Author: Hamilton

Supreme Court Decision: Department of Workforce Development v. Labor and Industry Review Commission (Unemployment Compensation)

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In a unanimous decision, the Supreme Court held in DWD v. LIRC that terminated employees are not eligible for unemployment compensation if they violate their employer’s absenteeism policy, even if the policy is stricter than the policy in statute.

In this case, terminated employee Valerie Beres violated the written attendance policy that she signed with her employer by missing a shift without notifying the employer. The employer’s single instance policy was stricter than the two occasions in a 120-day period policy laid out in the unemployment compensation absenteeism statute (Wis. Stat. § 108.04(5)(e)).

The unemployment compensation statutes state that employees terminated for “misconduct” – including absenteeism – are ineligible for benefits. Citing those statutes, the Department of Workforce Development (DWD) denied Beres benefits. Beres appealed to the Labor and Industry Review Commission.

The court’s ruling upheld DWD’s decision to deny Beres benefits. The court ruled that, according to the “unless clause” in Wis. Stat. § 108.04(5)(e), employers may adopt absenteeism policies stricter than the statute. If employees have violated their employer’s stricter policy, they are still ineligible for unemployment compensation.

Supreme Court Decision: Porter v. Wisconsin (Anti-Combination Statutes)

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A 5-2 Supreme Court held in Porter v. Wisconsin Funeral Directors Examining Board that the anti-combination laws prohibiting ownership of both a cemetery and funeral home are constitutional. In another interesting split decision for this term, liberal Justice Shirley Abrahamson wrote the opinion, and only two out of five conservative justices dissented.

The plaintiff in this case is E. Glen Porter, who owns Highland Memorial Park cemetery in New Berlin and wished to expand his business by opening a funeral home. Because owning both is illegal under the anti-combination laws (Wis. Stat. § § 157.067(2) and 445.12(6)), Porter sued the state, arguing a violation of the constitutional rights to due process and equal protection.

The court used the same rational basis test as in Mayo to determine that the anti-combination laws are rationally related to legitimate government interests in protecting consumers. Therefore, the anti-combination statutes survive the rational basis test and survive Porter’s constitutional challenge.

The dissent from Justices R. Bradley and Kelly disagrees with the state’s assessment that joint ownership of cemeteries and funeral homes would create an unfair market and harm consumers. Thus, the dissent argues the anti-combination laws lack rational relation to the legitimate government purpose of protecting consumers. The dissent also suggests that a potential violation of the fundamental right to economic liberty deserves strict scrutiny, rather than the broader rational basis test.

Supreme Court Decision: Kristi Koschkee v. Tony Evers (REINS Act & State Agency Counsel)

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The Supreme Court held that the Department of Public Instruction (DPI) and the state superintendent may retain separate counsel instead of representation by the Department of Justice (DOJ).

The cases rises from a dispute about whether DPI must comply with the Regulations from the Executive In Need of Scrutiny (REINS) Act (2017 Act 57). Stemming from the REINS Act dispute, another dispute arose between DPI and DOJ regarding whether DOJ attorneys should represent DPI. DOJ said DPI is subject to the REINS Act, a position contrary to DPI and DPI Superintendent Tony Evers. DOJ filed a motion that they should be DPI’s attorneys. DPI filed a motion to deny substitution of DOJ for their in-house counsel.

The court used its “superintending and administrative authority over all courts” (Wisconsin Constitution Art. 7 § 3) to allow DPI the counsel of their choice. The court argued that allowing DOJ to represent Evers and DPI would have given the attorney general too much power and would be unethical because of their disagreeing positions on the case.

The court also ruled that Gov. Scott Walker is not a necessary party to the action because he did not fulfill the statutory criteria necessary for a party to be joined in a case (Wis. Stat. § 808.03(1)). The court said the governor’s obligation to review scope statements under the REINS Act is not affected by the outcome of the DPI case.

 In a concurring opinion/dissent, Justice R. Bradley (joined by Justices Gableman and Kelly) agreed that Gov. Walker should not be a party to the action but would have allowed DOJ to represent DPI and Evers. The dissent argued that Wis. Stat. § 165.25(1m) says the governor can request DOJ represent any state department/agency in any matter in which the state has interest. The dissent says the court inappropriately exercised its superintending authority to override the statutes, which give no independent litigation authority to DPI or the state superintendent.

Supreme Court Decision: Cintas Corp. v. Becker Property Services (Indemnity Contracts)

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In this case, Becker Property Services contracted with Cintas Corp. to inspect regularly a fire suppression system at a property Becker managed. The property owner, tenants, and insurers sued Cintas, and Cintas sought to tender the defense to Becker pursuant to an indemnity clause in their contract.

In a 5-2 decision, the Supreme Court disagreed with Becker’s argument that, despite a choice-of-law provision requiring Ohio as the controlling law, Wisconsin’s strict construction rule for indemnity clauses that cover damages for negligence is an important enough public policy to nullify the contract. Instead, the court held that Ohio law controlled, pursuant to the contract, and ruling otherwise would have created uncertainty and “unpredictability in contractual relations.”

