On September 6, 2018, the Wisconsin Department of Revenue (“WDOR”) issued Emergency Rule 1819 requiring out-of-state internet sellers to collect and remit Wisconsin sales taxes if the seller’s sales or number of transactions exceed the substantial nexus thresholds upheld by the U.S. Supreme Court in its June 21, 2018 decision in South Dakota v. Wayfair, Inc., et al.  The WDOR’s emergency rule becomes effective on October 1, 2018, meaning that internet sellers may need to start collecting sales taxes as soon as October 1, 2018 and filing sales tax reports and remitting sales taxes as soon as November 2018.

            The WDOR’s position is current Wisconsin Statutes § 77.51(13g)(c) permits the emergency rule to become effective on October 1, 2018 without action of the Legislature.  As noted in the comments to the emergency rule, if an internet seller of tangible personal property did not have nexus prior to Wisconsin implementing the Wayfair standard for substantial nexus, then Wisconsin will not seek to cause the seller to collect and remit Wisconsin sales or use taxes for sales prior to October 1, 2018.

            As to Wisconsin franchise and income taxes, the emergency rule expressly notes that internet sellers with substantial nexus for sales and use tax applying the Wayfair thresholds may also have substantial nexus in Wisconsin for imposing Wisconsin franchise and income tax.  While not stated, P.L. 86-272 (a 1959 federal law providing that a state is not permitted to impose a tax measured by net income on an out-of-state company if orders for tangible personal property are solicited in the state and then accepted or rejected, and filled, from outside the state) continues to limit Wisconsin’s ability to assert substantial nexus for franchise or income tax purposes regarding sales of tangible personal property.

            Similar to Wayfair, in the emergency rule Wisconsin adopted a small out-of-state retailer rule providing that retailers who have sales that do not exceed $100,000 (which $100,000 is inclusive of both taxable sales and sales exempt from tax) and annual transactions of less than 200 are not required to collect and remit sales taxes to Wisconsin.  For purposes of what “year” a retailer uses when determining whether the $100,000 of sales and 200 transactions thresholds are exceeded, it is the retailer’s taxable year for federal income tax purposes.

            Under the emergency rule, if an out-of-state retailer’s annual gross sales into Wisconsin exceeds $100,000 in the “previous year,” or if the retailer’s annual number of separate sales transactions into Wisconsin is 200 or more in the previous year, the retailer is required to register and collect Wisconsin sales or use tax for the entire current year.  An example in the emergency rule describes an out-of-state retailer that has more than $100,000 in gross sales in 2018 and so for the entirety of 2019 the retailer is required to collect and remit Wisconsin sales or use taxes. 

            By a separate webpage uploaded onto the WDOR website on September 10, 2018 (captioned “Registration and Collection Dates for Remote Sellers”), the WDOR answered a question left open by the emergency rule, which is if an out-of-state retailer had more than $100,000 of sales for 2017, or 200 or more transactions in 2017, is the out-of-state retailer required to collect and remit Wisconsin sales or use taxes for sales beginning October 1, 2018?  That is, when the emergency rule refers to “previous year” do 2017 sales count for determining the obligation to collect and remit taxes beginning on October 1, 2018?

            The WDOR takes the position on its website page that if an out-of-state retailer exceeds either the $100,000 sales/200 transactions thresholds in 2017, then the retailer needs to register and collect Wisconsin sales taxes beginning on October 1, 2018.  See Example 1.  Similarly, if from January 1, 2018 to September 30, 2018 an out-of-state retailer exceeds either the $100,000 sales/200 transactions thresholds, then the retailer needs to register and collect Wisconsin sales taxes beginning October 1, 2018.  See Example 3.  While not necessarily the outcome one may infer from the emergency rule, there is little impediment from the WDOR taking the position on its website.

            If an out-of-state retailer’s annual gross sales into Wisconsin are $100,000 or less in the previous year, and separate sales transactions into Wisconsin is less than 200 in the previous year (where each periodic payment constitutes a “sale”), then according to the emergency rule the retailer is not required to collect and remit taxes until its sales or transactions exceed the $100,000 or 200 transactions thresholds for the current year.  Once having exceeding the thresholds, a retailer is required to collect and remit taxes for the remainder of the year.  The emergency rule provides a clarifying example showing how once a retailer has exceeded the $100,000 of sales, or the 200 or more transactions, thresholds then the obligation to collect and remit sales and use tax begins with the retailer’s next sale transaction. 

           In terms of implementing reporting and registration, Wisconsin is one of the 24 states that have adopted the Streamlined Sales and Use Tax Agreement (SSUTA) and is a “full member” of the Streamlined Sales Tax Governing Board.  So registration, reporting and software are available through the Streamlined Sales Tax Governing Board’s website.  Based on conversations with WDOR personnel, the use of the Streamlined Sales Tax Governing Board processes, SSUTA and certified software providers listed on the Streamlined Sales Tax Governing Board’s website are the method by which the emergency rule will have negligible costs to the private sector (and the emergency rule says “This proposed rule does not have anticipated costs on the private sector.”).

            While Wisconsin has now clarified that internet sellers that exceed the $100,000 in sales and 200 transactions thresholds of Wayfair are required to collect and remit Wisconsin sales tax, it is yet unclear whether Wisconsin will seek to expand what constitutes “substantial nexus” for sales/use taxes, and franchise/income taxes.  Based on tax audit experiences of the author, it will not be surprising if the WDOR seeks to expand substantial nexus by looking at economic nexus, click-thru nexus, “cookie” nexus and notice requirements to broaden the base of Wisconsin taxpayers.  The WDOR already has audit office presence in states outside of Wisconsin to facilitate audits to expand the number of businesses subject to Wisconsin tax.  The WDOR has a voluntary disclosure program (VDP), as to which Wisconsin’s policy is to collect four years’ taxes where a VDP has been implemented, if a VDP is entered into by a taxpayer.  Businesses that are on the cusp of meeting substantial nexus in Wisconsin may want to consider availing themselves of the VDP process.

