Court Must Adjudicate the Merits before Transferring Properties to Trust Over Owner’s Objection

Published by Jeffrey A. Mandell, Kyle P. Olsen, Kurt M. Simatic on | Permalink

In City of Milwaukee v. Choudry, 2018AP1693 (Dec. 27, 2019), the Wisconsin Court of Appeals reversed a circuit court order transferring the defendant’s properties into a trust. The appellate court held that, because the trial court never made a final judgment on the merits of the case, it lacked authority to impose a remedy.

Starting in 2002, Mohammad Choudry, personally and through several business entities, purchased 93 properties in the City of Milwaukee. These properties accumulated over $400,000 in delinquent property taxes and nearly 3,000 municipal code violations (triggering more than $240,000 in fines). Three years ago, the City filed a lawsuit against Choudry seeking to declare his properties a public nuisance, to collect monies owed, and to fix outstanding code violations.  

Among other steps, the City asked the court to appoint a receiver for the properties, who would manage them and bring them into compliance with the law. The circuit court issued a temporary injunction prohibiting Choudry from acquiring more property. It also appointed a receiver to manage Choudry’s existing properties. For approximately one and one-half years, the receiver worked with Choudry and regularly consulted with the court regarding management of the properties, payment of the delinquent taxes, and efforts to remediate the code violations.

In May 2018, the receiver filed a motion to transfer the properties into a trust controlled by the receiver. The receiver asserted that it would take several more years to finish paying back taxes, cleaning up the properties, and paying all expenses. A trust would allow this process to continue without the court’s involvement. When the taxes on all of the properties were up to date, ownership of the properties would revert to Choudry.

Choudry objected. He noted that the case had not been litigated on the merits—that is, he never had the opportunity to put on a defense—and transferring the properties into a trust would merely release the receiver, not resolve the dispute. The circuit court disagreed, asserting that “the record reflected that the ‘allegations’ of the City had been proven in the reports filed by … the receiver.” Choudry, slip op., ¶18. On that basis, the circuit court granted the receiver’s motion. The City then made, and the court granted, a motion to dismiss the case.

Choudry appealed, and the court of appeals reversed.

The court of appeals held that the circuit court lacked authority to transfer Choudry’s properties into a trust. Although Wis. Stat. § 813.16 empowers a court to appoint a receiver, it does not authorize other remedies. Choudry, slip op., ¶21. The appellate court then distinguished the case on which the receiver relied, Beloit Liquidating Trust v. Grade, 2004 WI 39, 270 Wis. 2d 356, 677 N.W.2d 298; while that case did involve a trust created without a final judgment, the case also involved a reorganization plan approved by the bankruptcy court—the equivalent of a final judgment. Choudry, slip op., ¶22.

Nor could the circuit court use its inherent equitable authority to create a trust in these circumstances. Wis. Stat. § 701.0401(4) authorizes circuit courts to equitably create a trust, but only in response to a legal wrong. Choudry, slip op., ¶24 (citing Breier v. E.C., 130 Wis. 2d 376, 389, 387 N.W.2d 72 (1986)). Here, because the trial court made no final determination of legal wrongdoing, it had no authority to transfer Choudry’s properties into a trust. Choudry, slip op., ¶¶25-26.

The appellate court reversed the dismissal and remanded the case with instructions that the transfer to the trust be unwound, with the receivership restored and the trial court to conduct further proceedings. Id., ¶27.

For municipalities and courts, nuisance properties present unique challenges. The Choudry decision makes clear that in nuisance actions, as in any other litigation, a court must reach a final judgment on the merits before it can grant certain remedies.

Seventh Circuit Reaffirms Stringent Standards for Municipal Liability in Civil Rights Actions

Published by Kurt M. Simatic on | Permalink

Since the United States Supreme Court’s seminal decision in Monell v. New York Department of Social Services, a municipality can be only found liable for civil rights claims brought under 42 U.S.C § 1983 if a plaintiff can show that a policy or custom of the municipality caused the violation of his or her constitutional rights. In a recent case involving a Wisconsin county jail, the U.S. Court of Appeals for the Seventh Circuit affirmed the rigorous standard articulated by Monell and reaffirmed the limited applicability of “single-incident” violations where liability is found absent an established pattern or practice of the violation. 

Plaintiffs are two female former county jail inmates who both alleged that a male corrections officer committed repeated acts of sexual assault against them and subsequently encouraged them to conceal the assaults from other corrections officers and inmates. County officials were unaware of the assaults until one of the women reported them to investigators in a neighboring county after her release, prompting an internal investigation by the county in which the assaults had allegedly occurred. When county officials confronted the corrections officer with the assault allegations, he immediately resigned and was eventually sentenced to 30 years in prison for the assaults. 

