Source: https://www.staffordlaw.com/blog/category/appellate-practice/P10/
Timestamp: 2019-04-26 04:08:18+00:00

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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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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”).
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.
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.
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.
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).
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.
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.
Generally, companies purchasing the assets of another company are not responsible for the seller’s liabilities. One long-established, but poorly defined, exception applies when the assets are transferred fraudulently in an effort to evade liabilities. In Springer v. Nohl Electric Products Corp., the Wisconsin Supreme Court took a step towards clarifying (and perhaps limiting) this fraudulent-transfer exception, over the dissent of Justice Abrahamson.
While the majority opinion focused on the legal issue presented in the case—the proper legal standard for fraudulent transfer exception—Justice Abrahamson’s dissent was most concerned with the outcome of the litigation and its broader implications for due process.
In a 5-2 decision, the Court held that the Wisconsin Uniform Fraudulent Transfer Act (“WUFTA”), in chapter 242 of the Wisconsin Statutes, does not define the scope of the fraudulent-transfer exception to successor non-liability under common law. The Court additionally decided that summary judgment was appropriate because the plaintiff’s complaint did not clearly allege that the defendants were liable under a successor-liability theory. Justice Abrahamson dissented, briefly arguing that WUFTA should play a role in the fraudulent-transfer analysis, but focusing primarily on the Court’s decision to dismiss the case. She argued that even addressing an issue with the pleadings was inappropriate because the issue was not raised by the defendants and plaintiff had no opportunity to be heard on that issue.
Springer involved negligence and strict-liability claims against several companies for creating, distributing, and selling asbestos products. The complaint named Fire Brick Engineers Company, Inc. (“FBE2”) and its successor, Powers Holdings, Inc., as defendants. FBE2 was formed in the 1980s to purchase the assets of Fire Brick Engineers Company (“FBE1”), a company formed in the 1940s to manufacture and distribute asbestos products. FBE2 later merged with another company to form Powers.
After initially allowing the claims to continue to discovery, the trial court granted the defendants’ motion for summary judgment, holding that FBE2 (now Powers) could not be liable because it was formed more than a decade after the plaintiff’s husband was exposed to asbestos. In response, Springer argued that there was a factual dispute about whether FBE2 (and thus Powers) could be held liable under the fraudulent-transfer exception to successor non-liability because a number of circumstances surrounding the sale indicated a possible fraudulent intent. These included the fact that a FBE2 shareholder was aware of FBE1’s potential liabilities, several FBE2 shareholders acted as attorneys for FBE1, and FBE1’s assets were sold for inadequate consideration, without appraisal or negotiation.
Springer appealed to the Wisconsin Court of Appeals, which reversed, finding that WUFTA should govern the fraudulent-transfer exception and that the evidence showed there was a genuine issue of material fact as to whether the transfer from FBE1 to FBE2 triggered the fraudulent-transfer exception. Powers then successfully petitioned the Wisconsin Supreme Court for review.
The Wisconsin Supreme Court reversed, holding that WUFTA does not apply to the common law fraudulent-transfer exception. The Court pointed out that successor non-liability and its exceptions arose out of the American and English common law. On the other hand, WUFTA “exists independently from this common law history” and is focused not on holding successor entities responsible for their predecessors’ obligations, but on helping creditors collect claims which “may be frustrated by recent asset transfers.” 2018 WI 48, ¶27. After surveying a number of common law sources, the Court found WUFTA’s standard inapplicable to claims of fraudulent transfer regarding successor liability. Justice Abrahamson disagreed, stating that WUFTA should be a source of guidance for courts in identifying “indicia of fraud” for purposes of the fraudulent-transfer exception.
After determining that WUFTA does not govern the fraudulent transfer exception, the Court turned its attention to the procedural posture of the case. The Court noted that while Springer argued for successor liability in response to a motion for summary judgment, she never amended her complaint to allege successor liability. Evaluating the sufficiency of the pleadings, the majority found that Springer’s pleadings failed to “allege facts that plausibly suggest [she was] entitled to relief” against Powers and therefore affirmed the trial court’s order of summary judgment dismissing Powers.
