Wisconsin Lawyer: Supreme Court Orders:

State Bar of Wisconsin

Sign In
    Wisconsin LawyerWisconsin Lawyer

News & Pubs Search

Advanced

    Supreme Court Orders

    07-11 Rule Governing the Discretionary Transfer of Cases to Tribal Court (effective Jan. 1, 2009); 08-03 Interest Comparability Rule for IOLTA Accounts, hearing Nov. 18 (links to 3 Appendices at http://wicourts.gov); 08-07 Admission of Lawyers on Proof of Practice Elsewhere, hearing Nov. 18
    Share This:

    Wisconsin LawyerWisconsin Lawyer
    Vol. 81, No. 10, October 2008

    Supreme Court Orders

    In order 07-11, the Wisconsin Supreme Court has created a rule governing the discretionary transfer of cases to tribal court, effective Jan. 1, 2009. On Nov. 18, the supreme court will hold public hearings on order 08-03 regarding a WisTAF petition seeking an interest comparability rule for IOLTA accounts; and order 08-07 regarding a Board of Bar Examiners petition relating to admitting lawyers on proof of practice elsewhere.

    Transfer of Cases to Tribal Court

    In the matter of the petition to create a rule governing the discretionary transfer of cases to tribal court

    Order 07-11

    On July 24, 2007, A. John Voelker,1 Director of State Courts, on behalf of the State-Tribal Justice Forum,2 petitioned the court to create a rule governing the discretionary transfer of cases to tribal court, pursuant to the court's rulemaking authority under Wis. Stat. § 751.12. On Oct. 1, 2007, the court issued an order scheduling the petition for a public hearing on Jan. 8, 2008.

    On Oct. 31, 2007, the Clerk of the Supreme Court issued a letter to 34 agencies and organizations potentially having an interest in the petition to solicit comment and offer the opportunity to appear in person at the public hearing. The court received comments from several recipients of this letter and others, all writing in favor of the proposed rule: (1) Honorable James R. Habeck, Circuit Court for Menominee and Shawano counties (Nov. 5, 2007); (2) Jerry P. Lang, District Court Administrator, Fourth Judicial District (Dec. 6, 2007); (3) Honorable Leland Wigg-Ninham, President, Wisconsin Tribal Judges Association (Dec. 7, 2007); (4) Attorney Paul Stenzel (Dec. 7, 2007); (5) James Botsford, Indian Law Office Director, Wisconsin Judicare Inc. (Dec. 10, 2007); (6) Honorable Eugene L. White-Fish, Chief Judge, Forest County Potawatomi Tribal Court (Dec. 10, 2007); (7) Winnifred L. Thomas, Chief Judicial Officer, Oneida Tribal Judicial System (Dec. 11, 2007); (8) Honorable Gerald Ptacek, Chief Judge, Circuit Court of Racine County, on behalf of the Committee of Chief Judges (Dec. 17, 2007); (9) Thomas J. Basting Sr., President, State Bar of Wisconsin (Jan. 3, 2008); and (10) John S. Swimmer, Chairman, Indian Law Section, State Bar of Wisconsin (Jan. 3, 2008). No comment was received opposing the petition.

    At the hearing at 9:30 a.m. on Jan. 8, 2008, the petition was presented to the court by Honorable James Mohr, LacCourte Orielles Tribal Court, Chairperson, State-Tribal Justice Forum. Judge Mohr testified in favor of the petition and responded to questions posed by individual justices. Six other individuals testified in favor of the petition and were questioned: (1) Honorable Eugene White-Fish, Forest County Potowatomi Tribal Court; (2) Honorable John Anderson, Bayfield County Circuit Court; (3) Representative Gary Sherman, member of Legislative Council Special Committee on State-Tribal Relations; (4) Attorney Kenneth J. Artis, Black River Falls, Wis.; (5) Honorable Stanley Webster, Oneida Tribal Judicial System; and (6) Huma Ahsan, Deputy Director, Great Lakes Indian Law Center, University of Wisconsin Law School and former Chief Justice of Turtle Mountain Court of Appeals, Bellacourt, North Dakota. No individual or representative of any group testified in opposition to the petition.

    Following the hearing, the court held an open administrative conference to discuss the petition. After discussion, the court voted to request further comment on three issues raised during the court's discussion of the petition: First, under what circumstances is jurisdiction concurrent between tribal and state courts or exclusive in tribal or state court? Second, is there a right under the United States or Wisconsin constitution to have a case heard in state court rather than tribal court? Third, how does the proposed rule impact the application of Wis. Stat. § 806.245 (full faith and credit)? On Jan. 11, 2008, the Clerk issued a letter to agencies and organizations with a potential interest in the petition requesting that comments on these issues be submitted to the court.

    The court received three responses to its request. On February 15, 2008, the State-Tribal Justice Forum, writing to help the court "move forward with this historic rule," provided a seven-page single-spaced discussion of the current legal status, case law, and history of the jurisdictional and constitutional issues raised by the court, with two substantive attachments. The first attachment was a tribal court directory _ a court-by-court index of Wisconsin's tribal courts, including the names of the judges, prosecutors, and tribal attorneys, the court's source of power, the areas of subject matter and personal jurisdiction, and tribal membership criteria. The second attachment was a United States Department of Justice memorandum regarding Public Law 83-280, which conferred jurisdiction on certain states, including Wisconsin, over most or all of Indian country within their borders. On Feb. 15, 2008, the Great Lakes Indian Law Center filed a 29-page single-spaced report "to assist the court with building a solid legal foundation for the proposed rule" and focusing on "the interplay between the State court and the Tribal court justice systems located in Wisconsin." On Feb. 22, 2008, the Department of Justice provided an 11-page single-spaced examination of the jurisdictional and constitutional issues raised by the court, including recommendations for revision to resolve these issues.

    In response to these comments, the Clerk prepared a revised draft of the proposed rule and, on March 5, 2008, provided it to the three commenting parties. On March 11, 2008, the State-Tribal Justice Forum responded with further suggestions and comments. On March 18, 2008, the Department of Justice provided further comments. On April 2, 2008, Representative Terry Musser, Chair of the Joint Legislative Council's Special Committee on State-Tribal Relations, submitted an 11-page single-spaced memorandum from the Wisconsin Legislative Council containing technical comments about the original and revised drafts of the proposed rule. Representative Musser indicated that the Special Committee has not taken a position on the petition.

    On April 15, 2008, the court discussed the proposed rule and the commentary at its open administrative conference. The court voted on specific changes to the proposed rule and examined the possibility of adapting an existing statute, Wis. Stat. § 801.63, to accommodate the transfer of cases from state court to tribal court as an alternative to the creation of a new rule. The court charged the Clerk with the task of drafting alternative versions of the rule: (1) a redraft of the proposed rule Wis. Stat. § 801.54 incorporating changes discussed and voted upon by the court, and (2) a draft of Wis. Stat. § 801.63 revised to include transfers to tribal court. At the court's request, on May 29, 2008, the Clerk submitted these drafts to Justice Crooks, who, upon reviewing these materials, determined that a revision of Wis. Stat. § 801.63 was not a feasible mechanism for transfer of cases to tribal court.

    On June 24, 2008, the court received a comment on the proposed rule from Attorney Meg Vergeront on behalf of the Village of Hobart, asking that the court not approve the proposed rule in its current form and instead schedule a public hearing so that certain issues could be explored. On June 25, 2008, the court discussed Attorney Vergeront's comment and the alternative drafts at an open administrative conference. After discussion, the court voted to adopt the petition, as modified. Justice Roggensack dissented from the adoption of the petition; Justice Prosser and Justice Ziegler have joined in the dissent. Finally, the court ruled that the effective date of this rule shall be Jan. 1, 2009, and that the court will review the operation of this rule in two years from the effective date.