Plaintiffs filed a civil rights lawsuit against both the corrections officer and the county alleging violations under the Fourth and Eighth Amendments of the U.S. Constitution. In support of their claims, plaintiffs asserted that (1) the jail’s sexual assault policies and training were inadequate; (2) county officials tolerated sexually offensive comments by corrections officers; (3) threats of sexual assault against inmates were not taken seriously by county officials; and (4) county officials declined to implement all of the provisions of the federal Prison Rape Eliminate Act (“PREA”). For these reasons, they argued, the county was deliberately indifferent to the risk of sexual assault of inmates by corrections officers and therefore liable for the corrections officer’s acts under Monell as well as under a single-incident liability theory.

The jury found in plaintiffs’ favor on all claims and awarded each plaintiff $2,000,000 in compensatory damages against both defendants, as well as $3,750,000 in punitive damages against the corrections officer.  The county moved for both judgment as a matter of law and a new trial, arguing that plaintiffs’ offer of proof was insufficient bordering on deceptive. The Court denied the county’s request. The county appealed. 

In a 3-1 decision, the Court of Appeals panel reversed, holding that plaintiffs failed to meet its burden of proof on any of the three Monell factors: (1) the existence of an express or implied unconstitutional custom or policy; (2) policymakers’ deliberate indifference to a known or obvious risk; and (3) evidence that the custom or policy caused the constitutional violation. 

First, the Court concluded that plaintiffs failed to produce any evidence at trial to support their argument that the county’s written policies against sexual assault were inadequate at preventing or detecting sexual assault. The Court held that in order to prove liability under this theory, plaintiffs were required to show actual culpability by the county (i.e. adherence to policies that the county knew or should have known failed to prevent sexual assaults against inmates). Having failed to produce any evidence of a history of sexual assaults by corrections officers against inmates or show the county’s decision not to adopt all of provisions of PREA constituted a custom or policy that led to the constitutional violations, the Court disposed of the argument.

Second the Court rejected plaintiffs’ argument that the county’s implicit policies (i.e., custom or practice) condoned and encouraged sexual misconduct.  The Court held that a jail captain’s participation in “tier talk,” a term described as “not necessarily flattering talk,” inappropriate remarks by jail officials over a twelve year period, and the county’s investigation into a single allegation of inappropriate touching of an inmate by a corrections officer were insufficient proof of a “widespread” unconstitutional policy or practice. The Court found that the alleged “tier talk” and other remarks were not necessarily sexually explicit and the inappropriate touching (putting an arm around an inmate’s waist and patting her backside) did not rise to the same degree of the “repeated and coercive sexual abuse” perpetrated by the corrections officer in this case.  Slip op. at 24. 

Third, the Court rejected plaintiffs’ argument that the county failed to adequately train its employees to prevent inmate sexual assault. The Court found that these were little more than conclusory allegations, that there was no widespread pattern of comparable behavior and, most significantly, that the offending corrections officer admitted at trial that his conduct was contrary to all of the training he received, jail policy, and Wisconsin law.

Finally, the Court also rejected plaintiffs’ attempt to shoehorn their failure-to-train claim into a single-incident liability exception to Monell’s “policy or custom” requirement. Although the U.S. Supreme Court has left open the possibility that “in limited circumstances, a local government’s decision not to train certain employees about their legal duty to avoid violating citizens’ rights may rise to the level of an official government policy for purposes of § 1983,” slip op. at 36 (quoting Connick v. Thompson, 563 U.S. 51, 61 (2011)), the circumstances that would give rise to the exception is exceedingly narrow and requires that policymakers are negligently unaware of their obligation to safeguard citizens’ constitutional rights. The Court found that was not the case here. The county had implemented official policies prohibiting corrections officers from having any sexual contact with inmates and regularly conducted state-certified training to corrections officers to protect inmates from sexual assault.  

Judge Scudder dissented from the panel opinion. He, too, recognized the “demanding standard for municipal liability,” slip op. at 50 (Scudder, J., dissenting in part), but concluded that in light of all of the evidence at trial, a reasonable jury could have found that the county acted with deliberate indifference to the need for more training for and monitoring of jail staff. The dissent seems to raise broader concerns that the majority’s forceful rejection of the sufficiency of the evidence presented at trial may act as a disincentive for municipal entities to take more aggressive measures to prevent sexual abuse of inmates housed in their jails.

Importantly, both the majority and dissenting opinions affirmed that the high evidentiary threshold plaintiffs must meet to prove municipal liability remains intact. 

