Stafford files U.S. Supreme Court amicus brief on scope of 5th Amendment Self-Incrimination Clause

Published by Jeffrey A. Mandell, Erika Bierma on | Permalink

The Fifth Amendment to the U.S. Constitution guarantees that “no person . . . shall be compelled in any criminal case to be a witness against himself.” U.S. Const. amend. V. In February, the Supreme Court of the United States will hear City of Hays, Kansas v. Vogt (No. 16-1495), a case about the scope of that guarantee.

The Vogt case asks “whether the prosecution’s use of a defendant’s prior compelled statement used in a preliminary hearing as evidence to his guilt violates the Fifth Amendment?” Stafford Rosenbaum filed a brief on behalf of the National Association of Criminal Defense Lawyers (NACDL) and the American Civil Liberties Union (ACLU) urging the Court to answer the question with a “yes.”

Factual and Procedural Background

Vogt was a police officer for the City of Hays. In 2013, he applied for a police job with the City of Haysville. (Despite similar names, the cities are almost 200 miles apart.) During the hiring process, Vogt disclosed that he had kept a knife that he obtained while working as a Hays police officer. Haysville offered him a job, conditioned upon his returning the knife to the Hays police department.

When Vogt returned the knife, the Hays police chief opened an internal affairs investigation to determine whether the circumstances constituted a violation of department policy. As required by his job with the Hays police department, Vogt cooperated with the inquiry, including by giving a statement about his possession of the knife. Vogt then gave his two-week notice. The officer leading the internal investigation required Vogt to provide a more detailed statement. The police chief forwarded Vogt’s second statement to the Kansas Bureau of Investigation (KBI), which opened a criminal investigation. That investigation led to two felony criminal charges against Vogt. As a result of those charges, Haysville withdrew its job offer to Vogt.

Because the charges against Vogt were felonies, Kansas law entitled him to a preliminary hearing. The purpose of such a hearing is for a judicial officer to determine whether the prosecution has enough evidence to show probable cause and move forward to trial. At the preliminary hearing, the prosecution used the statements Vogt provided during the Hays police department’s internal investigation. The district court dismissed the charges because it concluded that, even with Vogt’s statements, the prosecution lacked probable cause to proceed.

Vogt then filed a federal civil rights suit, alleging that the use of statements he made during his employer’s internal investigation to initiate a criminal case against him violated the Fifth Amendment’s guarantee against self-incrimination. The district court rejected this theory. But, on appeal, the U.S. Court of Appeals for the Tenth Circuit held that the Fifth Amendment applies to preliminary hearings so that Vogt’s suit should have been allowed to proceed. The Supreme Court granted a writ of certiorari to resolve a disagreement among various federal courts of appeals about the scope of the self-incrimination guarantee.

The arguments made by NACDL and the ACLU

As amici, NACDL and the ACLU presented three arguments to the Court.

First, the constitutional text and Supreme Court precedent support the application of the Self-Incrimination Clause to preliminary hearings. The term “criminal case” means “an action, cause, suit, or controversy at law” or “a question contested before a court of justice.” Chavez v. Martinez, 538 U.S. 760, 766 (2003) (plurality) (citing Blyew v. United States, 13 Wall. 581, 595 (1872)). While Chavez did not pinpoint when a “criminal case commences” for Fifth Amendment purposes, it clearly did not limit the guarantee against use of compelled statements to trial, stating that “‘[a] criminal case’ at the very least requires the initiation of criminal proceedings.” Id. at 766. It follows that an adversarial, evidentiary proceeding held after a criminal complaint has been filed by a prosecutor, designed for a judicial officer to determine whether there is sufficient evidence proceed to trial, is part of the criminal case at which compelled self-incriminating statements may not be used.

The Self-Incrimination Clause also applies by its own terms because a preliminary hearing is a stepping stone to conviction. When a preliminary hearing is held, the judicial officer’s finding of probable cause is a necessary precondition for the prosecution to proceed to criminal conviction. That means that the preliminary hearing—assuming the prosecution prevails at that hearing—moves the defendant one step closer to conviction; and if the prosecution does not prevail the criminal case is over. Using a defendant’s compelled statement against him in such a hearing is, therefore, part and parcel of the defendant’s path to conviction.

Second, a determination that the Self-Incrimination Clause does not apply to preliminary hearings would severely prejudice defendants. Preliminary hearings require only probable cause—a much lower bar than the beyond-a-reasonable-doubt standard used at criminal trials. Allowing a prosecutor to clear that bar with a defendant’s self-incriminating statement undermines the Constitution and the purposes of a preliminary hearing. Allowing cases to proceed by using a defendant’s self-incriminating statement is inefficient and unjust. Postponing consideration of challenges under the Fifth Amendment harms defendants and distorts the criminal justice system. Requiring a defendant to wait after the preliminary hearing to adjudicate the admissibility of their own statement is too late. Some defendants will plead guilty long before reaching such an adjudication. This is true because very few criminal cases—fewer than a handful of every 100 prosecutions—proceed to trial. As a result, a preliminary hearing may be the only “day in court” that a defendant has.

Third, none of the concerns cited by the U.S. Department of Justice in support of its position that the Tenth Circuit decision should be reversed can withstand scrutiny. Moreover, the government’s position carries a chilling implication. By the Government’s logic, nothing would prevent a prosecutor from compelling a defendant to take the witness stand and forcing him to testify at a preliminary hearing, as long as the testimony was not used at trial. Such a scenario is inimical to the absolute protections the Court has long understood the Self-Incrimination Clause to confer. A ruling that countenances such a practice would be a substantial and deleterious change in constitutional doctrine.