            Comments on the emergency rule may be submitted to the WDOR no later than a to be announced date for a public hearing regarding the emergency rule.  When information as to the place, date and time of the public hearing is published in the Wisconsin Administrative Register, this article will be updated to provide the deadline for comments.

Conclusion 

            The emergency rule announced by the WDOR leaves internet sellers with little time to implement collection and remitting processes to comply with the new rule.  While the emergency rule assists in harmonizing Wisconsin’s sales and use tax nexus thresholds with other states that adopt the Wayfair thresholds for substantial nexus, Wisconsin’s timeline for implementation of the emergency rule places a significant decision burden (e.g., start collecting sales tax in Wisconsin on October 1, 2018) and may place a procedural burden on internet sellers.

On July 1, 2018, for the first time in more than a century, major changes to Wisconsin’s class-action statute took effect. See Supreme Court Order No. 17-03, 2017 WI 108. As a result, Wis. Stat. § 803.08 now mirrors, nearly identically, Federal Rule of Civil Procedure 23, which governs class-action suits in federal courts. The harmonization of § 803.08 with Rule 23 expands the breadth of guidance and precedent available in Wisconsin class actions, as lawyers and judges can now refer to extensive federal case law interpreting and applying Rule 23. While the effect this change will have on the volume, variety, and outcome of class actions in Wisconsin remains to be seen, several questions are foreseeable.

Will this change increase the number of class-action lawsuits in Wisconsin courts?

State-court class actions have been relatively rare in Wisconsin. So few occur annually that the Wisconsin Court system does not track class actions as a category in its yearly “Civil Disposition Summary.” Among the reasons for this scarcity may be the fact that, prior to July 1, Wisconsin’s previous class-action statute provided very little guidance (and therefore very little predictability) for potential litigants, making federal court or other jurisdictions preferable venues. Now that Wisconsin class-action law parallels federal law, Wisconsin state courts may become a more appealing venue. (Note, however, that Congress relaxed removal rules for class actions, see 28 U.S.C. §§ 1332(d) & 1446, so that, even if more class-action plaintiffs choose to file in Wisconsin state courts, defendants will often have the option to move those cases to federal court.)

There are also some unique features of Wisconsin law that may make litigating class actions here more attractive to plaintiffs and defendants alike. For example, consider the opportunity for appellate review early in the class-action process. The crucial moment in many class-action suits is the trial court’s decision whether to certify a class. Where certification is granted, the defendant often faces enormous potential liability, which is why a certification order sometimes constitute a “death knell” for defendants, forcing them to settle rather than risk an adverse judgment after a full trial on the merits. See Balser et al., Interlocutory Appeal of Class Certification Decisions under Rule 23(f): An Untapped Resource, Bloomberg BNA (Mar. 16, 2017). And where certification is denied, the named plaintiff must decide whether to settle or proceed alone, which often means continuing in extensive, expensive litigation though the potential damages for their individual injury do not justify the costs of the process.

In federal court, litigants do not have an appeal as of right from the trial court’s critical decision of whether to certify a class. Instead, the party aggrieved by that decision must convince a federal appeals court to accept a discretionary appeal under Rule 23(f). By contrast, Wis. Stat. § 803.08(11) now grants litigants an appeal as of right from a class certification order. The chance to appeal class certification before proceeding to final judgment could be a substantial boon for whichever party loses on that issue in the trial court. It may be enough to encourage class-action plaintiffs to file in Wisconsin state court and to make class-action defendants sued in Wisconsin state court think twice before opting for removal to federal court.

Another feature of Wisconsin law that could attract more class-action suits is Wisconsin’s comparatively lenient standing requirements. In federal courts, standing is a constitutionally mandated jurisdictional prerequisite. But Wisconsin state courts view standing more leniently. In Wisconsin, standing is a prudential doctrine, “aimed at ensuring that issues and arguments presented will be carefully developed and zealously argued.” McConkey v. Van Hollen, 2010 WI 57, ¶¶15-16, 326 Wis. 2d 1, 783 N.W.2d 855. The greater flexibility Wisconsin law affords state courts to allow suits to proceed may be particularly advantageous for class-action plaintiffs, who frequently face arguments that the named plaintiff has not suffered a concrete and particularized injury sufficient to trigger federal jurisdiction. Additionally, it remains an unresolved question whether federal standing doctrine requires that all absent class members have standing or if the named plaintiff’s proof of standing is sufficient. Wisconsin’s more pragmatic approach to standing allows state-court plaintiffs to sidestep this thorny question.

How will Wisconsin courts address some of the open questions under federal class-action law?

While functionally adopting Rule 23 will likely bring improved clarity to Wisconsin’s class-action law in many respects, Wisconsin may be adopting some of Rule 23’s unresolved questions as well. To the extent that the language now incorporated into § 803.08 has led to disagreements among federal courts, Wisconsin courts will now face those same bedeviling questions.

One such question, which has divided federal appellate courts, concerns whether Rule 23 has an ‘implicit’ requirement that the members of a proposed class be “ascertainable.” See, e.g., In re Petrobas Securities, 862 F.3d 250, 264 (2d Cir. 2017), petition for cert. filed (No. 17-664). Traditionally, “a class is ascertainable if it is clearly defined by ‘objective criteria.’” Andrew J. Ennis and Catherine A. Zollicker, The Heightened Standard of Ascertainability in Class Actions, ABA Section of Litigation (Mar. 13, 2018). Most circuits, including the Seventh Circuit, adhere to this traditional rule. Id. However, the Third Circuit has held that “a class action plaintiff must also ‘demonstrate his purposed method for ascertaining class members is reliable and administratively feasible.’” Id. (quoting Carrera v. Bayer Corp., 727 F.3d 300, 308 (3d Cir. 2013)). The U.S. Supreme Court has thus far declined several requests to address this issue.