    Therefore,

    IT IS ORDERED that effective Jan. 1, 2009:

    Section 1. 801.54 of the statutes is created to read:

    801.54 Discretionary transfer of civil actions to tribal court.

    (1) Scope. In a civil action where a circuit court and a court or judicial system of a federally recognized American Indian tribe or band in Wisconsin ("tribal court") have concurrent jurisdiction, this rule authorizes the circuit court, in its discretion, to transfer the action to the tribal court when transfer is warranted under the factors set forth in sub. (2). This rule does not apply to any action in which controlling law grants exclusive jurisdiction to either the circuit court or the tribal court.

    (2) Discretionary transfer. When a civil action is brought in the circuit court of any county of this state, and when, under the laws of the United States, a tribal court has concurrent jurisdiction of the matter in controversy, the circuit court may, on its own motion or the motion of any party and after notice and hearing on the record on the issue of the transfer, cause such action to be transferred to the tribal court. The circuit court must first make a threshold determination that concurrent jurisdiction exists. If concurrent jurisdiction is found to exist, unless all parties stipulate to the transfer, in the exercise of its discretion the circuit court shall consider all relevant factors, including but not limited to:

    (a) Whether issues in the action require interpretation of the tribe's laws, including the tribe's constitution, statutes, bylaws, ordinances, resolutions, or case law.

    (b) Whether the action involves traditional or cultural matters of the tribe.

    (c) Whether the action is one in which the tribe is a party, or whether tribal sovereignty, jurisdiction, or territory is an issue in the action.

    (d) The tribal membership status of the parties.

    (e) Where the claim arises.

    (f) Whether the parties have by contract chosen a forum or the law to be applied in the event of a dispute.

    (g) The timing of any motion to transfer, taking into account the parties' and court's expenditure of time and resources, and compliance with any applicable provisions of the circuit court's scheduling orders.

    (h) The court in which the action can be decided most expeditiously.

    (i) The institutional and administrative interests of each court.

    (j) The relative burdens on the parties, including cost, access to and admissibility of evidence, and matters of process, practice, and procedure, including where the action will be heard and decided most promptly.

    (k) Any other factors having substantial bearing upon the selection of a convenient, reasonable and fair place of trial.

    (3) Stay of proceeding in circuit court. When a circuit court transfers an action to tribal court under this rule, the circuit court shall enter an order to stay further proceedings on the action in circuit court. Jurisdiction of the circuit court continues over the parties to a proceeding in which a stay has been ordered under this section until a period of 5 years has elapsed since the last order affecting the stay was entered in the court. At any time during which jurisdiction of the court continues over the parties to the proceedings, the court may, on motion and notice to the parties, subsequently modify the stay order and take any further action in the proceeding as the interests of justice require. When jurisdiction of the court over the parties and the proceeding terminates by reason of the lapse of 5 years following the last court order in the action, the clerk of the court in which the stay was granted shall without notice enter an order dismissing the action.

    (4) Appeals. The decision of a circuit court to transfer an action to tribal court may be appealed as a matter of right under s. 808.03(1).

    (5) Effect of transfer. When a circuit court orders the transfer of an action to tribal court under this rule, the circuit court shall retain the circuit court filing fee and shall transmit to the tribal court a copy of all circuit court records in the action.

    (6) Powers, rights and obligations unaffected. Nothing in this rule is intended to alter, diminish, or expand the jurisdiction of the circuit courts or any tribal court, the sovereignty of the state or any federally recognized American Indian tribe or band, or the rights or obligations of parties under state, tribal, or federal law.

    Section 2. The following Comment to Wis. Stat. § 801.54 is not adopted, but will be published and may be consulted for guidance in interpreting and applying the statute:

    COMMENT: The purpose of this rule is to enable circuit courts to transfer civil actions to tribal courts in Wisconsin as efficiently as possible where appropriate. In considering the factors under sub. (2), the circuit court shall give particular weight to the constitutional rights of the litigants and their rights to assert all available claims and defenses.

    IT IS FURTHER ORDERED that the circuit courts, tribal courts, litigants, and attorneys affected by this rule shall advise the court, in writing, regarding their experience of this rule on or before Jan. 1, 2011.

    IT IS FURTHER ORDERED that notice of creation of Wis. Stat. § 801.54 be given by a single publication of a copy of this order and the dissent thereto in the official state newspaper and in an official publication of the State Bar of Wisconsin.

    Dated at Madison, Wis., this 31st day of July, 2008.

    By the court:
    David R. Schanker,
    Clerk of Supreme Court

    ¶1 PATIENCE DRAKE ROGGENSACK, J. (dissenting). Four Wisconsin Supreme Court justices, who constitute a majority of this court today, legislate to create a rule by which circuit courts may transfer jurisdiction of pending civil cases from Wisconsin circuit courts to any tribal court in Wisconsin, even when the litigants object to the transfer. I write in dissent because: (1) Rule 801.54 is inadequate and misleading in regard to addressing tribal court concurrent subject matter jurisdiction, which jurisdiction is extremely limited in scope when nonmembers are parties to the action; (2) Rule 801.54 impermissibly alters the substantive rights of tribal members, as well as nonmembers, contrary to the provisions of Wis. Stat. § 751.12(1) (2005-06),3 which limits the court's rule-making power; (3) Rule 801.54 undermines federal and state constitutional and statutory rights of litigants; and (4) a majority of the court has pushed this rule-change through before the end of the 2007-08 term of the court, even though the court has been presented with no information about the substantive rights and civil procedures that are available in tribal courts.

    I. BACKGROUND

    ¶2 Tribal courts provide meaningful dispute resolution to many tribal members in courts that have well-grounded appreciations for the traditions so important to tribal justice. The Rule that the court implements today does not detract from their significant contributions.

    ¶3 However, today the court legislates through rule-making in response to Rules Petition 07-11. In so doing, four justices who constitute a majority of the court empower Wisconsin circuit courts to transfer pending civil actions to tribal courts, even when parties object to being subject to tribal court jurisdiction. The majority pushes forward under Rule 801.54, even though the conduct that forms the basis for the action may not have occurred on tribal land; even though all parties are not tribal members; even though this court has been provided no information about how the various tribal courts operate; and even though the United States Supreme Court in Plains Commerce Bank v. Long Family Land & Cattle Co., 554 U.S. __, 128 S. Ct. 2709 (2008),4 appears to have narrowed the occasions when tribal courts have concurrent subject matter jurisdiction in civil matters.5 Why has a majority of this court pushed this rule change through notwithstanding the inadequacy of the information provided to the court? I do not know, but I suspect there is a reason that is not apparent from the materials submitted and considered by the court in open conference. Time will tell.

    II. DISCUSSION

    A. Concurrent Jurisdiction

    ¶4 Rule 801.54, created by a majority of the court, requires that before a circuit court may transfer jurisdiction of a pending matter to a tribal court, the circuit court must determine that the tribal court has concurrent subject matter jurisdiction.6 Because Rule 801.54 is very broad, on its face it has the potential to be applied to non-tribal as well as tribal members for conduct that occurs off as well as on tribal land.

    ¶5 Under "Public Law 280," Wisconsin courts have subject matter jurisdiction over civil actions that arise on tribal land between tribal members, or where a tribal member is a party.7 Public Law 280 expands the scope of Wisconsin courts' jurisdiction into subject matters that in some states are handled by federal courts, but Public Law 280 does not address the subject matter jurisdiction of tribal courts. Tribal court subject matter jurisdiction is established by other federal laws and United States Supreme Court precedent. Nat'l Farmers Union Ins. Cos. v. Crow Tribe of Indians, 471 U.S. 845, 851-52 (1985). Stated otherwise, "whether a tribal court has adjudicative authority over nonmembers is a federal question"; it is not decided under state law or tribal law. See Plains Commerce Bank, 128 S. Ct. at 2716 (citing Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 15 (1987)).

