Vol. 84, No. 9, September 2011
The language of Wisconsin’s 49-word class-action statute, Wis. Stat. section 803.08, has been untouched since it was adopted by supreme court order in 1975. The 1975 language is nearly identical to Wisconsin’s first class-action statute from 18981 – which was itself a remnant of the 1849 Field Code.2 Thirty-seven years ago, the Wisconsin Supreme Court found section 803.08 had “intentionally been left in vague language unamended.”3
In 1973, the State Bar of Wisconsin’s Civil Rules Revision Committee advised against updating section 803.08 to conform to the federal statute, Federal Rule of Civil Procedure 23 (hereinafter Rule 23).4 The committee reasoned that although Rule 23 had been amended and improved seven years earlier, “Wisconsin would be wise not to adopt either version of Rule 23 until more experience is gained in other jurisdictions.”5
In the 38 years since that suggestion was made, federal law has developed, Rule 23 has undergone several refinements, and no fewer than 43 states have drafted or amended their class-action statutes to align with Rule 23.6 It is time for Wisconsin to become number 44.
Section 803.08’s Plain Language
Section 803.08 reads, in its entirety, as follows: “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.” Two potential requirements for class certification are explicitly mentioned: commonality and numerosity. Those requirements are stated in the disjunctive (“or”) rather than the conjunctive (“and”). This suggests that a Wisconsin circuit court judge could properly certify a class based on either commonality or numerosity alone. Most Wisconsin courts, however, ignore the plain language of the statute and interpret it conjunctively to require both commonality and numerosity for a class to be certified.7
The plain language of section 803.08 does not include some of Rule 23’s requirements. These include the concepts of adequacy of the class representative and superiority, meaning that handling the cases as a class action must be superior to handling the cases individually. It also is silent on the requirement of predominance, which necessitates that common questions of law or fact outweigh the individual issues involved.8
A staple of statutory interpretation is that courts begin with the statute’s text. If the language is plain and unambiguous, the inquiry ends.9 Because of the sparse language of section 803.08, however, opinions in which the courts attempted to interpret it as written are few and far between, and those that have done so often are unhelpful. In Mercury Records Productions Inc. v. Economic Consultants Inc., the court of appeals complained, “there is no case or statutory law in Wisconsin governing the procedural aspects of class action suits.… There has been no real guidance given by our Supreme Court in the area of state procedural requirements for class actions.”10 Unfortunately, this statement remains true today.
Supreme Court Efforts to Interpret Section 803.08
The Wisconsin Supreme Court has not published an opinion truly analyzing section 803.08 since 1978.11 These early decisions, while helpful, only go so far. Among other things, they show the court struggling to add to the statute elements – found nowhere in its text – to make it more robust. The reasoning supporting these early cases was quite varied, as the court attempted to apply the scanty statutory language.
Schlosser v. Allis-Chalmers Corp. (Schlosser I). In 1974, the Wisconsin Supreme Court evaluated whether former Allis-Chalmers employees could bring suit as a class against their former employer, the defendant corporation. After determining that plaintiffs need not satisfy joinder requirements to bring a class-action suit, the court analyzed the plaintiffs’ class-certification claim.12 Recognizing that Wisconsin’s governing statute was intentionally left vague, the Schlosser I court found three prerequisites to certification: a community of interests, adequate representation, and numerousness.13 Also, although not explicitly separating it from the three recognized class-action criteria, the court gave credence to the concept of manageability: “[T]he court must determine whether the advantages of disposing of the entire controversy in one proceeding are outweighed by the difficulties of combining divergent issues and persons.”14 Ultimately, the plaintiffs were permitted to join as a class.