Another involves the propriety of side-deals with individual objectors to a class-action settlement. Because the outcome of a class-action suit is binding upon all members of the class, when the named plaintiff and the defendant negotiate a settlement, the terms are submitted for the court’s review and all absent (that is, unnamed) class members have the opportunity to lodge objections to the settlement. Fed. R. Civ. P. 23(e)(5). Sometimes an absent class member files such an objection for the sole purpose of gaining an individual benefit in the form of a separate settlement payment in exchange for dismissing their objection. At least one litigant has characterized this practice as “objector blackmail.” See Pearson v. Target Corp., 893 F.3d 980, 982 (7th Cir. 2018).

This issue is a particularly interesting example because the U.S. Supreme Court has adopted an amendment to Rule 23 to address this by requiring court approval of any payment provided in connection with dismissing an objection to settlement. Unless Congress takes action to stop it, this proposed amendment will take effect on December 1, 2018. However, Wis. Stat. § 803.08 mirrors Rule 23’s text prior to the proposed amendment. Absent a further change to section 803.08, the settlement issue will remain one for the Wisconsin courts to handle in state-court class actions.

Conclusion

The first wholesale changes to Wisconsin’s class-action statute in a century might have unintended consequences. While changes to harmonize Wisconsin class-action law with federal class-action law mean that Wisconsin lawyers and judges have greater guidance on class-action procedures, they also bring to Wisconsin several thorny questions as yet unresolved by federal courts. And some differences between Wisconsin law and federal law could lead to an increased incidence of class-action litigation in Wisconsin state courts.

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

SAS and OMP

The European Union Parliament enacted the General Data Protection Regulation (“GDPR”), which aims to protect the personal information of individuals in the EU. Many U.S. businesses will have to comply with the GDPR if they have personal information—which includes a variety of data from name to birthdate, home address to IP address, and many other data points in between—of individuals in the EU. The GDPR went into effect on May 25, 2018.

Scope of the GDPR

U.S. companies engaged in processing personal data of individuals in the EU (not just EU residents, but anyone residing there or traveling through) may have to comply with the GDPR even if they have do not have a brick and mortar place of business in Europe. “Processing” has an expansive definition and includes collecting, storing, using, or retrieving personal data. “Personal data” is also broadly defined and includes any information relating to an identifiable person. Information obtained using cookies or web beacons, for example, may qualify as personal data. As a result, any business that has any personally identifiable information about any individual in the EU is arguably subject to the GDPR.

The GDPR gives individuals who are covered by the law certain rights that may be utilized against companies that control and process their data. For example, under certain circumstances, individuals may object to the processing of their data or request that it be deleted. Additionally, individuals in the EU are entitled to receive certain disclosures about how their information is collected and used. This means that companies will likely have to revise their privacy policies, and it explains why many people, even in the United States, received a flurry of updated privacy policies in late-May and early-June of this year.

As a means of protecting covered data, the GDPR requires companies that possess personal data and utilize third-parties to assist in supplying their goods or services to include certain provisions in their contracts with those third parties. And the GDPR establishes requirements for how companies respond to data breaches, in some cases mandating that companies notify the appropriate regulatory authority within 72 hours of learning that a breach occurred.

Compliance Efforts

The GDPR has garnered extensive attention. In part, that is because the law allows EU regulators to impose large fines for violations of the statute. Depending on which article is violated, the cap may be as much as €20 million (approximately 23 million U.S. dollars) or 4% of the company’s worldwide annual revenue—whichever is greater. On top of the provisions authorizing administrative fines, the GDPR also provides private causes of action under which individuals have the right to sue companies for damages.

Many variables are considered in assessing fines. An effort to comply with the law will certainly weigh in a business’s favor. All companies that keep or process personal data should evaluate whether they are subject to the GDPR. Once a company determines that it is subject to the GDPR, the next step is identifying the key areas of noncompliance that need to be addressed.

One way the EU may enforce the GDPR against U.S. companies without a physical presence in the EU is through the requirement that companies outside the EU (that process personal data more than “occasionally”) designate a representative in the EU to act on their behalf. This designated representative can be subject to enforcement proceedings in the event of non-compliance. If you are a Wisconsin business with questions about the GDPR, Stafford Rosenbaum’s business law experts can answer your questions about the GDPR and assist you in auditing your vulnerabilities under the new law.

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.

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.

Supreme Court Ends Great Weight Deference to Agency Legal Interpretations, Splinters on Rationale 

For decades, Wisconsin courts deferred to administrative agencies’ interpretation of statutes and regulations under certain conditions. See Harnischfeger Corp. v. LIRC, 196 Wis. 2d 650, 659–60, 539 N.W.2d 98 (1995). The Supreme Court of Wisconsin put an end to this practice in its recent decision, Tetra Tech EC, Inc. v. Wisc. Dep’t of Revenue, 2018 WI 75. The Tetra Tech decision marks a sea change in Wisconsin administrative law. But because the Court fractured in its reasoning and analysis, how the decision will be applied in lower courts and what it will mean in practice remains uncertain.

