Wisconsin Lawyer
Vol. 79, No. 10, October 2006

Supreme Court Orders

Order 05-05: Alternative Dispute Resolution Order 05-09: Continuing Legal Education

Order 06-03: Lawyers' Fund for Client Protection

Alternative Dispute Resolution

Order 05-05

On Feb. 16, 2005, Attorney Donald Leo Bach filed a petition seeking to amend Wis. Stat. § 807.05 and to create Wis. Stat. § 802.12(5). A public hearing was conducted on this petition on Oct. 25, 2005.

At the ensuing open administrative conference the court discussed the proposed creation of § 802.12(5) and determined that it was appropriate to obtain input from mediators regarding the anticipated scope and impact of the proposed rules change.

With respect to the proposed amendment to § 807.05, the court determined that it would benefit from additional research regarding the practice of other jurisdictions with respect to whether a stipulation made on the record during a deposition should be enforceable. The court directed its staff to undertake this research and to obtain comments from interested parties. On Jan. 26, 2006, Attorney Bach filed an amended petition, requesting this court issue an order creating § 802.12(5), as set forth in the amended petition.

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 Dec. 11, 2006, 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 publication of a copy of this order and of the petition in the official state newspaper once each week for three consecutive weeks 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 1st day of September, 2006.

By the court:
Cornelia G. Clark, Clerk of Supreme Court

Amended Petition

Pursuant to the Court's direction on Oct. 25, 2005, Petitioner Attorney Donald Leo Bach of DeForest respectfully amends that portion of his Feb. 15, 2005 Petition requesting the Supreme Court of Wisconsin to issue an Order creating Wis. Stat. § 802.12(5).

History of the Petition. On Feb. 15, 2005, Petitioner filed a formal request ("Petition") with the Supreme Court of Wisconsin to (1) amend Wis. Stat. § 807.05 relating to agreements, stipulations, and consents made at depositions and, (2) create Wis. Stat. § 802.12(5) relating to memorializing settlements reached by way of alternative dispute resolution. A copy of the Petition is attached. Notice of these rulemaking requests in the Petition was duly published in the Wisconsin Lawyer. Pursuant to such notice, on Oct. 25, 2005, the Supreme Court held a hearing and an open-court administrative rule conference on the Petition. Petitioner made a presentation before the Court in support of the Petition. There was no written or oral opposition to either rulemaking request. The Supreme Court, during its administrative rule conference, requested that internal staff conduct research within the 50 states in regard to the first proposed rule relating to agreements, stipulations and consents made and recorded during depositions. In regard to the second rule change requested, i.e., the creation of Wis. Stat. § 802.12(5) relating to memorializing settlements reached as a result of the use of a dispute resolution method, the Court requested that the Petitioner amend the Petition and resubmit it as amended.

Background. The Feb. 15, 2005 Petition proposed that Wis. Stat. § 802.12(5) be created as follows:

"(5) Settlement Finalization. Any settlement reached as a result of the use of an alternative dispute resolution method shall be reduced to writing, dated, and signed by each settling party prior to concluding the dispute resolution process."

This proposed rule simply sought to require that any settlement reached as a result of the use of an alternative dispute resolution method be reduced to writing, dated, and signed by each settling party prior to concluding the dispute resolution process. The purpose of the proposed rule is to address case law which establishes that if such settlement is not so finalized, it is not binding and a settling party can simply "back-out" and disclaim the settlement even if the party previously fully agreed to the settlement.

Alternative settlement dispute resolution methods, primarily mediation, have been found to be a very good method of resolving disputes short of a full court trial. Mediation, however, can be time-consuming and relatively expensive, especially if a professional mediator is retained. Further, in most cases, the strengths and weaknesses of a party's case are revealed in mediation. When a settlement is reached after the expenditure of time, expense, and tactical costs, that settlement should be enforceable and provide finality to the controversy.

However, Wis. Stat. § 807.05¹ and ensuing case law says that unless that settlement is in writing and is signed - even if the mediator recorded the settlement faithfully and sends a written memorialization of the settlement to all sides - it is not enforceable and binding. That is exactly what happened in Laska v. Laska, 2002 WI App 132, 255 Wis. 2d 823, 646 N.W.2d 393. After mediation, the parties agreed that one party would pay $135,000 and not make other claims in regard to a will dispute. However, that party was allowed to back out because of noncompliance with the formal requirements of Wis. Stat. § 807.05.

