Opinion ID: 4547416
Heading Depth: 2
Heading Rank: 2

Heading: Laches Applied Here

Text: ¶13 The parties dispute all three elements, and contend that we should exercise our discretion in their favor. We consider each of these matters in turn.
¶14 The first element requires the respondents to prove WSBU unreasonably delayed in bringing the suit. What constitutes a reasonable time will vary and depends on the facts of a particular case. Foote v. Harrison, 137 Wis. 588, 590, 119 N.W. 291 (1909) (quoting Rogers v. Van Nortwick, 87 Wis. 414, 429, 58 N.W. 762 (1894)); see also Wren, 389 Wis. 2d 516, ¶18 (Whether a delay is reasonable is case specific; we look at the totality of circumstances. (citation omitted)). ¶15 There can be no dispute that WSBU's claim became actionable on September 23, 2017, the day 2017 Wis. Act 59 went into effect. At that point, the underlying facts of the original action were set. This is true even though the legislature could have subsequently overridden the disputed 9 No. 2019AP2054-OA vetoes. It is the governor's procedural use of the vetoes, not the substance of the underlying laws, that is at the heart of WSBU's challenge. Notwithstanding, WSBU did not file its original action until October 28, 2019, well after the applicable biennium had closed and nearly four months after the new biennial budget had gone into effect. ¶16 WSBU does not contest these basic facts. Instead, it observes that other types of actions are governed by statutes of limitation longer than the time period at issue here, and argues the effect of these partial vetoes will be with us for years (decades in one instance, and a millennium in the other). This is true, but does not demonstrate that its delay was reasonable. Laches is an equitable doctrine, and therefore can and regularly does apply even before a statute of limitation has expired. See Wren, 389 Wis. 2d 516, ¶13 n.8 (explaining Wisconsin jurisprudence has long recognized laches as an equitable defense that operates independently of any statute of limitations (quoting Sheldon v. Rockwell, 9 Wis. 158 (), 162 () (1859))); Zizzo v. Lakeside Steel & Mfg. Co., 2008 WI App 69, ¶7, 312 Wis. 2d 463, 752 N.W.2d 889 (Laches is distinct from a statute of limitations and may be found where the statute of limitations has not yet run.). Moreover, it would be quite normal for partial vetoes to have a dramatic effect. Many a legislative proposal has been irrevocably altered by a governor's partial veto pen. ¶17 Where a litigant challenges the process by which a bill becomes a lawindeed whether it should even be treated as a 10 No. 2019AP2054-OA law at alla reasonably prompt lawsuit is and should be the norm. See, e.g., State ex rel. Ozanne v. Fitzgerald, 2011 WI 43, ¶¶29, 36, 334 Wis. 2d 70, 798 N.W.2d 436 (Prosser, J., concurring) (bill signed by the governor on March 11, 2011, constitutional challenge to the bill's procedural enactment filed on March 16, 2011). This is far different than a challenge to the substantive validity of a law, where such lawsuits may not even ripen until enforcement begins. See Schaeffer v. Anne Arundel Cty., 656 A.2d 751, 753-55 (Md. 1995) (distinguishing substantive objections to statutes from belated challenges to their procedural enactment for purposes of laches); Stilp v. Hafer, 718 A.2d 290, 293-94 (Pa. 1998) (finding lack of due diligence in pursuing procedural challenge given relevant legislative record and constitutional provisions publicly available at the time of the law's enactment).8 Here, as we discuss more fully below, money has been spent, revenues have come in, and the books have already been closed on the operation of the 2017-19 biennial budget. Cf. Schulz v. State, 615 N.E.2d 953, 957 (N.Y. 1993) (finding an 11-month delay unreasonable in constitutional challenge brought against the 8WSBU's reliance on a case rejecting a laches defense against a constitutional challenge to the substance of a law is misplaced given it is attacking the process by which Act 59, §§ 1641m and 2265 were enacted, not the substance of those provisions. Cf. Cathcart v. Meyer, 88 P.3d 1050, 1058-59 (Wyo. 2004) (rejecting laches defense against a challenge to a termlimit initiative based on the constitutionality of its substance, explaining there was no showing of particularized prejudice and contrasting with a case based on a procedural constitutional attack, not a substantive one). 11 No. 2019AP2054-OA procedural enactment of public financing laws). Waiting years after a budget bill has gone into effect to challenge whether it was constitutionally enacted in the first place is too long. See id. ([F]iscal year 1990-1991 has come and gone and its financial books in this respect have been closed. Equitable considerations of time, in the laches sense, may justifiably keep them closed . . . .). Giving a stamp of approval to delayed litigation raising procedural challenges like the proper exercise of a partial veto would invite lawsuits over budgets of yesteryear and disrupt the status quo. There must be a limit to when a lawsuit like this may be filed. We conclude the challenge here, brought well after the previous biennium had passed, and after a new budget based on current law and future projections had taken effect, constitutes unreasonable delay.9