Factual background

The basic dispute at the heart of the Tetra Tech litigation involved whether a sales tax applied when one company purchased environmental remediation services from another. Following a federal order to remove industrial pollutants from the Fox River, several paper companies created a LLC to carry out the work. Id., ¶4. That LLC hired Tetra Tech EC which, in turn, subcontracted with Stuyvesant Dredging, Inc. Id. Stuyvesant’s job was to dredge sediment from the river bed and then, using various filters, separate water from sand from contaminated sludge. Id. In 2010, the Wisconsin Department of Revenue audited Tetra Tech and assessed a sales tax on the portion of Stuyvesant’s work that yielded relatively clean sand. As authority, the Department of Revenue cited Wis. Stat. § 77.52(2)(a)10.­–11., both of which apply sales tax to services that involve “processing … tangible personal property….” Tetra Tech, 2018 WI 75, ¶5.

Tetra Tech fought the tax bill all the way to the Supreme Court of Wisconsin. At every step, the company lost and kept appealing. When the Supreme Court of Wisconsin agreed to hear Tetra Tech’s case, the Justices directed the parties to address an additional question, not raised in the company’s petition for review—whether “the practice of deferring to agency interpretations of statutes comport[s] with Article VII, Section 2 of the Wisconsin Constitution.” Id., ¶2. That question, not the underlying propriety of Tetra Tech’s tax bill, became the primary focus of the Supreme Court proceedings.

Legal background

The Supreme Court’s additional question did not come completely out of the blue. Indeed, it is part of a broader trend of questioning principles of federal and state law that some refer to as “decision avoidance” doctrines. Chief Justice Roggensack flagged this issue more than a decade ago in an article she wrote for the Marquette Law Review. See Patience Drake Roggensack, Elected to Decide: Is the Decision-Avoidance Doctrine of Great Weight Deference Appropriate in This Court of Last Resort?, 89 Marq. L. Rev. 541 (2006). And in a concurring opinion last year, three Justices on the Supreme Court wrote “separately to question whether [the] practice of deferring to agency interpretations of statutes comports with the Wisconsin Constitution, which vests judicial power in this court—not administrative agencies.” Operton v. LIRC, 2017 WI 46, ¶73, 375 Wis. 2d. 1, 894 N.W.2d 542 (R.G. Bradley, J., concurring). On a federal level, the issue gained attention during the U.S. Supreme Court confirmation hearings of Justice Neil Gorsuch, who has expressed concern about the degree to which federal courts defer to executive agencies. See, e.g., Gutierrez-Brizuela v. Lynch, 834 F.3d 1142, 1151–52 (10th Cir. 2016) (Gorsuch, J., concurring).

Prior to Tetra Tech, Wisconsin courts developed a multi-tiered deference analysis. In some circumstances, courts applied “great weight deference,” accepting an agency’s reasonable interpretation of the law, even if the court thought that alternative interpretations were more reasonable. The court explained that great weight deference to an agency decision on a question of law was appropriate if: (1) the statute was one the agency was charged by the legislature with administering; (2) the interpretation of the agency was one of long-standing; (3) the agency used its expertise or specialized knowledge in deciding the legal question presented; and (4) the agency’s interpretation provided uniformity in the application of the statute. Harnischfeger Corp., 196 Wis. 2d at 102. Essentially, under the “great weight deference” standard, if the agency could demonstrate a plausible explanation for its position, its interpretation would stand.

“Due weight deference” applied “when the agency ha[d] some experience in an area but ha[d] not developed the expertise that necessarily place[d] it in a better position than a court to make judgments regarding the interpretation of the statute.” Racine Harley-Davidson, Inc. v. State Div. of Hearings and Appeals, 2006 WI 86, ¶18, 292 Wis. 2d 549, 717 N.W.2d 184. Under “due weight deference,” the agency had to yield to better interpretations, but if multiple interpretations were equally plausible, the tie went in the agency’s favor. ABKA Ltd. P’ship v. DNR, 2002 WI 106, ¶116, 255 Wis. 2d 486, 648 N.W.2d 854 (Sykes, J., dissenting) (“[T]he agency’s legal interpretation will be upheld even if there is a different, equally reasonable interpretation—in other words, a tie goes to the agency.”).

Finally, when any of the following conditions was met: (1) the issue is one of first impression; (2) the agency had no experience or expertise in deciding the legal issue presented; or (3) the agency’s position on the issue had been so inconsistent as to provide no real guidance—courts would interpret statutes de novo. Racine Harley-Davidson, 2006 WI 86, ¶19. When a reviewing court accords an agency’s statutory interpretation no deference, “the reviewing court merely benefits from the agency’s determination and may reverse the agency’s interpretation even when an alternative statutory interpretation is equally reasonable to the interpretation of the agency.” Id., ¶20.

In its briefing, Tetra Tech argued that the Wisconsin Constitution charges courts with determining the meaning of the law, such that courts cannot defer at all to agency interpretations of statutes and must instead engage in de novo interpretation in every case. The Department of Revenue, represented by the Wisconsin Attorney General, largely agreed. The State argued that great weight deference is incompatible with the Wisconsin Constitution but that due weight deference should be retained as a proper way to balance, under appropriate circumstances, independent judicial review with the specialized expertise that administrative agencies bring to bear. Only one amicus curiae (friend of the court) brief offered any argument in support of great weight deference.

A Unanimous, Yet Fractured, Decision

The Supreme Court unanimously affirmed that Tetra Tech was on the hook for the sales tax at issue. But the seven Justices’ agreement did not extend to the deference question. On that topic, the Court produced four separate opinions. Making things more confusing, the lead opinion (by Justice Daniel Kelly) includes 15 separate sections, each attracting support from various combinations of Justices. Some—but significantly less than half—of the lead opinion has support from a majority of the Court and thus carries the force of law. But most of it does not. And three Justices declined to join any portion of the lead opinion’s analysis. (See the table at the bottom of this post.)

