Wisconsin Tort Reform: Judges now have less discretion in finding frivolousness, imposing sanctions

March 16, 2011 by matray

side note: Right now, Wisconsin is ground zero in the labor rights fight, but the villain Gov. Scott Walker pushed through a tort reform measure during an emergency session he called during his first week in office. Below is a synopsis by the Wisconsin Trial Bar of the tort reform law and its implications. Amendments to Wis. Stat. section 802.05, which sets out the procedure for challenging pleadings as frivolous and for imposing sanctions, remove judges’ discretion to impose sanctions after the safe-harbor period expires. Attorney Timothy Edwards warns those facing such a challenge to cure the offending pleading within 21 days. If this deadline is missed, the judge must impose sanctions, consisting of all actual costs resulting from the conduct – including attorney fees. March 16, 2011 – Gov. Scott Walker signed into law his “tort reform” bill, 2011 Senate Bill 1, on Jan. 27, 2011. This bill made significant changes to Wisconsin law relevant to tort litigation. One of the laws the bill changed was Wis. Stat. section 802.05, which allows and requires a court to impose damages for frivolous claims and defenses. Designed as Wisconsin’s counterpart to Federal Rule of Civil Procedure 11, section 802.05 lays out the procedure for challenging pleadings as frivolous and allows for the imposition of sanctions against a party, and its lawyer, for filing a frivolous pleading. This article explores the changes to this statute made by recent legislation. Historical version Section 802.05 was initially adopted as a court rule regulating pleading, practice, and procedure. In 2005, the Wisconsin Supreme Court adopted the 1993 revisions to federal rule 11 and incorporated them into Wis. Stat. section 802.05(3).1 These revisions abrogated the old requirement that upon a finding of frivolousness, a judge “shall award” costs and reasonable attorney fees. “Shall award” became “may impose an appropriate sanction,” which must be “limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated.”2 The court held open hearings on this move from mandatory to discretionary sanctions, including testimony from State Bar members expressing concerns about the chilling effect that mandatory sanctions would have on creative, zealous advocacy. The amendments to section 802.05 made another important change: they added a “safe-harbor” notice provision. When a party challenges an opposing party’s conduct, it must first serve its motion for sanctions on the party whose pleadings are being challenged, along with a safe-harbor letter that gives the opposing party 21 days in which to withdraw the challenged pleading. If the pleading is not withdrawn, then the party challenging the pleading can file the motion and ask the court to impose sanctions. So viewed, a safe-harbor letter and accompanying motion is a statutory prerequisite to the later filing of a motion for sanctions pursuant to section 802.05. 2011 amendment The newly amended version of section 802.05 retains the basic steps in the procedure for challenging frivolous pleadings. A party can bring a motion to request a determination on whether another party has initiated, maintained, or continued a frivolous action. The court also may enter an order on its own initiative based on conduct that appears to violate the rule against frivolousness. The safe-harbor period remains 21 days. The most significant change made by the 2011 legislation was to remove the discretion of judges to impose sanctions after the safe-harbor period expires. Now, if a judge finds by clear and convincing evidence that a party has filed or pursued a frivolous pleading, the judge must exercise his or her discretion to impose sanctions if a party cures the offending pleading within 21 days of receiving the safe-harbor letter. In addition, now the judge must award sanctions if the offending party does not cure the offending pleading within 21 days of receiving the safe-harbor letter. Such sanctions include all actual costs resulting from the conduct, including reasonable attorney fees. The new version of section 802.05 also applies to appeals. If an award of costs for violating these provisions is affirmed on appeal, the appellate court must send the action to the lower court to award actual attorney fees for defending the appeal to the successful party. An appeal is frivolous “in its entirety” if “any element necessary to succeed is supported solely by an argument that is [frivolous].” This new law applies to actions filed on or after the act’s effective date of Feb. 1, 2011. However, because the rule is procedural, it may be applied retroactively.3 Summary The new amendments to section 802.05 raise the stakes for potentially frivolous actions, and remove some of the discretion afforded to judges in applying the rule. The most significant change is the directive that circuit courts must impose sanctions following a finding of frivolousness if the 21-day safe-harbor period has expired. The added discretion to impose sanctions within the 21-day safe harbor period, and the mandatory imposition of fees and costs against a party who unsuccessfully appeals an adverse finding of frivolousness, provide additional strength to Wisconsin’s prohibition against frivolous pleadings. Time will only tell whether these new directives will deter the pursuit of frivolous claims and defenses, as intended, or chill the pursuit of legitimate, creative claims that would otherwise vindicate important client interests. see original

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