    ¶6 The United States Supreme Court has explained that tribal court concurrent jurisdiction is extremely limited when non-tribal members are among the parties to an action. Montana v. United States, 450 U.S. 544, 565-66 (1981). The Court recently has affirmed that tribal court jurisdiction over nonmembers for conduct that occurs off tribal land is almost nonexistent, having been upheld on only one occasion. Plains Commerce Bank, 128 S. Ct. at 2722. The Court has also said, "[T]ribes do not, as a general matter, possess authority over non-Indians who come within their borders: `[T]he inherent sovereign powers of an Indian tribe do not extend to the activities of nonmembers of the tribe.'" Id. at 2718-19 (quoting Montana, 450 U.S. at 565).

    ¶7 Even when nonmember conduct occurs on tribal land, the general rule is that tribes lack subject matter jurisdiction over nonmembers. Montana, 450 U.S. at 565. Tribes "may" have concurrent subject matter jurisdiction over nonmembers: (1) to "regulate … the activities of nonmembers who enter consensual relationships with the tribe or its members, through commercial dealing, contracts, leases, or other arrangements," and (2) to regulate nonmember conduct that "threatens or has some direct effect on the political integrity, the economic security, or the health or welfare of the tribe." Id. at 565-66. But as the Court's discussion of Montana in Plains Commerce Bank shows, the exceptions to the lack of subject matter jurisdiction are not to be broadly interpreted, but rather, they are extremely limited. Plains Commerce Bank, 128 S. Ct. at 2720.

    ¶8 In Plains Commerce Bank, tribal members (the Longs) sued a nonmember (Plains Commerce Bank) in tribal court, alleging that the bank discriminated against them when it sold property. Id. at 2715. The Longs further alleged that the property sales had arisen directly from their preexisting commercial relationship with the bank, and accordingly, the sales fell within the first Montana exception to the general rule that tribes lack jurisdiction over nonmembers. Id. at 2715-16. The tribal jury awarded $750,000 in damages. Id. at 2716. The bank then brought a declaratory judgment action in federal court asserting that the tribal court lacked subject matter jurisdiction to adjudicate the claims, and therefore, the judgment was void. Id.

    ¶9 The Supreme Court agreed with the bank. The Court began by explaining that the sovereign powers of tribes are limited by virtue of the tribes' "incorporation into the American republic."8 Id. at 2719. In so incorporating, the tribes generally lost the right to govern persons coming within tribal territory except for tribal members.9 Id.

    ¶10 In any attempt to exert jurisdiction over nonmembers, "[t]he burden rests on the tribe to establish one of the exceptions to Montana's general rule" that precludes jurisdiction over nonmembers. Id. at 2720. The burden of proof rests with the tribe to establish concurrent jurisdiction in tribal courts because of the general rule that tribal courts do not have jurisdiction over nonmembers. Rule 801.54 is in conflict with that requirement of federal law because under Rule 801.54(2), a circuit court can transfer a case to tribal court on its own motion. Therefore, the tribe would not be a moving party who carries the burden explained by the United States Supreme Court in Plains Commerce Bank. The circuit courts of Wisconsin cannot make a discretionary transfer to tribal courts, sua sponte, and still comply with this aspect of federal law because meeting that tribal burden is one prerequisite for the exercise of subject matter jurisdiction by tribal courts.

    ¶11 Notwithstanding the directive of the United States Supreme Court that the tribe has the burden of establishing that it has concurrent jurisdiction with the circuit court, the stated purpose of Rule 801.54 is "to enable circuit courts to transfer civil actions to tribal courts in Wisconsin as efficiently as possible where appropriate." Comment to Rule 801.54. "Where appropriate" is determined by the factors set out in sub. (2) of the Rule, which factors appear to presume that there is concurrent jurisdiction in tribal court. This apparent presumption is contrary to federal law, which holds that as a general rule tribes have no jurisdiction over nonmembers. Plains Commerce Bank, 128 S. Ct. at 2719. By implying that the factors set out in sub. (2) should be the focus of a circuit court's decision-making, Rule 801.54 is misleading and has significant potential to cause a circuit court to transfer a pending case to tribal court when the tribal court has no subject matter jurisdiction to adjudicate the claims and defenses made.

    ¶12 The Supreme Court also has explained that "a tribe's adjudicative jurisdiction does not exceed its legislative jurisdiction." Id. at 2720. This is an important principle because if a tribe could not pass a law that bound the conduct and the parties whose claims and defenses a tribal court attempts to adjudicate, then the tribal court lacks subject matter jurisdiction over those claims and defenses.10 Id.

    ¶13 It is not a simple matter for a circuit court to determine whether a case fits within one of the two very narrow Montana exceptions to the tribal courts' lack of subject matter jurisdiction over nonmembers. Rule 801.54 is completely inadequate in addressing this major obstacle to the exercise of tribal court jurisdiction over nonmembers; yet, it is a critical decision that must be made before any such action may be heard in tribal court. This is so because the contention that a court lacked subject matter jurisdiction may be raised at any time, even after judgment. See Arbaugh v. Y&H Corp., 546 U.S. 500, 506-07 (2006); see also Fed. R. Civ. P. 12(c)(3). Furthermore, subject matter jurisdiction cannot be created by waiver or consent. See United States v. Hazlewood, 526 F.3d 862, 864 (5th Cir. 2008). The majority gives the circuit courts no financial resources and no legal guidelines to assist with this weighty legal task.

    ¶14 At the open administrative conference on June 25, 2008, the majority appeared to take comfort in Rule 801.54(4), which provides that decisions transferring cases to tribal court are appealable as of right.11 However, an appeal is small comfort to litigants who are already overburdened with legal fees; and it provides no guidance to the circuit courts on the critical issue of whether there is concurrent tribal court subject matter jurisdiction.

    B. Wisconsin Stat. § 751.12(1)

    ¶15 This court's power to legislate, which we label as "rule-making," is derived from Wis. Stat. § 751.12(1), which provides in relevant part:

    "The state supreme court shall, by rules promulgated by it from time to time, regulate pleading, practice, and procedure in judicial proceedings in all courts, for the purposes of simplifying the same and of promoting the speedy determination of litigation upon its merits. The rules shall not abridge, enlarge, or modify the substantive rights of any litigant." (Emphasis added.)

    ¶16 Prior to the creation of Rule 801.54, all litigants who satisfied the statutory provisions for jurisdiction in Wisconsin courts had a statutory right to avail themselves of the Wisconsin court system. See Wis. Stat. § 801.04. The open courthouse doors of Wisconsin provide a significant, substantive right for tribal as well as non-tribal litigants. However, when Rule 801.54 goes into effect, the courthouse doors of Wisconsin may be closed to some litigants, both tribal members and nonmembers. This change in the substantive rights of litigants is contrary to the express provisions of Wis. Stat. § 751.12(1), which provides that any "rule" this court creates "shall not abridge, enlarge, or modify the substantive rights of any litigant."

    ¶17 Black's Law Dictionary's definition of "substantive law" supports my conclusion that the right to litigate in the courts of Wisconsin is a substantive right. Black's defines substantive law as:

    "The part of the law that creates, defines, and regulates the rights, duties, and powers of parties…. `So far as the administration of justice is concerned with the application of remedies to violated rights, we may say that the substantive law defines the remedy and the right, while the law of procedure defines the modes and conditions of the application of the one to the other.'"

    Black's Law Dictionary 1470 (8th ed. 2004) (quoting John Salmond, Jurisprudence 476 (Glanville L. Williams ed., 10th ed. 1947)). The power to litigate and the duty to defend actions brought in Wisconsin courts fit squarely within Black's definition of substantive rights.