¶18 We also determine the respondents lacked knowledge of WSBU's forthcoming claim. The respondents assert they remained unaware of any potential claim until this original action was filed, an assertion WSBU does not deny or further dispute. WSBU still contends, however, that the respondents certainly could have anticipated that someone might challenge vetoes with such prolonged consequences. That's possible, but only in the sense The respondents argue for a firm cutoff at the end of the 9 biennium for these kinds of challenges. However, laches is always case-specific, and we need not establish such a rule to conclude that the delay under these circumstances was too long. 12 No. 2019AP2054-OA that every partial veto could one day become a litigated matter. Based on the undisputed record before us, the respondents here had no advance knowledge or warning of this particular claim. That is sufficient to satisfy this element of a laches defense.10
¶19 The final element of laches requires proof of prejudice resulting from the claimant's unreasonable delay. What amounts to prejudice . . . depends upon the facts and circumstances of each case, but it is generally held to be anything that places the party in a less favorable position. Wren, 389 Wis. 2d 516, ¶32. ¶20 The respondents argue that, given their roles in the state budget-making process, WSBU's delay places them in a less favorable position with regard to the planning and management of state receipts and expenditures. The respondents' claim is specifically grounded in a prejudicial change to their position regarding the 2019-21 budget (i.e., the state's current budget). Collectively, this describes a form of prejudice that we have called economic prejudice. See id., ¶33 & n.26 (distinguishing economic and evidentiary prejudice); 27A Am. Jur. 2d Equity 10See Schafer v. Wegner, 78 Wis. 2d 127, 133, 254 N.W.2d 193 (1977) (concluding party asserting laches defense lacked knowledge of claim given that claim had not been raised in a reasonable time); cf. Watkins v. Milwaukee Cty. Civil Serv. Comm'n, 88 Wis. 2d 411, 422-23, 276 N.W.2d 775 (1979) (noting the petitioner informed the respondent at the time of his resignation that litigation would be commenced if a corresponding hearing was not held). 13 No. 2019AP2054-OA § 144 (discussing types of prejudice including economic prejudice caused by a change in a responding party's position). ¶21 Broadly speaking, every new budget bill is created with an understanding that earlier budgets, including any provisions bearing marks of former vetoes, will serve as a foundation. At the direction of the governor, the respondents and other executive branch officers hold this understanding when they create department budgets and ready all of the other fiscal information that must be included in a biennial budget report.11 The governor then carries the same understanding when creating his proposed budget and when signing the legislature's proposed budget into law. See Champagne, supra, at 1 (describing the state budget bill as Wisconsin's most significant piece of legislation in part because it contains most of the governor's public policy agenda for the entire legislative session). ¶22 Turning to the making of the 2019-21 budget, if the challenged vetoes from the outgoing budget are removed from the picture, as WSBU now pleads, there would have been cascading The 11 respondents, while acting in their official capacities, each direct and supervise a department within the executive branch structure. See Wis. Stat. § 15.10 (department of administration); Wis. Stat. § 15.37 (department of public instruction); Wis. Stat. § 15.43 (department of revenue). In these roles, they all have various duties related to the state budget-making process. See, e.g., Wis. Stat. § 15.04(1)(b) (requiring from each department a biennial compilation of a comprehensive program budget); Wis. Stat. §§ 16.43 and 16.46 (requiring the secretary of administration to prepare the biennial state budget report); Wis. Stat. § 16.46(8) (requiring the department of revenue to report on estimated state revenues for inclusion in the budget report). 14 No. 2019AP2054-OA effects on the state's global policy calculus and budget outlook, as well as options available to policymakers. For instance, eliminating the moratorium on the school district revenue-limit adjustment in Act 59, § 1641m could have led to property tax increases in school districts across the state. Even a change like this adjusts how the state's policy puzzle fits together. With potentially higher property taxes, the respondents could have chosen to offer various offsetting property tax relief measures. Maybe different revenue limits would have been proposed. Maybe school district spending priorities would have been altered by the incentive in a way that would have changed their funding requests during the new biennium. Likewise, according to the respondents' calculations, putting 2013 Wis. Act 229 into effect by undoing the partial veto in Act 59, § 2265 could have caused an annual decline