are circulating a bill that would generally prohibit an employer, including the state, from discharging an employee unless the employer meets a seven-part test. One element of the test requires the employer prove by clear and convincing evidence that the employee committed a violation of work rules or performance standards that were uniformly enforced and properly noticed. The bill allows the terminated employee to sue the employer and then requires the employer to prove all seven tests were met.

Specifically, the bill considers it an actionable wrongful discharge of an employee (deemed “unfair” under the law) if any of the following applies:

  1. The work rule or performance standard was not made known to the employee prior to the discharge.
  2. The employer failed to enforce the work rule or performance standard in similar situations for a prolonged period.
  3. The employer did not conduct an interview with the employee, or hold a hearing, concerning the violation prior to the discharge, did not conduct that interview or hearing promptly after the violation, or did not provide the employee with a precise description of the conduct constituting the violation.
  4. The employer did not prove by clear and convincing evidence that the employee committed the violation.
  5. The violation is the same as or substantially similar to a violation committed by another employee who was not discharged for committing the same or a substantially similar violation.
  6. Unless the violation is egregious, the employer failed to first apply a less drastic form of discipline for the violation.
  7. The discharge is disproportionate to the gravity of the violation, taking into consideration any mitigating or aggravating circumstances.