Justice Abrahamson stridently disagreed with the Court’s decision to review the pleadings, noting that the defendants never challenged the sufficiency of the pleadings at any stage of litigation, including before the Wisconsin Supreme Court. Justice Abrahamson insisted that the issue of the sufficiency of the pleadings was not “properly before this court.” Id., ¶49 (Abrahamson, J., dissenting). She was particularly troubled by the fact that the parties were not given notice that the Court “[was] concerned about these issues” and were therefore given no opportunity to address them. Id. Pointing to two recent cases, Justice Abrahamson lamented what she described as “the court’s growing bad habit of addressing issues without giving parties notice and the opportunity to address the issue . . . .” Id., ¶52. She voiced a concern that this trend might violate due process, which “requires (at a minimum) notice and an opportunity to be heard.” Id., ¶51.
Springer makes clear that the fraudulent-transfer exception to successor non-liability is rather narrow. It is also serves as a startling reminder of increasingly demanding pleading standards. The long-established flexibility of notice pleading was somewhat curtailed by the U.S. Supreme Court’s Twombly and Iqbal decisions a decade ago, and the Wisconsin Supreme Court has largely followed suit. Springer reminds litigants to take care to amend or seek leave to amend pleadings as part of the defense of a summary judgment motion, even when that motion does not expressly attack the sufficiency of the initial pleading.
In Milwaukee Academy v. Department of Children and Families, 2016 AP 2377, the Wisconsin Court of Appeals faced the question of whether residential care centers for minors are prohibited from ever strip-searching residents. The Court concluded that state law does not contain a blanket prohibition against strip searches in all circumstances.
The specific strip search at issue before the court took place at Milwaukee Academy, a DCF-licensed residential care center for girls ages ten through seventeen. The children placed at Milwaukee Academy include victims of sexual abuse, subjects of CHIPS cases (where children and parents are subject to court supervision due to findings related to abuse or neglect), children experiencing emotional and behavioral disorders who need respite care, and children who have been adjudicated delinquent.
Milwaukee Academy acknowledged that J was forcibly searched and her clothing was cut off. According to an internal investigation , “[s]taff were able to complete the body search but due to J’s continued attempt to kick, bite, scratch and pinch, the nurse had to cut off her bras (she had two of them on) and shirt, and removed her pants.” After the search, Milwaukee Academy staff called for assistance from sheriff’s deputies, who took J to the hospital and then to jail.
Milwaukee Academy subsequently prepared and filed a “Serious Incident Report,” as required by DCF regulations. DCF then imposed a forfeiture on Milwaukee Academy, stating that the relevant statutes and code sections impose an absolute prohibition against strip searches in a residential care center for minors. Milwaukee Academy’s administrative challenge to the forfeiture failed, as the Division of Hearings and Appeals concluded that the strip search had violated J’s rights under state law.
On appeal, DCF argued that, as a matter of law, strip-searching an RCC resident is never permissible. DCF based its argument on Wis. Admin. Code § DCF 52.31(1)(a), which cross-references Wis. Admin. Code ch. DHS 94, and Wis. Stat. § 51.61. Because this was an appeal of an administrative decision, the Court of Appeals reviewed the agency action, not the circuit court’s analysis, and it afforded due-weight deference, under which the agency’s legal interpretation is sustained unless there is a more reasonable interpretation.
Ultimately, the Court of Appeals came reached the same result as the circuit court. It held that DCF’s interpretation—based on a distinction between a “patient” and an “inpatient”—lacked textual support in the statutes and regulations. Those sources, the Court determined, do not distinguish between “patient” and “inpatient” but use those terms interchangeably. As an example, the Court focused on the administrative code section that DCF cited, finding “no clear or meaningful distinction between the rights of a ‘patient’ and an ‘inpatient’ in § DHS 94.24(2)(d), contrary to DCF’s argument.” Slip op., ¶26.
The Court of Appeals held that the plain text of the relevant statutes and regulations led to a conclusion more reasonable than that reached by DCF: there is nothing in the DCF regulations that prohibits a strip search of an RCC resident in all circumstances. Instead, such searches are limited by the framework contained in § DHS 94.24(2)(d). Because the Courtdeemed the record insufficient to apply the governing regulations to this particular search, it remanded the case to DCF for further proceedings.
While it is too early to know how Milwaukee Academy’s strip search of J will be adjudicated, this case may have a significant effect on juveniles’ out-of-home placements moving forward. It remains to be seen if courts will be more hesitant to place certain juveniles in RCCs, even when the juveniles need services that cannot be managed exclusively by the Department of Children and Families.