The Court held:

"Wisconsin Stat. § 807.05 is an exception to the usual rule that oral contracts are binding. Adelmeyer v. WEPCO, 135 Wis. 2d 367, 400 N.W.2d 473 (Ct. App. 1986). It `seeks to prevent disputes and uncertainties as to what was agreed upon.' Id. at 372, 400 N.W.2d 473 (citation omitted). The statute adds requirements for enforceability of an otherwise valid oral agreement when the agreement is reached in the course of a claim that is in the process of adjudication. Kocinski v. Home Ins. Co., 154 Wis. 2d 56, 67, 452 N.W.2d 360 (1990). `An oral contract reached by stipulation in the course of court proceedings is unenforceable unless formalized in the way required by sec. 807.05.' Id. at 67-68, 452, N.W.2d 360." Id. at ¶ 9.

Very recent case law indicates that failure to meet the requirements of Wis. Stat. § 807.05 continues to cause problems in enforcing settlements, including those reached by way of mediation. See Affordable Erecting, Inc. v. Neosho Trompler, Inc., 2005 WI App 189, ____ Wis. 2d ____, 703 N.W. 737, review granted, Sept. 8, 2005, and Wangard Partners Inc. v. Tandem Tire & Auto Serv., Inc., No. 2005 AP 64 (Ct. App. Oct. 27, 2005).

Proposed rule 812.05(5) addresses Wis. Stat. § 807.05 and case law to provide the following benefits:

1. It puts everyone on notice that settlement reached in mediation is not final and binding until reduced to paper and signed;

2. It tells professional mediators that ensuring the settlement is so finalized is a minimum standard of their jobs;

3. It provides the parties another opportunity to clarify, confirm, and potentially change their agreement through the final step of formalizing the agreement in writing;

4. It greatly limits the ability to "back-out" of a negotiated agreement.

Supreme Court Request for Amendment of the Petition Relating to Proposed Wis. Stat. § 802.12(5)

During the Court's administrative rule conference, concerns were expressed as to the scope and coverage of the proposal to create Wis. Stat. § 802.15(5) in the following areas:

1. What is a "settlement" under the proposed rule?

2. Is it the intent of the proposed rule to cover all alternative dispute resolution methods? If so, how does that comport with the binding arbitration alternative outlined in Wis. Stat. § 802.12(1)(a) and its formal requirements and the definition of "settlement alternative" in Wis. Stat. § 802.12(1)(i)?

3. Should language be added that to be binding any settlement agreement must be reduced to writing and signed?

Discussion

1. What is a settlement?

Concern was expressed by one member of the Court as to what Petitioner meant by the words "settlement" in the proposed rule and that the Petition did not include any definition of "settlement."

The proposed rule is simply an amendment to Wis. Stat. § 802.12, the section of the statutes providing for alternative dispute resolution. This section was first enacted by the Supreme Court in 1993 as a result of a petition by the Judicial Council and has been in place for about twelve years. The section also appears to have been amended three times since. However, § 802.12 itself does not contain any definition of "settlement," and there does not appear to have been any difficulty carrying out the goals and intent of the section as a result. Settlement is also not defined in Wis. Stat. § 990.01, a list of definitions used in construction of Wisconsin law, nor elsewhere in the statutes. This suggests "settlement" is one of those concepts that is self-explanatory.

To the extent it is felt necessary that "settlement" must be defined in order to carry out the intent and purpose of proposed rule 802.12(5), the following definition could also be created by adding a definition of "settlement" to § 802.12(1)(i) (and renumbering current § 802.12(1)(i) and (1)(j) to 802.12(1)(j) and (k) respectively):

(1) "Settlement" means the agreement of the parties to resolve their dispute entirely or in part.²

2. Was it the intent of the proposed rule to cover all alternative dispute resolution methods; if so, how does that comport with the binding arbitration alternative outlined in Wis. Stat. § 802.12(1)(a) and its formal requirements and the definition of "settlement alternative" in Wis. Stat. § 802.12(1)(i)?

Because Wis. Stat. § 801.12(1)(i) lists binding arbitration as a "settlement alternative," a concern was raised that the proposed rule did not make sense if such "settlement alternative" were chosen as an alternative dispute resolution between the parties, because binding arbitration does not result in a "settlement," but instead in a formal decision rendered by a neutral third-person.

It is the case that Wis. Stat. § 802.12 recognizes that binding arbitration is not a negotiated compromise under the statute. Wis. Stat. § 802.12(4) states:

(4) Admissibility. Except for binding arbitration, all settlement alternatives are compromise negotiations for purposes of s. 904.08 and mediation for purposes of s. 904.085. [Emphasis supplied]

However, the language of the proposed rule stating that "any settlement" reached as a result of the use of an alternative dispute resolution method ..." is broad enough to cover any negotiated compromise reached during the binding arbitration process. Thus, it was and is the intent of the proposed rule to cover all voluntary settlements reached as a result of the use of any dispute resolution method.

If it is felt ambiguity still remains, the proposed rule could be modified as follows:

(5) Settlement Finalization. Any settlement reached as a result of the use of an alternative dispute resolution method, including a settlement voluntarily reached by the parties during binding arbitration, shall be reduced to writing, dated, and signed by each settling party prior to concluding the dispute resolution process.