Browne v. Milwaukee Board of School Directors. A year after Schlosser I, the Wisconsin Supreme Court heard an appeal to class certification of employees of the Milwaukee Board of School Directors, who brought the action to challenge a portion of the Municipal Employment Relations Act.15 In rejecting the defendants’ appeal, the Browne court held the community-of-interest requirement demands that all members of the purported class desire the same outcome of the suit as do their alleged representatives.16 This evaluation merged Schlosser I’s separate requirements of a community of interests and adequate representation. The court also relied on a 1960 Wisconsin Supreme Court case, Pipkorn v. Brown Deer, which referenced the typicality and adequate-representation elements by relying on the general discussion of class actions found in the treatise, American Jurisprudence.17
Nolte v. Michels Pipeline Construction Inc. The three Schlosser I criteria were reaffirmed by the Wisconsin Supreme Court in 1978 in Nolte.18 Nolte is significant because the court clearly accepted Schlosser I’s manageability criterion. The concept of manageability requires the court to decide whether the benefits of the plaintiffs proceeding as a class outweigh the “inherent difficulties, so as to justify maintaining” a class-action suit. The court saw this determination as a weighing of convenience and efficiency on one hand versus accuracy and fairness on the other. The court asked whether the class-action suit will settle all the issues involved or whether the parties will need to maintain individual actions afterwards. This determination was left to the sole discretion of the circuit court.19
Although this is an effective and common-sense element of a class-certification evaluation, it is nowhere to be found in the statute. The court clearly was struggling with the minimal statutory language. The Nolte court cited two 1960 supreme court cases, Lozoff20 and Pipkorn,21 along with Schlosser I.22 The two 1960 cases, however, discuss the circuit court’s discretion in determining numerosity, not manageability. And as mentioned above, although Schlosser I does evaluate manageability as a prerequisite to certification, the opinion does not cite binding Wisconsin authority but does cite Zechariah Chafee’s 1950 book, Some Problems of Equity.23 The court made significant progress, albeit with shaky support.
The Nolte court ultimately concluded certification was inappropriate in situations in which the members of the purported class suffer both different amounts and different types of injury.24
Paul Benson, Minnesota 1990, is chair of the product and tort liability litigation focus group, leader of the agribusiness, food and beverage industry team, and a member of the class action/multi-district litigation team at Michael Best & Friedrich. He has litigated matters involving products liability and personal injury, general commercial law, toxic torts, and insurance.
Joe Olson, U.W. 2003, is a trial attorney, a partner in the firm’s litigation practice group, and a member of the firm’s class action/multi-district litigation team. He practices primarily in the areas of constitutional law, class-action defense, products-liability defense, employee benefits, and complex commercial-litigation matters.
Ben Kaplan, Minnesota 2010, is an associate and a member of the firm’s litigation practice group. He maintains an active commercial-litigation practice, including commercial torts, products liability, and contract disputes.
Goebel v. First Federal Savings & Loan Association. Only one day after releasing its opinion in Nolte, the supreme court heard oral arguments in an appeal to the class certification of a group of mortgagors.25 In evaluating whether the class was improperly certified, the Goebel court focused on the commonality and adequate-representation requirements. The court found commonality requires only “a community of interest among [the class members] in the questions of law and fact involved in the general controversy, or in the kind and form of relief demanded and obtained by or against each individual member of the numerous body.”26 This appears to be inconsistent with the language of the Rule 23 commonality provision, which requires that class actions have “questions of law or fact common to the class.” There is no mention of commonality of relief sought being a possible substitute for commonality of issues at play or alleged injuries suffered.27
The Goebel court concluded by determining that the balancing process favored certification of the class, and that there was no question that “all the members of the purported class desire the same outcome of the suit that their alleged representatives desire.”28
Schlosser v. Allis-Chalmers Corp. (Schlosser II). After hearing Schlosser I and permitting the plaintiffs to proceed as a class, the supreme court again heard an appeal in this case, this time from an interlocutory summary judgment finding the defendant liable to the plaintiffs.29 The Schlosser II court reiterated the class-certification criteria from Schlosser I – commonality, numerosity, and adequate representation – and held that the decision “whether the action may proceed as a class suit is addressed to the trial court’s discretion. It involves a weighing of the benefits to be gained from disposing of the entire controversy in one proceeding against the difficulties inherent in a single action.”30 Later in its analysis, the Schlosser II court discussed the propriety of a class constructed on an “opt-out” basis as opposed to an “opt-in” basis. The court upheld the “opt-out” scheme, as “expressly prescribed by [Rule 23].”31
Subsequent Efforts to Interpret Section 803.08
An ever-increasing class-action docket has required the Wisconsin Court of Appeals to further develop the section 803.08 analysis over the past three-and-a-half decades. Perhaps not coincidentally, the court has reached toward federal law and begun to follow the more developed and nuanced Rule 23 jurisprudence.32
In 1989, the court of appeals stated in Sisters of St. Mary v. AAER Sprayed Insulation33 that class certification required the three then-regularly applied section 803.08 elements and also required manageability, with near-full discretion given to the circuit court.34 In Sisters, however, the court supported its manageability holding by citing not to Wisconsin precedent but to a Fourth Circuit case interpreting Rule 23.35 Although the concept of manageability had been a part of Wisconsin case law for at least a decade at that point, the Sisters court asked, “Is the proposed class action manageable? This is the same question federal courts are faced with” under Rule 23.36 Further, the court of appeals supported its holding that manageability determinations fall within the circuit court’s broad discretion, a well-developed component of section 803.08, by citing not to a Wisconsin case but to a Third Circuit opinion.37
Similarly, in Cruz v. All Saints Healthcare System Inc., the court of appeals analyzed the adequacy-of-representation requirement for certification.38 Although the court was evaluating an element discussed in Nolte and Browne, it found more persuasive an 11th Circuit opinion using a two-factor test: 1) whether plaintiffs or counsel have interests antagonistic to absent class members, and 2) whether class counsel are generally able and qualified to conduct the proposed litigation.39 In this way, Sisters and Cruz demonstrate the modern judicial mindset of seeking direction from federal authority, not only when the issue is not addressed in Wisconsin precedent but also when the federal law is more clearly developed.