Five Justices broadly agree that great-weight deference should no longer be used.[1] Two Justices—Daniel Kelly and Rebecca Bradley—base that conclusion on the Wisconsin Constitution. See Tetra Tech, 2018 WI 75, ¶¶42–84. Three others—Patience Roggensack, Annette Ziegler, and Michael Gableman—avoid any constitutional analysis, invoking instead principles of judicial administration and the Court’s power to overrule its own prior decisions. See id., ¶¶135–142 (Ziegler, J., concurring, with Roggensack, C.J., joining in part); id., ¶¶159–170 (Gableman, J., concurring, with Roggensack, C.J., joining in full). Two Justices—Ann Walsh Bradley and Shirley Abrahamson—support the continued use of great weight deference. See id., ¶¶109–134 (A.W. Bradley, J., concurring, joined by Abrahamson, J.).

The result of these fractured opinions is that most of the analysis in the lead opinion lacks enough support to be considered law and to provide clear guidance to agencies, private parties, and lower courts. There are four votes for this key paragraph in the lead opinion’s conclusion (in Section III):

We have also decided to end our practice of deferring to administrative agencies’ conclusions of law. However, pursuant to Wis. Stat. §227.57(10), we will give “due weight” to the experience, technical competence, and specialized knowledge of an administrative agency as we consider its arguments.

Id., ¶108. (The four votes were from Justices Kelly, R. Bradley, and Gableman, as well as Chief Justice Roggensack. Id., ¶3 n.4.) That is, therefore, the new law.

But what it means in practice, and how lower courts are to afford “due weight” remains unclear. The lead opinion heavily criticizes the prior use of “due weight deference” and advocates for a significant change to how courts assess agencies’ legal interpretations. See id., ¶¶71–81. But that portion of the lead opinion (in Section II.A.5) attracted support from only two of the seven Justices. Id., ¶3 n.4. The lead opinion explained: “Henceforth, we will review an administrative agency’s conclusions of law under the same standard we apply to a circuit court’s conclusions of law—de novo. As with judicial opinions, we will benefit from the administrative agency’s analysis, particularly when they are supplemented by the “due weight” considerations discussed above.” Id., ¶84 (internal citations omitted). But that portion of the opinion (in Section II.A.6) also lacks the force of law as it attracted support from only three Justices (still short of a majority). Id., ¶3 n.4 (“Therefore, this opinion announces the opinion of the court with respect to Sections I., II.A.1., II.A.2., II.B., and III.”).

Consequences on Prior Adjudications

Adding yet another layer of uncertainty is the concern expressed in the concurring opinions that the lead opinion fails to adequately account for the effect its analysis will have on cases decided under the pre-Tetra Tech standard. The lead opinion asserts that the Tetra Tech decision “is incapable of reopening cases that have already been decided. If they were final upon release of this opinion, their finality will go on undisturbed by our decision today.” Id., ¶89. In the next paragraph, the lead opinion cites Schauer v. DeNeveu Homeowner’s Ass’n, Inc., 194 Wis. 2d 62, 75, 533 N.W.2d 470 (1995), to support its conclusion that Wis. Stat. § 806.07 “does not authorize relief from a judgment on the ground that the law applied by the court in making its adjudication has been subsequently overruled in an unrelated proceeding.” Tetra Tech, 2018 WI 75, ¶90.

But there are two reasons to doubt that this resolves the issue. First, like so much of the lead opinion, Section II.A.6 lacks enough support to have the force of law. Id., ¶3 n.4. This means that paragraphs 89 and 90 do not provide a conclusive adjudication on the issue. Second, as the concurring opinions point out, there are colorable arguments that Schauer does not resolve the issue. Wis. Stat. § 806.07(1) authorizes relief from a judgment on eight distinct grounds. Schauer addressed only one of those—subsection (1)(f) (“A prior judgment upon which the judgment is based has been reversed or otherwise vacated”). The lead opinion’s conclusion that great weight deference is unconstitutional leaves open the possibility that a previously decided case could be attacked under several other subsections: (1)(a), on the basis of “mistake”; (1)(d), on the basis that “[t]he judgment is void”; or (1)(h), on the basis of “[a]ny other reasons justifying relief from the operation of the judgment.” Tetra Tech, 2018 WI 75, ¶139 & n.3 (Ziegler, J., concurring); accord id., ¶131 (A.W. Bradley, J., concurring). There also remains the possibility of attack under (1)(f), because Schauer did not address the consequence of a constitutional adjudication (like the one undertaken by the Tetra Tech lead opinion). The Court’s fractured decision seems to create the opportunity to argue that the lead opinion is correct as to the constitutional basis for departing from the great weight deference standard (an issue on which there was no majority) and that, if so, there is room to interpret (1)(f) as a valid basis for relief from a prior judgment based on a deference regime that is now understood to be unconstitutional. Like the precise contours of the post-Tetra Tech deference regime, all of these tangential issues will require further clarification.

Conclusion

In time, lower courts—and perhaps additional opinions from the Supreme Court—will flesh out the extent of deference Wisconsin courts should now afford to administrative agencies’ legal conclusions and whether Tetra Tech’s changes to the standard of review of administrative decisions on issues of law have any effect on cases previously decided under the great-weight deference standard. For now, agencies, litigants, and lower courts have the unenviable task of trying to build a roadmap from the Supreme Court’s fractured opinions in Tetra Tech.

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

Table: How many Justices support which arguments in Tetra Tech opinions

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.