    ¶18 Furthermore, Rule 801.54 is contrary to our obligation to uphold the constitutions of the United States and the State of Wisconsin. As the United States Supreme Court has held, the United States Constitution is not binding on tribal courts. Talton v. Mayes, 163 U.S. 376, 382-83 (1896). However, litigants in Wisconsin courts are protected by the United States Constitution and the Wisconsin Constitution. See Dep't of Admin. v. WERC, 90 Wis. 2d 426, 434-35, 280 N.W.2d 150 (1979). The constitutions provide the framework in which the courts of the state of Wisconsin are obligated to operate. See State v. Cockrell, 2007 WI App 217, ¶34 n.10, 306 Wis. 2d 52, 741 N.W.2d 267. That constitutional framework includes the United States Constitution's Bill of Rights and the Wisconsin Constitution's Declaration of Rights. Helgeland v. Wis. Municipalities, 2008 WI 9, ¶13, 307 Wis. 2d 1, 745 N.W.2d 1. However, as separate sovereigns antedating the Constitution, Indian tribes have "historically been regarded as unconstrained by those [federal] constitutional provisions framed specifically as limitations on federal or state authority." Santa Clara Pueblo v. Martinez, 436 U.S. 49, 56 (1978).

    C. Lack of Information and Failure to Heed Concerns

    ¶19 I also am deeply troubled by the majority's willingness to create Rule 801.54 when this court has engaged in no fact-finding to determine the procedures available in the tribal courts of Wisconsin and has ignored the concerns expressed by others over the Rule's adoption. Further troubling is that, in adopting Rule 801.54, the court has not adhered to the usual procedure for drafting and adopting court rules.

    ¶20 First, a majority of the court rushes ahead to create Rule 801.54 even though the court has not been provided with descriptions from the Wisconsin tribes about the procedures employed in the various tribal courts in Wisconsin. Although the majority is correct in its assertion that it received several responses to Petition 07-11, not one of those responses provided information about the procedures by which each of the various tribal courts operate. For example, the court has not been presented information that provides when, or if, a litigant may have a jury trial.12 The court has not been presented information that shows whether each tribe has a written code of laws or a constitution and if those exist, what provisions they contain. The court has not been presented with information about what types of evidence may be introduced during a trial. The court has not been presented with the educational or experiential backgrounds of the persons who serve as tribal court judges. The list of what the court has not investigated goes on and on.

    ¶21 At the open conferences on Petition 07-11, I repeatedly requested that the court require that the tribes provide specific information about how the court of each tribe operates, before the court voted on Petition 07-11. However, a majority of the court determined that its lack of information about tribal courts' procedures should not prevent it from adopting Rule 801.54. I do not understand the majority's willingness to create a law that sends Wisconsin litigants into tribal courts when the majority lacks knowledge about the operation of those courts and over which courts this court has no control or power of judicial review. This seems to me an abdication of the court's obligation to protect the constitutional and statutory rights of litigants who have chosen to file actions in Wisconsin circuit courts.

    ¶22 Second, the majority has ignored the responses of those who were opposed to the creation of Rule 801.54 based on the Rule's failure to guarantee individual rights. For example, Attorney Meg Vergeront, who wrote on behalf of the Village of Hobart, expressed concern that while Article I, Section 5 of the Wisconsin Constitution preserves the right to trial by jury in all cases at law if the right to a jury trial existed at the time the Constitution was adopted, there is no provision in Rule 801.54 to guarantee this right in tribal courts.

    ¶23 In addition, the Wisconsin Department of Justice's comments on Petition 07-11 have been largely ignored. On February 22, 2008, the Department of Justice addressed its concerns about, "Under what circumstances is jurisdiction concurrent between tribal and state courts or exclusive in tribal or state court?" Rule 801.54 does not attempt to address this important and complicated question. See my discussion above in ¶¶4-14.

    ¶24 The Wisconsin Department of Justice also addressed whether there was "a right under the United States or Wisconsin Constitution to have a case heard in state court rather than tribal court?" The Department of Justice pointed out that a "state may not arbitrarily restrict or deny access to its courts, nor may it limit such access where that access is necessary for the exercise of fundamental constitutional rights." The majority ignores this concern as well because it has been provided with no information about what, if any, constitutional rights are available in tribal courts.13 I am dismayed that the court appears not to have given due regard to the concerns expressed by Attorney Vergeront, the Department of Justice and others who have pointed out the inadequacies of Rule 801.54, and instead, appears to have heeded only those who support the law the majority creates.

    ¶25 Finally, the procedures employed in adopting Rule 801.54 deviated from our usual procedures for rule adoption. Petition 07-11 was drafted by the Director of State Courts, not the State-Tribal Justice Forum, and Rule 801.54 was created by the court's own redrafting of the rule proposed in Petition 07-11 through the efforts of the Clerk of the Supreme Court. Neither of these actions comports with our usual procedure for rule adoption. And lastly, Rule 801.54 was created even though there was no showing that there was any need to send those who chose to litigate in circuit court to tribal court.

    III. CONCLUSION

    ¶26 I write in dissent because: (1) Rule 801.54 is inadequate and misleading in regard to addressing tribal court concurrent subject matter jurisdiction, which jurisdiction is extremely limited in scope when nonmembers are parties to the action; (2) Rule 801.54 impermissibly alters the substantive rights of tribal members, as well as nonmembers, contrary to the provisions of Wis. Stat. § 751.12(1), which limits the court's rule-making power; (3) Rule 801.54 undermines federal and state constitutional and statutory rights of litigants; and (4) a majority of the court has pushed this rule-change through before the end of the 2007-08 term of the court, even though the court has been presented with no information about the substantive rights and civil procedures that are available in tribal courts.

    ¶27 I am authorized to state that Justices DAVID T. PROSSER and ANNETTE KINGSLAND ZIEGLER join in this dissent.

    Endnotes

    1In keeping with the court's usual practice, A. John Voelker, Director of State Courts, frequently submits petitions for rules on behalf of court entities. See, e.g., petition nos. 06-01 (In re amendment of SCR 72.01 Regarding Record Retention), 06-07 (In the matter of the Creation of a Court Rule Authorizing Use of Electronic Signatures by Court Officials), 06-08 (In the matter of the Creation of a Court Rule Governing Electronic Filing in the Circuit Courts), 07-05 (In the matter of the Amendment of Supreme Court Rule 32.09 regarding continuing education for Wisconsin Judiciary), 07-12 (In the matter of the petition to create a rule governing the use of videoconferencing in the courts), 07-14 (In the matter of the Amendment to SCR 70.14(2) formalizing vice-chairperson position on the Planning and Policy Advisory Committee (PPAC)), and 08-01 (In the matter of the Amendment of Rules of Pleading, Practice and Procedure: Wis. Stat. Rule Ch. 756, Juries). Furthermore, as the court considers a petition, it is the court's practice to assign a court commissioner or the clerk or chief deputy clerk of the supreme court to staff the petition, communicate with interested persons, and redraft the proposed rule in accordance with the court's instructions.

    2The State-Tribal Justice Forum is a joint committee of state and tribal court representatives established by Chief Justice Abrahamson in 2005 to promote and sustain communication, education, and cooperation among tribal and state court systems. The committee consists of five circuit court judges, five tribal judges, one tribal attorney, one legislative liaison, one district court administrator, and the director of state courts.

    3All subsequent references to the Wisconsin Statutes are to the 2005-06 version unless otherwise indicated.

    4Plains Commerce Bank v. Long Family Land & Cattle Co., 554 U.S. __, 128 S. Ct. 2709 (2008), bears Supreme Court Case Number 07-411 and was issued June 25, 2008.

    5The majority refers to a document provided by the tribal courts as listing the areas over which the tribes assert they have subject matter jurisdiction. See majority op., p. 4. However, this listing has no affect on whether a tribe has concurrent subject matter jurisdiction with a circuit court. This is so because, while the tribes may identify the matters over which they assert that they exercise subject matter jurisdiction, whether they actually have concurrent subject matter jurisdiction is a question of federal law, not tribal law. Id . at 2716.

    6The rule states in relevant part: "In a civil action where a circuit court and a court or judicial system of a federally recognized American Indian tribe or band in Wisconsin (`tribal court') have concurrent jurisdiction, this rule authorizes the circuit court, in its discretion, to transfer the action to the tribal court…." Rule 801.54(1).

