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

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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.

Are You Ready? Reminder: New White-Collar Exemption Rule is Effective January 1, 2020.

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Under the Federal Fair Labor Standards Act (FLSA) “white collar” exemption, employees are exempt and not entitled to overtime if:

(1)       a “duties” test establishing that the employees are executive, administrative or professional employees as defined by federal rules is met;

(2)       employees are paid on a salary or fee basis; and

(3)       employees are paid at least a specified threshold amount per week.

Currently, the threshold amount equates to $23,660 per year.  As most employers know by now, the federal Department of Labor (DOL) recently raised the threshold amount.  The new rate, which goes into effect on January 1, 2020, raises that amount to $684 per week, or $35,568 per year.  Previously exempt employees who are paid less than $684 per week will no longer be exempt from overtime, even if they are paid a salary and meet the duties test.  The DOL estimates this change will have an impact on approximately 1.3 million workers. 

Other significant changes to the rules include:

(1)       raising the minimum compensation required to be eligible for the “highly compensated employees” exemption to $107,432 per year; and

(2)       allowing employers to count non-discretionary bonuses, incentives and commissions as up to 10% of the $684 per week salary threshold as long as the bonuses are paid at least annually.

While the DOL intends to propose updates to the salary threshold every four years, the updates will not be automatic, but will require notice and public comment periods.

Employers should start preparing now for the January 1, 2020 implementation date.  A good first step would be to identify currently exempt employees whose salary is below the threshold amount.  Once that is done, consider which employees you want to keep as exempt and adjust the salary accordingly.  Now is also be a good time to conduct a comprehensive audit to correct any potential misclassification issues, e.g. whether the position meets the duties test for a white-collar exemption. 

As always, employers should check with state and local laws to make sure any changes that might be considered are consistent with those laws. 

Towns Can Still Enforce Some Shoreland Frontage Requirements

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In State of Wisconsin ex rel. Michael Anderson v. Town of Newbold, 2018AP547 (Oct. 29, 2019), the Wisconsin Court of Appeals, District III, recently upheld a minimum-shoreland-frontage requirement adopted under a town’s subdivision authority, even though an identical requirement could not be validly adopted within the town’s zoning authority.

Michael Anderson owns a lot with 358.43 feet of shoreland frontage in the Town of Newbold. When he sought in 2016 to split the property into two lots, the Town Board denied his request. The Town Board reasoned that the property did not have sufficient total shoreland frontage for each of the proposed lots to satisfy a subdivision ordinance, which requires a minimum of 225 feet of shoreland frontage for each lot. After the circuit court upheld the Town Board’s decision on certiorari review, Anderson appealed.

The court of appeals acknowledged that there is a tension between inconsistent statutes on zoning and subdivision authority. Wis. Stat. § 59.692 prohibits towns from enacting shoreland zoning regulations. Anderson, slip op. at ¶11. However, the Wisconsin Supreme Court has also recognized that Wis. Stat. § 236.45 provides independent authority “to enact subdivision control regulations.” Anderson, slip op. at ¶12 (citing Town of Sun Prairie v. Storms, 110 Wis. 2d 58, 70, 327 N.W.2d 642 (1983)).

The court of appeals considered the critical question to be whether the Town’s subdivision ordinance was authorized by Chapter 236, not whether the ordinance could also be considered zoning. Anderson, slip op. at ¶16 (citing Town of Sun Prairie, 110 Wis. 2d at 70-71). Anderson, however, focused on the similarities between the Town’s subdivision ordinance and a zoning ordinance. Id. at ¶14. Anderson did not argue that the ordinance was improper under Chapter 236. Accordingly, the court seized upon Chapter 236 in rejecting Anderson’s claim that the Town lacked authority to adopt the minimum-frontage requirement in its subdivision ordinance. Id. at ¶16.

