Wisconsin Supreme Court Reaffirms Bright-Line Building Permit Rule

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In McKee Family I, LLC and JD McCormick Company, LLC v. City of Fitchburg, 2017 WI 34, No. 2014AP1914 (April 12, 2017), the Wisconsin Supreme Court affirmed the bright-line building permit rule, under which a property owner cannot claim vested rights absent submission of an application for a building permit that conforms to the zoning or building code requirements in effect at the time of application.

A McKee entity owned property in the City of Fitchburg, including two undeveloped lots. Those lots were zoned as residential-medium (R-M) zoning classification. McKee applied for and received approval to rezone the land as planned development district (PDD) zoning, which would allow mixed-used development of a higher density than under the R-M classification. Fitchburg enacted an ordinance rezoning this land to a PDD classification and at the same time approved McKee’s general implementation plan for developing the property. As approved, the plan provided for development of a senior living community.

In 2008, McKee entered into negotiations to sell JD McCormick Company, LLC the two undeveloped lots. The sale was contingent on McCormick’s ability to obtain approval from Fitchburg to build 128 apartment units on the undeveloped lots. McCormick prepared a PDD-specific implementation plan for the 128-unit apartment complex on the two undeveloped lots.

After McCormick submitted the plan, Fitchburg rezoned the two lots from PDD to R-M classification. This rezoning limited McCormick to developing 28 dwelling units, as compared to a maximum of 132 dwelling units under the PDD zoning classification. McKee and McCormick (which was eventually dismissed for lack of standing) filed a lawsuit seeking declaratory judgment, damages, and injunctive relief, all on the theory that City’s the rezoning was unlawful.

The circuit court granted summary judgment in favor of Fitchburg. McKee appealed, asserting on appeal that: it had a vested right in the PDD zoning classification; the PDD classification created a contract that gives rise to expectations on which developers may rely; and to the extent the reclassification was unlawful, the rezoning ordinance constituted a taking. The court of appeals determined that McKee did not have a vested right and affirmed the circuit court’s grant of summary judgment to Fitchburg.

On review before the Wisconsin Supreme Court, McKee relied upon the same arguments raised before the court of appeals. With respect to the vested rights argument, McKee argued that the court should depart from the well-established rule in Wisconsin that rights vest only once a developer has applied for a building permit and instead evaluate vested rights on a case-by-case basis. McKee asserted that in this case, it had obtained vested rights based on the substantial expenditures incurred in preparation for development under the PDD zoning plans submitted to Fitchburg.

Relying on Lake Bluff Housing Partners v. City of South Milwaukee, 197 Wis. 2d 157, 540 N.W.2d 189 (1995), the court rejected McKee’s argument and reaffirmed the bright-line building permit rule. The court noted that such a rule “creates predictability for land owners, purchasers, developers, municipalities and the courts.”

The court further opined that, even if it were to determine that a rule based on substantial expenditures should apply in this case, McKee’s claim would still fail because McKee had not introduced sufficient evidence to support that claim. McKee had failed to present evidence that it made expenditures in reliance on the PDD zoning or submitted an application for a building permit.

The court also opined that the planned development district zoning classification did not create contractual expectations upon which McKee could rely. The court explained that there is a strong presumption that legislative enactments do not create contractual or vested rights, and that presumption cannot be overcome without a clear indication that a legislative body intends to bind itself contractually. McKee failed to make such a showing.

This case highlights the necessity for developers that wish to develop land under existing zoning classifications to submit a completed building permit application before zoning law changes under their feet.

U.S. Supreme Court Reaffirms Capacious Scope of Federal Fair Housing Act

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The Supreme Court of the United States recently decided Bank of America Corp. v. City of Miami, Nos. 15-1111 & 15-1112, slip op. (U.S. May 1, 2017). The Court remanded the case for further proceedings, and it remains far from clear whether the City can prevail in the end. But the case illustrates the striking breadth of the federal Fair Housing Act (“FHA”). Any municipality, or anyone who deals with housing in any respect, should pay heed.

In the underlying litigation, the City of Miami alleged a pattern in which both Bank of America and Wells Fargo “intentionally issued riskier mortgages on less favorable terms to African-American and Latino customers than they issued to similarly situated white, non-Latino customers.” Id. at 3. The City further alleged that the banks’ practices “(1) adversely impacted the racial composition of the City, (2) impaired the City's goals to assure racial integration and desegregation, (3) frustrated the City's longstanding and active interest in promoting fair housing and securing the benefits of an integrated community, and (4) disproportionately caused foreclosures and vacancies in minority communities in Miami.” Id. (internal quotation marks and citations omitted). The result, the City asserted, was decreased property values in minority neighborhoods, “(a) reducing property tax revenues to the City, and (b) forcing the City to spend more on municipal services that it provided and still must provide to remedy blight and unsafe and dangerous conditions which exist at properties that were foreclosed as a result of the Banks’ illegal lending practices.” Id. (internal quotation marks and citations omitted).