On July 24, 2019, plaintiffs filed a motion petitioning the court for rehearing and rehearing en banc. In support of their motion, plaintiffs argue for a lower evidentiary standard in Monell claims and challenge the sufficiency of the county’s official policies and training designed to prevent inmate sexual assault. This case is generating substantial interest among high-profile civil rights organizations. On the same day plaintiffs filed their motion for rehearing, the ACLU and other prisoners’ rights organizations filed a brief amici curiae in support of plaintiffs’ position.

In light of the substantial and growing interest of civil rights organizations in this case and others like it, municipalities should take special note of one key aspect implicit in the majority’s holding: Although the Monell standard remains a rigorous one, a municipality may be required to have affirmative policies in place to avoid liability. This is evident in the majority’s rejection of plaintiffs’ argument that the county was deliberately indifferent to the sexual abuse of inmates based in large part on the county’s adoption and implementation of state-approved policies and training as well officials’ reasonable responses to prior allegations of sexual misconduct.

Municipalities may thus be well-advised to review their policies and practices in light of this decision and, where deficient, modify them. For assistance with conducting a compliance review and update of sexual assault policies, contact Kurt Simatic or Liz Stephens at (608) 256-0226.

Public Records Requests: Form Matters

Published by Kurt M. Simatic, Kyle P. Olsen on | Permalink

Wisconsin’s Public Records Law requires officials to provide “the greatest possible information” in response to public records requests. Wis. Stat. § 19.31. In Lueders v. Krug, the Wisconsin Court of Appeals, District II, clarified that this mandate requires officials to provide electronic copies of materials if electronic copies are requested.

In June 2016, Bill Lueders emailed State Representative Scott Krug to request copies of all citizen correspondence relating to specified bills and key terms. Krug made paper copies of the responsive emails, which Lueders personally inspected. In July, Lueders again emailed Krug to revise his request, clarifying that he wished “to receive the records in electronic form.” Krug refused, arguing that the paper copies were sufficient, and citing Wis. Stat. § 19.35(1)(b):

If a requester appears personally to request a copy of a record that permits copying, the authority having custody of the record may, at its option, permit the requester to copy the record or provide the requester with a copy substantially as readable as the original.

Lueders filed a mandamus action to require Krug to release the documents in electronic form. The circuit court granted mandamus relief to Lueders. The court of appeals affirmed.

The court of appeals first concluded that Krug misinterpreted the applicable statute. Section 19.35(1)(b) only applies when a requester appears in person and makes a request. Here, Lueders made both of his requests by email. Further, the Legislature amended this section in the 1990s; previously, the section applied to all public records requests. This change demonstrated to the court of appeals that the Legislature intentionally distinguished between in-person and other public records requests.

The court of appeals next explained why paper copies were not an adequate substitute for electronic copies. As in State ex rel. Milwaukee Police Ass’n v. Jones—where an amended request for a digital copy of an audio recording was not satisfied by having previously provided an analog copy—electronic copies contain substantially more and different information compared to paper copies. For example, metadata (i.e., data about other data) can “show when documents were created and who created them[; …] a paper printout from electronic records, unlike an electronic copy, results in a loss of some information.” Lueders at ¶ 12.

Ultimately, Krug was left arguing that the paper copies were “good enough” in response to a request for electronic copies. The court disagreed, and ordered release of electronic copies.

Moving forward, public records custodians should carefully review all records requests, and provide answers in the desired format (when this would not require them to create additional documents, i.e., create a record). Officials should also understand what metadata is, and what it can reveal to public records requesters.

Scabby the Rat is Deflated

Published by Meg Vergeront on | Permalink

Scabby the Rat is the nickname unions have given to the large, rat-shaped inflatables used by unions when demonstrating at worksites to let the public know that they have a labor dispute with the employer.  In the past, courts have held that the use of Scabby at worksites is a form of speech protected by the First Amendment.  Does that mean unions can locate Scabby wherever they want at a worksite?  A recent decision by the United States Court of Appeals for the Seventh Circuit tells us not necessarily.  Construction and General Laborer’s Union No. 330 v. Town of Grand Chute.

In the case, a union used Scabby to show its displeasure with a Toyota car dealership in Grand Chute, Wisconsin. The dealership had used a masonry contractor that the union alleged did not pay standard area wages and benefits to its employees.  The union anchored Scabby using tethers staked into the ground in a public right-of-way.  The Town, however, had a sign ordinance that prohibited all private signs on public right-of-ways, and so its code enforcement officer ordered the union to remove Scabby.  The union sued, claiming that the Town violated its First Amendment rights.