The court of appeals also rejected Anderson’s invitation to treat Wis. Stat. § 59.692 as an implicit revocation of the relevant authority in Wis. Stat. § 236.45. Id. at ¶17. Section 59.692 repeatedly states it applies only to zoning, while section 236.45(2)(b) provides that subdivision authority “should be liberally construed in favor of the municipality.” Anderson, slip op. at ¶19. Therefore, even though it acknowledged “undeniable tension” between these two statutes, the court declined to rewrite either of them. Id. at ¶21.

Although this decision recognizes a town’s subdivision authority, it also expressly invites the Legislature to limit that authority in accord with recent strictures on zoning. The Legislature may well take up the court’s invitation. Towns should review their ordinances in the meantime. When the Legislature eliminated towns’ authority to enact shoreland zoning, it vested the rights of those towns that had existing shoreland zoning ordinances. Towns should consider adopting or amending shoreland subdivision ordinances now, so that a similar legislative change to Chapter 236 would not fully divest them of authority to regulate shoreland frontage.

Wisconsin Supreme Court Procedural Orders Limit Circuit Court Authority To Issue Injunctions

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The Wisconsin Constitution grants circuit courts the power to “issue all writs necessary in aid of [their] jurisdiction.” Wis. Const. art. VII, § 8. And the Legislature has expressly authorized circuit courts to issue injunctions. Wis. Stat. §§ 813.01, 813.02. Yet, in two unsigned and unpublished procedural orders issued this past spring, the Supreme Court has—intentionally or not—stripped circuit courts of the power to enjoin enforcement of unconstitutional laws.

The supreme court issued these orders in two underlying lawsuits, both challenging legislative overreach in last fall’s lame-duck extraordinary session. (Full disclosure: I represented the plaintiffs in one of those suits.) In each case, a circuit court concluded that the laws passed in the December 2018 Extraordinary Session violated the Wisconsin Constitution and issued an injunction prohibiting their enforcement. In each case, the Legislature appealed the injunction and sought a stay that would prevent the injunction from taking effect during the appeal. In each case, the supreme court granted the Legislature’s request in an unsigned, unpublished procedural order issued before the case was resolved on the merits.

These two orders suggest a substantial shift in Wisconsin law governing injunctions against the enforcement of unconstitutional laws (as well as in the legal standard that applies to motions to stay an injunction pending appeal). Understanding that shift requires examining three questions:

  1. To what extent do these orders have precedential effect?
  2. How do these orders alter the standard for stays pending appeal?
  3. Do these orders prohibit circuit courts from enjoining unconstitutional laws?

I address all three questions in detail in a new essay published in the Wisconsin Law Review Forward. This blog post provides a brief synopsis of my conclusions.

First, the orders are unpublished and unsigned. But that does not mean they lack precedential effect. The Supreme Court issues per curiam opinions that create binding precedent. And both actions of the Court and the text of the orders themselves clearly suggest that the Justices—both those in the majority and those in the written dissents—understand the orders to be precedential. Given that, it is particularly problematic that the orders were not published in any official reporter or in any online legal research databases. They are now posted online by the Wisconsin Law Review.

Second, these orders significantly change the analysis that Wisconsin courts apply in determining whether to stay an injunction pending appeal.

Almost 25 years ago, the Supreme Court established that test in State v. Gudenschwager, 191 Wis. 2d 431, 529 N.W.2d 225 (1995) (per curiam). It did so by approving the court of appeals’ prior adoption of four factors used in federal courts. See id., 191 Wis. 2d at 440 (citing Leggett v. Leggett, 396 Wis. 2d 787 (Wis. Ct. App. 1986), which cites Reserve Mining Co. v. United States, 498 F.2d 1073 (8th Cir. 1974)). The Gudenschwager opinion then adopted a balancing approach that is not entirely consistent with the factors as it articulated them.