    7Public Law 280, a portion of which is set out in 28 U.S.C. § 1360, provides in relevant part: "[Wisconsin] shall have jurisdiction over civil causes of action between Indians or to which Indians are parties which arise in the areas of Indian country [within Wisconsin] to the same extent that [Wisconsin] has jurisdiction over other civil causes of action, and those civil laws of [Wisconsin] that are of general application to private persons or private property shall have the same force and effect within such Indian country as they have elsewhere within [Wisconsin]." 18 U.S.C. 1151 defines "Indian Country." (Public Law 280 does not include the Menominee Tribe due to "retrocession of jurisdiction by the State of Wisconsin." Panzer v. Doyle , 2004 WI 52, ¶12 n.6, 271 Wis. 2d 295, 680 N.W.2d 666).

    8The court in Plains Commerce Bank, 128 S. Ct. at 2721, cited two limited types of exceptions that involved the regulation of nonmember activities on reservation land "that had a discernable effect on the tribe or its members": Williams v. Lee, 358 U.S. 217 (1959) (concluding the tribe had jurisdiction over a contract dispute about "the sale of merchandise by a non-Indian to an Indian on the reservation"); Washington v. Confederated Tribes of the Colville Indian Reservation , 447 U.S. 134 (1980) (upholding tribal determination of the taxing authority of the tribe for activities by non-Indians on reservation land). The Court cited other cases that also upheld tribal determinations involving taxes for activities within tribal land.

    9In Plains Commerce Bank, the Court pointed out that tribal courts lack jurisdiction over: a "tort suit involving an accident on non-tribal land"; the regulation of "hunting and fishing on non-Indian fee land"; taxation of nonmember activities on non-Indian fee land. Id . at 2722.

    10In Plains Commerce Bank, the tribe lacked "the civil authority to regulate the Bank's sale of its fee land," and therefore, the tribal court could not adjudicate the circumstances under which the land sales were made. Id . at 2720-21.

    11The right to appeal a circuit court's decision that concurrent jurisdiction exists may appear to present the review of a discretionary decision. However, a court erroneously exercises its discretion when it incorrectly applies the law. Brookfield v. Milwaukee Sewerage Dist., 171 Wis. 2d 400, 422, 491 N.W.2d 484 (1992). And, whether concurrent jurisdiction exists is a question of law. Plains Commerce Bank, 128 S.Ct. at 2716. Questions of law are subject to an independent review on appeal. Hoida, Inc. v. M&I Midstate Bank , 2006 WI 69, ¶23 & n. 12, 291 Wis. 2d 283, 717 N.W.2d 17. Therefore, the review of whether concurrent jurisdiction exists in a tribal court is subject to independent review.

    12Our lack of information in this regard is further troubling and problematic, because a litigant may be compelled to appear before a jury whose composition is less than that provided for under Wisconsin statute. In Wisconsin state courts, civil litigants who request a jury trial are guaranteed at least six jurors. Wis. Stat. 756.06(2)(b). If tribal courts employ juries comprised of less than six persons, litigants in tribal courts may be compelled to relinquish a state statutory right.

    13However, as I explained in ¶18, the United States Supreme Court has concluded that the United States Constitution is not binding on tribal courts. Talton v. Mayes, 163 U.S. 376, 382-83 (1896).

    Top of Page

    Interest on IOLTA Accounts

    In the matter of amendment of SCR 20:1.15 Safekeeping property; trust accounts and fiduciary accounts

    Order 08-03

    On March 12, 2008, the Wisconsin Trust Account Foundation (WisTAF) Board of Directors petitioned this court to amend Supreme Court Rule 20:1.15, relating to interest paid on IOLTA (Interest on Lawyers Trust Accounts) accounts. On Aug. 22, 2008, WisTAF Board of Directors filed an amended petition. WisTAF requests the court adopt an interest comparability rule for IOLTA accounts. Petitioner's proposed amendments would require attorneys to hold IOLTA accounts at financial institutions that pay those accounts the highest interest rate generally available at that institution to other customers when IOLTA accounts meet the same account qualifications.

    IT IS ORDERED that a public hearing on the amended petition shall be held in the Supreme Court Room in the State Capitol, Madison, Wis., on Tuesday, Nov. 18, 2008, at 9:30 a.m.

    IT IS FURTHER ORDERED that the court's conference in the matter shall be held promptly following the public hearing.

    IT IS FURTHER ORDERED that the appendices filed with the amended petition, namely Appendix A (proposed changes to relevant portions of Supreme Court Rule 20:1.15), Appendix B (proposed changes in context of entire Supreme Court Rule 20:1.15), and Appendix C (summary of proposed revisions), shall be made available on the Web site of the Wisconsin Supreme Court under "Opinions and rules," "Supreme Court," "Rules," "View rules orders and pending petitions and petitions," "Petitions and audio of public hearings," at http://wicourts.gov.

    IT IS FURTHER ORDERED that notice of the hearing be given by a single publication of a copy of this order and of the amended petition in the official state newspaper and in an official publication of the State Bar of Wisconsin not more than 60 days nor less than 30 days before the date of the hearing.

    Dated at Madison, Wis., this 28th day of August, 2008.

    By the court:
    David R. Schanker,
    Clerk of Supreme Court

    Amended Petition

    Background: For about two years, the Wisconsin Trust Account Foundation, Inc. ("WisTAF") has explored the possibility of developing a comparable interest rule so that IOLTA (Interest on Lawyers Trust Accounts) accounts are treated equitably by earning interest comparable to that earned by similarly situated non-IOLTA bank customers. In August 2007, WisTAF formed a Comparable Interest Committee to develop a comparable interest rule change. In the rule development process, the committee received substantial input from the Office of Lawyer Regulation. The committee has met twice with the Wisconsin Bankers Association ("WBA") seeking its input. Lisa Roys, Public Affairs Director of the State Bar of Wisconsin, joined the meetings with the WBA. The committee has presented its proposed rule change to the State Bar of Wisconsin's Board of Governors, which unanimously voted to support the proposed comparable interest petition and trust account rule changes. In drafting the proposed rule change, WisTAF utilized American Bar Association resources to develop the proposed rule language.

    In October 2007, WisTAF hired experienced and qualified independent consultants to perform a feasibility study to determine the impact an interest rate comparability rule would have on Wisconsin IOLTA accounts. The study estimated that under an IOLTA interest rate comparability rule, WisTAF would realize a net remittance of up to $2,400,000 more per year above present IOLTA revenue. This estimate assumed a Federal Funds Rate of 4.75%. A supplemental report (in February 2008) from the consultants indicated an estimated net remittance revenue of up to $1,300,000 above present IOLTA revenue at a Federal Funds Rate of 3.00%. At the present Federal Funds Target rate of 2.00%, a smaller increase is likely but as rates recover, the increases over past revenue will grow. Other states report their revenue no longer falls as low as it did before comparability even at the lowest part of the interest rate cycle.

    An updated rule is also necessary to be consistent with the recent United States Supreme Court decision on the legality of IOLTA. In Brown v. Legal Foundation of Washington, 538 U.S. 216, 123 S. Ct. 1406 (2003), the court defined IOLTA accounts as those that may only contain funds which cannot earn income for the benefit of the client or 3rd party in excess of the costs to secure that income.

    General Comments: The attached rule proposal, Appendix A, presents proposed deletions in strikethroughs and additions in underlines to relevant sections of the trust account rule. Appendix B presents the proposed changes within the context of the entire trust account rule. Also attached are lists that provide synopses of the proposed changes. The first list, Appendix C, contains descriptions of specific proposed revisions. The second list, Appendix D, contains general substantive changes.

    DISCUSSION: In WisTAF's 18-year history, it has granted more than $26,000,000 to agencies providing civil legal services to low income people. While these funds help thousands of people every year receive legal representation to help with basic life necessities, many thousands more go without any civil legal assistance.