This case presents a significant self-incrimination question. The Court’s decision could significantly affect Fifth Amendment jurisprudence. Oral argument will be held February 20. Stafford Rosenbaum’s Appellate Practice Blog will report on further developments as the case progresses


Published by Richard Latta, Gregory M. Jacobs on | Permalink

On December 12, 2017, the Wisconsin Court of Appeals addressed a civil dispute arising from the high-profile criminal embezzlement scheme committed by Koss Corporation Vice President of Finance, Sujata (“Sue”) Sachdeva.  At issue were allegations Koss made against its bank seeking recovery on the theory that the bank committed bad faith in not detecting the embezzlement scheme. See Koss Corp. v. Park Bank, No. 2016AP636 (Wis. Ct. App. Dec. 12, 2017).

Koss’s complaint alleged that Park Bank of Milwaukee, Wisconsin, violated Wisconsin’s Uniform Fiduciaries Act (“UFA”) by allowing Ms. Sachdeva to embezzle about $34 million from Koss accounts for personal use. Ms. Sachdeva used a variety of ways to embezzle the $34 million, including requesting cashier’s checks and cashing checks made out to “petty cash,” as well executing wire transfers to pay personal credit card bills.  Koss alleged the bank’s failure to discern Ms. Sachdeva’s embezzlement scheme amounted to a violation of Wis. Stat. § 112.01(9), which exposes a bank to liability if it permits transactions “with knowledge of such facts that [the Bank’s] action in paying the check amounts to bad faith.”

The bank moved for summary judgment, asserting that no material facts established it had intentionally or deliberately allowed the transactions to occur in bad faith.  At the circuit court, the court held that Koss had failed to cite any evidence that the bank “intentionally ignored Sachdeva’s embezzlement,” without which there was no way to show the bank acted in bad faith.  The court further noted that the circumstances established only the bank may have been negligent in failing to uncover the fraudulent conduct, but that one of the purposes in adopting the UFA was to eliminate negligence claims against banks arising from transactions where employees or other persons acting as an agent of a depositor commit an act causing a loss to the depositor. 

On appeal, Koss took the position that, although the bank lacked actual knowledge of Ms. Sachdeva’s embezzlement scheme, the circumstances raised enough red flags that a factfinder could conclude that the bank’s failure to detect the fraudulent transactions amounted to bad faith under the UFA.  In support of its position, Koss cited to (1) the large volume of improper checks—adding up to millions of dollars—Sachdeva requested, (2) the bank allowing unauthorized Koss representatives to request, endorse, and pick up checks, (3) the bank’s acceptance of checks payable to companies with cryptic initials (e.g., “N.M., Inc.” for Neiman Marcus and “S.F.A., Inc.” for Saks Fifth Avenue), (4) after-the-fact deposition testimony from a bank employee that the large number of cashier’s checks requested were “strange,” (5) Ms. Sachdeva’s testimony that she chose the bank at issue because of the ease in which she could conduct her fraudulent transactions, and (6) the bank’s failure to implement and/or enforce proper fraud-detection policies and procedures.

Despite this evidence, the Court of Appeals affirmed the circuit court by dismissing Koss’ claim of bad-faith.  Consistent with cases from other jurisdictions interpreting the UFA, our Court of Appeals concluded that to effectively bring a claim of bad faith under the UFA a depositor needs “proof of two elements: (1) circumstances that are suspicious enough to place a bank on notice of improper conduct by the [employee embezzling the depositor’s money on deposit]; and (2) a deliberate failure [by the bank] to investigate the suspicious circumstances because of a belief or fear that such inquiry would disclose a defect in the transaction at issue.”  Id., ¶ 27.

While the Appeals Court acknowledged that Koss cited ample evidence to establish the bank’s negligent failure to investigate and discover Ms. Sachdeva’s embezzlement scheme, it concluded that Koss failed to adduce facts sufficient to allow a factfinder to determine that the elements of proof for bad faith under the UFA were satisfied:

Although the transactions Sachdeva engaged in may appear suspicious or odd in hindsight, Koss has not cited any evidence to indicate that, in the larger context of Koss’s banking practices and the banking practices of Park Bank’s other corporate clients, the transactions were suspicious enough to put Park Bank on notice of Sachdeva’s misconduct.  Koss also fails to cite any evidence indicating that Park Bank deliberately declined to investigate Sachdeva’s transactions due to a fear that further inquiry would disclose defects in them.

Id., ¶ 51.  The Appeals Court then concluded that allowing Koss’ claim to proceed would be contrary to the UFA’s purpose of insulating banks from the misconduct of a depositor’s employees.  Id., ¶ 52.

This decision highlights how important it is for businesses to adopt and enforce internal monitoring protocols for financial activities by their employees and agents.  By adopting the UFA, Wisconsin has allocated the risk of loss stemming from fraudulent financial transactions to businesses rather than banks in all but the most egregious circumstances.  Businesses failing to take notice of suspicious financial activities (1) not only expose themselves to the risk of severe financial losses, but also (2) if the business has publicly traded securities then they may expose themselves to possible violations of federal securities law for failing to properly ensure the accuracy of their financial reporting.  See id., ¶ 12 n.4 (noting an adverse judgment entered against Koss pursuant to SEC lawsuit).