Enbridge Corporation (“Enbridge”) transports crude oil through a pipeline that runs from Superior, Wisconsin to Pontiac, Illinois. Enbridge wants to expand the volume of crude oil pumped through their line. The Dane County Board of Supervisors granted Enbridge a conditional use permit (“CUP”), subject to two insurance-related conditions. Condition 7 required Enbridge to procure and maintain $100,000,000 in General Liability insurance with a time element exception to the pollution exclusion and $25,000,000 in Environmental Impairment Liability insurance. Condition 8 required the liability insurance in Condition 7 to meet the specifications in a County- commissioned underwriting report, including a requirement that Enbridge provide proof of such insurance at the County’s request.

            While the Dane County Board was considering Enbridge’s permit application, the Wisconsin legislature adopted 2015 Act 55, which limits the insurance requirements that counties can include in CUPs for interstate hazardous liquid pipelines. Specifically, Act 55 prohibits counties from requiring pipeline operators to obtain insurance if the operator “carries comprehensive general liability insurance coverage that includes coverage for sudden and accidental pollution liability.” Wis. Stat. § 59.70(25). Dane County granted Enbridge’s CUP, with Conditions 7 and 8, after Act 55 took effect.

            Enbridge first appealed the inclusion of Conditions 7 and 8 to the Dane County Board. When that failed, Enbridge sought certiorari review in the circuit court.  A month later, seven local landowners filed a separate circuit court action seeking an injunction to enforce Conditions 7 and 8. The court consolidated the two lawsuits. The circuit court decided that (1) the landowners had no standing (that is, legal right) to participate in Enbridge’s challenge to the legality of the CUP, (2) Dane County had agreed that Enbridge’s representations during the permitting process were sufficient to trigger Act 55’s insurance limitations, and (3) Conditions 7 and 8 of the CUP were void and unenforceable. The circuit court struck Conditions 7 and 8 from the CUP, leaving the rest of the permit intact.

            Both the County and the landowners appealed. The Wisconsin Court of Appeals reversed and remanded the matter to the circuit court with instructions to return it to the county zoning committee. The court of appeals held that (1) the landowners have standing to participate in the certiorari review action; (2) Enbridge had not demonstrated that it maintains the required comprehensive general liability insurance; and (3) Act 55 does not preclude counties from requiring pipeline operators from showing, upon request, proof of compliance with the statutory insurance requirements.

1. The landowners had standing to pursue an injunction

            The circuit court, in consolidating the actions of the landowners and Enbridge, initially treated the landowners as intervenor-respondents to the action and told them that they did not need “leave to implead” in the action. There was therefore no reason the landowners should expect that they would be required to file a separate certiorari action to gain standing in an action in which the circuit court had already made them full participants. The court of appeals held that the circuit court’s dismissal of the landowners’ request for an injunction on the basis of standing had no legal foundation.

2. Enbridge did not demonstrate that it carries insurance for

sudden and accidental pollution liability

            Act 55 prohibits counties from requiring a liquid pipeline operator to obtain additional insurance coverage if the operator “carries comprehensive general liability insurance coverage that includes coverage for sudden and accidental pollution liability.” Wis. Stat. § 59.70(25). During the permit review process, Dane County’s underwriter confirmed that Enbridge had the required amount of comprehensive general liability insurance, but noted that the policy was set to expire before any permit would be issued. Because Enbridge had not shown continued or ongoing coverage, it did not demonstrate that it “carries” the required insurance and had not triggered Act 55’s exclusion of other insurance requirements. Further, the Act requires coverage for sudden and accidental pollution liability. The court of appeals reasoned that “sudden and accidental,” as defined in Just v. Land Reclamation, Ltd., 155 Wis.2d 737, 742-57 (1990), includes circumstances that are “abrupt or immediate” or “unexpected and unintended.” The insurance historically carried by Enbridge, even if renewed and ongoing, was a general liability policy with a “time element exception” to a pollution exclusion that covered abrupt or immediate pollution but did not provide coverage for unexpected or unintended pollution. Because there was no coverage for unexpected or unintended pollution, the court held that Enbridge’s comprehensive general liability policy did not trigger the Act 55 exclusion.

3. Act 55 does not preclude a county from including valid permit conditions related to insurance

            The circuit court severed CUP Conditions 7 and 8 from the permit as void and unenforceable but left the rest unchanged. The court of appeals found this action was an impermissible usurpation of authority by the courts, and it remanded the matter to the circuit court with instructions that the permit should be returned to the Dane County Zoning Committee for review. The court also found that Act 55 prohibits counties from requiring compliant operators from obtaining additional insurance, but it does not limit other insurance-related conditions. Thus, even if Enbridge had satisfied the Act 55 trigger, there was no reason Dane County could not require ongoing proof of the compliant insurance policy. In remanding to the County, the appellate court held that the Zoning Committee is the “body best suited to evaluate the facts and weigh appropriate conditions,” such that it can best determine whether to grant the permit and under what conditions.

CONCLUSION

            With Enbridge Energy, Inc. v. Dane County, the court of appeals essentially established three things. First, a court cannot grant a party status as an intervenor, allow the party to rely on that status, and then later dismiss the party on standing grounds for failing to file a separate action in that same case. Second, 2015 Act 55 only prohibits counties from requiring a liquid pipeline operator to obtain additional insurance if the operator has fully met the triggers in the Act. Even if the triggers are met, the Act does not prohibit all insurance-related conditions on conditional use permits, including requirements that an operator show proof of the required insurance. Finally, unless otherwise authorized by statute (e.g., livestock siting), it is inappropriate for courts to rework rather than simply reverse invalid permits issued by counties.

            Although it extends the permitting process for Enbridge, the court’s decision provides a clear, and relatively simple path forward for Enbridge to obtain the CUP. Enbridge should be able to work with its insurer to obtain the coverage outlined in Act 55, including coverage for both “sudden” and “accidental” pollution. And, it should be no hardship to provide ongoing proof of such insurance if required. The decision also clearly limits the role of courts, delineating zoning and permitting as legislative functions. Therefore, with few exceptions, courts should restrict their review to whether a county zoning commission correctly interpreted the law and leave to that body any specific determinations of whether and under what conditions permits should be granted.

