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Papa v. DHS (Administrative Rules)

Posted on by Hamilton

In Papa v. DHS (2016AP2082/2017AP634), the court held that a challenge to a Wisconsin Department of Health Services (DHS) policy failed because the policy was not an administrative rule with the force of law.

Medicaid-certified nurse Kathleen Papa and Professional Homecare Providers, Inc. (PHP) filed the instant claim against DHS regarding Topic #66 in DHS’s Medicaid Provider Handbook. Topic #66 states that Medicaid providers must “meet all applicable program requirements” for reimbursement. If providers fail to meet all requirements, DHS can recoup payments from the providers.

Papa and PHP argued that Topic #66 was an illegal unpromulgated administrative rule and that the policy exceeded DHS’s explicit statutory authority under Wis. Stat. Ch. 227. The court held that Topic #66 is not an unpromulgated administrative rule because it does not have the “force of law” (Wis. Stat. § 227.01(13)). According to the court, Topic #66 simply summarizes existing law found elsewhere. Furthermore, PHP failed to show that DHS was enforcing Topic #66 like a rule. In recouping payments, DHS was not enforcing Topic #66 but was enforcing other statutes and rules referred to in the Topic.

Because the court found Topic #66 was not an administrative rule, Papa and PHP could not obtain a declaratory judgement via Wis. Stat. Ch. 227 judicial review of administrative rule proceedings.

In a dissent, Judge Reilly agreed that Topic #66 is not an administrative rule. However, the dissent argued Papa and PHP should be entitled to relief based on that fact. Under Topic #66, DHS was enforcing a requirement and recouped payments without legal right by statutes or properly promulgated administrative rules, in violation of 2011 Act 21 requirements in Wis. Stat. Ch. 227.

Tarrant v. DHS (Medicaid Eligibility)

Posted on by Hamilton

In Tarrant v. DHS (2018AP1299), the Court of Appeals District II held that testamentary trusts are countable unearned income for determining Medicaid eligibility.

The state Department of Health Services (DHS) denied Christine Tarrant’s application to renew medical assistance because her monthly payments from a testamentary trust combined with other income exceeded Medicaid eligibility limits. Tarrant appealed DHS’s decision, arguing that testamentary trusts are not “unearned income” countable toward determining Medicaid eligibility.

The court agreed with DHS and ruled against Tarrant. Federal law and state guidance in the Medicaid Eligibility Handbook do not specifically include testamentary trusts as countable unearned income, but the lists of countable unearned income sources are not exclusive. The regulations do include trusts as sources of unearned income, and the court rejected Tarrant’s argument that testamentary trusts should not be included because this particular type of trust is not specifically named. Under the court’s decision testamentary trusts are countable unearned income for DHS in determining Medicaid eligibility.

Secura Insurance v. Super Products, LLC (Economic Loss Doctrine)

Posted on by Hamilton

In Secura Insurance v. Super Products, LLC (2018AP1600), the Court of Appeals District II held that the economic loss doctrine bars recovery for damage to contracted property, even if there was injury to other property.

Wisconsin Utility Exposure purchased an excavator from Super Products. The excavator caused a fire that damaged the excavator itself and a variety of other items. Secura, Wisconsin Utility Exposure’s insurer, paid for the damages to its insured then filed the instant negligence lawsuit against Super Products. Super Products sought to dismiss the claims under the economic loss doctrine.

The economic loss doctrine typically bars lawsuits seeking to recover solely economic losses arising from the nonperformance of a contract, in this case the defective purchased product. Damages to “other property,” in this case the variety of other items damaged in the fire, are exempt from the economic loss doctrine and can be recovered. Secura argued the economic loss doctrine did not apply because the damage to the other property allows for recovery for the defective product.

The court rejected Secura’s reading of previous case law and held that the economic loss doctrine barred Secura’s claims for recovery of damages to the excavator. Secura could recover damages for injury to the other property, but that exempt claim did not open damages to the contracted property for recovery.

WCJC and Industry Partners Submit Comments on DHS PFAS Standards

Posted on by Hamilton

Wisconsin Civil Justice Council, as part of the Water Quality Coalition, recently submitted a letter and comments to the Wisconsin Department of Health Services (DHS) regarding their strict recommended groundwater standards for two PFAS chemicals, PFOA and PFOS. If promulgated as an enforceable rule, the standards would be costly to Wisconsin industry and would open up the state for frivolous lawsuits.