Please feel free to contact Greg Jacobs or Rich Latta if you would like to discuss any of the matters discussed above.

While a law firm with which Mr. Latta was previously affiliated may have provided legal representation of a party mentioned in Koss Corporation v. Park Bank, Mr. Latta did not represent any party involved and the thoughts expressed herein are strictly his own.


Published by Jeffrey A. Mandell, Matthew Dregne on | Permalink

A new law signed by Governor Walker makes major changes to how private property can be regulated in Wisconsin. This new law, 2017 Wisconsin Act 67 (the “Act”), makes broad changes. This post addresses two aspects of the Act: changes to conditional use permits and preemption of clauses that merge substandard lots.

Conditional use permits

Before the Act, conditional use permit regulations were a flexible zoning tool that allowed potentially objectionable land uses, but only if the community determined that the use would meet specified standards. For example, a community might use a conditional use process to authorize a restaurant or nightclub in a neighborhood business district, but first require the applicant to demonstrate that the proposed operation will not lead to noise, traffic, or other conflicts with neighboring properties.

Act 67 changes or casts doubt upon several longstanding practices associated with conditional use regulations and proceedings. Historically, Wisconsin courts have upheld ordinances that contained generalized standards allowing the community to consider a proposed conditional use’s impacts on public health, safety, and general welfare. Plan commissions and governing bodies have had the right to consider a broad range of testimony from concerned citizens. Communities have had the right say no to a proposed conditional use, if the applicant failed to convince the community that the proposed use met specified community standards. The Act alters all of these practices.

First, the Act requires that standards governing conditional uses be “reasonable and, to the extent practicable, measurable….” This new requirement is certain to spark litigation. We anticipate legal challenges to generalized health, safety, and welfare standards that are common in zoning codes but leave significant discretion to municipal decision-makers. Especially in the short-term, communities will likely struggle to identify standards that will withstand legal scrutiny when challenged under the Act. Even before the courts weight in, it is clear that the Act reduces the flexibility local governments had under prior law.

Second, the Act prohibits a community from basing a conditional use permit decision on “personal preferences or speculation.” Much public testimony will be subject to challenge under this language. Public testimony from citizens about the impact of a proposed conditional use will be off-limits, unless it is directly tied to “reasonable” and “measurable” standards. The Act enables permit applicants to challenge adverse public testimony on the theory that it improperly expresses personal preferences or contains speculative personal opinions. Members of the public are not always experts in science or the law, and it may prove difficult for many to provide testimony that meets the requirements of the Act.

Third, the Act instructs that, where an applicant “meets or agrees to meet all of the requirements and conditions specified” in the ordinance or imposed by the decision-maker, the conditional use permit must be granted. This language appears to put the burden on the community to prove that a proposed conditional use cannot meet “reasonable” and “measurable” standards. This reverses prior law, which placed the burden on the applicant to show that it would meet the community’s standards.

In light of these changes, Wisconsin communities will likely reevaluate their ordinances—and even the viability of conditional use regulations. The Act may significantly decrease the incidence of the conditional use process. It may prove much easier for local governments to delete potentially objectionable land uses from their zoning codes than to develop new conditional use standards and practices that comply with the Act.

Merger clauses

The Act also creates new statutory provisions, Wis. Stat. § 66.10015(4) and § 227.10(2p), that preempt any ordinance, rule, or action requiring lots to be merged without the consent of the owners. Like the treatment of conditional use permits, this is a significant departure from settled law.

As the U.S. Supreme Court noted earlier this year, merger provisions are “legitimate exercise[s] of government power, as reflected by [their] consistency with a long history or state and local merger regulations that originated nearly a century ago.” Murr v. Wisconsin, 137 S. Ct. 1933, 1947 (2017). Merger provisions are also widespread in Wisconsin, in use by more than two-thirds of Wisconsin counties. See Brief of Amici Curiae Wis. Counties Ass’n, et al. at 7, Murr v. Wisconsin, No. 15-214 (U.S.) (filed June 16, 2016).

The state’s blanket preemption of merger provisions will remove a major tool that local governments and regulatory agencies have used to reduce the number of properties too small to comply with land-use restrictions. “When States or localities first set a minimum lot size, there often are existing lots that do not meet the new requirements, and so local governments will strive to reduce substandard lots in a gradual manner.” Murr, 137 S. Ct. at 1947. As the Supreme Court recognized, one “classic way of doing this” is “by implementing a merger provision, which combines contiguous substandard lots under common ownership, alongside a grandfather clause, which preserves adjacent substandard lots that are in separate ownership.” Id. The Act’s preemption of merger provisions removes this tool to ameliorate the number of substandard lots.

Moreover, the Act favors substandard lots over minimum lot-size regulations. It creates another new provision, Wis. Stat. § 66.10015(2)(e), which prohibits a local government from taking any action “that prohibits a property owner from…conveying an ownership interest in a substandard lot [or] using a substandard lot as a building site.…” Property regulators are thus restricted in two ways: they cannot restrict the development of properties that do not meet current restrictions and they cannot reduce the number of such properties through merger. Under the new rules, once a property has been created and recognized by law, it is largely immune from later-enacted restrictions on development or sale.

Municipalities should review their ordinances for provisions restricting substandard lots or providing for merger of such lots that are now inconsistent with state law.