Where the application of the balancing test yielded clear results, the weaknesses of the Gudenschwager framework were easily papered over. But where, as in the extraordinary-session cases, all parties had substantial interests at stake, the balancing became more difficult. The Supreme Court’s recent orders modified all four Gudenschwager standards:

  • The requirement that a movant make “a strong showing it is likely to succeed on the merits of the appeal,” Gudenschwager, 191 Wis. 2d at 440, is now per se satisfied in any case where the appellate court will apply de novo review.
  • The requirement that the movant show it will, in the absence of a stay, suffer irreparable harm, is satisfied anytime the movant is connected with the Legislature and a court has interfered with the enforcement of a law adopted through the legislative process.
  • And the remaining requirements—“no substantial harm … to other interested parties” and “no harm to the public interest,” id.—are subsumed to the “irreparable harm of the first magnitude” that the Court now says the Legislature suffers when enforcement of a statute is enjoined.

All of this was done without recognition, much less consideration, of the public’s interest in ensuring that all branches of the state government act within the limited power granted them by the people in the Wisconsin Constitution.

Moreover, all of it was done without acknowledgement (at least by the unsigned majority portions of the orders) that the Supreme Court was significantly changing Wisconsin law. Such modifications should not be made sub silentio, and certainly not in unpublished orders that provide the public and the Bar no notice of how the law has changed.

Third and most importantly, the orders make clear that a circuit court commits legal error any time it declines to immediately stay its own injunction preventing enforcement of an unconstitutional law. This necessarily follows from the way the orders recast the Gudenschwager test, creating per se rules for the first two factors while largely discounting the third and fourth factors. But it means that the Supreme Court has, in practical terms, divested the circuit courts of power to issue such injunctions, notwithstanding the express grants of such power to the circuit courts in both the Constitution and the Chapter 813 of the Wisconsin Statutes.

Why Your 18 Year-Old Needs Powers of Attorney for Finances and Healthcare

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As parents, you may not realize that once your child turns 18 years-old, federal and state law restrict your ability to access your child’s healthcare records and to make healthcare and financial decisions on your child’s behalf. This becomes problematic if your adult child were ever to become incapacitated, and unable to make those decisions for him or herself.  This issue can be avoided if your child executes financial and healthcare powers of attorney. 

Generally speaking, a power of attorney is a document that allows you, as principal, to appoint an agent or agents to act on your behalf in connection with matters identified in the document in the event you become incapacitated. These documents relate to financial and healthcare matters.

One of the greatest benefits of a power of attorney is that it allows the agent to act quickly in an emergency.  If your adult child becomes incapacitated and does not have a power of attorney naming you as the agent, then a guardianship may be necessary. In a guardianship proceeding, the court appoints a guardian to make the healthcare and financial decisions on behalf of the incapacitated individual. Guardianship proceedings take time and can be expensive. Having your college student sign a power of attorney for healthcare and finances is a simple way to prepare for an emergency.

7th Circuit Finds Broad Breach of Contract Exclusion in Prof Services Liability Policy Unenforceable

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Recently, in Crum & Forster Specialty Insurance Co. v. DVO, Inc., Slip Op., Case No. 18-2571 (7th Cir. Sept. 23, 2019) (“Slip Op.”), the Seventh Circuit held that, under Wisconsin insurance policy interpretation principles, an insurer may not avoid its coverage responsibilities by invoking an exclusion that is broad enough to fully encompass the scope of the coverage grant, thus rendering the policy illusory.

The dispute at issue originated from a state court action that WTE-S&S AG Enterprise, LLC (“WTE”) brought against DVO, Inc. (“DVO”), an anaerobic digester design and manufacturing company.  WTE alleged that DVO breached a contractual agreement between the parties by failing to properly design and produce a digester.  DVO provided notice of the claim to Crum & Forster Specialty Insurance Company (“Crum & Forster”), DVO’s primary and excess liability insurer, under its comprehensive insurance policy that included Errors & Omissions coverage to protect DVO from professional malpractice claims.