The trial court dismissed the City’s complaints, holding that the City’s theory is not within the scope of the FHA and that the harms the City cites are too remote from the banks’ actions to allow recovery. On appeal, the U.S. Court of Appeals for the Eleventh Circuit reversed, deeming that the City had properly alleged claims that, if proven, would entitle it to damages. The Supreme Court agreed with the appellate court that the FHA does reach the City’s claims, but it also required further proceedings to determine whether the banks’ alleged actions caused the damages the City tries to pin on them.

The key holding for our purposes is about the FHA’s scope, or its “zone of interest.” As the Court explained: “The statute allows any ‘aggrieved person’ to file a civil action seeking damages for a violation of the statute.” Id. (internal quotation marks omitted). And it “defines ‘aggrieved person’ as any person who either claims to have been injured by a discriminatory housing practice or believes that such an injury is about to occur.” Id. at 6 (internal quotation marks omitted). The Court acknowledged the banks’ argument that such a capacious definition would mean “restaurants, plumbers, utility companies, or any other participant in the local economy could sue the Banks to recover business they lost when people had to give up their homes and leave the neighborhood as a result of the Banks’ discriminatory lending practices.” Id. at 8. Yet this argument did not cause the Court to blink.

Instead, the Court emphasized that it has long construed the FHA broadly, including prior holdings “that the Act allows suits by white tenants claiming that they were deprived benefits from interracial associations when discriminatory rental practices kept minorities out of their apartment complex; a village alleging that it lost tax revenue and had the racial balance of its community undermined by racial-steering practices, and a nonprofit organization that spent money to combat housing discrimination.” Id. at 6 (citing Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 209-12 (1972); Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 110–11 (1979); Havens Realty Corp. v. Coleman, 455 U.S. 363, 379 (1982)). Further, the Court noted, Congress amended the FHA subsequent to some of these decisions and did not change the statutory definition of “aggrieved person.” See id. at 7. Thus, the Court concluded, “[p]rinciples of stare decisis compel our adherence to those precedents” and “principles of statutory interpretation require us to respect Congress’ decision to ratify those precedents when it reenacted the relevant statutory text.” Id. at 8.

Dissenting from the Court’s broad reading of the FHA, Justice Thomas (joined by Justices Kennedy and Alito) criticized the breadth of the Court’s statutory construction: “Miami's complaints do not allege that any defendant discriminated against it within the meaning of the FHA. Neither is Miami attempting to bring a lawsuit on behalf of its residents against whom petitioners allegedly discriminated. Rather, Miami’s theory is that, between 2004 and 2012, petitioners’ allegedly discriminatory mortgage-lending practices led to defaulted loans, which led to foreclosures, which led to vacant houses, which led to decreased property values, which led to reduced property taxes and urban blight.” Id. at 10 (Thomas, J., dissenting in part and concurring in part). But the majority’s capacious interpretation is the law.

To be sure, the Court’s cautions against allowing recovery for remote harms may, as it plays out in the lower courts, prove a significant restriction on the use of the FHA. It is too soon to predict exactly how that aspect of the opinion will play out, however.

The Bank of America decision has two important takeaways. First, the FHA is not limited to obvious cases of housing discrimination by landlords; it captures a broad range of actions by a broad range of actors, including municipalities, banks, and others. Second, claims under the FHA are not limited to plaintiffs who were the direct victims of housing discrimination; a wide swath of plaintiffs—including individuals, municipalities, and businesses—have legal standing to seek redress under the FHA.

Court of Appeals Reaffirms Parties Cannot Recover Lost Profits for Unlawful Activity

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The Wisconsin Court of Appeals recently decided 200 Broadway LLC v. City of Milwaukee, Case No. 2016AP273 (May 2, 2017). The decision is interesting both for its central holding that a party is not entitled to damages for lost profits from an unlawful business, and because the appellate court relied heavily on nineteenth century precedent. 

200 Broadway owns property in the Third Ward neighborhood of Milwaukee. The property is near the Henry W. Maier Festival Park, which hosts Milwaukee’s Summerfest and other festivals.  Milwaukee ordinances require a special use permit for the property to be used for parking. 

After catching wind that the owner intended to use the property for parking during Summerfest, a Milwaukee Police Department Captain and Assistant City Attorney visited the property to investigate.  They advised employees that the property could not be used for parking because there had been an order prohibiting that use.  The Assistant City Attorney also advised the property owner that, without a permit on file, use of the property for parking could subject the owner to citations at a rate of $1267/vehicle parked. 

Initially, the owner abstained from using the property for parking.  After the first few days of Summerfest, the City agreed to rescind its objections to the parking.  The owner used the property for parking for the remainder of Summerfest, but filed suit against the City claiming lost profits of more than $10,000 for the days the City would not allow parking space rental on the property.

The trial court granted summary judgment in favor of the City.  In doing so, it accepted the City’s argument that a party cannot recover lost profits it claims it would have realized from an unlawful activity.  The court of appeals affirmed. 

The City’s argument rested upon a case from the nineteenth century, Raynor v. Blatz Brewing Co., 100 Wis. 414, 76 N.W. 343 (1898).  Raynor clearly provides that a party cannot base a claim for lost profits on its inability to engage in unlawful activity.  The court found no contradictory authority and no reason to disregard Raynor as precedent based simply on its age, as 200 Broadway urged. 