Generally speaking, most speech is protected from content-based government regulation under the First Amendment.  However, a government can restrict speech in a public forum without running afoul of the First Amendment if the restriction is content neutral, is narrowly tailored to serve a significant governmental interest and leaves open ample alternative ways to communicate a message.  In an earlier decision in the case, the court applied this standard and held that the sign ordinance did not violate the First Amendment because it banned all private signs on public right-of-ways, regardless of content, and was enacted to further public safety—a significant governmental interest—by protecting visibility. 

The issue in this second trip to the Seventh Circuit was whether the Town selectively enforced the ordinance by not uniformly policing all types of speech prohibited under its provisions.  Selective enforcement by the Town would have violated the First Amendment.  The court determined that the evidence showed uniform enforcement.  Therefore, it held that the order to remove Scabby from the public right-of-way did not violate the union’s First Amendment rights.

This case illustrates why municipalities should not only carefully craft, but also ensure uniform enforcement of, sign ordinances.  Given the potential First Amendment pitfalls in regulating signs through local ordinances, municipalities should consider consulting with legal counsel in drafting and implementing them. 

U.S. Supreme Court Holds That Federal Age Discrimination Law Applies to All Public Employers

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In the first opinion of its new term, the United States Supreme Court unanimously held that the federal Age Discrimination in Employment Act (the “ADEA”) applies to all public employers, regardless of the number of employees that the entity has.  The ruling in Mount Lemmon Fire District v. Guido affirmed the Ninth Circuit Court of Appeals, which was alone among the circuits in holding that the ADEA applies to small as well as larger public employers.

The fire district involved in the case is a political subdivision in Arizona, and in order to resolve a budget shortfall, laid off its two oldest full-time firefighters (aged 46 and 54).  The firefighters sued the fire district and alleged that their termination violated the ADEA.  The fire district moved to dismiss the suit on the ground that the district was too small to qualify as an “employer,” as defined by the ADEA.  The ADEA’s definitional provision, which can be found at 29 U.S.C. § 630(b), states as follows:

The term “employer” means a person engaged in an industry affecting commerce who has twenty or more employees . . . . The term also means (1) any agent of such a person, and (2) a State or political subdivision of a State . . . .

The Equal Employment Opportunity Commission (the “EEOC”) found reasonable cause that the fire district had discriminated against the fire fighters.  The district court reversed and—following the at least four other circuit courts, including the Seventh Circuit—held that the 20-employee threshold applied to state and local public employers.  The Ninth Circuit reversed the district court.

In an opinion written by Justice Ruth Bader Ginsburg, the Court sided 8-0 with the Ninth Circuit and the fire fighters (Justice Kavanaugh took no part).  The Court briefly recounted that the ADEA originally imposed liability on private employers only and even then only when those entities “met a numerical threshold” for employees.  Slip op. at 2.  When Congress amended the ADEA to cover state and local governments, it added them to the definition of employer at the end of the definitional provision.  Thus, the Court focused on the parties’ dispute over the phrase “also means”:  Does it “add new categories to the definition of ‘employer,’ or does it merely clarify that States and their political subdivisions are a type of ‘person’ included” in the first sentence?  Id. 

The Court concluded the former interpretation—that in adding “also means,” Congress added new categories of employers to the ADEA—was the right one.  “First and foremost, the ordinary meaning of ‘also means’ is additive rather than clarifying.”  Id. at 4.  The Court also noted that the phrase appears “dozens of times throughout the U.S. Code, typically carrying an additive meaning.”  Id. at 4–5.  Finally, the Court rejected the fire district’s warning that applying the ADEA to small public employers “risks curtailment of vital public services such as fire protection,” as the EEOC has consistently interpreted the ADEA as covering all public employers regardless of size and many state age discrimination statutes do the same, and “[n]o untoward service shrinkages have been documented.”  Id. at 6. 

Although it is a short and unanimous opinion, Mount Lemmon is notable in that the Court sided with employees and the oft-maligned Ninth Circuit.  And, for a more local angle, the Supreme Court has implicitly overruled the Seventh Circuit’s decision in Kelly v. Wauconda Park District, 801 F.2d 269 (7th Cir. 1986), which held that the ADEA covered state and local governments only if they have at least 20 employees.  Small Wisconsin municipalities and other political subdivisions should take note of their vulnerability to age discrimination claims filed with the EEOC.  Of course, similar claims filed under Wisconsin law do not face any numerosity requirement for any kind of employer.  See Wis. Stat. §§ 111.32(6), .321–.322. 