That is not to say appellate courts have completely abandoned or ignored state standards. In 2006, the court of appeals stated in Noonan that it “rel[ied] on Wisconsin case law” regarding deference to the circuit court on manageability determinations,40 but that is the same area in which Sisters relied on federal law. Later in that opinion, the Noonan court stated that because manageability is primarily a factual determination that mirrors Rule 23 evaluation, the circuit court “correctly relied for guidance on federal cases discussing class certification.”41
Arguably, these court of appeals decisions relying on federal statutes and case law are of uncertain precedential value. As an error-correcting body, the Wisconsin court of appeals “does not have [a] law-developing or law-declaring function.”42 Inserting federal standards into section 803.08 could be termed by some as “law-developing,” thereby placing these decisions outside the purview of an error-correcting court. Thus, Wisconsin’s class-action jurisprudence is muddled indeed.
Proposal: Formally Adopt Rule 23 as Wisconsin’s Class Action Statute
The current judicial trend appears to be a piece-by-piece incorporation of Rule 23 standards into section 803.08. That being the case, Wisconsin should simply overhaul section 803.08 to follow its federal counterpart.
The advantages of importing the federal rule into the Wisconsin statutes is readily apparent: circuit courts would have a much wider, more refined body of precedent as guidance; certification considerations would become more uniform; questions of what jurisprudence was controlling would be clarified; and parties could predict with greater accuracy the merits of their litigation, potentially lowering the costs involved in the litigation for both the parties involved and the judiciary.
Rule 23 should be imported in full. However, if in the process of political compromise there is a desire to maintain aspects of Wisconsin’s class-action jurisprudence, that can easily be accomplished. This should not be an impediment to the overhaul but simply a point of negotiation. In fact, of the 43 state statutes based on Rule 23, only a few adopted every provision of the federal rule. If, for example, the Wisconsin legislature wants circuit courts to have greater deference in determining manageability, it may decide to include that in the language of the new statute. There is no requirement that Rule 23 be adopted in its entirety, and the desire to avoid such absolute adherence should not prevent implementation of the majority of Rule 23.
Some may ask, given that Rule 23 is so often looked to for guidance, why should Wisconsin bother updating its statute? Will this change have much impact? The answer is that an obvious and foreseeable problem remains. Circuit court judges apply different standards in their interpretation and application of the statute and are forced to continually look beyond Wisconsin case law and the plain language of the statute for guidance. Compounding this problem is Wisconsin’s grant of “sole discretion” to circuit courts for manageability evaluations, a threshold determination in class certification. Forum shopping and inconsistent intrastate results could very well be the result.
Class actions are a different animal today than in 1975 and vastly different from when the statutory language of section 803.08 originated. Judges face a dearth of guidance, attorneys face substantial uncertainty, and courts produce inter- and intra-district discrepancies that are justifiable under the current law. It is time to act, by adopting Rule 23 as the class-action law of Wisconsin.
1 Wis. Stat. § 2604 (1898).
2 Adolf Homburger, State Class Actions and the Federal Rule, 71 Colum. L. Rev. 609, 612 (1971).
3 Schlosser v. Allis-Chalmers Corp., 65 Wis. 2d 153, 168, 222 N.W.2d 156 (1974) (Schlosser I).
4 State Bar Civil Rules Revision Committee, Wisconsin Judicial Council, Minutes from May 4, 1973.
6 American Bar Ass’n, Survey of State Class Action Law, A Report of the State Laws Subcommittee of the Class Actions and Derivative Suits Committee (2010).
7 See, e.g., Mercury Records Prods. Inc. v. Economic Consultants Inc., 91 Wis. 2d 482, 283 N.W.2d 613 (Ct. App. 1979).
8 Fed. R. Civ. P. 23(b)(3).
9 State v. Doss, 2008 WI 93, ¶ 30, 312 Wis. 2d 570, 754 N.W.2d 150 (internal citations omitted).
10 Mercury Records, 91 Wis. 2d at 490-91.
11 This is not intended to in any way be a criticism of the Wisconsin Supreme Court. In 1978, the court heard Goebel, Nolte, and Schlosser II. Since then, it has heard many cases relating to class-action lawsuits, but none focusing on the statute’s interpretation and application for class certification. It may very well be that the court simply has not been presented with the right opportunity to add to its prior teachings on this subject.