 The court held that the contract’s language was clear that Becker must indemnify Cintas for any liabilities and damages, including those caused by Cintas’s own negligence. The court said that even under Ohio law the indemnity agreement is not “public policy” for the purpose of invalidating the contract.

Supreme Court Decision: John McAdams v. Marquette University (Academic Freedom in Contract)

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In a 4-2 decision, the Supreme Court did not defer to the recommendations of a Marquette University advisory committee and held that Marquette breached its contract with a professor, John McAdams, by implementing disciplinary action for activities protected under academic freedom.

 McAdams had written a blog post criticizing another instructor at the university, who then filed a complaint against McAdams. The complaint went through the disciplinary hearing process laid out in Marquette’s handbook. An advisory committee reviewed the incident and presented a report with disciplinary recommendations to the university president. The president then decided to suspend McAdams without pay but with benefits through the fall semester and required he write a letter acknowledging wrongdoing and expressing regret for his comments against the other instructor. McAdams refused to write the letter and filed a complaint in circuit court against Marquette for breach of his tenure contract with the university. McAdams argued that the contract protects him from disciplinary actions for activities considered as academic freedom.

The court held that McAdams’s contract with the university does guarantee freedom from disciplinary actions for activity protected as academic freedom or free speech, and McAdams’s blog post falls under the definition of academic freedom. The court ordered Marquette to reinstate McAdams.

The court chose not to defer to the Marquette advisory committee’s recommendations to suspend McAdams for three reasons:

  1. The contract did not prohibit litigation outside Marquette’s disciplinary process.
  2. The disciplinary process was biased and did not represent a true arbitration process.
  3. The court recently ended the practice of agency deference in Tetra Tech v. Department of Revenue.

In a concurring opinion, Justice R. Bradley engaged in a philosophical analysis of academic freedom and free speech on college campuses.

In dissent, Justice Walsh Bradley (joined by Justice Abrahamson), citing the “shared governance” procedures of allowing faculty to participate in decisions affecting the university, argued that the court should have deferred to Marquette’s advisory committee, which is better suited to solve its own disputes. The dissent said the court should have preserved the university’s institutional academic freedom to determine who may teach there.

Wisconsin To Begin Collecting Online Sales Tax

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Last month, the U.S. Supreme Court ruled in South Dakota v. Wayfair that states may collect online sales tax from sellers with no physical presence in the state. Gov. Walker’s administration has announced that the Department of Revenue (DOR) will promulgate rules for administering Wisconsin’s 5 percent sales tax online and begin collection in October.

Wisconsin’s rule will be modeled after the South Dakota law approved by the Supreme Court in Wayfair. Online sales tax collection will exclude small businesses with less than $100,000 in sales or less than 200 transactions in the state.

The Legislative Fiscal Bureau estimated that collecting online sales tax would increase sales and use tax revenue by $120 million annually. A state budget provision in 2013 provided that any additional revenue resulting from changes to federal law regarding online sales taxes must be used to offset income tax reductions. The statute requires DOR to analyze revenue from the first 12 months of sales tax collection before administering income tax reductions, so DOR could implement income tax changes as early as 2020.

The Wayfair decision overturned Quill Corp. v. North Dakota, which held that states can only collect sales and use tax from retailers with a physical presence in the state. Before Wayfair, states relied on consumers purchasing from out-of-state, online retailers to self-report use tax. Since self-reporting is difficult to enforce, it was estimated that states missed out on significant revenue from online sales. South Dakota enacted its law to collect on this missed revenue, and its case against internet retailers including Wayfair was appealed to the Supreme Court.

3rd District Court of Appeals Decision: Patrick Humfeld v. State Farm Fire and Casualty Co. (Recreational Immunity)

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The Court of Appeals District III held in this case that, under Wisconsin’s recreational immunity statute (Wis. Stat. § 895.52), a property owner is not liable for a hunter shot on his land.

John Marsh allowed plaintiff Patrick Humfeld – and several other individuals – to hunt on his property. Humfeld was shot by another hunter while both were hunting on Marsh’s property. Humfeld subsequently filed a lawsuit against Marsh and his insurer, State Farm, claiming negligence because Marsh did not properly monitor the hunters on his property. State Farm argued Marsh was not liable under recreational immunity.

Humfeld argued the social guest and profit exceptions made the recreational immunity inapplicable in this case. The social guest exception says that owners are liable for injuries to guests expressly invited for a specific occasion. The court held that the social guest exception did not apply here because Marsh gave Humfeld general permission to hunt on his property at any time. Marsh allowed several different people to hunt on his property, so he falls within the intent of the recreational immunity statute: to open private land to the public.

The profit exception says that owners are liable for injuries if they collect payments from those using their property for recreational activity. Although Marsh leased part of his land for hunting, the court held the profit exception did not apply in this case because Humfeld did not pay Marsh, nor was he hunting on the leased portion of the property.

Humfeld plans to appeal to the Supreme Court.