Court of Appeals Suggests Possible Path To Waiver of PFC Review

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Court of Appeals Suggests Possible Path To Waiver of PFC Review

Can a municipality and a public safety employee agree to waive the disciplinary process before a police and fire commission under Wis. Stat. § 62.13(5). Yes, at least in some circumstances, according to the Wisconsin Court of Appeals.

City of Janesville v. WERC, 193 Wis. 2d 492, 535 N.W.2d 34 (Ct. App. 1995), held that Wis. Stat. § 62.13(5) provides the exclusive method for law enforcement officers to challenge discipline and that a labor union’s proposal for arbitration of grievances related to discipline was a prohibited subject of bargaining. City of Menasha v. Wisconsin Employment Relations Comm’n, 2011 WI App 108, 335 Wis. 2d 250, 802 N.W.2d 531, recognized that by enacting Wis. Stat. §§ 111.70(4)(c)2.b. and (4)(mc) the Wisconsin Legislature had abrogated the City of Janesville decision. In 2011, the legislature then reversed itself, abolishing those sections,[1] essentially resuscitating City of Janesville from the legal graveyard.

But this legislative yo-yo on the ability to “opt out” of the PFC disciplinary process was of no consequence to the court in State ex rel. Beck v. Lamb, 2017AP969 (Wis. Ct. App. July 25, 2018). In Beck, the waiver was made in the context of a “Last Chance Agreement” between Officer Beck and his employer, the City of Fond du Lac. The LCA was the product of a 2014 settlement between Beck and the City to resolve an investigation of Officer Beck’s honesty.

Pursuant to the LCA, Beck received a short suspension and agreed that any further “untruthful conduct” by him would constitute “cause” for his immediate discharge. He also agreed that any investigation into his alleged untruthful conduct would include a Loudermill hearing[2] but would not be subject to the PFC procedure under Wis. Stat. § 62.13(5). Instead, reminiscent of the procedures that could be used during the brief period when Wis. Stat. § 111.70(4)(c)2.b. was in effect, the LCA afforded Lamb the right to appeal the investigation’s findings to the Wisconsin Employment Relations Commission (“WERC”).

Lamb tried to have it both ways. He resigned his employment, in order to preserve his vacation pay, and then grieved the matter to the WERC. But the WERC dismissed the grievance on the basis that Beck had voluntarily resigned. Beck then filed an action in circuit court seeking a writ of mandamus to order his reinstatement, alleging the LCA was a void and unlawful agreement to circumvent Wis. Stat. § 62.13(5). The circuit court agreed and ordered Beck’s reinstatement.

The court of appeals reversed. Rejecting Beck’s reliance on City of Janesville, the court stated that Beck failed to show “that a procedure that is exclusive and mandatory is also necessarily individually unwaivable.” Beck, ¶ 16 (emphasis added). The court also rejected Beck’s reliance on Faust v. Ladysmith-Hawkins School Systems, 88 Wis. 2d 525, 277 N.W.2d 303, on motion for reconsideration, 88 Wis. 2d 525[JM1] , 281 N.W.2d 611 (1979) (per curiam) for the proposition that statutory procedures protecting both a private interest and a public policy purpose could not be waived. Concluding that Faust was limited to its peculiar facts, the court held it did not apply to void the LCA under which Beck knowingly and intentionally waived his statutory rights in the context of settling misconduct allegations. Beck, ¶¶ 17-21.

The result in Beck should not be construed broadly. The court emphasized that the question of a “prospective officer forsaking statutory PFC rights to land a job are not the facts before us.” Beck, ¶ 24. It emphasized that there was substantial caselaw addressing waivers of rights in the context of LCA agreements, suggesting that its holding here may be limited to that context.

Given that Beck is not recommended for publication, it is citable only “for its persuasive value.” Wis. Stat. § 809.23(3)(b). However, it does suggest that an individualized waiver of the PFC disciplinary process may be permissible, notwithstanding City of Janesville’s general prohibition upon opting out of the PFC process.

[1]           See 2011 Wisconsin Act 32, §§ 2407dg and 2409cp, effective July 1, 2011.

[2]           A due process hearing afforded under Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532 (1985).

Condemnor’s Duty to Negotiate in Good Faith is Limited to Compensation

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Condemnor’s Duty to Negotiate in Good Faith is Limited to Compensation

In Zastrow v. American Transmission Company LLC, Case No. 17-AP-1848 (July 3, 2018) (unpublished) the Wisconsin Court of Appeals confirmed that a condemnor’s duty to negotiate in good faith relates only to the issue of compensation.