12 Schlosser I, 65 Wis. 2d at 168.
13 Id. at 168-69.
14 Id. at 172 (citing Chafee, Some Problems of Equity, 193).
15 Browne v. Milwaukee Bd. of Sch. Directors, 69 Wis. 2d 169, 171, 230 N.W.2d 704 (1975).
16 Id. at 181 (citing Pipkorn v. Brown Deer, 9 Wis. 2d 571, 577, 101 N.W.2d 623 (1960)).
17 Pipkorn, 9 Wis. 2d at 577 (citing 39 Am. Jur., Parties 919, 921, 922, §§ 45, 47, 48).
18 Nolte v. Michels Pipeline Constr. Inc., 83 Wis. 2d 171, 176, 265 N.W.2d 482 (1978): “(1)The named parties must have a right or interest in common with the persons represented; (2) the named parties must fairly represent the interest or right involved so that the issue may be fairly and honestly tried; and (3) it must be impracticable to bring all interested persons before the court” (citing Schlosser I, 65 Wis. 2d at 169) (other citations omitted).
19 Id. at 177.
20 Lozoff v. Kaisershot, 11 Wis. 2d 485, 488-89, 105 N.W.2d 783 (1960).
21 Pipkorn, 9 Wis. 2d at 578-79.
22 Nolte, 83 Wis. 2d at 177 (citing Schlosser I).
23 Schlosser I, 65 Wis. 2d at 172.
24 Nolte, 83 Wis. 2d at 178-79.
25 Goebel v. First Fed. Savings & Loan Ass’n, 83 Wis. 2d 668, 670, 266 N.W.2d 352 (1978).
26 Id. at 684 (citing Nolte) (internal citations omitted).
27 See Hassine v. Jeffes, 846 F.2d 169, 176-77 (3d Cir. 1988).
28 Goebel, 83 Wis. 2d at 684.
29 Schlosser v. Allis-Chalmers Corp., 86 Wis. 2d 226, 230, 271 N.W.2d 879 (1978) (Schlosser II).
30 Id. at 233-34 (citing Schlosser I and Nolte).
31 Id. at 243.
32 In the last decade, Wisconsin courts have also heard Hermanson v. Wal-Mart Stores Inc., 2006 WI App 36, 290 Wis. 2d 225, 711 N.W.2d 694, and Tietsworth v. Harley-Davidson Inc., 2003 WI App 75, 261 Wis. 2d 755, 661 N.W.2d 450 (and accompanying line of cases). These cases, although significant in their own right, do not significantly add to the class-action analysis conversation and therefore are not discussed in this article.
33 Sisters of St. Mary v. AAER Sprayed Insulation, 151 Wis. 2d 708, 445 N.W.2d 723 (Ct. App. 1989).
34 Id. at 713-14.
35 Id. at 721 (citing Windham v. American Brands Inc., 565 F.2d 59, 68 (4th Cir. 1977)). The Windham court stated that a key manageability determination is whether the differences between individuals trying to bring a class action can be determined “mechanical[ly]” or if they will require numerous “mini-trials.”
36 Id. at 714.
37 Id. at 714-17 (citing Link v. Mercedes-Benz of N. Am. Inc., 550 F.2d 860, 864 (3d Cir. 1977)).
38 Cruz v. All Saints Healthcare Sys. Inc. 2001 WI App 67, 242 Wis. 2d 432, 625 N.W.2d 344.
39 Id. ¶ 18 (citing Griffin v. Carlin, 755 F.2d 1516, 1533 (11th Cir. 1985)). Cruz then held the second prong of that test required a representative to simply have a general understanding of the nature of the class claims alleged, citing Andrew P. Campbell, Class Actions: A Primer, 20 Am. J. Trial Advoc. 305, 310 (1997).
40 Noonan v. Northwestern Mut. Life Ins. Co., No. 2005AP1683, 2006 WL 3314622, ¶ 6 (Wis. Ct. App. Nov. 16, 2006) (unpublished decision) (discussing the standard of review to examine a circuit court’s manageability determination).
41 Id. ¶ 21 n.16.
42 State v. Schumacher, 144 Wis. 2d 388, 407, 424 N.W.2d 672 (WI 1988) (internal citations omitted).