The court explained that the prohibition on recovery of lost profits for “unlawful conduct” is not limited only to activities that violate criminal statutes, but also those that run afoul of municipal ordinances and regulations.  The court also found no genuine issue of material fact regarding 200 Broadway's claim that the City selectively enforced the parking ordinance, pointing out that the City never actually enforced the parking ordinance against plaintiff.

The clear reasoning of this case provides municipalities with some security that enforcing an ordinance provision will not result in an adverse judgment for a regulated individual’s or entity’s lost profits.  It also reinforces the concept that precedent is precedent, even when it was decided in a different century.

Wisconsin Supreme Court Decision Leaves Certified Questions Unanswered

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In State v. Howes, 2017 WI 18, the Wisconsin Supreme Court analyzed a warrantless blood draw in an OWI in light of, Missouri v. McNeely, 133 S. Ct. 1552 (2013), in which the U.S. Supreme Court addressed the constitutionality of warrantless blood draws to prevent dissipation in alcohol concentration.  Howes, however, may not provide Wisconsinites all of the guidance that many anticipated.

The defendant, David Howes, was involved in a motorcycle versus deer crash.  By the time a deputy responded, emergency personnel were already treating an unconscious Howes.  The deputy could not find any witnesses, but a bystander reported that Howes smelled of intoxicants.  Howes was hospitalized.  On his way to the hospital, the deputy checked Howes’ record and found out that Howes had three prior OWI/PAC. This meant that Howes was subject not to the general 0.08% limit on blood alcohol concentration while driving but, as a repeat offender, to a stricter 0.02% limit.  The deputy also spoke with the EMTs who treated Howes, one of whom reported smelling intoxicants emanating from Howes.  The deputy arrested Howes, then unconscious, for operating a motor vehicle with a prohibited alcohol concentration based on the smell reported by others, the 0.02% threshold and the crash itself.  While Howes was still unconscious the deputy read him the Informing the Accused form and asked if he would submit to a blood test. Receiving no response and without first seeking a warrant, the deputy instructed the hospital staff to draw a blood sample.  The results showed Howes’ blood alcohol concentration was 0.11%. 

In his trial for OWI (4th offense) and operating with a prohibited alcohol concentration, Howes moved to suppress the results of the blood draw.  The circuit court granted the motion.  The court found the deputy had probable cause to arrest Howes.  However, the court held Wisconsin’s implied consent law was unconstitutional as it related to a blood draw of an unconscious person without a warrant or exigent circumstances.

The State appealed and the court of appeals certified the case to the Wisconsin Supreme Court.  The court of appeals certified a single issue: whether the portions of Wisconsin’s implied consent law that allow for warrantless blood draws from unconscious suspects violate the Fourth Amendment to the Constitution.

The lead opinion, authored by Chief Justice Roggensack, reversed the decision by the trial court, but on grounds that appear to diverge from the reasoning of the trial court and the issue certified by the court of appeals.  First, the court found the deputy had probable cause to arrest Howes for the same reasons outlined by the trial court.  The court focused its analysis on exigent circumstances sufficient to justify a warrantless blood draw.  Citing extensively to Schmerber v. California, 384 U.S. 757 (1966), and McNeely, the court found there were exigent circumstances, stating "Under the totality of the circumstances presented herein, which included a seriously injured, unconscious person, who was being subjected to medical treatments for his injuries and who had 0.02 percent as his PAC threshold, a reasonable officer could have concluded that further delay in drawing Howes’ blood would have led to the destruction of evidence through the dissipation and dilution of alcohol in Howes’ bloodstream."  Howes, ¶ 51.  The court remanded the case for further proceedings.

The majority concluded that exigent circumstances existed at the time due to the possible dissipation or destruction of evidence (alcohol) in Howes’ blood had the deputy waited to obtain a warrant. This was not the question presented in the circuit court, nor was it the question certified by the Court of Appeals.

Justice Gableman, joined by Justice Ziegler, concurred.  While Justices Gabelman and Ziegler agreed with the majority’s mandate, Justice Gableman focused on the question certified by the court of appeals – “whether provisions in Wisconsin’s implied consent law authorizing a warrantless blood draw from an unconscious driver based on the driver’s implied consent are unconstitutional under the Fourth Amendment to the United States Constitution.”  Id. ¶ 52.  Noting that McNeely was not relevant to this consideration, he found Howes did not prove beyond a reasonable doubt that the portions of the implied consent law applicable to unconscious drivers, namely the portions that indicate a driver consents unless he or she expressly revokes consent, are unconstitutional.  The concurrence concluded the presumption established by the implied consent law that an unconscious driver does not withdraw consent was not per se unreasonable and in such a circumstance, there was no need for a warrant because the unconscious driver has voluntarily consented to the blood draw.

The dissent, authored by Justice Abrahamson and joined by Justice Walsh Bradley in full and Justice Kelly in part, held the portions of the implied consent law authorizing warrantless blood draws on unconscious individuals to be unconstitutional.  Harshly criticizing the lead opinion’s focus on exigent circumstances, the dissent explained “because unconscious drivers have not freely and voluntarily consented to the warrantless blood draw under the Fourth Amendment . . . the warrantless blood test in the instant case should be suppressed.”  Id. ¶ 136.  More specifically, the dissent evaluated the issue in the context of searches incident to arrest, arguing that if the U.S. Supreme Court will not establish blood draws as a per se rules that warrantless blood draws are authorized under the search incident to arrest exception, then warrantless blood draws cannot be allowed based solely on statutorily imputed implied consent.