of more than $10 million in sales-and-use tax revenue. This is a significant adjustment to the state balance sheet. To compensate, policymakers could have enacted a tax increase to make up for lost revenue. Or maybe they would have chosen to spend $10 million less per year on some other state program or priority. ¶23 WSBU responds that the financial footprint of these budgetary programs was a microscopic fraction of the total appropriations for the 2019-21 biennium. We disagree that $20 million is mere change in the state's coffers. While this amount of specific tax revenue seems small in comparison to the state's total revenues over the course of a biennium, it is 15 No. 2019AP2054-OA still a significant sum. The state's budget reserve provides a clear example of why this is so. The reserve, which is premised on projections of revenues and expenditures, acts as a budget stabilization mechanism in times of fiscal uncertainty.12 In fact, state law imposes a mandatory reserve floor. Wis. Stat. § 20.003(4). For the 2019-21 budget, the state was required to maintain a reserve of at least $80 million and $85 million in the two fiscal years. See § 20.003(4)(L). Two years of $10 million in tax revenue is almost a quarter of the reserve required for the entire biennium. ¶24 Even so, the point of this discussion is not the specific amount of revenue loss or a definitive statement regarding what would have happened. The point is that unreasonable delay cost the respondents the opportunity to account for those changes in the development and passage of the 2019-21 biennial budget. The alternatives are not pure speculation as WSBU alleges. These examples show that the 2019-21 budget paid for and relied upon decisions the partial vetoes solidified into law more than two years earlier. ¶25 In short, the provisions of a biennial budget are hardly something that can be examined in isolation. Budget bills are complex and dynamic creatures, and each individual figure and measure incorporated within the enacted law plays a 12 See generally Christa Pugh, Legislative Fiscal Bureau, Budget Stabilization Fund and General Reserve Fund Requirements (2019) (outlining the design and purposes of Wisconsin's budget reserve). 16 No. 2019AP2054-OA part in an interconnected network of complementary policy choices. WSBU's delay in seeking to reverse decisions from the 2017-19 biennium deprived the respondents of the opportunity to take an altered policy foundation into account in subsequent choices. For this, the respondents are surely placed in a less favorable position. Wren, 389 Wis. 2d 516, ¶32. And that constitutes prejudice.13
¶26 The respondents have proved all three elements of laches are met in this case. Even so, application of laches is within our equitable discretion. See id., ¶15 (explaining a court may choose not to apply laches if it determines that application of the defense is not appropriate and equitable). We conclude equity weighs strongly in favor of applying laches here. ¶27 We have already covered the specific prejudicial effect to the respondents. This by itself is weighty. But in addition, every new budget generates substantial reliance As part of their prejudice argument, the respondents 13 emphasize that the challenged vetoes were made by a previous gubernatorial administration. All of the respondents have been sued in their official capacity, which means the individual occupant of any given position is irrelevant to the broader prejudice argument. The prejudice to the official functions of the named respondents is the same regardless of whether their priorities or policy views may be different. In any event, the respondents have shown they will be prejudiced regardless of whether there was an intervening change in the governor's office. 17 No. 2019AP2054-OA interests on behalf of both public and private parties across the state. The same cascading effects of even modest changes to a broader policy framework are true not just within the biennial budget itself, but for the budgets and outlook of counties, municipalities, school districts, nonprofit organizations, colleges, road contractors, health care systems, and innumerable other public and private actors.14 ¶28 Part of this is the reasonable presumption that enacted laws, especially budget bills, can be relied upon to order one's affairs. The respondents make this point in reference to our recent decision in Winebow, Inc. v. CapitolHusting Co., which turned in part on the effect of partial vetoes in the 1999-2001 budget. 2018 WI 60, ¶¶12–22, 381 Wis. 2d 732, 914 N.W.2d 631 (discussing 1999 Wis. Act 9, § 2166m and § 2166s). There, on a certified question from the Seventh Circuit, we determined whether a wine grantor-dealer relationship satisfied the definition of a dealership in the Wisconsin Fair Dealership Law. Id., ¶1. Underlying that question, the parties each pointed to a different statutory provision as containing the dispositive answer. See id., ¶¶23, 14See also 30A C.J.S. Equity § 155 (The defense of laches is applied with even greater force when delay in attacking the legality of the collection and spending of public moneys will result in grave public injury were the relief sought to be granted.); 27A Am. Jur. 2d Equity § 145 (The court may look at the disruptive effect a plaintiff's relief would have on other parties in determining whether laches applies to the claim. Thus, laches is particularly justified where the plaintiff's delay in pursuing a claim would have a catastrophic effect on the rights of many third parties. (footnote omitted)). 