Law clerk Leakhena Au assisted with researching and writing this post.

As litigants turn the calendar on June, significant new rules await for cases filed after July 1, 2018. Rather than take its cues from the Wisconsin Supreme Court, which traditionally governed procedural rules, the Legislature enacted substantial changes to Wisconsin’s laws on discovery. In 2017 WI Act 235, the Legislature implemented many new rules covered below that will affect civil procedure in Wisconsin.

New Limitations on Interrogatories and Depositions

The changes in Act 235 are highlighted by new limitations on interrogatories and depositions. Unless otherwise stipulated or ordered by the Court, parties are now limited to the following:

• 25 interrogatory requests, including all subparts. Wis. Stat. § 804.08(1)(am).
• 10 depositions, none of which may exceed seven hours in duration. Wis. Stat. § 804.045.

As in the Federal Rules, there remains no limit on the number of document requests that can be made. However, unlike the Federal Rules, Act 235 creates new limitations on requests for certain electronically stored information (ESI) as explained below.

In another noticeable departure from the Federal Rules, Act 235 does not require initial disclosures like those mandated by Fed. Rule Civ. Proc. 26(a)(1). The initial disclosures under the Federal Rules help alleviate the need for discovery in light of the limits on interrogatories, but Act 235 provides no such requirement for the parties to identify individuals likely to have discoverable information, the categories of documents that support a claim or defense, a computation of damages, or any insurance agreements that may be available to satisfy a judgment. 

These changes will likely increase motion practice (requesting and/or opposing additional discovery) and demand more active court management.

Automatic Stay on Discovery

Act 235 creates a new provision that stays all discovery requests upon the filing of a motion to dismiss, a motion for judgment on the pleadings, or a motion for a more definite statement, “unless the court finds good cause upon the motion of any party that particularized discovery is necessary.” The stay applies for the shorter of 180 days or until the court rules on the motion. Wis. Stat. § 802.06(1)(b). By comparison, the Federal Rules permit discovery once the parties have a scheduling meet and confer conference under Rule 26(f) and otherwise provide no automatic stay.

Proportionality

Act 235 removes the “reasonably calculated” language that previously framed Wisconsin’s scope of discovery. In its place, the Act adds a “proportionality” standard borrowed from the Federal Rules. Wis. Stat. § 804.01(2)(a). Parties may still obtain discovery concerning non-privileged matters relevant to the party’s claims or defenses, but now discovery requests must be proportional to the needs of the case. Courts must consider the following when weighing “proportionality”:

• The importance of the issues at stake in the action;
• The amount in controversy;
• The parties’ relative access to relevant information;
• The parties’ resources;
• The importance of the discovery in resolving the issues; and
• Whether the burden or expense of the proposed discovery outweighs its likely benefit.

Although early in its development under the Federal Rules, the proportionality test appears to have resulted in the federal courts taking a more proactive role in managing or tailoring discovery requests. See, e.g., O’Boyle v. GC Servs. Ltd. P’ship, No. 16-C-1384, 2018WL2271033, at * 5 (E.D. Wis. May 17, 2018) (denying motion to compel because requests are not “proportional to the needs of the case”).

New Limitations on ESI

Act 235 creates new rules related to electronically stored information (“ESI”) by requiring “substantial need” and “good cause” to request the following information:

• Data that cannot be retrieved without substantial additional programming or without transforming it into another form before search and retrieval can be achieved;
• Backup data substantially duplicative of more accessible data;
• Legacy data remaining from obsolete systems; or
• Data not available to the producing party in the ordinary course of business and not reasonably accessible because of burden or cost.

These new rules depart from the Federal Rules by carving out particular categories of ESI subject to the “substantial need” and “good cause” standard. Wis. Stat. § 804.01(2)(e)1g. In light of the already frequent fights over ESI, this new standard could significantly alter the playing field in discovery disputes—especially when only one party holds significant ESI and there is less incentive to be reciprocally reasonable with respect to discovery responses.

Act 235 also limits requests for any document within five years of the accrual of the cause of action; this limit does not apply to health care, vocational, or educational records. Finally, parties should also be aware of the existing requirement that parties confer before requesting any ESI. Wis. Stat. § 804.01(2)(e)1r.

New Standards for Protective Orders

Act 235 includes provision that the court “shall” limit discovery if either:

• The discovery sought is cumulative or duplicative, can be obtained from another source that is more convenient, less burdensome, or less expensive; or
• The burden or expense of the proposed discovery outweighs its likely benefit or is not proportional to the claims and defenses at issue.

Interestingly, the standard for a protective order—Wis. Stat. § 804.01(2)(am)2—does not exactly mirror the “proportionality” test found in the new scope of discovery. Wis. Stat. § 804.01(2)(a). Among other differences, the standard for granting a protective order omits the “parties’ relative access to relevant information” as a consideration that is found under the “proportionality” test. Neither Act 235 nor legislative history appears to explain this discrepancy. It will remain to be seen if the courts apply these standards differently as a result.

Finally, like the Federal Rules, the new rules permit the court to allocate discovery expenses among the parties.

Amendments to Class Certification Rules

Act 235 authorizes an appeal as a matter of right from the circuit court’s class certification decision. The Act also requires detailed reasoning for the benefit of the appellate court and automatically stays all proceedings until the appellate decision. These changes come in conjunction with the Wisconsin Supreme Court’s recent adoption of changes to conform Wisconsin class action law to the requirements of Federal Rule 23.