3. Should language be added that to be binding any settlement must be reduced to writing and signed?

This is the current state of the law and, in fact, is the situation that the proposed rule addresses.

If necessary to "reconfirm" the requirements of Wis. Stat. § 807.05 and to provide notice of the same in the alternative dispute resolution section of the statutes itself (Wis. Stat. § 802.12), language could be added to the proposed rule as follows:

(5) Settlement Finalization. To be binding, any settlement reached as a result of the use of an alternative dispute resolution method, including a settlement voluntarily reached by the parties during binding arbitration, shall be reduced to writing, dated, and signed by each settling party prior to concluding the dispute resolution process.

or

(5) ) Settlement Finalization. Any settlement reached as a result of the use of an alternative dispute resolution method,

including a settlement voluntarily reached by the parties during binding arbitration, shall be reduced to writing, dated, and signed by each settling party prior to concluding the dispute resolution process.

Compliance with these requirements

satisfies Wis. Stat. § 807.05 and binds the parties to their settlement.

Respectfully submitted:
Donald Leo Bach (#1014386), (608) 255-8891, dlb@dewittross.com

¹Wis. Stat. § 807.05 provides: "No agreement, stipulation, or consent between the parties or their attorneys, in respect to the proceedings in an action or special proceeding shall be binding unless made in court or during a proceeding conducted under ss. 807.13 or 967.08, and entered into the minutes or recorded by the reporter, or made in writing and subscribed by the party to be bound thereby or the party's attorney."

²"In part" is included to allow parties to reach a final settlement as to a portion of their dispute and yet allow other portions to be decided through the course of litigation. For example, the parties may agree as to liability but not damages or vice-versa.

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Continuing Legal Education

Order 05-09

On Dec. 9, 2005, the Director of the Board of Bar Examiners filed a petition proposing certain amendments to SCR 31.01 and 31.05 relating to continuing legal education.

IT IS ORDERED that a public hearing on the petition shall be held in the Supreme Court Room in the State Capitol, Madison, Wis., on Dec. 11, 2006, 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 single publication of a copy of this order and of the 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 1st day of September, 2006.

By the court: 
Cornelia G. Clark, Clerk of Supreme Court

Petition

The Petitioner, Gene R. Rankin, Director of and on behalf of the Board of Bar Examiners of the Supreme Court of Wisconsin, hereby petitions the Supreme Court of Wisconsin for an order that amends Supreme Court Rules SCR 31.01 and 31.05 relating to expanding the nature of continuing legal education (CLE) as follows:

PROPOSED AMENDMENT:

SCR 31.01 Definitions

(9) A "repeated on-demand" program is an on-line program delivered over the Internet, repeating a program previously approved by the board, and given at a time of the attendee's choosing during the same calendar year during which the course was originally approved.

SCR 31.05 Approved hours.

(5) On-line programs which repeat programs previously approved by the board and which are attended on an on-demand basis may be used to satisfy the requirement of SCR 31.02, provided that:

(a) Such repeated on-demand programs are approved prior to being claimed for credit by a lawyer on CLE Form 1; and

(b) A certificate of attendance identifying the course by title and as a repeated on-demand program, submitted by the sponsor of the repeated on-demand program, is attached to a lawyer's CLE Form 1 if credit is to be granted; and

(c) No more than 10.0 credits may be claimed for such repeated on-demand programs during a lawyer's reporting period.

(d) No ethics and professional responsibility credit will be allowed for repeated on-demand programs.

(e) Repeated on-demand programs may not be used for reinstatement, readmission, or reactivation.

(6) Service on the Office of Lawyer Regulation (OLR) District Committee or as Special Investigator may be used to satisfy the requirement of SCR 31.02, to a maximum of 3.0 hours (to include 3.0 hours of legal ethics and professional responsibility credit) per reporting cycle provided that a certificate of attendance submitted by OLR is attached to a lawyer's CLE Form 1 if credit is to be granted.

JUSTIFICATIONS

1. The additions to SCR 31.01 and 31.05(5) would enable the use for credit of on-line CLE programs that have heretofore been deemed self-study and, as such, not able to be approved. Such on-line programs are repeats of prior `live' or real-time programs that can be reviewed by a lawyer at his or her own time rather than at a specified time. To a limited extent they are analogous to video-taped programs, but differ in that video-taped programs now must have a moderator present in order for credit to be granted. On-demand programs represent a close approach to self-study, which is not permitted in Wisconsin (nor most states with mandatory CLE). They are limited to but 1/3 of a lawyer's CLE requirement, require additional documentation, and are not allowed for ethics credit nor for reinstatement, readmission, nor reactivation.