PFOA and PFOS are the most extensively produced and studied of a class of chemicals referred to as PFAS (per- and polyfluoroalkyl substance), which are found in many everyday products, including nonstick pans, cleaning products, paints, and firefighting foam. Existing best available science does not establish adverse health effects to humans from PFOA and PFOS exposure at current levels.

DHS, along with the Department of Natural Resources (DNR) and Department of Trade, Agriculture & Consumer Protection, announced in June a recommended groundwater standard of 20 parts per trillion (ppt) combined for PFOA and PFOS. The recommendation of 20 ppt is significantly below the federal Environmental Protection Agency’s (EPA) health advisory standard of 70 ppt. EPA also recently released a draft interim guideline for groundwater standards of 70 ppt.

Wisconsin law requires DHS to use EPA values for health standards if they are available, unless there is scientifically valid technical information that was not considered when the federal value was established (Wis. Stat. § 160.13(2)(b)). However, other studies show little effect on human health from PFOA and PFOS, even at much higher exposure levels than 20 ppt. Out of 19 other states regulating PFAS, only Vermont has set a standard as strict as the one proposed by Wisconsin’s DHS. New Jersey has an interim recommendation of 10 ppt.

DHS also recommends that the preventive action limit for PFOA and PFOS be set at 10 percent of the enforcement standard in accordance with Wis. Stat. § 160.15(1)(c). At 2 ppt, the preventive action limit would be the most strict regulation on PFOA and PFOS in the world. Preventive action limits are initial regulatory limits used to inform DNR about potential groundwater contamination and minimize the level of substances “to the extent technically and economically feasible” to prevent further contamination.

Costs imposed on the regulated community by these recommended standards could be significant. With no evidence of adverse human health effects resulting from PFOA and PFOS exposure, the recommended standards would not provide public health protections and instead would impose significant, unnecessary costs on Wisconsin businesses.

DHS held a comment period on the guidance documents related to these recommendations for just one day earlier this month. Under the Ch. 227.112 guidance documents requirements created in the 2018 extraordinary session legislation, comment periods must be 21 days, unless the governor approves a shorter period. In this case, the governor approved just a one day comment period on the PFOA and PFOS standards.

The DHS recommendations now must go through the DNR rulemaking process, with more opportunities for public input, before they are enforceable. DNR has not yet released a scope statement to begin promulgating the rules.

 

Wisconsin Redistricting Case Dismissed Following U.S. Supreme Court Decision

Posted on by Hamilton

The U.S. Supreme Court recently held in Rucho v. Common Cause that partisan gerrymandering claims are nonjusticiable political questions. As a result, plaintiffs and defendants agreed to dismiss the redistricting case Gill v. Whitford, which challenged Wisconsin’s state legislative district maps.

The 5-4 Supreme Court decision dismissed the plaintiffs’ arguments that redistricting maps in North Carolina and Maryland violated the First Amendment, the Equal Protection Clause, the Elections Clause, and Article I § 2 of the U.S. Constitution. The Court held that the Constitution does not prohibit partisan intent in redistricting. Furthermore, the court could not determine any judicially enforceable limits on partisan motivation in districting maps and instead left the option for reforms to redistricting processes to Congress and state legislatures.

In 2018, after the Supreme Court initially ruled they lacked standing, Wisconsin plaintiffs in Gill refiled their federal redistricting case against the 2010 map drawn by Assembly Republicans. The plaintiffs, all Democratic voters from Wisconsin, argued similarly to the Rucho plaintiffs 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.

While the Supreme Court’s initial Gill decision addressed standing, the Rucho decision addressed whether the merits of partisan gerrymandering claims are justiciable questions. After the Rucho court declared partisan gerrymandering claims nonjusticiable, the Wisconsin plaintiffs and defendants in the Gill both agreed to dismiss the refiled case without deciding the merits.

As a result of the Rucho decision, any reforms to redistricting processes in Wisconsin must come from the legislature. Wisconsin Democrats have introduced a bill that would authorize the nonpartisan Legislative Reference Bureau to draw redistricting maps. However, the bill is unlikely to move in the Republican-controlled Legislature.