Revisions to Statute of Limitations / Repose Periods

Act 235 shortens the Statute of Limitations from six years to three for:

• Statutory claims (unless otherwise specified) (Wis. Stat. § 893.93(1m));
• Injury to character, or rights of another (Wis. Stat. § 893.53); and
• Certain claims by franchised motor vehicle dealers (Wis. Stat. § 218.0125).

Perhaps more significantly, Act 235 shortens the repose periods for personal injury claims following construction. Wis. Stat. § 893.89. Here, the Act shortens the period from ten years to seven years. Practitioners should take particular notice because this change took immediate effect on April 5, 2018. This change may result in litigation regarding whether the Act intended this change to have retroactive effect. See Gutter v. Seamandel, 103 Wis. 2d 1, 308 N.W.2d 403 (1981) (declining to apply a new statute of limitations to causes of actions accruing prior to the effective date of the new statute of limitation absent express language in the statute imposing retroactive effect).

Other significant changes

Under state law, unless otherwise provided by law, an insurer must pay insurance claims within 30 days after the insurer is furnished written notice of the fact of a covered loss and loss amount. Under prior law, overdue payments must bear simple interest at the rate of 12% per year. Wis. Stat. § 628.46(1). The Act changes the interest rate applicable to overdue payments to 7.5% per year (by comparison, offers of settlement accrue prime rate plus 1%—currently 4.5% per year. Wis. Stat. § 807.01).

Act 235 creates novel mandatory disclosures for a party to provide any agreement in which any person has a right to receive compensation contingent upon the proceeds of the civil action (this requirement does not apply to attorneys’ contingent fee representations).

Finally, Act 235 also limits the Secretary of Revenue from using third-party contingent agreements to enforce the Uniform Unclaimed Property Act.

Conclusion

Although some of the discovery provisions are already in effect (noticeably, the “proportionality” test that already exists in federal courts), the demarcation for most of Act 235’s changes is for cases filed after July 1, 2018. The Act creates new battlefronts on whether discovery is proportional, ESI is reasonably accessible, and the likely benefit of discovery justifies its costs. Forewarned of these changes, parties can proceed accordingly.

2017 Wisconsin Act 203 (“Act 203”) recently made significant changes to the law that governs when one divorced parent seeks to relocate geographically far away from their child’s other parent. This post summarizes Act 203’s changes to prior law and details the new procedures and standards applicable under the Act.

Act 203, which went in effect on April 5, 2018, changes prior law in four major ways:

1. It Reduces— from 150 miles to 100 miles—the distance that triggers legal scrutiny.

2. It requires the moving parent to provide the court with more detailed information about the reason for the move and with a proposal for placement if the relocation is granted.

3. It provides for special consideration of cases involving a parent who does not significantly exercise placement and relocations related to abuse.

4. Finally, it clarifies the somewhat confusing presumptions and burdens of proof under prior law by generally placing the burden of proof on the party requesting the relocation.

Overall, the new law streamlines the standards a court considers in deciding whether to grant the relocation and places additional requirements on the parent requesting the move.

Prior Law

Under prior law, if both parents shared physical placement of the child, then a parent wishing to move 150 miles or more away from the other parent, or wishing to remove the child from the state for more than 90 consecutive days, had to give the other parent and the court 60 days’ written notice. Wis. Stat.  767.481(1) (2015-2016). If the other parent objected, the court would refer the parents to mediation and had discretion as to whether to appoint a Guardian ad Litem. Wis. Stat.  767.481(2) (2015-2016).

After the filing of a motion or order, the court would consider different statutory factors (such as whether the change was in the best interests of the child) and determine whether to grant the relocation request. Wis. Stat.  767.481(5) (2015-2016). Prior law created numerous presumptions and varying burdens of proof depending on the current custody and placement agreements at the time of the proposed relocation. Wis. Stat. § 767.81(3) (2015-2016).   

New Law

Under Act 203, if both parents share physical placement, then the parent intending to relocate 100 miles or more from the other parent must first file a motion with the court seeking permission to relocate the child. Wis. Stat.  767.481(1)(a) (2017-2018). If the move is less than 100 miles from the other parent, notification is no longer required, even if the move crosses state lines. When a motion is required, the motion must include a relocation plan that provides the reason for the relocation and outlines proposed responsibility and allocation of costs relating to transportation, among other items. Wis. Stat.  767.481(1)(b) (2017-2018). The parent wishing to move must send notice to the other parent of the deadline to object, and attach the “Objection to Relocation” form. Id.

The court must hold an initial hearing within 30 days of the motion. Wis. Stat.  767.481(2) (2017-2018). If the parent not seeking to move does not appear at the initial hearing, or appears but does not object, then the court must approve the proposed relocation plan, absent a finding that relocation is not in the best interests of the child. Id. If the other parent does object, then the parties are referred to mediation and a Guardian ad Litem is appointed. Wis. Stat.  767.481(2)(c)2.-3. (2017-2018).

At the final hearing, the court must approve the proposed relocation if it only minimally changes or affects the current placement schedule. Wis. Stat.  767.481(4) (2017-2018). If that is not the case, the court must consider the 16 factors outlined in  767.41(5). A presumption in favor of the proposed relocation plan applies if the court determines that the objecting parent has not significantly exercised court-ordered physical placement or if the relocation is related to abuse.

The new statute clarifies that the moving party bears the burden of proof in a contested relocation, except in cases where objecting parent has not significantly exercised placement or relocation is related to abuse.

Conclusion

Act 203 should make relocation requests simpler for both parents, by making the process and the applicable standards clearer. The State Bar’s Family Law Section, of which I am past chair, was heavily involved in drafting Act 203 and shepherding it through the legislative process.