Authors: Attorney John C. Mitby & Law Clerk Sarah E. Schuchardt
Phone: 608-575-4077
Email: jmitby@hbslawfirm.com
On December 21, 2017, the supreme court cast a unanimous vote in favor of granting the petition to amend the rules governing class actions brought in Wisconsin to align more closely with the Federal Rules. Wis. Stat. § 803.08 previously provided the procedure for class actions:
(1) “Class actions may be maintained.” When the question before the court is one of a common or general interest of many persons or when the parties are very numerous and it may be impracticable to bring them all before the court, one or more may sue or defend for the benefit of the whole, except that no claim may be maintained against the state or any other party under this section if the relief sought includes the refund of or damages associated with a tax administered by the state.
Wis. Stat. § 803.08(1) (2017). This one-sentence provision provided little to no guidance to parties pursuing a class action in Wisconsin. A major overhaul was needed to update and clarify the procedures. As a result, the Judicial Council1 submitted a petition to the Supreme Court of Wisconsin in order to repeal and recreate Wis. Stat. § 803.08. The Supreme Court granted the Petition, and Wisconsin’s class action statute would largely mirrors Federal Rule of Civil Procedure 23. However, two notable diversions from the Federal Rule include subsections (10) and (14):
(10) Disposition of residual funds. (a) In this subsection:
1. “Residual Funds” means funds that remain after the payment of all approved class member claims, expenses, litigation costs, attorney fees, and other court-approved disbursements in an action under this section.
2. “WisTAF” means the Wisconsin Trust Account Foundation, Inc.
(b)1. Any order entering a judgment or approving a proposed compromise of a class action that establishes a process for identifying and compensating members of the class shall provide for disbursement of any residual funds. In class actions in which residual funds remain, not less than 50 percent of the residual funds shall be disbursed to WisTAF to support direct delivery of legal services to persons of limited means in non-criminal matters. The circuit court may disburse the balance of any residual funds beyond the minimum percentage to WisTAF for purposes that have a direct or indirect relationship to the objectives of the underlying litigation or otherwise promote the substantive or procedural interests of members of the certified class.
2. This subsection does not prohibit the trial court from approving a settlement that does not create residual funds.
Wis. Stat. § 803.08(10) (eff. July 1, 2018). A section providing for the disposition of residual funds was provided for in the previous version of Wis. Stat. § 803.08. See Wis. Stat. § 803.08(2) (2017). The other area in which Wisconsin goes above and beyond the Federal Rule is subsection (14):
(14) Prohibition against certain class actions. No claim may be maintained against the state or any other party under this section if the relief sought includes the refund of or damages associated with a tax administered by the state.
Wis. Stat. § 803.08(14) (eff. July 1, 2018). The Judicial Council Committee also noted that the federal Advisory Committee Notes for Rule 23 should be consulted for guidance, although they are not binding. Judicial Council Committee Notes, Wis. Stat. § 803.08 (eff. July 1, 2018). Although the rest of the revised § 803.08 closely mirrors FRCP 23, there are slight language changes, such as the language “all of the following,” added in order to conform to Wisconsin statutory drafting standards. Id. (For example, “The notice must clearly and concisely state in plain, easily understood language, all of the following…” Wis. Stat. § 803.08(4)(b) (emphasis added)).
Since this new rule will apply to all class actions, the court has proposed that the procedures for class actions under Wis. Stat. § 426.110(10) be repealed. Id. Indeed, § 426.110(4m) was created in order to direct parties to § 803.08 for the procedures for class actions:
426.110(4m) Actions commenced under this section shall be conducted under the procedures set forth in s. 803.08.
See In re proposed amendments to Wisconsin Statutes §§ 803.08 and 426.110, Pet. No. 17-03 (entered Dec. 21, 2017). Further, § 426.110(5) through (13) were repealed. Id. Section 426.110(16) was also amended so that it now reads as follows:
(16) The administrator, whether or not a party to an action, shall bear the costs of notice except that the administrator may recover such costs from the defendant.
Wis. Stat. § 426.110(16). Since the changes closely track the Federal Rule, “Wisconsin courts and practitioners can look to the well-developed body of federal case law interpreting Rule 23 for guidance.” Judicial Council Committee Notes, Wis. Stat. § 803.08 (eff. July 1, 2018). Although not effective until July 1, 2018, the new rules may apply to pending proceedings, as long as the application of the rules is feasible and would not work injustice.
The changes to the class action rules will likely clarify the procedures for class actions and provide procedural uniformity between federal and state class actions. Further, the wealth of federal case law interpreting Rule 23 will provide additional guidance for parties pursuing class actions under Wisconsin state law.
However, at the time of this writing, there is also a bill (AB-773 / SB-645) making its way through the Capitol. Among potential changes to Wisconsin’s rules of discovery and other civil litigation measures, the bill also includes changes to the current sec. 803.08. Notably, the changes are not in line with what the Judicial Council and Supreme Court recommended.
The provisions impacting class actions largely track FRCP 23. However, the bill makes several departures from the Federal rule in ways that deprive courts of needed guidance and potentially create more disputes. For example, the bill allows for an automatic appeal from an order granting or denying class certification. This provision would likely slow class litigation to a crawl, even when other issues are conceded; i.e., in the case of subclasses or stipulated classes.
So, the guidance sought by Wisconsin judges, and provided for by the recommendations of the Judicial Council and Supreme Court, would likely be eroded if this bill were to pass in its current form.
[1] The Judicial Council is a 21-member council which “[o]bserve[s] and stud[ies] the rules of pleading, practice and procedure, and advise[s] the supreme court as to changes which will, in the council’s judgment, simplify procedure and promote a speedy determination of litigation upon its merits.” Wis. Stat. § 758.13(2). The composition of the council, as well as its other duties, are expanded upon in Wis. Stat. § 758.13.