    In fact, only about 12% of Wisconsin's low-income residents' civil legal assistance needs are being met satisfactorily, according to Bridging the Justice Gap: Wisconsin's Unmet Legal Needs, a study released in March 2007 by the Access to Justice Committee, State Bar of Wisconsin. The study also found that closing the gap in meeting the civil legal needs of people who are eligible for legal services programs but are turned away because of lack of funding would require an additional $16,000,000 per year for direct civil legal services.

    It is important to update IOLTA account interest requirements because the banking landscape has changed since those requirements were written well over 20 years ago. Since WisTAF began, some banks have not treated lawyers' trust accounts ("IOLTA accounts") in the same manner as other accounts with similar balances. Generally, lawyers' trust accounts have been treated as a group, regardless of principal balance size. Today, an interest-bearing checking (NOW) account often may no longer be the best or only option for an IOLTA account. To benefit from changes in the banking landscape, updating the IOLTA rule is necessary to allow IOLTA accounts to be treated equitably by earning rates comparable to what banks pay their similarly-situated non-IOLTA customers.

    Without the rule changes proposed in this petition, interest rates for many larger IOLTA accounts will remain artificially low. Representatives from the Wisconsin Bankers Association assert that the smaller IOLTA trust accounts are earning interest rates similar to those earned by non-IOLTA customers in the same bank. Because IOLTA accounts with larger balances have been treated the same as other smaller IOLTA accounts, they have not been considered eligible to use alternate revenue generating vehicles to earn a higher rate of interest similar to that earned by non-IOLTA customers with higher balances. The trust account rule changes proposed by this petition would allow IOLTA accounts to be treated in the same fashion as non-IOLTA accounts that earn higher rates of interest. The majority of IOLTA accounts with smaller balances would not change their current interest rate or revenue generation. Those IOLTA accounts with larger balances, however, would likely generate greater revenue through use of alternate investment vehicles.1

    It is a matter of fairness that IOLTA accounts be paid the highest interest rate or dividend generally available at a bank to its other customers when IOLTA accounts meet the same minimum balance or other qualifications. Twenty states2 have incorporated an interest rate comparability provision into their IOLTA Supreme Court rule, statute, or regulatory guideline. Most states that have adopted interest rate comparability have seen impressive increases in IOLTA revenue. For example, with the implementation of its comparability rule, Florida's IOLTA income grew by 298% from June 2004 to June 2006.

    The proposed rule changes will predominantly affect IOLTA accounts with larger balances. These accounts often qualify for higher yield products that offer higher rates, but the current trust account rule does not contain language allowing IOLTA accounts to be placed in higher yield products with the appropriate safety protections. As stated before, IOLTA accounts with smaller balances already typically receive business checking account interest rates that are comparable to what banks pay their customers with similar account balance sizes.

    To offer financial institutions flexibility and maximum choice in complying with comparability requirements, the proposed rule changes provide a variety of choices for account options. The option of converting or establishing an IOLTA account in a higher yield product is offered in all of the states that have comparability rules, however, no bank has chosen to convert or establish an account as a higher yield product. Instead, banks have chosen to emulate interest rates of higher yield products. Even so, the higher yield product must be one of the options for IOLTA accounts, or, consequently, IOLTA accounts would not be compared to higher yield products. In addition, because establishing and maintaining higher yield products often takes additional bank resources, the proposed rule changes allow for the usual sweep fees charged to customers with the higher rate products as well as an IOLTA administrative fee approved by WisTAF.

    Comparability requirements regulate where lawyers place IOLTA accounts, but do not regulate the banking industry. Under the proposed rule change, lawyers would be required to place IOLTA accounts in participating institutions that meet interest rate comparability and related IOLTA account requirements. Banks are not required to offer IOLTA accounts; doing so is completely voluntary.

    Comparability requirements do not require banks to offer a product for IOLTA accounts that they do not already offer their other customers. Presumably, these other products are profitable or banks would not offer them to their customers.

    Comparability requirements do not compare rates among banks or set specific rates. Rather, each bank sets rates for its own customers based on factors a bank normally considers in setting rates. Comparability simply requires that an IOLTA account receive the highest interest rate or dividend that other non-IOLTA customers receive if the IOLTA account meets the same eligibility or other requirements.

    Under the comparability requirements, attorneys will not need to do anything differently in managing their IOLTA accounts than they do now. There are only two situations where an attorney's or law firm's IOLTA account could be affected: (1) A bank decides to place the IOLTA account in a sweep account in which case the attorney or law firm would need to sign two documents, provided by WisTAF, allowing for the investment transaction to occur; or (2) A bank chooses not to comply with the trust account requirements established in SCR 20:1.15, requiring an attorney to move his or her IOLTA account to a participating institution. WisTAF is unaware of either situation happening in any of the other states that have adopted comparability language because banks have chosen to emulate product rates rather than establish IOLTA accounts in sweep products, and banks have not refused to comply with comparability requirements.

    Interest rate comparability is important because it achieves fairness with other similarly situated non-IOLTA bank customers. WisTAF believes that interest rate comparability will significantly enhance the revenue paid on IOLTA accounts thereby generating substantially more revenue for civil legal services for low-income people in Wisconsin. Interest rate comparability should not affect financial institutions' profitability since they already price the products allowed in the proposed rule amendments and routinely offered to their other customers to be profitable.

    KEY PROPOSALS: Many of the proposed changes to the trust account rule involve updating language. There are no changes regarding how attorneys manage IOLTA accounts. The most substantive change in the rule concerns IOLTA interest rate requirements under a collected new subsection titled "(cm)." The following is a synopsis of the proposed changes to SCR 20:1.15, "Safekeeping property; trust accounts and fiduciary accounts."

    SCR 20:1.15(a)(7) Definitions. This proposal amends the existing definition of "IOLTA account" to incorporate proposed trust account rule references and to clarify that IOLTA accounts are trust accounts subject to SCR 20:1.15.

    SCR 20:1.15(a)(7m) Definitions. "IOLTA participating institution" is a new definition that clarifies the difference between financial institutions that choose to offer IOLTA products to their attorney customers and financial institutions offering other trust account or fiduciary products. "IOLTA participating institution" means a financial institution that has voluntarily chosen to offer IOLTA accounts and which is certified by WisTAF as meeting the IOLTA account requirements of SCR 20:1.15(cm) and has also assured WisTAF that it has complied with the overdraft notification requirements of SCR 20:1.15(h).

    SCR 20:1.15(a)(11) Definitions. The definition of WisTAF has been added for ease of reference.

    SCR 20:1.15(c)(1) IOLTA accounts. This proposal amends the existing definition of IOLTA so that it is consistent with the definition in Brown v. Legal Foundation of Washington, 538 U.S. 216, 123 S. Ct. 1406 (2003): An IOLTA account may only contain funds which cannot earn income for the benefit of the client or 3rd party in excess of the costs to secure that income.

    SCR 20: 1.15(cm) Interest on Lawyer Trust Account (IOLTA) requirements. This is a new provision that incorporates existing language and new information on where IOLTA accounts may be placed, necessary insurance and safety requirements, income requirements (including comparable interest requirements), allowable reasonable fees on IOLTA accounts, and remittance and reporting requirements.

    SCR 20:1.15(d) Prompt notice and delivery of trust property; (e) Operational requirements for trust accounts; and (f) Record-keeping requirements for trust accounts. This proposal amends existing titles and terms to provide clarity regarding which trust accounts are subject to the provisions contained within these sections.

    Under the proposed rule changes, attorneys will continue to be required to instruct their financial institutions to comply with the provisions of the rule for any IOLTA account that the bank establishes for the attorney or law firm. These new provisions require attorneys to hold IOLTA accounts in banks that comply with the trust account rule, including comparability requirements. Banks that comply are called "IOLTA participating institutions." WisTAF will identify whether a bank is in compliance with the rule and will publish on its web site a list of IOLTA participating institutions that comply with the IOLTA account requirements and overdraft notice requirements. A bank can become an IOLTA participating institution at any time.