Ultimately, the split decision does not provide direct authority on the issue of the constitutionality of the implied consent law.  Instead, this decision suggests that officers must continue to evaluate the totality of the circumstances and with an eye toward the issues relevant to exigent circumstances.  The only clear-cut instruction at this point may be to obtain a warrant whenever possible.

Court of Appeals Expands Municipal Protection Conferred by Wisconsin’s Recreational Immunity Statute

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Wisconsin’s recreational immunity statute, Wis. Stat. § 895.52, provides municipalities with broad immunity from liability for injuries to any person engaged in recreational activities on municipal property. The statute sets forth a three-part definition of recreational activity. The first part of the section defines recreational activity as “any outdoor activity undertaken for the purpose of exercise, relaxation or pleasure, including practice or instruction in any such activity.” The second part of the statutory definition of recreational activity lists 29 specific activities denominated as recreational. The third part of the statutory definition broadly adds “and any other outdoor sport, game or educational activity.”

Wisconsin courts have wrestled with applying the recreational immunity statute to varied fact situations since its enactment. The line between recreational and non-recreational activities can be difficult to draw under Wis. Stat. § 895.52, and the issue has been litigated with some frequency, most recently in Wilmet v. Liberty Mutual Ins. Co., 2015AP2259 (Wis. Ct. App. Feb. 28, 2017). The case is of particular importance to municipalities, because the court construed the statute to broaden municipal recreational-related immunity.  

Mrs. Wilmet was at a city-owned and operated swimming pool to drop off her grandchildren. After dropping them off, she remained outside the premises, supervising her grandchildren from behind the fenced perimeter of the pool as they swam. Mrs. Wilmet’s grandson shouted to her that he was going to jump off the high dive. When Mrs. Wilmet observed there were no lifeguards in the area, she became concerned about her grandson’s safety and told her grandson to wait. She then entered the pool premises without paying the entry fee (but with the attendant’s permission), and went immediately from the entrance through the locker room and toward the high dive. Mrs. Wilmet did not plan to swim at the pool or stay on the premises following her grandson’s dive. As she walked toward the high dive, she tripped on a cement doorstop and was injured.

The Wilmets sued the municipality and its insurer. The city invoked the recreational immunity statute as an affirmative defense and sought the action’s dismissal on that basis.  The city argued that Mrs. Wilmet’s activity of supervising her grandson, who was himself engaged in a recreational activity, was sufficient to bring the Wilmets’ claims within the ambit of the recreational immunity statute.  The court of appeals agreed, basing its holding on principles of statutory interpretation and previously developed tests under which courts consider, among other factors, whether the activity in question was undertaken in circumstances substantially similar to the circumstances of recreational activities set forth in the statute.

The court reasoned that supervising other persons, who are themselves engaged in recreational activities, involves actively overseeing or directing the performance of the recreational activity of another. Thus, the court concluded, “supervision” was akin to, and subsumed within, “practice” and “instruction” in a recreational activity, which the legislature specifically identified as giving rise to immunity. In addition, the court found that conferring recreational immunity for supervision is consistent with the legislature’s purpose in enacting the recreational immunity statute. Because it was undisputed that Mrs. Wilmet was supervising her grandson’s recreational activity on the city’s pool grounds at the time of her injury, the city was entitled to immunity under § 895.52 from her claims.

For more information about statutory exceptions to recreational immunity and case law interpretations of the recreational immunity statute that might expose a municipality to potential liability, contact any member of Stafford Rosenbaum LLP Government Team.

Top 10 Municipal Law Developments of 2016

Published by Holly J. Wilson, Jeffrey A. Mandell, Susan Allen on | Permalink

Stafford Rosenbaum’s Government Law and Government Relations teams continuously stay apprised of the latest developments in Wisconsin municipal law. Below, in no particular order, are the top 10 municipal law developments of 2016.

Public records; open meetings. Three important cases affecting Wisconsin Public Records and Open Meetings Law came down this year.

First, in New Richmond News v. City of New Richmond, 2016 WI App 43, 370 Wis. 2d 75, 881 N.W.2d 339, the Wisconsin Court of Appeals held that police departments are permitted to release unredacted copies of accident reports upon request. However, the Court remanded several issues relating to the release of incident reports upon request, questioning whether police departments should release unredacted incident reports containing driver’s information from the DMV. We posted about this decision in May.

Second, in Voces de la Frontera, Inc. v. Clarke, 2016 WI App 39, 369 Wis. 2d 103, 880 N.W.2d 417, review granted (June 15, 2016), the Wisconsin Court of Appeals held that, according to Wisconsin’s Public Records Law, the Milwaukee County Sheriff must produce unredacted immigration detainer forms received from U.S. Immigration and Customs Enforcement.

