MADISON – The Wisconsin Civil Justice Council thanks the Wisconsin Assembly for passing Assembly Bill 773, which contains a number of important civil litigation reforms, including discovery and class action rules.

“These important litigation reforms will help reduce costs for small to large businesses and bring Wisconsin into the mainstream when it comes to discovery and class action lawsuits,” said Bill G. Smith, president of the Wisconsin Civil Justice Council and state director for National Federation of Independent Business-Wisconsin.

AB 773 aligns Wisconsin’s civil procedures for discovery and class actions to the corresponding federal rules. The modernization of these court procedures, mostly aimed at costly discovery practices, will reduce litigation costs for businesses, as well as state and local governments who must spend taxpayers’ dollars responding to abusive discovery practices.

Common-sense reforms under the bill will:

• Prevent litigants from abusing the discovery process to leverage a higher potential settlement or engage in a “fishing expedition.”
• Require notice of third-party litigation financing. Such third-party finance can increase the cost of litigation and cause suits to be brought that would not otherwise have been financially justified.
• Limit discovery of electronically stored information (ESI) to address the escalating volume of ESI that is now one of the most significant discovery-related costs.
• Allow parties to appeal a trial court’s decision to certify a class in a class action lawsuit.
• Lower the statute of limitations for certain claims.
• Prohibit the Department of Revenue from entering into contingency fee arrangements with third parties in unclaimed property audits. Working under contingency fee arrangements incentivizes aggressive approaches to audits that unfairly increase costs for businesses in Wisconsin.

The bill is supported by over 30 Wisconsin business organizations.

The Senate Committee on Judiciary and Public Safety held a hearing on Jan. 30 on a bill that would reform Wisconsin’s civil liability statutes to lower litigation costs for Wisconsin businesses and government. SB 645, authored by Sens. Tom Tiffany (R-Hazelhurst) and David Craig (R-Big Bend) and Reps. Mark Born (R-Beaver Dam) and John Nygren (R-Marinette), would further improve Wisconsin’s litigation climate by making changes to discovery and class action statutes, among other reforms.

The bill’s authors began the hearing by emphasizing their goal to draft legislation that makes Wisconsin consistent with federal rules and other states’ procedures and maintains fairness in Wisconsin’s civil justice system.

A wide variety of groups testified in support of the bill. The National Federation of Independent Business, Wisconsin Chapter, and the American Tort Reform Association (ATRA) focused on the costs savings for businesses small and large that could be affected by the debilitating costs of discovery. According to ATRA’s testimony, from 2006 to 2008, the average company paid average discovery costs per case of $600,000 to $3 million. Under the bill’s reforms, they said, businesses will be able to settle based on the merits of the cases, not simply in fear of paying these massive discovery costs.

Wisconsin Manufacturers and Commerce’s (WMC) testimony also emphasized the importance of lowering litigation costs for Wisconsin businesses. WMC highlighted the provision of the bill that prohibits the Department of Revenue (DOR) from hiring third-party audit firms on a contingency fee basis for unclaimed property audits. DOR testified for information only, expressing concerns that this provision could increase costs and make it difficult to hire auditors, but WMC testimony assured legislators that contingency fee arrangement bans have been implemented in other states and would not prohibit audits from taking place in Wisconsin.

The Wisconsin Defense Counsel (WDC) later testified in support of the bill’s provisions regarding discovery and lawsuit lending. The bill’s limit on discovery of electronically stored information would reduce overburdensome discovery requests, and its proportionality requirements would prevent unnecessary “fishing expeditions.” WDC also noted that regulating lawsuit lending makes Wisconsin’s civil liability procedures fairer by protecting consumers and ensuring transparency in civil cases.

The U.S. Chamber of Commerce’s Institute for Legal Reform (ILR) testified on the class action portions of the bill. The bill would make class action statutes more fair and efficient by requiring the type and scope of injury of the representative class members be typical of the type and scope of injury being alleged by the absent class members, thus precluding “no-injury” class actions. The bill also requires class members be verifiable by reliable and feasible means and would provide for interlocutory appeal of class certification. ILR said these changes would make Wisconsin’s civil justice system fairer and less costly.

The Wisconsin Builders Association testified in support of the bill’s provisions related to statute of repose. The revised limits will bring consistency among Wisconsin liability laws and align Wisconsin better with other states that have significantly lower limits. These lower time limits will promote efficiency and reduce burdens and costs on the state and businesses forced to investigate distant claims.

The Wisconsin Insurance Alliance also testified in support of the bill’s provision adjusting the interest rate insurers must pay on overdue claims. The bill provides that the rate mirror interest rates on general judgments and self-adjust consistent with markets.

Wisconsin Economic Development Corporation and the Department of Justice also submitted testimony in support of the bill.

The State Bar of Wisconsin testified for information only, seeking amendments to the bill’s limits on discovery, adjustment of interest rates on overdue claims, changes to statutes of repose, and definition of consumer lawsuit lending.

Those testifying against the bill, including the Wisconsin Association for Justice and the Alliance for Responsible Consumer Legal Funding, arguing that the changes stray too far from simply federalizing Wisconsin statute. Many said that there is no evidence of discovery abuses in Wisconsin and that state judges consistently keep discovery in check. However, supporters refuted that the bill would give judges guidelines related to discovery and class actions that are currently missing from state statute.

The Assembly Committee on Judiciary held a hearing on the bill on Jan. 4. Reps. Ron Tusler (R-Appleton) and Cody Horlacher (R-Mukwonago) have offered an Assembly Substitute Amendment that would remove the class action provisions of the bill.

Committee votes on the bill have not yet been scheduled.