    These new provisions also allow for appropriate safety and security protections, including language to ensure that, if used, repurchase agreements and money market funds meet safety parameters based on government securities and that open-end money market funds have a minimum level of asset protection. Expanded language on interest and dividend requirements provide that IOLTA accounts must bear the highest rate or dividend generally available to non-IOLTA customers when the IOLTA account meets the same minimum balance or other eligibility requirements. In determining the highest rate or dividend available, banks cannot discriminate between IOLTA accounts and accounts of non-IOLTA customers. The new language will also require that IOLTA participating financial institutions be in compliance with the overdraft agreement requirements of SCR 20:1.15(h).

    To comply with the comparability requirements, the rule offers banks three account options. The first option allows financial institutions to actually establish the IOLTA account as the qualifying higher rate product, such as a repurchase agreement3 or an open-end money market fund.4 In lieu of establishing a comparable high yield product, a second option is for a bank to pay a comparable rate on the IOLTA checking account. In states with comparability rules, most banks have chosen this option. A third option allows a bank to pay a benchmark rate, which is a fixed percentage of the Federal Funds Rate based on data showing what percentage would be close to comparable rates net of fees for Wisconsin banks.5 An additional option is available for banks that wish to pay IOLTA interest rates higher than the comparable or benchmark level. Banks which agree to pay a set rate negotiated with WisTAF over a fixed period of time that is above their comparable rate will receive recognition from WisTAF for voluntarily going above and beyond the requirement of the rule.

    A new provision lists the reasonable fees allowed to be deducted from IOLTA account interest and states that these fees may not be taken from interest or dividends of other IOLTA accounts. The fees cannot be assessed against or deducted from the principal of any IOLTA account. Lawyers are responsible for any other fees banks charge on the account.

    IMPLEMENTATION AND MANAGEMENT OF A COMPARABILITY PROGRAM: Currently, there are 230 financial institutions participating in Wisconsin's IOLTA program. If the trust account rule is amended to provide for comparable interest on IOLTA accounts, a certification process and a monitoring plan will be necessary to assist financial institutions that wish to offer IOLTA accounts in complying with the amended rule. Implementing rate comparability will not be possible without clear, fair guidelines that ensure financial institutions currently participating in the IOLTA program have sufficient time to comply with changes to the trust account rule.

    WisTAF will identify whether a financial institution is a participating institution, and consequently eligible for lawyers to hold IOLTA accounts there, based on the institution's compliance with SCR 20:1.15 IOLTA provisions. Each bank will choose between a safe harbor certification benchmark rate of 70 percent of the Federal Funds Rate or an application certification and return the appropriate form and any materials to WisTAF by a specified date. WisTAF will evaluate certification statements and applications as they are received.

    Financial institutions that submit a safe harbor certification statement will not be subject to further review and the implementation process is complete once the proposed benchmark rate is in effect and documented. Financial institutions that submit an application for certification will provide designated information supporting the application (including but not limited to rate sheets and product descriptions). Financial institutions submitting an application for certification will receive final approval after any required change has been implemented. Institutions receiving final approval will be added on an ongoing basis to WisTAF's list of IOLTA certified financial institutions, maintained on the WisTAF website.

    If the comparable interest rule language is approved, WisTAF is prepared to implement comparable interest at the earliest possible date in a manner that allows financial institutions currently holding IOLTA accounts to reasonably attain compliance. WisTAF's implementation plan is based on successful implementation plans followed in Michigan, Illinois, Texas and Maine.

    With the earliest possible effective date of Jan. 1, 2009, WisTAF would establish a six-month grace period in which financial institutions that currently hold IOLTA accounts could attain compliance. Current IOLTA participating institutions would have until July 1, 2009 to come into compliance with the comparable interest requirements. All financial institutions that enter the IOLTA program as new IOLTA participating institutions (i.e., institutions that did not offer IOLTA accounts prior to Jan. 1, 2009) would be required to be compliant immediately.

    Comparable interest rates would be effective as of April 1, 2009. Institutions completing their compliance requirements and approved by WisTAF before April 1, 2009, would have no further deadlines to meet. Financial institutions completing their compliance requirements between April 1, 2009 and July 1, 2009 would be allowed to retroactively submit, by July 1, 2009, the difference between their IOLTA rates prior to April 1, 2009, and the April 1, 2009 adjusted compliance rates. The deadline for applications to be sent to WisTAF would be June 1, 2009. In order to best support financial institutions through the process of certification, WisTAF will complete all certification reviews in a prompt and timely manner.

    Alternately, if comparability rate language were made effective as of July 1, 2009, WisTAF would conduct the certification process between the time the rule language was approved and July 1, 2009 so that all currently participating IOLTA financial institutions would be certified and compliant on the effective date.

    This foregoing implementation plan could be modified to accommodate a later implementation date, if needed.

    Once the initial certification process has been implemented, WisTAF will establish a monitoring program adaptable to factors such as financial institution size, the average principal balance of IOLTA deposits held, and the fluctuation of the economy. These factors will be used to determine whether a financial institution should be monitored on a monthly, quarterly or annual basis, or to monitor financial institutions' implementation of new rates as the Federal Funds Rate changes. Any discrepancies discovered between stated interest rates and the amounts of funds that are received by WisTAF would be promptly addressed with the financial institution involved.

    Once a financial institution has been certified to hold IOLTA accounts, WisTAF will decertify that financial institution only if repeated and documented attempts to resolve any compliance issue(s) are not successful. At that time, the financial institution will receive written notice of its decertified status and attorneys holding accounts at the decertified financial institution would be notified that the institution no longer is in compliance with the trust account rule and they will need to move their IOLTA accounts to certified participating institutions. If the decertified financial institution subsequently reapplies for certification and can demonstrate compliance with the IOLTA provisions of the trust account rule, WisTAF will re-certify the institution. To date, no other comparable interest state has had to decertify a financial institution for non-compliance.

    CONCLUSION: The Wisconsin Trust Account Foundation respectfully requests approval of the proposed rule changes to ensure that comparable interest is paid on all IOLTA accounts.

    Attached to this Petition are the proposed amendments to SCR 20:1.15.

    Respectfully submitted, this 21st day of August, 2008.

    John Bermingham, President,
    Wisconsin Trust Account Foundation Inc.

    De Ette Tomlinson, Executive Director
    Wisconsin Trust Account Foundation Inc.

    Endnotes

    1In 2006, 23 banks held IOLTA accounts with an interest rate greater than 1.0%, 112 banks had IOLTA accounts with an interest rate of between 0.5 and 1.0%, and 115 banks held IOLTA accounts with an interest rate less that 0.5%. Out of 250 banks holding IOLTA accounts, 227 (or 90%) paid interest of less than 1.0%.

    2As of August, 2008, these states have adopted comparable interest: Alabama Supreme Court Rules of Professional Conduct, Rule 1.15; Arkansas Supreme Court Rules of Professional Conduct 1.15; State Bar of California Rule 2.110-2.130; Connecticut Superior Court Rules of Professional Conduct, Rule 1.15; Rules Regulating the Florida Bar 5-1.1; Supreme Court of Hawaii Rule 11; Illinois Supreme Court Rules of Professional Conduct, Rule 1.15; Louisiana Supreme Court Rules of Professional Conduct, Rule 1.15; Maryland Rules of Procedure, Rule 16-610; Massachusetts Rules of Professional Conduct, Rule 1.15 and Supreme Judicial Court Rules 3.07 and 4.02; Maine Bar Rules, Rule 3.6(e); Michigan Supreme Court Rules of Professional Conduct 1.15; Minnesota Supreme Court Rules of Professional Conduct Rule 1.15; Mississippi Supreme Court Rules of Professional Conduct 1.15; Supreme Court of Missouri Rules of Professional Conduct, Rule 4-1.15; New Jersey Supreme Court Rule 1:28A; New York State Register, Ch. LXIX Section 7000; Ohio Rules of Professional Conduct, Rule 1.15; Supreme Court of Texas IOLTA Rule 7; and Utah Supreme Court Rules of Professional Practice, Ch. 14-1001 .