Finally, in State ex rel. Krueger v. Appleton Area Sch. Dist. Bd. of Educ., No. 2015AP231, 2016 WL 3510300 (Wis. Ct. App. June 28, 2016) (unpublished), review granted, (Oct. 11, 2016), the Wisconsin Court of Appeals held that a committee created by members of the Appleton School District curriculum department “on their own initiative” was not a “governmental body” subject to the open meetings law.

The Wisconsin Supreme Court has granted petitions for review in both Voces de la Frontera and Krueger. We previewed the Supreme Court’s consideration of the Krueger case here

Home rule; preemption. In Milwaukee Police Association v. City of Milwaukee, 2016 WI 47, ___ Wis. 2d ___, ___ N.W.2d ___, the Wisconsin Supreme Court held that Wis. Stat. § 66.0502, which essentially prohibits local governments from enacting residency requirements, precluded the City of Milwaukee from enforcing its residency requirement. We posted about this case when it was decided in June.

Alcohol licensing; social host ordinances. In County of Fond du Lac v. Muche, 2016 WI App 84, ___ Wis. 2d ___, ___ N.W.2d ___, the Wisconsin Court of Appeals invalidated Fond du Lac County’s social host ordinance because it did not strictly conform with Wis. Stat. § 125.07(1) regulating underage drinking. The Court stated that Wis. Stat. § 125.07 does not penalize social hosts for conduct in private residences because “premises” is a defined term that only includes places under permit or license to supply alcohol, not private residences. The Court concluded that the social host ordinance that penalizes underage drinking at private residences prohibits conduct allowed under the state statute and thus does not “strictly comply” with state law. For more on this case, see our post from November.

Zoning ordinances. Generally, 2015 Wisconsin Act 391 created and amended legislation regarding shoreland zoning. It has several provisions that will significantly affect property owners and development. One interesting provision that applies to all Wisconsin land, near water or not, created Wis. Stat. § 895.463. That new statutory provision states that, in any dispute, “the court shall resolve an ambiguity in the meaning of a word or phrase in a zoning ordinance or shoreland zoning ordinance in favor of the free use of private property.” As detailed in this post from July it is not clear how, if at all, this will affect zoning disputes.

Voter apportionment; redistricting. In Evenwel v. Abbott, 578 U.S. ___ (2016), the United States Supreme Court held that states and local governments may apportion legislative districts based on total population under the one‑person, one‑vote rule. The challengers in this case had argued that Texas should not have considered total population but instead should have looked at the population of eligible voters in each district. The Supreme Court held that such an approach would be permissible, but is not required, as states draw congressional districts and seek to make those districts have populations that are close to equal. We explained the import of this decision in April.

In Whitford v. Gill, No. 15-CV-421-BBC, 2016 WL 6837229 (W.D. Wis. Nov. 21, 2016), a panel of three federal judges held that Wisconsin’s 2012 redistricting involved an unconstitutional partisan gerrymander. Of particular import, the decision accepted a new measure, known as the efficiency gap, of how much partisan effect the placement of district lines has. In 2017, the three-judge panel will consider possible remedies for the improper districts, and then the case will almost certainly be appealed to the U.S. Supreme Court. When, as a result of the Whitford decision or as a matter of course after the 2020 census, Wisconsin next draws district lines, both the Whitford decision and the Evenwel decision will be at the forefront of legislators’ minds.

Takings. On January 15, 2016, the U.S. Supreme Court granted certiorari review of the Wisconsin Court of Appeals decision, Murr v. Wisconsin, 2015 WI App 13, 359 Wis. 2d 675, 859 N.W.2d 628 (unpublished) (per curiam), cert. granted, 136 S. Ct. 890 (2016). In Murr, the Wisconsin Court of Appeals held that an ordinance effectively merging the Murrs’ two adjacent, riparian lots for development purposes, did not deprive the Murrs of all or substantially all practical use of their property and was not an uncompensated taking of property. The Supreme Court’s decision in this case has the potential to substantially alter takings jurisprudence; however, the Court has not scheduled oral argument in this case, which has been fully briefed since July. For a more in-depth discussion on this case, see our discussion of an amicus brief we filed on behalf of municipal government interests in June here.

Eminent domain; compensation. In Hoffer Properties, LLC v. State, Department of Transportation, 2016 WI 5, 366 Wis. 2d 372, 874 N.W.2d 533, the Wisconsin Supreme Court held that Wis. Stat. § 84.25(3) authorizes the DOT to change a property owner’s access to state highways in whatever way it deems “necessary or desirable.” Such changes, including elimination of direct access points, are duly authorized exercises of the police power and are not compensable under Wis. Stat. § 32.09, (the just compensation statute), as long as alternate access is provided. Further, the Court held that as long as alternate access is given or exists, a property owner is precluded as a matter of law from challenging the reasonableness of the access and receiving compensation under § 32.09.

Annexation. In Town of Burnside v. City of Independence, 2016 WI App 94, ___ Wis. 2d ___, ___ N.W.2d ___, the Wisconsin Court of Appeals upheld the dismissal of an intervening town’s challenge to a city’s annexation ordinance where the town intervened in an action started by two other towns outside the applicable statute of limitations.