18 No. 2019AP2054-OA 25 (citing Wis. Stat. §§ 135.02(3)(b), 135.066 (2015-16)). To provide background, we unpacked the provisions' relevant statutory history, which included partial vetoes from nearly two decades earlier. Id., ¶¶12-22. In answering the certified question, we did not address the constitutionality of those vetoes. But if we had done so and ruled that they were beyond the governor's constitutional authority, Wisconsin's commercial wine industry could have been radically upended given statewide reliance interests on a 19-year-old partial veto that was newly determined invalid. ¶29 Other jurisdictions have similarly barred untimely challenges to alleged procedural deficiencies in the enactment of a law. In so doing, these courts acknowledge the broader and more pervasive prejudicial effects resulting from belatedly undoing statutory enactments. See, e.g., Schaeffer, 656 A.2d at 753, 755 (emphasizing prejudice that would be caused to hundreds of county employees who relied on pension plan modifications effected by an ordinance subject to belated procedural challenge); Cole v. State ex rel. Brown, 42 P.3d 760, 764 (Mont. 2002) (identifying prejudice of former officeholders and potential candidates who relied on presumptively valid 19 No. 2019AP2054-OA constitutional term-limit initiative subject to belated procedural challenge).15 15The New York Court of Appeals decision in Schulz v. State appears to provide a particularly fitting comparison to this case. There, the court held laches should apply against a procedural challenge to various public financing laws that had been enacted 11 months earlier. 615 N.E.2d 953, 957-58 (N.Y. 1993). In the intervening period, significant financial activity was conducted in reliance on the statues. Id. Thus, amongst the profound destabilizing and prejudicial effects from delay that could affect the state in its operation and maintenance of orderly government, the New York court explained: Appellants' demand for relief on the merits of their constitutional challenge would have the bonds recalled and refunded and the nonbond transactions nullified. Metaphorically, the impossibility of putting genies back in their bottles springs to the imagination. Realistically, constitutional challenges to public financing of such massive and profound dimension, possibly causing traumatic disturbance to settled matters of public finances and governance, should be undertaken reasonably promptly. To relax this procedural safeguard could disproportionately incur or threaten a greater harm to the public weal than the alleged constitutional transgression itself. Undoing such closed financial transactions would also add hundreds of millions of dollars of unplanned expenditures to the taxpayers' burdens. In sum, fiscal year 1990–1991 has come and gone and its financial books in this respect have been closed. Equitable considerations of time, in the laches sense, may justifiably keep them closed and do not warrant, in the circumstances presented here, a piecemeal invalidation challenge as suggested . . . . Id. (citation omitted). 20 No. 2019AP2054-OA ¶30 Orderly state governance is premised in no small part on the stability and certainty of state finances. Nowhere are those principles needed more than in the state's biennial budget. Each budget bill is a massive undertaking that is meant to fully encapsulate the financing of the state's operations and programs over the next two years. Our state is, to a very large degree, publicly and privately ordered around that single piece of legislation. Judicial disturbance of biennial budgets past would be incredibly disruptive to the public and private affairs of many whose livelihoods are tied to public policy (which is to say, almost everyone). ¶31 It is true that the proper interpretation of the governor's partial veto powers is an important question. But that alone, in our view, does not counsel undoing the current policy framework that was crafted in reliance on the policy choices settled in the previous biennium. This court has considered cases arising from the governor's veto authority before; we will surely do so again. But it is crucial that claims of this sort are brought in a timely manner. Because this claim was not, application of laches in this case is equitable and appropriate. WSBU's citation to another New York case that distinguished itself from Schulz simply shows that laches is a fact-specific defense. Cf. Saratoga Cty. Chamber of Commerce, Inc. v. Pataki, 798 N.E.2d 1047, 1056-57 (N.Y. 2003) (rejecting laches defense against a challenge to a gaming compact because, in contrast to Schulz, there was no showing that delay caused economic prejudice given the casino's operations had never been interrupted). 21 No. 2019AP2054-OA