Wisconsin Supreme Court Rules DPI and Superintendent Must Comply With Act 21 and REINS Act

Posted on by Hamilton

In one of the more important cases of the 2018-19 term, the Wisconsin Supreme Court ruled on June 25 in Koschkee v. Taylor that the Department of Public Instruction and Superintendent of Public Instruction must comply with rulemaking requirements in the 2017 Regulations from the Executive In Need of Scrutiny Act (REINS Act) and 2011 Act 21.  The decision overturned the 2016 case Coyne v. Walker. Background on the case.

In the Koschkee v. Taylor decision, a 4-2 Wisconsin Supreme Court held that Act 21 and the REINS Act, specifically, provisions requiring Department of Administration and gubernatorial review of administrative rules, apply to rulemaking by the Department of Public Instruction and Superintendent of Public Instruction.  Wis. Const. Art. X § 1 provides the Superintendent constitutional authority to supervise public instruction. However, when the Superintendent promulgates rules via the Department, it is exercising legislative power delegated to it by the legislature, not its constitutional supervisory power. Therefore, giving the governor and Department of Administration the authority to review the Superintendent and Department of Public Instruction’s rulemaking does not interfere with the Superintendent’s constitutional supervisory authority.

The Koschkee decision overturns Coyne, which challenged Act 21 as unconstitutional as applied to the Department of Public Instruction and the Superintendent. While a majority agreed Act 21 was unconstitutional, there was no majority opinion written by the Wisconsin Supreme Court in Coyne.

In a concurring opinion in Koschkee, Justice R. Bradley criticizes the portion of the decision stating that administrative rulemaking is necessary to address the complexity of government. Justice Bradley expresses separation of powers concerns with state and federal courts allowing legislatures to defer their authority to a nonelected “fourth branch” of government. The concurring opinion suggests the court take a closer look at delegation of legislative power to agencies if an appropriate case arises.

Justice Kelly’s concurring opinion disagrees with the same paragraph of the court’s decision (paragraph 17) related to the administrative state but does not elaborate on his reasoning.

In a dissent, Justice Walsh Bradley (joined by Justice Dallet) argue the court should have applied stare decisis and kept the Coyne decision intact. As Justice Abrahamson argued in Coyne, Act 21 unconstitutionally gives the governor superiority over the Superintendent’s constitutional supervisory powers.

 

Enbridge Energy Co., Inc. v. Dane County (Conditional Use Permit)

Posted on by Hamilton

In Enbridge Energy Co., Inc. v. Dane County (2019 WI 78), the Wisconsin Supreme Court held that counties may not include unenforceable permit conditions on conditional use permits.

Dane County issued Enbridge Energy a conditional use permit to expand the volume of oil pumped through a local Enbridge pipeline. The permit contained conditions requiring Enbridge to maintain two liability insurance policies. Shortly after Dane County issued the permit, the legislature passed in the 2015-16 state budget (2015 Act 55) a provision precluding counties from requiring pipeline operators to obtain insurance if the operators already carry general liability insurance including coverage for sudden and accidental pollution liability. After the law change, Dane County retained the previous insurance conditions in Enbridge’s permit, but added language indicating that the new state law made the conditions unenforceable.

Enbridge filed the instant lawsuit asking the court to remove the unenforceable insurance conditions. Additionally, several Dane County property owners filed a lawsuit asserting that Enbridge was not in compliance with the new state law insurance requirements, so they could enforce the conditions.

The Supreme Court determined that Enbridge did have the requisite insurance coverage, both comprehensive general liability and sudden and accidental pollution liability, to comply with the Act 55 requirements. Therefore, Act 55 applies and precludes Dane County and the landowners from enforcing additional insurance conditions. The Supreme Court then concluded that the circuit court properly struck the unlawful conditions from the permit, as courts can modify conditional use permits under Wis. Stat. § 59.694(10). The decision allows Enbridge to proceed with its pipeline activity without the unlawful permit conditions and without having to start over in the conditional use permit process.

In a dissent, Justice Ann Walsh Bradley argued that Enbridge did not carry the statutorily required sudden and accidental pollution liability insurance. Therefore, Act 55 preemption provisions did not apply, and Dane County could enforce the additional insurance conditions. The dissent argued Enbridge did not show it carried the proper insurance. Under a definition of “sudden” used in a previous case, the policy must cover both “abrupt and immediate” and “unexpected and unintended” pollution events. According to the dissent, the policy covered “abrupt and immediate” but not “unexpected and unintended” events. Without the requisite insurance, Dane County could enforce the additional permit conditions without state law preemption under Act 55.