Preemption. On January 11, 2016, the Wisconsin Supreme Court accepted Wisconsin Carry’s petition for review in Wisconsin Carry, Inc. v. City of Madison, 2015 WI App 74, 365 Wis. 2d 71, 870 N.W.2d 675, review granted, 2016 WI 16, 367 Wis. 2d 125, 876 N.W.2d 511. In Wisconsin Carry, Inc., the Court distinguished between agency rules and ordinances or resolutions in applying the preemption provision in Wis. Stat. § 66.0409 when it upheld a City of Madison Transit and Parking Commission rule prohibiting riders on city buses from carrying weapons. The decision in this case could have a significant impact on the ability of municipal agencies to regulate firearms. The Court held oral arguments in September; thus, we expect the Court to issue a decision in the first half of 2017. For more on this case, see this post from March.

Dane County Zoning. 2015 Wisconsin Act 178 (which, despite its name, was enacted on February 29, 2016) establishes a process for certain towns to withdraw from county zoning. This Act applies only to towns in counties with a population of at least 485,000, and therefore, effectively applies only to towns located in Dane County, as there are no towns within Milwaukee County.

Seventh Circuit Decision Calls for Class Action Reform

Published by Susan Allen on | Permalink

In its recent decision in Manistee Apartments, LLC. v. City of Chicago, No. 15-3113 (7th Cir. Dec. 20, 2016), a three-judge panel of the Seventh Circuit Court of Appeals upheld the district court’s dismissal of the plaintiff’s class-action complaint.  Potentially more interesting than the decision itself was the court’s express call for changes to the class-action process to avoid frivolous class actions motivated solely by attorneys seeking fees.

The claims at issue in the case arose from a default administrative judgment entered against Manistee Apartments in 2011 by the City of Chicago.  Once registered, the judgment imposed a lien against Manistee’s real estate holdings.  Manistee claims it first became aware of the lien years later, when pursuing a sale of its real estate.  In response to Manistee’s inquiry, the City provided a payoff letter detailing the outstanding amount, which included the underlying judgment of $3,540, plus $820.34 in statutory interest and $1,394.82 in collection costs and attorney fees.  Manistee disputed only the collection costs and attorney fees.  While working to resolve the City’s claim, Manistee conveyed the property to an out-of-state buyer representing the title was clear.  It also paid the total amount due to the City, but claimed to be doing so “under protest.”  Shortly thereafter, Manistee filed a class action against the City, alleging that the assessment of collection costs and attorney fees violated due process guarantees under the federal and state constitutions, as well as other provisions of Illinois state law. 

The district court granted the City’s motion to dismiss on the grounds that Manistee’s payment to the City was not made under duress, but was voluntary.  As a result, Manistee could not be deprived of a protected property interest under federal law.  Finding no federal constitutional violation, the court applied the same test to dismiss the state constitutional claims and declined to exercise supplemental jurisdiction over the remaining state-law claims.

On appeal, the Seventh Circuit employed similar reasoning in upholding the district court’s decision.  The court noted that there was a more than year-long gap between the date of sale of the property by warranty deed and the release of the lien as well as the fact that the sale price of the property was only $10, ultimately rejecting Manistee’s claim that it was coerced into paying the full amount demanded by the City.  The court easily held that there was no deprivation of any property interest by the City, and upheld the district court’s dismissal of Manistee’s claims.  Noting the extremely minimal amount at issue and the extremely limited pool of the potential class of plaintiffs in the same position as Manistee, the court went on to question the true motivation behind the class action.  The answer:  attorney fees – a fact which plaintiff’s counsel apparently admitted during oral argument.  The court explained “it is cases like the one before us that demonstrate precisely why the courts, and Congress, ought to be on the lookout for ways to correct class action abuses.” 

The court’s distain for attorney abuses of the class action and overall litigation system in this case is clear.  Unfortunately, no easy answer exists to protect defendants against the hassle and costs of such litigation, but the court has issued a clear warning to class-action counsel that it has no patience for this sort of extortion-style litigation.

Seventh Circuit reaffirms that issue preclusion applies to United States government

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Anyone who has watched a television legal drama knows that different standards of proof apply in a criminal prosecution and a civil trial; a prosecutor must prove guilt beyond a reasonable doubt, while civil liability requires only a bare majority (a preponderance, in legalese) of the evidence. The Seventh Circuit’s recent decision in United States v. Egan Marine Corp., Nos. 15-2477 & 15-2485 (7th Cir. Dec. 12, 2016), turns primarily on the interplay of those two standards.

In January 2005, a barge exploded en route from Joliet, Illinois to Chicago. The explosion caused the death of a deckhand named Alex Oliva and led to an oil spill. After an investigation, the United States government concluded that the explosion resulted from a sequence of events that began when the master of the tug boat pushing the barge told Oliva to use a propane torch to warm a pump on the barge. Because the barge was carrying clarified slurry oil, the use of an open flame was both inherently dangerous and contrary to federal regulations. The United States sought to place the blame on the tug’s master, Dennis Egan, and its owner, Egan Marine Corp., by obtaining a criminal indictment.

