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

    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, otherwise the judge must impose sanctions.

    Timothy D. Edwards

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    Timothy Edwards

    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. The new provision, Wis. Stat. section 895.044, allows and requires a court to impose damages for frivolous claims and defenses. Section 895.044 does not affect Wis. Stat. section 802.05, which this new legislation neither amends nor repeals. Designed as Wisconsin’s counterpart to Federal Rule of Civil Procedure 11, section 802.05 has historically set out the procedure for challenging pleadings as frivolous and allowing for the imposition of sanctions against a party, and its lawyer, for filing a frivolous pleading. Section 895.044 provides for a similar, and somewhat inconsistent, new procedure. This article explores the changes to the law of frivolous pleadings made by Gov. Walker’s recent legislation. 

    History: Wis. Stat. section 802.05

    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.  

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

    2011 amendment

    Section 895.044 is Gov. Walker’s recent amendment. This statute 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.

    Section 895.044 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

    Section 895.044 raises the stakes for potentially frivolous actions, and removes 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.

    Endnotes

    1See Trinity Petroleum v. Scott Oil Co., 2007 WI 88, ¶ 25, 302 Wis. 2d 299, 735 N.W.2d 1.

    2Wis. Stat. § 802.05(3)(b).

    3Trinity Petroleum, 2007 WI 88, ¶ 52, 302 Wis. 2d 299, (applying the “presumption of retroactive application” to Wis. Stat. section 802.05 (2005-06) because it was a procedural rule designed to benefit judicial administration of the court system, and holding that the new rule governed conduct occurring before the rule’s effective date).

    About the author

    Timothy D. Edwards, Wayne State 1989, is a litigation partner at Axley Brynelson LLP, Madison. He chairs the firm’s electronic discovery and records management team. He can be reached at com TEdwards axley axley TEdwards com.