While Act 67’s changes are substantial, they do not go as far as the sponsors of the legislation initially proposed. The legislation that became Act 67—2017 Assembly Bill 479—was initially introduced as an effort to reverse the outcome in Murr. There, Wisconsin state courts and then the U.S. Supreme Court affirmed the use of land use regulations and a merger clause as proper exercises of regulatory authority to protect environmentally sensitive land along the shores of the Lower St. Croix River. (For more about the Murr case, go here, here, and here.)

As initially proposed, the responsive legislation sought not only to protect substandard lots but also to adopt by statute a lower legal threshold for a plaintiff to prove that a land-use restriction constituted a government taking that necessitates government compensation of the landowner. The Wisconsin legislature amended the legislative language to remove the takings language. For land-use regulators, this small victory may be cold comfort given the extensive ways the Act limits the tools available to them.

Circuit Court Ordered to Enforce Option-to-Purchase Provision in Commercial Real Estate Lease

Published by Susan Allen, Gregory M. Jacobs on | Permalink

District II of the Wisconsin Court of Appeals recently remanded a commercial lease dispute back to the Waukesha County Circuit Court, directing the court to enforce the parties’ agreed-upon option-to-purchase provision as written.  See Headstart Building, LLC v. National Centers for Learning Excellence, Inc., No. 2016AP434 (Wis. Ct. App. Nov. 8, 2017).

The dispute originated from a 2002 commercial lease in which Headstart Building, Inc. (“Headstart”) agreed to lease real estate property in Waukesha to National Centers for Learning Excellence, Inc. (“NCLE”).  Id. ¶ 5.  The lease included a provision allowing NCLE to invoke an option to purchase the property at any time.  The following language in the option-to-purchase provision is the focus of the parties’ dispute:

In the event Tenant shall elect to exercise Tenant’s option to purchase the Premises, Landlord and Tenant shall each choose an appraiser to appraise the Premises which appraisals must be completed within forty-five (45) days of the date Tenant notifies Landlord that it intends to exercise its option to purchase.  In the event the fair market value of the Premises in the two appraisals differs by no more than five percent (5%), the Appraised Value shall be the average of the two appraisals.  In the event the appraised value of the Premises in the two appraisals differs by more than five percent (5%), the two appraisers shall agree upon a third appraiser and the result of such third appraisal shall be the Appraised Value.

Id. ¶ 6.

In December 2012, NCLE invoked its right to purchase the property, and the two parties commissioned their respective appraisals.  Headstart’s appraiser valued the property at $6.88 million dollars while NCLE’s appraiser issued a $4.075 million valuation.  Upon comparing the two appraisals, it became clear that the cause of such a wide discrepancy was the differing methodologies employed by the appraisers.  Headstart’s appraiser determined the fair market value with consideration of the current NCLE lease encumbrance, while NCLE’s appraiser calculated the fair market value of the property free and clear of the current lease.  Id. ¶¶ 7-8.

Rather than following the terms of the option-to-purchase provision and have their respective appraisers seek a third party to resolve the conflict, the parties instead engaged in written correspondence disputing the proper methodology to calculate the fair market value of the property.  Once those communications broke down, Headstart filed suit in Waukesha County Circuit Court requesting specific performance of the option-to-purchase (at $6.88 million) and damages arising from NCLE’s bad faith breach of the lease.  NCLE filed a declaratory judgment counterclaim, requesting the court to declare the proper appraisal methodology.  Id. ¶ 9.

After a two-day bench trial, Judge Haughney issued an oral ruling rejecting Headstart’s breach of contract and bad faith claims, though it was unclear from the record whether the grounds for the dismissal was based on Headstart’s failure to follow the option’s procedure of seeking a third appraisal or because the court concluded that the parties’ differing appraisal methodology positions represented a failure to reach a meeting of the minds, rendering the entire provision unenforceable.  Judge Haughney requested supplemental briefing regarding the fate of NCLE’s declaratory judgment counterclaim, and ultimately dismissed that claim as moot on the ground that the option provision was unenforceable and must be stricken from the lease in its entirety.  Id. ¶¶ 10-11.

After NCLE filed an appeal seeking to revive its declaratory judgment counterclaim, the Wisconsin Court of Appeals overruled the Circuit Court’s order striking the option from the lease.  Writing for the Court, Judge Hagerdorn noted that, while essential contractual terms (such as the purchase price in a real estate transaction) must be definite in order to be enforceable, it is well-settled under Wisconsin law that the terms need not be 100% certain so long as they are “capable of being ascertained from the agreement itself.”  Id. ¶ 17.  The Court referenced a long line of Wisconsin precedent upholding real property contracts setting a “fair market value” price to be determined by appraisement, and concluded that the parties’ dispute was one of differing interpretations of agreed-upon contractual terms.  Id. ¶¶ 17-22.   In conclusion, the Court found that the provision provided a simple, straightforward and definite means of determining the purchase price: either the average of the parties’ respective appraisals or, if the difference between those values was too great, the third appraised value of the property.  Id. ¶ 22.

Despite this conclusion, however, the Court found that substantive questions regarding the meaning of the option-to-purchase provision were not before it on appeal and remanded the case to the Circuit Court to address NCLE’s declaratory judgment counterclaim regarding whether the parties must appraise the property with consideration of the NCLE lease encumbrance.  Id. ¶¶ 24-25.  In a concurring opinion, Presiding Judge Reilly disagreed with these remand instructions, concluding that the proper methodology for determining the fair market value of commercial real estate is not a question of law for the courts to decide and that the provision here provides a dispute resolution procedure (i.e., a third appraisal) that should be enforced.  Id. ¶¶ 26-29.