After initially providing a defense of the lawsuit under a reservation of rights, Crum & Forster subsequently disclaimed all of its coverage obligations based on language in the policy that excluded from coverage claims or damage “based upon or arising out of” breach of contract.  This denial ultimately led to a coverage dispute between the parties, with DVO taking the position that the breach of contract exclusion was unenforceable because it effectively rendered the E&O coverage illusory by broadly encompassing all potential professional liability claims.

The district court rejected DVO’s position, concluding that the breach of contract exclusion would not apply to third-party claims asserted against DVO by entities to which DVO was not in direct contractual privity.  Slip. Op. at 3.  The district court further held that, even if it accepted DVO’s position that the exclusion as written rendered the coverage illusory, the proper remedy would be to narrow the exclusion to allow coverage for third-party claims, which would not help DVO under the circumstances given that DVO and WTE had a contractual relationship.  Id.

On appeal, the Seventh Circuit took issue with both holdings.  Regarding the scope of the exclusion, Judge Rovner noted that it expressly applies not only to direct breach of contract allegations, but also to any claim “based upon or arising out of” that contract.  Thus, because Wisconsin courts have interpreted such language to broadly apply to any claim originating from, growing out of, or flowing from a contractual breach, including tort claims asserted by third parties (see Great Lakes Beverages, LLC v. Wochinski, 2017 WI App 13, ¶¶ 20-25, 373 Wis. 2d 649), the district court’s more narrow interpretation must be rejected.  Slip Op. at 6-8.  The court accordingly concluded that the scope of the breach of contract exclusion as written was more broad than the professional liability insuring agreement, thus rendering the E&O coverage illusory.  Slip Op. at 10.

Moreover, the Seventh Circuit found that the district court improperly focused on hypothetical third-party claims in asserting that the exclusion simply should be narrowed to not exclude such claims.  Rather, the court found that under Wisconsin law illusory insurance coverage must be reformed to meet the insured’s reasonable expectations, which requires a trial court to consider the intended role of the coverage and, under these particular circumstances, a determination regarding whether DVO expected its E&O coverage to apply to liability arising out of negligence, omissions, mistakes, and errors stemming from its professional services.  Slip Op. at 11-12.

While the Seventh Circuit ultimately remanded the case to the district court to properly evaluate DVO’s reasonable expectations of coverage, it did note that the breach of contract exclusion was set forth in an endorsement that applied to all of the various coverages offered by the comprehensive liability policy (including CGL, pollution liability, and cleanup costs).  The court suggested that a possible reformation would be to find that DVO did not reasonably expect the endorsement to apply specifically to its E&O coverage, as that is the only coverage in the policy that was rendered illusory by application of the exclusion.  Slip Op. at 12.

This case is an important reminder that, under settled Wisconsin principles of insurance policy interpretation, insurance policies must (and should) be applied consistently with the insured’s purpose and intent in purchasing the coverage.  Insureds should keep these equitable principles in mind when asserting their coverage rights, especially under circumstances where the policy at issue is written on standard coverage forms drafted unilaterally by the insurance industry.

Court of Appeals, District II, Upholds Town’s Denial of CUP for Cell Tower

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In Eco-Site LLC et. al. v. Town of Cedarburg, 2019 WI App 42, the Wisconsin Court of Appeals, District II affirmed the Town of Cedarburg’s authority to deny Eco-Site LLC’s conditional use permit application to build a cell tower.

After a full discussion of the information and issues, the Town Board denied Eco-Site’s application on four bases - three rooted in its ordinance and one in state law. First, the Board found the cell tower would likely result in the reduction of nearby property values. Second, the Board determined the placement of the cell tower was incompatible with land uses on adjacent land. Third, the Board concluded the cell tower would pose dangers to public health, safety and welfare. And, fourth, the Board noted that Eco-Site did not comply with Wis. Stat. § 66.0404(2)(b)6.’s “search ring” requirement in its application.