A “walking quorum” is a series of gatherings among separate groups of members of a governmental body, each less than quorum size, who agree, tacitly or explicitly, to act uniformly in sufficient number to reach a quorum. Recognizing that a walking quorum may produce a predetermined outcome and deprive the public the opportunity to observe the decision making process, Wisconsin courts have long warned public officials that any attempt to circumvent a public meeting through use of a walking quorum is subject to prosecution under the Open Meetings Act. See e.g., State ex rel. Newspapers v. Showers, 135 Wis.2d 77, 398 N.W. N.W.2d 154 (1987).
In State ex rel. Zecchino v. Dane County (February 27, 2018), the Court of Appeals (District IV) considered an Open Meetings Act claim based on a series of email messages between Dane County Board Supervisor Paul Rusk and no more than eight of his fellow supervisors prior to a controversial vote on the renewal of a billboard lease. The plaintiffs argued that the emails suggested the effort to assemble a walking quorum in violation of the Open Meetings Act, such that he should be allowed discovery to ascertain the full extent of informal communications.
The Court of Appeals dismissed the complaint for failure to state a claim. The Court first determined that the emails Zecchino already had did not indicate a “tacit agreement” between the defendants to vote against the lease. One of the emails dealt with a scheduling matter, while others asked supervisors for their opinion or expressed Rusk’s personal position. The Court also found that because the quorum of the Board on the day of the vote was eighteen, Rusk’s communications with eight supervisors could not establish a walking quorum. The court confronted the walking quorum prohibition in the context of email messages. Applying the walking quorum concept in light of newer technologies will raise new issues for Wisconsin governmental bodies. Today, members of governmental bodies can communicate using a wide variety of real-time communications platforms. Along with email, public officials can chat through tweets, Gchat, Yik Yak, Snapchat, Facebook, Instagram, Viber, Skype, HipChat, FireChat, Cryptocat, What’s App, and, of course, text messaging. Stafford Rosenbaum LLP’s Municipal Law team works with governmental bodies to navigate the challenges that new technologies present in complying with the Wisconsin Open Meetings Law.
The Supreme Court unanimously decided a bankruptcy issue that had the circuit courts across the country split. The Court weighed in favor of trustees’ ability to avoid debtors’ pre-petition transfers. Merit Mgmt. Grp., LP v. FTI Consulting, Inc. (Feb. 27 2018). Specifically, the Court analyzed an exception to trustees’ avoidance powers carved out in the bankruptcy code for transfers made by or to entities such as financial institutions in connection with a securities contract. The Court’s interpretation is favorable to bankruptcy trustees because it limits the ability of transferees to invoke the “safe harbor” provision in 11 U.S.C. § 546(e).
In 2003, Valley View Downs LP and Bedford Downs Management Corporation both sought licenses to operate a horse racetrack in Pennsylvania. The state had only one racetrack license left. Bedford Downs agreed to withdraw its license application if Valley View purchased Bedford Downs for $55 million. Valley View agreed. Upon attaining the license in 2007, Valley View obtained loans to fund the purchase from a variety of financial institutions, including Credit Suisse. Credit Suisse wired funds to Citizens Bank of Pennsylvania, the escrow agent. Citizens Bank then wired the appropriate share of the purchase price to each of the Bedford Downs’ shareholders, including Merit Management Group (which had a 30% interest).
Although Valley View secured the racetrack license, it was unable to obtain a gaming license to operate slot machines. Valley View soon thereafter filed for Chapter 11 bankruptcy protection. During the course of the bankruptcy, the bankruptcy trustee sued Merit Management, seeking to avoid the transfer of funds it had received for Bedford Downs’ shares prior to the bankruptcy filing—that is, the trustee sought to force Merit Management to return its share of the purchase price. Merit Management argued that the safe harbor provision in § 546(e) applied and prevented the trustee from avoiding the transfer.
Section 546(e) prohibits trustees from avoiding “settlement” payments “made by or to” a “financial institution” in connection with a securities contract. As a result, Merit Management argued that the § 546(e) “safe harbor” applied because the payments for the purchase of securities were not made directly from Valley to it, but rather including intervening payments made by or to two separate financial institutions: Credit Suisse and Citizens Bank. In contrast, the trustee argued that the § 546(e) “safe harbor” did not apply because the relevant transfer was the payment made in conjunction with the overarching transaction between Valley View and Merit Management.
This decision limits the applicability of § 546(e) because transferees may invoke it only with respect to the overarching transfer the trustee seeks to avoid. The Merit case means that intermittent transfers made by financial institutions who are “mere conduits” are no more than a component part of the overarching transfer and therefore do not provide a “safe harbor” in defense of a trustee’s avoidance action in connection with securities, commodities, and forward contracts.

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