Before pursuing the criminal case, the United States sought civil recovery from Egan Marine. In the civil case, the United States contended that Egan Marine was liable because its employee, Dennis Egan, had negligently instructed Oliva to use a propane torch, which caused an explosion and, in turn, both Oliva’s death and an oil spill. After a bench trial, the court found that “the government did not prove, by a preponderance of the evidence, that Alex Oliva was using a propane torch on the cargo pump of the [barge] at the time of the incident.” Egan Marine, slip op. at 2-3 (quoting district court 2011 decision). The government could have appealed that decision but opted not to.

Undeterred by the civil result, the government proceeded with its criminal prosecution against both Dennis Egan and Egan Marine. The defendants attempted to terminate the criminal case, arguing that the civil determination that the government could not prove its theory by a preponderance of the evidence meant it could not prevail under the higher criminal standard of proof beyond a reasonable doubt. The defendants’ argument rested on the doctrine of issue preclusion (collateral estoppel, in legalese), which prevents a party from relitigating an issue already decided by a court. Issue preclusion prohibits a litigant who lost in one case from filing a new case to try again.

The judge hearing the criminal case—who was not the same judge who heard the civil case—dismissed the defendants’ preclusion argument. He did not assert that the issues raised by the criminal prosecution differed from those in the civil trial. And he did not assert that anything was wrong with or procedurally improper about the civil trial. Instead, “he simply announced that he would disregard the civil judgment because that course seemed best to him.” Id. at 7. At the conclusion of the criminal prosecution, the court found the defendants guilty, sentencing Dennis Egan to prison, placing Egan Marine on probation, and assessing nearly $6.75 million in restitution against both defendants.

In the defendants’ appeal, the Seventh Circuit declared, in no uncertain terms, that the government is no more entitled than any other litigant to “a situation in which it can win but not lose.” Id. at 6. In doing so, the court explained that “had the criminal case gone to trial first and defendants been acquitted, the United States doubtless would be arguing that it could still pursue civil remedies because of the different burdens of persuasion.” Id. In that circumstance, the government would be right. But, “by bringing the civil case first, the United States received the benefit of civil discovery, which is more extensive than that allowed in criminal prosecutions…—discovery that it could put to use in the criminal case as well as the civil one.” Id. at 6-7. While the court acknowledged it could “understand why the United States seeks these advantages,” it did “not think [the government was] entitled to them, without the detriment of being bound by the civil judgment if it loses.” Id. at 7. As a result, the appellate court reversed the defendants’ convictions and ordered that judgments of acquittal be entered.

The case makes clear that the government must play by the same rules as other litigants. And if the government chooses to pursue both criminal penalties and civil recovery, that does not guarantee it two independent chances to make its case. Instead, the government must make strategic decisions and abide by the consequences. While this seems like an obvious principle, it was sufficiently uncertain that the government was willing to argue against it (and that the criminal trial judge accepted the government’s view). Not only does the Seventh Circuit’s decision reject the government’s desired double-standard, it does so emphatically. In addition to using strong, resounding language, the Seventh Circuit issued its opinion only one week after oral argument in the case. One week is an incredibly short period for the three-judge panel to decide the case, have one judge explain the decision in a written opinion, and have the other two judges review, edit, and finalize the written opinion.[1] This immediate turn-around is a substantial departure from usual processes that underscores the court’s view of this case as a slam-dunk.


[1] For context, the most recent statistics, covering the 12 months ending September 30, 2015, show that it took the Seventh Circuit an average of 2.5 months in criminal appeals to issue a written decision after oral argument, and an average of 3.0 months to do so in all appeals. Admin. Office of the U.S. Courts, 2015 Judicial Business, Table 4A, available at http://www.uscourts.gov/sites/default/files/data_tables/B04ASep15.pdf.

Court of Appeals Affirms Police Officer’s Discharge After Taking Unclaimed Property

Published by Paul W. Schwarzenbart, Holly J. Wilson on | Permalink

In Vidmar v. Milwaukee City Bd. of Fire Police Commissioners, No. 2015AP1832 (Ct. App. Nov. 15, 2016) (recommended for publication), the court of appeals upheld a decision by the Milwaukee City Board of Fire and Police Commissioners (Board) to terminate an officer for rules violations arising out of his falsifying a document that allowed him to take possession of an unclaimed dirt bike from police inventory.

In late August 2012, Daniel Vidmar, a police officer with the City of Milwaukee Police Department since December 2004, saw a dirt bike in an inventory room and thought it would be good for his son. According to Vidmar, he was told by an unnamed person in the Department’s Property Control Division that if the dirt bike was unclaimed after thirty days in inventory, he could claim it as long as someone else was listed as the claimant. Vidmar waited thirty days, and then completed and filed an official form for the release of the bike. He listed a friend as the “claimant” on the form, omitted the date and description of the bike, and misspelled the friend’s name. An audit of returned bicycle records disclosed the irregularities, which led to Vidmar returning the bike. That would have been the end of it, but for the Board receiving an anonymous letter disclosing the incident and suggesting that it was being swept under the rug. At that point a reference was made to the Department’s Internal Affairs Division for a more thorough investigation.