The plaintiff argued that the federal Telecommunications Act of 1996 and Wis. Stat. § 66.0404 constrain municipalities’ ability to regulate the siting and construction of new mobile service support structures and facilities. Specifically, plaintiff argued municipalities are prohibited from denying siting or construction permission by ordinances that prohibit placement of a cell tower in a particular location, or “based solely on aesthetic concerns.”

While acknowledging these limitations on municipal authority, the Circuit Court found that the Town’s denial of the cell tower CUP application was permissible, supported by substantial evidence, and not “just another way of saying aesthetics.” The Court of Appeals agreed, noting that of the Town’s six CUP standards regulating cell tower siting, none prohibited towers in certain locations or was based purely on aesthetics.

The Court of Appeals rejected Eco-Site’s claims that the Town misapplied its ordinance regarding the proposed cell tower’s compatibility with adjacent lands or relied on solely aesthetic concerns. Rather, the Town intentionally chose to zone land residential and agricultural “to keep this area rustic, rural and populated.” These zoning decisions and development goals were not purely aesthetic and did not prohibit towers in specific locations.

The Court also found the Town’s and citizen’s concerns regarding reduced property values were legitimate and not purely aesthetic. Eco-Site argued that the mere presence of “aesthetic language” in the Town’s denial letter suggested that the decision was impermissibly based on aesthetics. But the Court noted that the denial letter also discussed how the proposed project would affect broader uses of the neighborhood and nearby property values. The Court found this to be a decisive factor, explaining that the legislature’s choice of words matters. That is, an application can be denied for reasons relating to aesthetics, just not “based solely on aesthetic concerns.” 2019 WI App 42 at ¶23. Therefore, the Court found the Town’s CUP standards and its denial of Eco-Site’s permit valid because “it simply does not matter that aesthetic comments were made.”

The Court further held that, despite the parties’ differing interpretations of the statute, the Town provided the requisite substantial evidence for its denial. 2018AP580 at ¶24; see Wis. Stat. § 66.0404(2)(d)4. This deferential standard allows the Court to uphold a municipality’s decision if it finds sufficient evidence to suggest that “reasonable persons could decide as the Town did.” Oneida Seven Generations Corp. v. City of Green Bay, 2015 WI 50 ¶ 43.

In a concurring opinion, Judge Reilly stated that the Court could have affirmed the lower court’s holding for another reason: Eco-Site’s failure to demonstrate that existing locations or collocation could not meet the public’s communication needs. See Wis. Stat. § 66.0404(2)(b)6.

This decision represents an important acknowledgment of municipalities’ regulatory authority over cell tower siting. However, the Court’s decision suggests that, when denying cell tower permit applications, a municipality should ensure that it first gathers and examines substantial evidence, and finds multiple non-aesthetic reasons for denial.

Court of Appeals Weighs in on Class Action Cert Issues Under Federal Standard Recently Adopted in WI

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Last month, District I of the Wisconsin Court of Appeals was provided an opportunity to review a circuit court’s grant of a motion for class certification under the newly-revised version of Wis. Stat. § 803.08, which adopted the language and scope of FRCP 23, the federal class certification analogue.  See Harwood v. Wheaton Franciscan Services, Inc., et al., Case No. 2018AP1836 (Aug. 20, 2019).

At issue were allegations that Wheaton Franciscan Services, Inc. and a number of affiliated entities (collectively, “Wheaton”) had violated Wis. Stat. § 146.83, which places strict limitations on what health care providers may charge for the production of certain medical records, including a prohibition on charging any certification or retrieval fees to any patients or persons authorized by the patient to access the records.  Ms. Harwood alleged that she was one of many patients that had been charged with such fees in violation of this statute and accordingly filed a complaint on behalf of all such persons that had been charged by Wheaton in the past six years.