American Transmission Company (ATC) held a pre-existing transmission line easement on the plaintiffs’ property.  In May 2014, ATC applied to the Wisconsin Public Service Commission (PSC) for permission to construct and operate two new high-voltage transmission lines that would run across plaintiffs’ property, and which, if approved, would ultimately require an extension of the existing easement.  Plaintiffs participated in the PSC proceedings, opposing the project and specifically complaining that the vegetation management practices relating to the clearing of the right-of-way during construction and thereafter were too extensive.  The PSC staff recommended approval of the application, but with the condition that ATC employ the wire zone-border zone vegetation management technique that was preferred by plaintiffs.  In issuing its decision, the PSC acknowledged the concerns raised by plaintiffs and its own staff, but did not include the recommended conditions.  Despite ongoing discussions between the PSC and plaintiffs, no modifications were ever made to the vegetation management terms for the relevant area.  ATC proceeded through the statutory process for condemnation of the easement area, under Wis. Stat. § 32.06, serving its jurisdictional offer in August 2016.

Plaintiff filed suit challenging ATC’s right to condemn the property on the grounds that ATC had not negotiated in good faith relating to the vegetation management issue.  The circuit court granted summary judgment in favor of ATC, finding Wis. Stat. § 32.06(2a) only required ATC to negotiate in good faith with respect to compensation.  The court of appeals affirmed, noting that while Wis. Stat. § 32.06(2a) includes multiple references to compensation or price, it does not include similar references to other topics.  Similarly, “(2a) grants landowners the right to appeal only one issue – i.e., the amount of compensation – [which] further indicates that the negotiation required by subsec. (2a) is limited to that topic.”  ¶ 18.

The court also rejected plaintiffs’ claims that ATC agreed to negotiate in good faith by accepting the PSC certificate because ATC has specifically advised plaintiffs that it did not generally negotiate on the vegetation issue.  Similarly, the court found no support for plaintiffs’ argument that ATC made any false statements in violation of Wis. Stat. § 32.29, and noted that even if there was a violation of the statute, the only penalty was a forfeiture and/or jail time.

Finally, the court held that the circuit court lawsuit was not the proper means of challenging the PSC’s decision.  Rather, the court noted that plaintiffs could have sought judicial review of the PSC’s decision and raised PSC’s failure to include any specific vegetation management conditions in the certificate.  By not seeking judicial review at that time, plaintiffs forfeited their right to challenge the substance of the PSC certificate.

Though this opinion is unpublished, it is instructive to parties involved in condemnation proceedings, particularly providing valuable instruction to condemnors on the scope of their obligations.  It also suggests that condemnors should be actively involved in PSC proceedings in attempt to manage potential issues that may arise in condemnation proceedings.

Wis. Supreme Court Finds TID Findings are Legislative Determinations, Subject to Certiorari Review

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Wis. Supreme Court Finds TID Findings are Legislative Determinations, Subject to Certiorari Review 

In a recent 5-2 decision, the Wisconsin Supreme Court held, inter alia, that findings of blight and a corresponding need for Tax Incremental Districts (TIDs) were “legislative determinations” and therefore not susceptible to full declaratory judgment review. Voters with Facts v. City of Eau Claire, 2018 WI 63. Voter with Facts strongly suggests, but stops short of directly holding, that certiorari review is the sole method for challenging findings in the creation of TIDs.

Municipalities will need to closely watch the next stages of the Voters with Facts litigation and other similar cases to see how courts conduct certiorari review of TID formation. In particular, it is unclear how courts will review the required finding that a TID is necessary because development of a blighted area would not occur “but for” the creation of a TID. See Wis. Stat. § 66.1105(4m)(b)2. Even under the more forgiving certiorari standard, it will be necessary to have a record supporting the blight and “but-for” determinations.

Voters with Facts Litigation

Plaintiffs, various Eau Claire area businesses and taxpayers, sought a declaratory judgment invalidating two TIDs that were part of the City’s “Confluence Project,” a downtown redevelopment effort. In approving the TIDs, the City found, as required by statute, that at least 50% of the area in the TIDs was “blighted.” 2018 WI 63, ¶ 8. The Joint Review Board (JRB) (also as required by statute) subsequently found that development in the area would not occur “but for” the creation of the TIDs. Id. ¶ 9.

The plaintiffs argued the TIDs were invalid because the City and the JRB failed to “articulate the basis for . . . and the evidence of record that support[ed]” these findings. Id. ¶ 11. In essence, the Plaintiffs wanted to engage in discovery and conduct a trial, seeking a judicial determination of whether the blight and “but for” determinations were justified by the facts on the ground. Alternatively, the Plaintiffs argued that if they could not get a full trial, they were entitled to certiorari review of the City and JRB’s actions. Id. ¶ 14.