While exercising restraint in only addressing the narrow question presented to it on appeal (whether NCLE’s declaratory judgment claim was properly dismissed), the Court of Appeals’ analysis leaves little doubt in the enforceability of the entirety of the parties’ option-to-purchase provision, including their agreed-upon means of resolving any valuation disputes through the use of a third appraiser.  It will be interesting to see if the Circuit Court follows the Court of Appeals’ lead on remand or instead elects to resolve the substance of the parties’ “fair market value” appraisal methodology dispute, which is one of first impression in Wisconsin.  See id. ¶ 24 n.7

U.S. Supreme Court Reiterates That Not All Procedural Time Limits Are Jurisdictional

Published by Jeffrey A. Mandell, Meg Vergeront on | Permalink

The U.S. Supreme Court’s first decision of the current term involves a suit alleging age and sex discrimination in the workplace. But the Court addressed only an important, though technical, issue about deadlines for appellate filings. Hamer v. Neighborhood Housing Services of Chicago, No. 16-658, was argued on October 10. The Supreme Court quickly turned around a unanimous decision on November 8, 2017, authored by Justice Ruth Bader Ginsburg.

Charlaine Hamer brought a federal lawsuit for employment discrimination. The trial court granted summary judgment in favor of the defendants. Under 28 U.S.C. 2107(a) and Federal Rule of Appellate Procedure 4(a)(1)(A), Ms. Hamer had 30 days from the entry of judgment to notice an appeal. But a few days before the 30-day deadline, Ms. Hamer’s attorneys sought both to withdraw from the case due to strategic differences with the client and requested a 60-day extension of the appeal deadline so that Ms. Hamer could find new counsel for her appeal. The trial court granted both motions. Represented by new counsel, Ms. Hamer filed her appeal shortly before the extended deadline.

The U.S. Court of Appeals for the Seventh Circuit, however, questioned whether it had jurisdiction over Ms. Hamer’s appeal and asked the parties to brief that issue. As the appellate court noted, Federal Rule of Appellate Procedure 4(a)(5)(C) limits extensions of time for noticing an appeal to no more than 30 days after the initial deadline. Federal statute—28 U.S.C. 2107(c)—also addresses extensions, but it does not set an outer limit for their length. Here, the district court had granted Ms. Hamer a 60-day extension.

The difference between the statutory text (which does not limit the length of an extension) and Rule 4(a)(5)(C) (which does) has divided appellate courts. Two circuits had deemed the limitation in Rule 4(a)(5)(C) a mandatory claims-processing rule, which means it must be followed but can be waived or forfeited such that there are circumstances where an appeal could be timely even if filed during an extension longer than the Rule countenances. Three circuits had deemed the limitation jurisdictional, which means they considered it an absolute bar to proceeding with an appeal filed after the outside limit of the rule, regardless of circumstances. In Ms. Hamer’s case, the Seventh Circuit joined the jurisdictional side of this split.

The Supreme Court clarified that the 30-day limitation on extensions in Rule 4(a)(5)(C) is a mandatory claims-processing rule, not a jurisdictional limit. The Court reiterated that limits prescribed by congressionally enacted statutes mark jurisdictional boundaries, whereas those prescribed by judicially crafted rules present mandatory claims-processing rules. Here, because the statute governing the timing of appeals—28 U.S.C. 2107—does not itself limit the length of a potential extension, the 30-day restriction in Rule 4(a)(5)(C) is not jurisdictional.

While 28 U.S.C. 2107 had, prior to 1991, limited extensions of the deadline to notice an appeal to 30 days, the Supreme Court refused to speculate that Congress’s deletion of that limit was inadvertent. See Hamer, slip op. at 7-8. And though a prior Supreme Court decision had stated that “the taking of an appeal within the prescribed time is ‘mandatory and jurisdictional,’” Bowles v. Russell, 551 U.S. 205, 207 (2009) (quoting Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 61 (1982) (per curiam)), the Hamer Court explained that the word “jurisdictional” is now more carefully and precisely used. See Hamer, slip op. at 9-10.

What’s next? Ms. Hamer’s case goes back to the Seventh Circuit. And future appellate litigants and their attorneys should proceed cautiously, recognizing that the rule allowing an extension of up to thirty days to notice an appeal is a mandatory claims-processing rule, not a jurisdictional limitation.

Law clerk Laura Lamansky assisted with researching and writing this blog post.

Court of Appeals Decides Wis. Stat., Ch. 90, Applies Equally to Cities, Villages, and Towns

Published by Matthew Dregne, Holly J. Wilson on | Permalink

Over 150 years ago, the Wisconsin legislature passed a law, now codified in Chapter 90 of the Wisconsin Statutes, to resolve conflicts over fences separating neighboring agricultural lands.  Chapter 90 requires fences partitioning farmland from neighboring properties. Chapter 90 also provides detailed requirements for what constitutes a sufficient partition fence and provides cost sharing and dispute-resolution procedures. Chapter 90 assigns towns to assist in resolving disputes between property owners regarding partition fences on land located within their borders.  Chapter 90 also references cities and villages, but it makes no similar assignment to such municipalities. The law therefore is ambiguous about whether cities and villages are obligated to resolve fence disputes.  

In White v. City of Watertown, No. 2016AP2259 (Oct. 12, 2017), the Wisconsin Court of Appeals resolved this ambiguity and clarified that Chapter 90 applies to cities, villages, and towns alike.