The circuit court granted Ms. Harwood’s class certification motion, concluding that the forty-plus Wheaton invoices submitted in support of her motion demonstrated that the proposed class met the requirements of Wis. Stat. § 803.08—Wheaton had charged numerous patients the fees in dispute, the patients had all been charged the same fees and would be entitled to the same statutory remedies if such fees amounted to a violation Ms. Harwood’s claim was typical and substantially similar to the claims of the unnamed class members, and the class shared predominantly the same issues given the straightforward nature of the damages calculations under the statute.  Id. ¶¶ 31-39.

The Court of Appeals affirmed the circuit court’s decision in full, providing future litigants with a number of key takeaways in its written decision, including the following:

  • The Court of Appeals affirmed that Wisconsin appellate courts will continue to review all circuit court 803.08 class certification decisions under an abuse of discretion standard, which is consistent with the deference afforded to federal district courts.  Id. ¶ 41. 


  • When adopting the revisions to Wis. Stat. § 803.08, the Supreme Court left it up to the lower courts to determine whether application of the reformed statute to previously-filed matters (such as this one) “would not be feasible or would work injustice.”  Id. ¶ 4, n.4.  The Court of Appeals did not disturb the circuit court’s conclusion that application of the reformed statute here would actually benefit both parties in that Wheaton “get[s] the benefit of a more rigorous analysis, which in turn corresponds to less appellate risk for [Ms. Harwood].”  Id. ¶ 34.  Litigants should expect a similar adoption of the reformed standard in their pre-existing matters unless they can substantiate that it would result in one or more parties suffering significant and concrete prejudice.


  • The Court of Appeals expressly agreed with the circuit court’s finding that public policy favors certifying a class when, as here, “the amount in controversy is so small that the wronged party is unlikely ever to obtain judicial review of the alleged violation without a class action.”   Id. ¶ 58.  Both courts appeared to find this reasoning especially persuasive and a core principle behind allowing individual aggrieved parties to litigate their claims collectively.


  • The Court of Appeals rejected Wheaton’s reliance on federal Third Circuit precedent imposing a “heightened ascertainability” requirement upon proposed class members (which requires “a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition,” see Byrd v. Aaron’s Inc., 784 F.3d 154, 163 (3d Cir. 2015)), noting that the federal Seventh Circuit disagrees that FRCP 23 imposes such a rigorous requirement upon potential class members.  Slip. Op. ¶ 64 (citing Mullins v. Direct Digital, LLC, 795 F.3d 654, 672 (7th Cir. 2015).  This suggests that Wisconsin courts will interpret federal Seventh Circuit precedent as more persuasive than other circuits when addressing class certification issues under the newly-reformed version of Wis. Stat. § 803.08, and may even view such precedent as binding (as the next bullet point suggests).


  • The Court of Appeals cited favorably to Szabo v. Bridgeport Machines, Inc., 249 F.3d 672 (7th Cir. 2001), for the proposition that it would be improper for a circuit court to certify a class based solely on the allegations raised in the complaint, as that would “‘move[] the court’s discretion to the plaintiff’s attorneys—who may use it in ways injurious to other class members, as well as ways injurious to defendants.’”  Slip. Op. ¶ 62 (quoting Szabo, 249 F.3d at 677)).  The Court of Appeals ultimately held that such circumstances were not present here, where the plaintiff had substantiated its claims by submitting the Wheaton invoices as evidence.  Id.  The Court further rejected Wheaton’s argument that it needed more discovery to properly respond to the plaintiff’s certification motion, noting that the parties had already had an opportunity to conduct discovery and that the crucial evidence to the analysis (i.e., the Wheaton invoices) were Wheaton’s own business records.  Id. ¶ 64.  Future litigants accordingly should take note that Wisconsin courts may be receptive to arguments seeking to delay class certification decisions under circumstances where discovery of potential evidence relevant to the analysis may be warranted.

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

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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 SR Administrator on

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.

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