The Wisconsin Supreme Court concluded that, because the blight and “but for” findings were “legislative determinations,” they “do not present justiciable issues of fact or law” and are not appropriate subjects for declaratory judgment relief. Voters with Facts v. City of Eau Claire, 2018 WI 63, ¶ 4. The Court noted that because blight findings involve determinations about areas which are “detrimental to the public health, safety, morals, or welfare,” they are a quintessential exercise of municipalities’ “police power,” a legislative power typically accorded deference by courts. Id. ¶ 37. The Court found that like other “[l]egislative determinations of public policy,” for example zoning decisions, TID determinations “[do] not raise justiciable issues,” Id. ¶ 39. The case was remanded to the circuit court with instructions to address the Plaintiffs’ challenges through certiorari review, which the court described as “the appropriate mechanism for a court to test the validity of a legislative determination.” Id. ¶ 5.

Justices Rebecca Bradley and Daniel Kelly authored a joint dissent, criticizing the court’s decision to dismiss the “Plaintiffs’ richly-detailed and amply supported 25-page Complaint . . . .” Voters, ¶ 77. The dissent opined that “[t]he court’s decision forecloses taxpayers from ever seeking declaratory judgment when municipalities violate the TIF statutes.” Id. ¶ 78. The dissent criticized both the majority opinion and the Wisconsin Court of Appeals, arguing (among other things) that: (1) Plaintiffs had standing to bring their declaratory judgment claims; (2) declaratory judgment was appropriate for challenging the TID findings; and (3) the Complaint adequately pleaded facts to support the Plaintiffs’ declaratory judgment challenges to the TID findings. Id.

Certiorari Review 

Certiorari review is generally limited to the “record compiled by the municipality,” and “there is a presumption of the correctness and validity to a municipality’s decision.” Ottman v. Town of Primrose, 2011 WI 18, ¶¶ 35, 48. On review, the court reviews whether the municipality: (1) “kept within its jurisdiction;” (2) “proceeded on a correct theory of law;” (3) “was arbitrary, oppressive, or unreasonable . . . ;” and (4) “whether the evidence was such that it might reasonably make the . . . determination in question . . . .” Voters with Facts, ¶ 71 (quoting Ottman, ¶ 35).

A recent example of just how deferential certiorari review is (at least as understood by the current members of the Wisconsin Supreme Court) is AllEnergy Corp. v. Trempealeau Cty. Env. & Land Use Committee, 2017 WI 52. In that case, the plaintiffs challenged the denial of a conditional use permit for non-metallic mining on several grounds, including that there was insufficient evidence to support the committee’s denial. Id. ¶ 3. While no one opinion garnered four votes, the court upheld the committee’s decision on a 4-3 vote under the certiorari standard. See id. ¶¶ 130, 133.

Justice Ziegler’s concurrence demonstrated a view that certiorari review is very deferential to municipal decisions. Her opinion (joined by Justice Roggensack) summed her rationale in one sentence: “This case should be decided narrowly: ours is a certiorari review.” Id. ¶ 133. Rather than delve into a deep review of the Environment & Land Use Committee’s evidence in the record and rationale, Justice Ziegler pointed out that the Committee’s decision “is entitled to a presumption of correctness and validity.” Id. ¶ 135. Given that presumption, Justice Ziegler could not conclude “that the Committee’s decision [was] invalid.” Id. ¶ 136. 

The dissenters in AllEnergy took another view. Three justices dissented, demonstrating a willingness to undertake a closer review of the Committee’s decision.  The dissent argued that the Committee exceeded its jurisdiction and acted arbitrarily. Id. ¶ 146. The dissent also criticized the record compiled by the Committee, saying that “no evidence” of whether the committee properly evaluated the plaintiff’s proposed mining plans “made its way into the record.” Id. ¶ 183.

The fractious nature of the AllEnergy decision, along with the strong views of the dissenters in AllEnergy and Voters with Facts, suggests that even with a “deferential” certiorari standard, municipal bodies would do well to create detailed records supporting legislative determinations, particularly for TIDs.

Law Clerk Collin Weyers assisted with researching and writing this post.

Top 10 Municipal Law Developments of 2017

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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 2017.

  1. 2017 Wisconsin Act 67 made broad changes to conditional use permits and preemption of clauses that merge substandard lots. For more information regarding this Act and its implications, read our blog post here. Additionally, the Act was partially a response to the U.S. Supreme Court’s decision in Murr v. Wisconsin, which we covered extensively with blog posts and a series of videos.