The Whites owned and farmed land in the City of Watertown on which they maintained a partition fence. The cost and maintenance of the fence resulted in a dispute between the Whites and their neighbors. Invoking the procedures of Chapter 90, the Whites asked the City to assist in resolving this dispute. When the City refused, the Whites filed suit, asking the circuit court to clarify that the City was legally obligated to help. The circuit court observed that Chapter 90 is ambiguous but held that Chapter 90 applies to cities and villages, the same as it does to towns.

The City appealed, and the Court of Appeals affirmed. The appellate court agreed with the circuit court that the text of Chapter 90 is ambiguous. On the one hand, the statute requires “fence viewers” to carry out specified governmental duties, which include resolving disputes between property owners. And the statutory definition of fence viewers includes town supervisors, city alderpersons, and village trustees. On the other hand, most of Chapter 90’s references to “fence viewers” include only “town fence viewers.” Further, additional provisions in Chapter 90 appear to contemplate administration and enforcement only by towns.

To resolve this ambiguity, the Court of Appeals looked to the Chapter’s legislative history. The Court found that, prior to 1875, the Chapter contained no references to cities or villages. However, in 1875 the legislature amended Chapter 90 to apply to cities, villages, and towns alike. In 1878, the legislature revised the Wisconsin Statutes. Without reason, most of the language added in the 1875 amendments—language clarifying that the Act applied to cities and villages, as well as to towns—was omitted from the 1878 revised publication. Concluding that the omission “must have been inadvertent,” the Court of Appeals held that, when farmland is in a city or village, that municipality must administer and enforce Chapter 90’s requirements just as a town would if the land were within the town’s boundaries. As a result, the Whites prevailed and the City of Watertown will have to assume Chapter 90 duties with respect to the Whites’ land.

The Court of Appeals in White clarified that cities, villages, and towns must now assume the duties of fence viewers under Chapter 90. The main duty for fence viewers under Chapter 90 is to resolve disputes between adjoining property owners with lands divided by partition fence. For example, under Wis. Stat. § 90.10, fence viewers can direct property owners to repair or rebuild partition fences. Further, under § 90.07, fence viewers, under certain circumstances, may locate the line upon which a partition fence between adjoining lands must be built.

Multi-Month Medical Leave Not A Reasonable Accommodation Under the ADA

Published by Meg Vergeront, Elizabeth C. Stephens on | Permalink

The Court of Appeals for the Seventh Circuit recently held in Severson v. Heartland Woodcraft, Inc., 2017 U.S. App. LEXIS 181197*, 872 F.3d 476 (7th Cir. 2017) that a leave for medical purposes of two months or more is not a reasonable accommodation under the federal Americans with Disabilities Act (ADA).  In so doing, however, the Court left open the possibility that shorter or intermittent leaves might be, under appropriate circumstances.    

In Severson, the plaintiff took the full 12-week allotment of medical leave under the federal Family and Medical Leave Act (FMLA) due to back pain.  During his leave, he scheduled back surgery for day his FMLA leave expired.  Severson told the employer that he would not be able to work for two-to-three months after the surgery and requested non-FMLA medical leave for the recovery time.  The employer denied the request, given that Severson would be unable to perform any part of his job for several months.    

The court held that the employer’s decision did not violate the ADA.  The ADA, the court explained, is an anti-discrimination statute, not a medical-leave entitlement.  Id. at *3.  According to the court, the ADA is designed to prevent discrimination against a “qualified” individual, defined as a person who, “with or without reasonable accommodation, can perform the essential functions of the employment position.”  Id.  Thus, protection under the ADA is “expressly limited to those measures that will enable the employee to work.  An employee who needs long-term medical leave cannot work and thus is not a ‘qualified individual’ under the ADA.”  Id. (citing Byrne v. Avon Prods., Inc., 328 F.3d 379, 381 (7th Cir. 2003)).  Based on these considerations, the court determined that Severson was not a qualified individual under the ADA because the requested accommodation—a leave of two-to-three months—would not allow him to perform the essential duties of his job and thus was not reasonable.   

Employer Takeaway

Severson provides definitive guidance to employers in the Seventh Circuit with respect to employee requests for medical leave for two or more months, but only if the leave is not mandated by a medical leave statute like the federal FMLA or any state law counterparts.  While Severson also suggests that even a leave of more than a couple of weeks may not be a reasonable accommodation, employers should still proceed with caution in responding to requests for leave of less than two months because the reasonableness of the leave will turn on the particular circumstances of each request.  Employers also should keep in mind that Severson does not permit employers to deny extended leave mandated by another statute.  In such cases, of course, employers must provide the leave whether or not it would be considered a reasonable accommodation under the ADA. 

For additional guidance or questions related to employers’ responsibilities under the ADA, contact Meg Vergeront at (608) 256-0226.    

Stafford Rosenbaum files Supreme Court brief on behalf of International Center for Law & Economics

Published by Jeffrey A. Mandell on | Permalink

Courts generally defer to agency expertise when reviewing administrative rules that regulate conduct in areas where Congress has delegated authority to specialized executive-branch actors. An entire body of law—administrative law—governs agency actions and judicial review of those actions. And at the federal level, courts grant agencies varying degrees of deference, depending on what kind of function the agency is performing, how much authority Congress delegated, and the process by which the agency adopts or enforces policies.