    3A repurchase agreement is a contract in which the seller of securities agrees to buy them back at a specified time and price. A party sells the securities to investors, usually on an overnight basis, and buys them back the following day.

    4An open-end money market fund is a mutual fund that invests only in money markets. Funds are invested in short-term debt obligations, such as Treasury bills, certificates of deposit, and commercial paper.

    5In the proposed rule change, the benchmark rate is set at 70% of the Federal Funds Rate. WisTAF's Board of Directors selected this benchmark rate after reviewing a benchmark rate analysis report provided by The Resource (a consulting firm that works with IOLTA programs across the country) and following The Resource's recommendation of establishing a benchmark rate of 70% of the Federal Funds Rate based on the Wisconsin financial institution market. There were several reasons for this recommendation. First, this level restricts potential revenue losses to WisTAF to a reasonable threshold and to just one bank. The threshold was defined as the point at which the average high-interest product would pay a net interest rate to IOLTA accounts equivalent to the net interest rate paid to other bank customers with similarly situated accounts, expressed as a percentage of the Federal Funds Rate. The independent analysis report indicated that in Wisconsin, this threshold was reached at an interest rate net of fees equivalent to 67% of the Federal Funds Rate. US Bank currently pays interest rates on IOLTA accounts that are significantly above that threshold, which would result in a loss of IOLTA income from US Bank if it were to switch to the benchmark rate. Second, the rate is within the range set by IOLTA programs nationally (ranges from 55-80%) and is easier to apply than a more nuanced rate such as 67%. Third, if the 67% threshold level were rounded down to the next most easily applicable rate, a benchmark rate of 65% or lower would continue to place IOLTA accounts at a disadvantage to other customers in the Wisconsin financial institution market.

    Top of Page

    Admitting Lawyers on Proof of Practice Elsewhere

    In the matter of amendment to Supreme Court Rule SCR 40.05 relating to admitting lawyers upon proof of practice elsewhere

    Order 08-07

    On April 1, 2008, the Board of Bar Examiners, by its director, John E. Kosobucki, petitioned this court to amend Supreme Court Rule 40.05, relating to admitting lawyers upon proof of practice elsewhere. On July 24, 2008, an amended petition was filed in this matter to show a marked version of the proposed amendments to SCR 40.05.

    IT IS ORDERED that a public hearing on the amended petition shall be held in the Supreme Court Room in the State Capitol, Madison, Wis., on Tuesday, Nov. 18, 2008, at 9:30 a.m.

    IT IS FURTHER ORDERED that the court's conference in the matter shall be held promptly following the public hearing.

    IT IS FURTHER ORDERED that notice of the hearing be given by a single publication of a copy of this order and of the amended petition in the official state newspaper and in an official publication of the State Bar of Wisconsin not more than 60 days nor less than 30 days before the date of the hearing.

    Dated at Madison, Wis., this 28th day of August, 2008.

    By the court:
    David R. Schanker,
    Clerk of Supreme Court

    Amended Petition

    The Board of Bar Examiners, by its director John E. Kosobucki, petitions the Supreme Court of Wisconsin for orders amending Supreme Court Rule 40.05, relating to admitting lawyers to the Wisconsin bar upon proof of practice elsewhere, by deleting SCR 40.05(1)(c), (1m), (5) and (6), and by amending SCR 40.05(1)(b) and (2). If the Court issues these orders, SCR 40.05 will read as follows:

    PROPOSED AMENDMENT:

    SCR 40.05 Legal competence requirement: Proof of practice elsewhere.

    (1) An applicant shall satisfy the legal competence requirement by presenting to the clerk certification of the board that the applicant has provided all of the following:

    (a) Proof of admission to practice law by a court of last resort in any other state or territory or the District of Columbia.

    (b) Proof that the applicant has been primarily actively and substantially engaged in the active practice of law in the courts of the United States or another state or territory or the District of Columbia for 3 five years within the last 5 seven years prior to filing application for admission.

    (c) If any state, territory or the District of Columbia practice in which is proposed

    to satisfy the requirement of sub. (b) has, as of the date of the filing of the application, requirements for bar admission in that jurisdiction on the basis of practice in Wisconsin other than those set forth in subs. (a) and (b), proof that the applicant has satisfied those requirements of that state, territory or the District of Columbia.

    (1m) Eligibility for admission under this rule shall be limited as follows:

    (a) An applicant who proposes to satisfy sub. (1)(b) by practice in a jurisdiction that does not grant bar admission to attorneys licensed in Wisconsin on the basis of practice in Wisconsin shall not be eligible for admission on proof of practice elsewhere.

    (b) An applicant who proposes to satisfy sub. (1)(b) by practice in a jurisdiction that does not grant bar admission on the basis of practice to attorneys licensed in Wisconsin under SCR 40.03 shall not be eligible for admission on proof of practice elsewhere.

    (2) Legal service as corporate counsel or trust officer, or lawfully before the courts or administrative agencies of the United States or of another state or territory or the District of Columbia, if conducted in compliance with the rules of a state or territory or of the District of Columbia where the applicant was admitted to practice law, may be deemed to be the practice of law for the purposes of sub. (1)(b) and (c) this section.

    (3) The following activities, whether or not conducted in a state where the applicant was admitted to practice law, may be deemed to be the practice of law for the purposes of sub. (1)(b): and (c):

    (a) Service as a judge of a court of record of the United States, any state or territory or the District of Columbia.

    (b) Legal service with any local or state government or with the federal government.

    (c) Legal service in the armed forces of the United States.

    (d) Teaching in any law school approved by the American bar association.

    (4) An applicant who has failed the Wisconsin bar examination shall not be eligible for admission on proof of practice elsewhere.

    (6) An applicant who satisfies sub. (1)(b) by legal service in the U.S. armed forces is not subject to the limitations under sub. (1)(c).

    JUSTIFICATION

    Wisconsin welcomes competent lawyers from twenty states and the District of Columbia upon proof that they have practiced elsewhere. Lawyers from other states and territories are not eligible for admission here unless they first pass the Wisconsin bar examination. This disparate treatment of foreign lawyers, required by SCR 40.05(1m), depends not on their competence or their usefulness to Wisconsin consumers of legal services, but on whether their home jurisdictions admit Wisconsin lawyers without examination.

    Nor are lawyers from those twenty-one favored jurisdictions all treated equally. Under SCR 40.05(1)(c), lawyers from jurisdictions with requirements different from Wisconsin's for admission on proof of practice elsewhere must satisfy their own state's terms as well as Wisconsin's if they are to be admitted here without examination.

    SCR 40.05(1m) and (1)(c) should be repealed because Wisconsin consumers of legal services are better served when there are no artificial barriers to the admission of capable lawyers. If competent lawyers from California or Ohio (states that do not admit foreign lawyers without examination) are welcomed here on the same basis as those from Illinois and Indiana (states that do), Wisconsin residents will have wider choices when they need legal services.

    The petitioner therefore asks the Court to repeal SCR 40.05(1)(c) and (1m). SCR 40.05(6) should also be repealed because it is unnecessary if SCR 40.05(1)(c) is repealed.

    The other proposed amendments to SCR 40.05 are of less moment. Requiring foreign lawyers to practice for five years (instead of three) before being admitted without examination here might better assure the applicants' competence. All the other recommended changes to SCR 40.05 are deemed to be insubstantial, and intended solely to clarify what constitutes a foreign practice of law.

    Dated this 31st day of March, 2008.

    Respectfully submitted,

    John E. Kosobucki, Director, Board of Bar Examiners

    Top of Page




To view or add comment, Login