  2. In McKee Family I, LLC v. City of Fitchburg, 2017 WI 34, 374 Wis. 2d 487, 893 N.W.2d 12, the Supreme Court affirmed the bright-line limitations on the building permit exception to the general prohibition on vested rights in land use. McKee reaffirmed the common-law principle that 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. We posted about this decision in May.  After the McKee case was filed but years before it was decided, the legislature engrafted a vested-rights provision onto Wis. Stat. § 66.10015. Under that provision, local governments are prohibited from applying new changes or conditions to permit-approval processes after a property owner has submitted an application for a development-related permit. We do not yet know how courts will interpret the new statute and how much it will change established common-law principles.

  3. In Benson v. City of Madison, 2017 WI 65, 376 Wis. 2d 35, 897 N.W.2d 16, the Supreme Court held that the Wisconsin Fair Dealership Law applies to municipalities. Though the WFDL is the subject of extensive litigation, this was an unexpected resolution. We posted about this decision in June, addressing both its municipal aspects and its business aspects.

  4. In Melchert v. Pro Elec. Contractors, 2017 WI 30, 374 Wis. 2d 439, 892 N.W.2d 710, the Supreme Court held that a private contractor was entitled to governmental immunity for damage done while carrying out the government’s specifications. The private contractor severed a sewer lateral line while working on a government construction project. Neighboring property owners then sued to recover damages from the resulting flood. The Court held the contractor immune because its work complied with the Wisconsin Department of Transportation’s reasonably precise specifications for the project.

  5. In Wilmet v. Liberty Mut. Ins. Co., 2017 WI App 16, 374 Wis. 2d 413, 893 N.W.2d 251, the Court of Appeals held the supervision of a child engaged in recreational activity falls within the immunity granted for recreational activities by Wis. Stat. § 895.52. We posted about this decision in March.

  6. In City of Oshkosh v. Kubiak, 2017 WI App 20, 374 Wis. 2d 337, 893 N.W.2d 271, the Court of Appeals held that the use of the term “organizer” in a municipal special events permitting ordinance was not unconstitutionally vague. The ordinance required that the “organizer” of an event apply for a permit and pay the City’s costs. The ordinance did not define the term “organizer.” After a college pub crawl proceeded without a permit, the City sued the students who planned the event. The court held that the ordinance was not unconstitutionally vague because it did not invite guesswork in application and enforcement.

  7. In Wisconsin Carry Inc. v. City of Madison, 2017 WI 19, 373 Wis. 2d 348, 891 N.W.2d 803, the Supreme Court held that Wisconsin’s concealed-carry statute preempts the City of Madison’s rule restricting a licensee’s right to carry concealed weapons on City’s buses so long as the licensee complies with the statute’s requirements. The concealed-carry statute states that no political subdivision may adopt an ordinance or resolution that regulates the possession, bearing, or transportation of any firearm in a manner more stringent than state law. The Court held that the concealed-carry statute applies to all legislative activity by local governments, including Madison’s rule against guns on public buses.

  8. In Voces De La Frontera Inc. v. Clarke, 2017 WI 16, 373 Wis. 2d 348, 891 N.W.2d 803, the Supreme Court held that I-247 immigration detainer forms issued by U.S. Immigration and Customs Enforcement (ICE) are exempt from disclosure under Wisconsin’s public records law. Wisconsin public records law prevents disclosure of any record that is exempted by federal law. The Court found that certain federal regulations prohibited the disclosure of the forms.

  9. In Bank of America Corp. v. City of Miami, Fla., ocal governments have standing to sue banks under the Fair Housing Act for economic harm caused to them by discriminatory lending practices, but in order to prove causation, local governments must show “some direct relation between the injury asserted and the injurious conduct alleged.” We posted about this decision in May.

  10. In AllEnergy Corp. v. Trempealeau Cty. Env’t & Land Use Comm., 2017 WI 52, 375 Wis. 2d 329, 895 N.W.2d 368, the Supreme Court held that: 1) a county committee did not exceed its jurisdiction when acting on a conditional use permit application by considering public health, safety and general welfare matters; 2) public testimony and opinion provided substantial evidence for a conditional use permit application denial; and 3) a conditional use permit applicant is not entitled to the permit whenever it meets the specific conditions set forth in the ordinance and any additional conditions imposed by the permitting authority. AllEnergy applied for a conditional use permit for a 265-acre silica sand mine shortly before the County imposed a temporary moratorium on new non-metallic mining activities. The County denied the permit, and AllEnergy filed suit.


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.

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