After a referral, the Milwaukee County District Attorney’s office chose not to charge Vidmar criminally. However, the District Attorney’s office advised the Police Department that it would not use Vidmar as a witness in future proceedings. The Milwaukee City Attorney’s office followed suit. In addition, an Assistant United States Attorney advised the Department that if Vidmar were to be called to testify as a witness, his office would be required to disclose the investigation regarding the bike.

At the conclusion of the internal investigation, Milwaukee Police Chief Edward Flynn discharged Vidmar based on three rules violations involving integrity and competence. The Board upheld the termination. Vidmar appealed that decision to the circuit court and also challenged the decision on certiorari. The circuit court affirmed the Board’s decision on appeal and dismissed the certiorari action. Vidmar appealed.

The court of appeals affirmed as well, rejecting Vidmar’s three arguments. The court rejected Vidmar’s first argument – that the Board proceeded on an incorrect theory of law when the Board concluded that he lacked the capacity to enforce federal and state laws and city ordinances in violation of the Department’s policies. The court agreed with the Board that the “capacity” to enforce the laws embraced the “full spectrum” of the responsibilities an officer may be called upon to undertake, including the “crucial” responsibility of giving testimony in court that is worthy of belief.

The court of appeals likewise rejected Vidmar’s second argument, that the circuit court gave undue deference to the board’s findings of fact and credibility determinations. Noting first that caselaw precluded Vidmar from making an evidence-based argument on appeal, the court concluded that “the Board made sufficient findings of fact and credibility determinations to supports its decision.”

Lastly, Vidmar argued that the circuit court applied an incorrect standard of review by focusing on the “reasonableness” of the Board’s decision rather than the “just cause” standard adopted by 1997 Wisconsin Act 237. The court rejected this argument. The court stated that the circuit court applied the correct standard of review by thoroughly considering each of the just cause standards in light of Vidmar’s arguments and found that there was sufficient evidence to support the board’s determination. Thus, the court upheld Vidmar’s termination.  

This decision serves as a reminder that the statutory standards of appellate review in police and fire disciplinary cases are limited to whether the Board kept within its jurisdiction or applied correct legal theories. The court of appeals reviews the Board’s decision. It cannot, for example, set aside a PFC board’s findings of fact and credibility determinations or reweigh the evidence. For additional information about the PFC process in general, including appellate options, see Stafford's previous blog post on this topic. 

If you have any questions about the PFC disciplinary process, contact a member of Stafford Rosenbaum LLP’s Government Law Team members.

Court Prevents County from Regulating Private Underage Drinking Parties

Published by Holly J. Wilson, Susan Allen on | Permalink

In County of Fond du Lac v. Muche, No. 2015AP2223 (Wis. Ct. App. Oct. 26, 2016) (recommended for publication), the Wisconsin Court of Appeals, District II, invalidated Fond du Lac’s social host ordinance because it did not strictly conform with Wis. Stat. § 125.07(1) regulating underage drinking. 

On June 20, 2015, Muche hosted a party at his home in Fond du Lac County. Alcoholic beverages were served at the party. Eventually, “persons under the age of 21 … who were not invited by Mr. Muche, joined the gathering.” Muche had reason to believe that these underage individuals brought beer to the party and “intended to or were consuming it.” County sheriff’s deputies arrived on the scene and cited Muche for violating Fond du Lac County’s social host ordinance, which essentially prohibited adults from hosting underage drinkers in their homes.

Muche challenged the citation, arguing that the ordinance was improperly stricter than state law. The circuit court rejected this argument, found that Muche violated the social host ordinance, and imposed a $1000 civil forfeiture. Muche appealed.

The court of appeals reversed, finding the social host ordinance conflicted with state law. The court first noted that the subject of alcoholic beverages is a matter of state wide concern and, under Wis. Stat. § 125.10, a county ordinance regulating underage drinking must strictly conform to state law. The County argued that its social host ordinance was in strict conformity with the state statute because its language was consistent with Wis. Stat. § 125.07(1)(a)3., which states in part that “[n]o adult may knowingly permit or fail to take action to prevent the illegal consumption of alcohol beverages by an underage person on premises owned by the adult or under the adult's control.” Muche argued that under § 125.02(14), “premises” is specifically defined as “the area described in a license or permit” and does not include a private residence.

The court agreed with Muche, citing Nichols v. Progressive Northern Insurance Co., 2008 WI 20, 308 Wis. 2d 17, 746 N.W.2d 220. The court in Nichols held that parents who allowed underage drinking at their home were not liable for common law negligence when one of the underage guests later caused a car accident. The court noted that Nichols “compels the conclusion that the statute does not penalize social hosts for conduct in private residences” because “premises” is a defined term that includes a place under permit or license to supply alcohol, not private residences. The court concludes that the social host ordinance that penalizes underage drinking at private residences prohibits conduct allowed under the state statute and thus does not “strictly comply” with state law.

This case essentially means that social host ordinances similar to the County’s enacted by local governments are unenforceable. Local governments may now be banned from punishing adults who host or allow underage drinking parties on their property. The County is likely to appeal this decision. Thus, a decision from the Supreme Court could clarify the status of social host ordinances enacted by local governments around the state. The decision in this case could have a significant impact on the ability of local governments to regulate underage drinkers in private residences. Please continue to watch Stafford’s blogs for updates on this case.

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