Justice Abrahamson and Dallet did not participate in the case.

 

 

L.G. v. Aurora Residential Alternatives, Inc. (Compelled Arbitration)

Posted on by Hamilton

In L.G. v. Aurora Residential Alternatives, Inc. (2019 WI 79), the Wisconsin Supreme Court held that a circuit court’s order denying a motion to compel arbitration is a final order under Wis. Stat. § 808.03(1), allowing the order to be appealed.

The plaintiff patient filed the underlying lawsuit in this case against Aurora regarding an incident that occurred in an Aurora residential facility. However, the plaintiff had previously signed an arbitration agreement with Aurora. Aurora filed a motion in circuit court to stay the litigation pending arbitration pursuant to the agreement, following procedures outlined in Wisconsin’s Arbitration Act (Wis. Stat. § 788.02). The circuit court denied the motion to stay and compel arbitration. The instant issue before the Supreme Court was whether that circuit court order on arbitration was a final order that Aurora could appeal.

According to Wis. Stat. § 808.03(1), an appealable final order is one that “disposes of the entire matter in litigation…whether rendered in an action or special proceeding.” The Supreme Court’s analysis determined Aurora’s motion to stay pending arbitration was a “special proceeding,” not an action, because it addressed an issue separate from the merits of the underlying action. Because the circuit court’s decision on the arbitration motion was a separate “special proceeding,” the order need not address the merits of the entire underlying action in order to “dispose of the entire matter” pursuant to § 808.03(1). Therefore, circuit court orders on arbitration motions under Wis. Stat. § 788.02 are final and appealable.

The court decided the case 5-0, with Justices Abrahamson and Walsh Bradley not participating.

Pranke Holding LLC v. DOT (Eminent Domain)

Posted on by Hamilton

In Pranke Holding LLC v. DOT (2018AP1646), the Court of Appeals District I held that a business was not due rental losses after an eminent domain taking on its property.

The Department of Transportation (DOT) acquired part of Pranke Holding’s property through eminent domain. The taking closed off one of four access points to the property. Subsequently, a restaurant leasing the building on the Pranke property terminated its lease, citing DOT’s eminent domain activities.  When Pranke was unable to rent the building after the restaurant terminated the lease, Pranke filed a claim for rental losses as a result of an eminent domain taking under Wis. Stat. § 32.195(6).

Section 32.195(6) provides that reimbursement for rental losses is due when 1) the losses are “directly attributable” to the taking and 2) the losses exceed normal vacancy in the area. The court of appeals found that Pranke did not meet the § 32.195(6) requirements. According to the court, the letter terminating the restaurant’s lease with Pranke did not establish that the eminent domain taking was “directly attributable” to its terminating the lease. Pranke also did not show sufficient evidence that its rental losses exceeded the “normal rental or vacancy experience for similar properties in the area.” Because Pranke did not meet the statutory requirements, DOT did not owe rental losses for the eminent domain taking.

Mallett v. LIRC (Worker’s Compensation)

Posted on by Hamilton

In Mallett v. LIRC (2017AP1601), the Court of Appeals District I held that part of a worker’s compensation claim was barred by issue preclusion but directed further litigation on the plaintiff’s other claims.

Gregory Mallett filed and received awards for worker’s compensation claims in both 1981 and 1983. LIRC denied a 2007 claim that the 1983 injury and previous work had contributed to Mallett acquiring an occupational disease. Mallett filed the instant claim from the Work Injury Supplemental Benefits Fund in 2014, alleging his work in 1984, in addition to the 1981 and 1983 injuries, caused an occupational disease.

The Labor and Industry Review Commission (LIRC) agreed with the Fund that issue preclusion barred Mallett’s claims because the 1981 and 1983 injuries had already been litigated and because Mallett lacked evidence to prove his 1984 work caused the occupational disease.

The appeals court partially set aside the LIRC decision. The court agreed that issue preclusion barred Mallett’s argument that the 1981 and 1983 injuries were a cause of the occupational disease. Those claims had already been litigated and assessed fairly by LIRC. However, the court found Mallett’s alleged injuries stemming from his 1984 work had not yet been litigated and remanded the case to LIRC for additional fact finding.