Supreme Court Upholds $750,000 Limit on Noneconomic Damages in Med Malpractice Cases

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The Wisconsin Supreme Court in a 5-2 decision (Mayo v. Wisconsin Injured Patients and Families Compensation Fund) has upheld Wisconsin’s $750,000 limit on noneconomic damages in medical malpractice cases. The Court determined that the cap is constitutional because the legislature had a rational basis in enacting the cap statute to ensure affordable and accessible health care in Wisconsin.

Notably, neither the statutes nor the Court’s decision preclude plaintiffs from being compensated for their injuries. Current law only limits the amount of noneconomic damages, i.e., pain and suffering, a plaintiff may receive at $750,000. There is no limit on the amount of damages a plaintiff can receive for his or her physical injuries.

The case arose from a septic infection resulting in the amputation of the plaintiff’s limbs. The lower court did not find negligence, but instead rested liability on improper informed consent regarding diagnosis and treatment options. The jury awarded the plaintiff $15 million in noneconomic damages, such as pain and suffering, and $1.5 million to the plaintiff’s husband for loss of society and companionship. Unaffected is the reported $8.8 million award for economic damages, which has no statutory limitation.

Ruling the cap constitutional, the Supreme Court remanded the case to circuit court to impose the $750,000 cap on the plaintiffs’ noneconomic damages.

The decision also clarified the definition and application of the “rational basis test” for courts considering reversal of legislative enactments. Courts use the rational basis test to determine the constitutionality of a statute based on whether the statute appears to have a rational basis in achieving the legislature’s objective in writing it. Since Ferdon v. Wis. Patient Comp. Fund (holding that the previous $350,000 cap was facially unconstitutional), the courts have been unclear regarding the “rational basis” test as it relates to an equal protection claim. The Mayo decision reversed new scrutiny level created by Ferdon called “rational basis with teeth.”

Supreme Court Ends Agency Deference

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The Wisconsin Supreme Court recently issued a decision (Tetra Tech v. Department of Revenue) that ends the “agency deference” doctrine. Previously, Wisconsin courts deferred to regulatory agencies when interpreting statutory provisions that ultimately define agencies’ own power and reach. Under the decision, courts will continue to give “due weight,” or respectful consideration, to agencies’ expertise but not yield to them.

The business community in Wisconsin has applauded the decision, saying it will bring more predictability and level the playing field between businesses and agencies in civil lawsuits.

In 2007, the Environmental Protection Agency required several paper companies to remediate the environmental impact of harmful chemicals into the Fox River. The collective group of paper companies formed Fox River Remediation, which hired Tetra Tech to perform the remediation. Tetra Tech subsequently hired Stuyvesant Dredging, Inc. (SDI) as a subcontractor. The Department of Revenue (DOR) audited the entities and found that Tetra Tech owed sales tax on the portion of its sale for services to Fox River Remediation on SDI’s activities, and Fox River Remediation owed use tax on the purchase of remediation services from Tetra Tech on SDI’s activities. The entities filed petitions for redetermination with DOR, then with the Tax Appeals Commission. A Wisconsin circuit court, then appeals court upheld the commission’s ruling, giving great weight deference to DOR’s interpretation of tax statutes. The case was then appealed again at the Wisconsin Supreme Court, with the Court asking parties brief the constitutionality of providing deference to agencies on questions of law.

In a unanimous decision with three concurring opinions, the court again upheld the Commission’s ruling on the tax issue. The court also decided to end the practice of agency deference, and the three concurring opinions disagreed on this aspect of the decision.

Wisconsin Civil Justice Council Applauds Wisconsin Supreme Court’s Decision Upholding Limits on Noneconomic Damages

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Today, the Wisconsin Supreme Court in a 5-2 decision (Mayo v. Wisconsin Injured Patients and Families Compensation Fund) upheld Wisconsin’s limit on noneconomic damages in medical malpractice cases. Importantly, the Court reversed its 2005 decision, Ferdon v. Wisconsin Patients Compensation Fund, which held unconstitutional Wisconsin’s previous limit on noneconomic damages.

“The Court’s decision is a victory for the rule of law and reconfirms that the legislature, not the judiciary, is the proper branch of government to determine public policy,” said Bill G. Smith, president of the Wisconsin Civil Justice Council and Wisconsin Director for the National Federation of Independent Business.

“The importance of this decision cannot be overemphasized. Gone are the days of the Supreme Court of Wisconsin setting public policy and overriding laws enacted by the legislative branch,” added Smith. “We applaud the Court for correcting its erroneous decision in Ferdon and upholding the law.”

It is also important to note that neither the statutes nor the Court’s decision preclude plaintiffs from being compensated for their injuries. Current law only limits the amount of noneconomic damages, i.e., pain and suffering, a plaintiff may receive at $750,000. There is no limit on the amount of damages a plaintiff can receive for his or her physical injuries.

The Wisconsin Civil Justice Council consists of representatives from Wisconsin’s leading business and professional organizations whose mission is to promote fairness and equity in Wisconsin’s civil justice system, with the ultimate goal of making Wisconsin a better place to work and live.