Should courts be more skeptical when an agency changes a policy position, especially if the agency is reversing prior policy without a corresponding change to the governing statute? Daniel Berninger v. Federal Communications Commission, No. 17-498 (U.S.), raises these questions. And this week Stafford Rosenbaum was honored to serve as counsel of record for the International Center for Law & Economics (“ICLE”) in filing an amicus curiae brief urging the U.S. Supreme Court to hear the case and to answer these questions.

ICLE’s amicus brief highlights new academic research suggesting that systematic problems undermine judicial review of agency changes in policy. The brief also points out that judicial review is complicated by conflicting signals from the Supreme Court about the degree of deference that courts should accord agencies in reviewing reversals of prior policy. And the brief argues that the specific policy change at issue in this case lacks a sufficient basis but was affirmed by the court below as the result of a review that was, but should not have been, “particularly deferential.”

In 2015, the Federal Communications Commission (“FCC”) issued the Open Internet Order (“OIO”), which required Internet Service Providers to abide by a series of regulations popularly referred to as net neutrality. To support these regulations, the FCC interpreted the Communications Act of 1934 to grant it authority to heavily regulate broadband internet service. This interpretation reversed a long-standing agency understanding of the statute as permitting only limited regulation of broadband service.

The FCC ostensibly based the OIO on factual and legal analysis. However, ICLE argues, the OIO is actually based on questionable factual reinterpretations and misunderstanding of statutory interpretation adopted more in order to support radical changes in FCC policy than for their descriptive accuracy. When a variety of interested parties challenged the OIO, the U.S. Court of Appeals for the D.C. Circuit affirmed the regulations. In doing so, the court afforded substantial deference to the FCC—so much that the D.C. Circuit never addressed the reasonableness of the FCC’s decisionmaking process in reversing prior policy.

ICLE’s amicus brief argues that the D.C. Circuit’s decision “is both in tension with [the Supreme] Court’s precedents and, more, raises exceptionally important and previously unaddressed questions about th[e] Court’s precedents on judicial review of agency changes of policy.” Without further guidance from the Supreme Court, the brief argues, “there is every reason to believe” the FCC will again reverse its position on broadband regulation, such that “the process will become an endless feedback loop—in the case of this regulation and others—at great cost not only to regulated entities and their consumers, but also to the integrity of the regulatory process.”

The ramifications of the Supreme Court accepting this case would be twofold. First, administrative agencies would gain guidance for their decisionmaking processes in considering changes to existing policies. Second, lower courts would gain clarity on agency deference issues, making judicial review more uniform and appropriate where agencies reverse prior policy positions.

ICLE’s brief is available [here]. The Supreme Court’s decision whether to hear the case will likely be issued early next year. Check back for updates as this case develops.

Stafford Rosenbaum collaborated with Geoffrey A. Manne, Executive Director of ICLE, and Justin (Gus) Hurwitz, Assistant Professor of Law and Co-Director of the Space, Cyber, and Telecom Law Program at the University of Nebraska College of Law, in preparing the ICLE amicus brief. Law clerk Laura Lamansky assisted with the preparation of the brief and with writing this blog post.

U.S. District Court Enjoins Proposed Overtime Regulations

Published by Meg Vergeront, Olivia M. Pietrantoni on | Permalink

In Nevada v. United States Department of Labor, the United States District Court for the Eastern District of Texas determined that the U.S. Department of Labor (DOL) overstepped its administrative authority in issuing Fair Labor Standards Act (FLSA) regulations relating to overtime pay. 218 F. Supp.3d 520 (E.D. Tex. 2017). DOL wrote the regulations in response to President Obama’s instruction to the Secretary of Labor to “modernize and streamline the existing overtime regulations….” The court’s decision is good news for employers:  the regulations, if fully implemented, would have dramatically increased the number of employees eligible for overtime pay. 

FLSA Background

The FLSA requires employers to pay employees one and one-half times the employee’s regular rate of pay for all hours worked above forty in a given work week. However, employers do not have to pay overtime to employees who hold positions that fall within a regulatory exemption.  With respect to the executive, administrative and professional exemption, prior to the regulation at issue in this case, positions were considered exempt only if an employee in the position performs specified duties and is paid a salary of at least $455 per week, or $23,660 annually. 

At Obama’s prompting, the DOL revised the federal overtime regulations.  Had they gone into effect, they would have drastically raised the threshold salary amount to $913 per week, or $47,476 annually.  These figures would be updated automatically every three years. 

The Court’s Decision

Twenty-one states and fifty-five business groups sued the DOL seeking to invalidate the final rule. The plaintiffs argued that the overtime regulations exceeded the scope of DOL’s delegated authority.  The court considered whether the DOL’s interpretation was based on a permissible construction of FLSA.  The court analyzed the statutory text, and the plain meaning of the words “executive,” “administrative,” “professional,” and “capacity.”  Based on this analysis, the court determined that Congress intended the exemption to apply to employees who perform “executive, administrative, or professional capacity” duties.

The court found that the final rule will “effectively eliminate the duties test…” and is thereby a “salary-level only test,” which does not align with Congress’s intent.  The court explained that a lower minimum salary-level “screen[s] out the obviously nonexempt employees, making an analysis of duties in such cases unnecessary.”  A higher minimum salary-level “makes an employee’s duties…irrelevant if the employee’s salary falls below the new minimum.”  The court believed this ignored Congress’s intention to consider employees’ duties. Based on this determination, the court held that the DOL’s final overtime rule was unlawful.

Effect of the Court’s Ruling

The court’s decision enjoins the DOL from implementing the Obama-era rule.  Furthermore, the Trump administration did not advocate for the increased salary test on appeal of the lower court’s decision.  Therefore, regardless of the outcome on appeal, the Obama-era overtime rule will not go into effect, at least not during the current administration.  On July 26, 2017, the DOL published a Request for Information to gather public comments to aid in revising the rule.

Wisconsin Supreme Court Sets Tight Standard of Proof for Conspiracy to Misappropriate Trade Secrets

Published by Jeffrey A. Mandell, Meg Vergeront, Gregory M. Jacobs on | Permalink

The Wisconsin Supreme Court recently clarified the evidentiary requirements for establishing a conspiracy to misappropriate trade secrets under Wis. Stat. § 134.90.  See North Highland Inc. v. Jefferson Machine & Tooling Inc. et al., 2017 WI 75, 898 N.W.2d 74 (2017).  In a narrow 4-3 decision written by Justice Ann Walsh Bradley, the Court concluded that such a claim may proceed to trial only if there is evidence establishing the defendant had direct knowledge of the misappropriation.

North Highland Inc. is a small manufacturing company that served as a vendor for Bay Plastics, a distributor of customized plastic parts.  Dwain Trewyn worked as a business generator for North Highland.  His duties included submitting bids for potential projects.  When Frederick Wells, Bay Plastics’ owner, decided to form his own manufacturing company, Jefferson Machine & Tool Inc., he approached Trewyn about joining the new venture.  Trewyn became a 25% owner of Jefferson, even as he continued to work at North Highland.

A dispute arose when Jefferson and North Highland submitted competing bids to manufacture stainless steel trolley assemblies for Tyson Foods Inc.  Trewyn submitted North Highland’s confidential bid for the project. Then, he submitted a slightly lower bid on behalf of Jefferson. Tyson awarded the contract to Jefferson, until North Highland threatened to sue and the deal fell apart.

North Highland sued Trewyn, Wells, Jefferson, and Bay Plastics, alleging, among other theories, that Wells and Trewyn had conspired to misappropriate North Highland’s trade secrets (namely, the amount of the Tyson bid).  After Trewyn filed for bankruptcy and settled North Highland’s claims against him, the circuit court granted Wells’ summary judgment motion and dismissed the claims against Wells.

On appeal, the Court of Appeals affirmed the dismissal of the claims against Wells. The court concluded that (1) North Highland had failed to set forth any facts establishing that Trewyn and Wells conspired to misappropriate North Highland’s trade secrets, and (2) North Highland had not established that the amount of its bid qualified as a trade secret under Wis. Stat. § 134.90(1)(c).  At North Highland’s request, the Wisconsin Supreme Court agreed to review the case.

Writing for the majority, Justice Ann Walsh Bradley affirmed the dismissal.  Like the lower courts, the Supreme Court determined that the evidentiary record did not support the allegation that Wells had conspired with Trewyn to misappropriate North Highland trade secrets allegedly protected by statute.  Id. ¶ 39.  While it was undisputed that Trewyn had formulated the Tyson bids for both North Highland and Jefferson, the Court was unwilling to permit a jury to say that meant that Wells himself must have known the amount of North Highland’s bid.  Id. ¶ 41.  The Court cited repeated deposition testimony from both Wells and Trewyn that (1) Wells was not aware Trewyn had submitted a Tyson bid on North Highland’s behalf, (2) Wells was not involved in formulating Jefferson’s bid, and (3) Wells had not created Jefferson to compete against North Highland.  Id. ¶¶ 11-15, 30-33.

In the face of this “unrebutted” deposition testimony, the Court concluded that “[t]here are simply no facts or reasonable inferences derived from the facts to support such an allegation [of trade secret misappropriation against Wells].”  Id. ¶ 42.  Having found no evidence of misappropriation, the Court had no need to decide whether the amount of a confidential project bid qualifies as a “trade secret” under Wis. Stat. §134.90(1)(c).

In a detailed dissent, Chief Justice Roggensack noted that § 134.90(2) extends liability to anyone who “knows or had reason to know” about misappropriation, such that circumstantial evidence of an actor’s knowledge should be enough to prove a violation.  Id. ¶¶ 109-110 & n.38.  Applying this standard, the dissent referenced additional deposition testimony from Wells that (1) Wells worked with Trewyn to develop Jefferson’s bid, (2) Wells knew Trewyn continued to work at North Highland during the Tyson bidding process, (3) Wells recognized that North Highland and Jefferson were competitors, and (4) Wells was aware that Trewyn’s employment contract with North Highland did not contain  a non-compete provision.  Id. ¶¶ 56-61, 109.  Given this additional testimony, the dissent argued that the evidentiary record presented factual issues appropriate for a jury to resolve.

In the wake of North Highland, entities considering suit against former employees and/or competitors for violations of Wis. Stat. § 134.90 should evaluate what admissible evidence ties their competitors’ conduct to the alleged misappropriation.  The majority was unwilling to allow North Highland to extend liability beyond its own employee (Trewyn), who clearly was the primary actor, despite Wells’ presumed awareness of Trewyn’s business conflicts.  Accordingly, before undertaking expensive litigation under Wisconsin trade-secrets law, companies should be prepared to establish a clear, strong, direct link between their targeted defendants and the alleged misappropriation.

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