2. The addition to SCR 31.05(6) expands in limited fashion the permitted activities for which CLE credit can be granted, permitting the concentrated work of Office of Lawyer Regulation (OLR) District Committees and Special Investigators to qualify for a limited number of ethics and professional responsibility (EPR) credits per reporting period when accompanied by the appropriate documentation. Members of those Committees and those Special Investigators gain intensive training in the Code of Professional Responsibility in the course of their performance of their duties for many hours more than they are allowed EPR and CLE credit.

Dated this 7th day of December, 2005.

Respectfully submitted:
Gene R. Rankin, Director, Board of Bar Examiners

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Lawyers' Fund for Client Protection

Order 06-03

On April 3, 2006, the Board of Governors of the State Bar of Wisconsin filed a petition proposing an amendment to SCR 12.11, confidentiality, and the creation of SCR 12.12, regarding immunity, SCR 12.13, providing that reimbursement from the Lawyers' Fund for Client Protection is discretionary, and SCR 21.16(5m), regarding restitution.

IT IS ORDERED that a public hearing on the petition shall be held in the Supreme Court Room in the State Capitol, Madison, Wis., on Dec. 11, 2006, 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 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 1st day of September, 2006.

By the court:
Cornelia G. Clark, Clerk of Supreme Court

Petition

I. The Board of Governors of the State Bar of Wisconsin hereby petitions the Wisconsin Supreme Court to amend SCR 12.11 Confidentiality. Such a change requires the following specific amendments:

SCR 12.11 Confidentiality.

All applications, proceedings and reports concerning applications for reimbursement from the fund shall be confidential until such time as the committee authorizes or denies payment to the claimant unless the attorney upon whose alleged dishonest conduct the application is predicated requests that the matter be made public. This rule shall not be construed so as to deny access to relevant information to the supreme court or to such appropriate agencies as the committee shall authorize by rule or as the law may otherwise provide or to prohibit the committee from giving publicity to its activities as the committee deems appropriate.

A. (1). Claims, proceedings and reports involving claims for reimbursement are confidential until the Fund authorizes payment to the claimant, except as otherwise provided by these rules or by law. After payment of a claim, the Fund may publicize the nature of the claim, the amount of the payment, and the name of the lawyer. The Fund shall not publicize the name and address of the claimant unless authorized by the claimant.

(2). The Fund may:

(a) Authorize access to relevant information by professional discipline agencies or other law enforcement authorities.

(b) Release statistical information that does not disclose the identity of the attorney or the claimant.

(c) Use any information in its possession to pursue its subrogation rights.

DISCUSSION. This rule is patterned after Rule 18 of the American Bar Association's Model Rules for Lawyers' Funds for Client Protection. The Comments to the Model Rules state:

[1] The need to protect wrongly accused lawyers and to preserve the independence of the Board's deliberations should be balanced with the strong public interest in protecting legal consumers and promoting public confidence in the administration of justice.

[2] Publication of awards by the Board demonstrates the legal profession's responsiveness to clients and its commitment to self-regulation. Responsible public information programs are essential to achieving the purposes of the Fund. The public, bar, and judicial leaders, and the news media should be kept informed of the activities of the Board and the status of its reimbursement efforts.

[3] The Board must also be sensitive to the privacy concerns of claimants, and of the constitutional rights of lawyers who may be the subject of criminal proceedings. Deferring publicity may therefore be appropriate where there is a pending criminal prosecution against a lawyer. Securing a claimant's consent to the release of information concerning a claimant's loss and reimbursement may also be a desirable practice, particularly for a voluntary fund which may not be protected by the immunity that is afforded a court-established Fund under Rule 9.

[4] It is within the discretion of the Board to determine which public agencies should be provided access to claim files. Lawyer discipline, law enforcement, and agencies considering nominations to public offices may have a legitimate need for information contained in the Fund's records that would otherwise be confidential.

II. The Board of Governors of the State Bar of Wisconsin hereby petitions the Wisconsin Supreme Court to create SCR 12.12 Immunity and SCR 12.13 Reimbursement from the Fund is Discretionary. Such a change requires the following:

SCR 12.12 Immunity.

The committee members and agents of the Fund are immune from civil liability for all acts performed in the course of their official duties.

DISCUSSION. This rule is patterned after Rule 9 of the American Bar Association's Model Rules for Lawyers' Funds for Client Protection. The Comments to the Model Rules state:

[1] Immunity from civil liability encourages lawyers and nonlawyers to serve on the Board, and protects their independent judgment in the evaluation of claims. Immunity also protects the fiscal integrity of the fund, and encourages claimants and lawyers to participate in seeking reimbursement for eligible losses.

[2] As a matter of public policy, immunity should attach to the Fund's activities and proceedings in the same way that absolute immunity attaches in lawyer disciplinary proceedings.

[3] In the absence of court rule or statute, immunity may not be available in proceedings involving voluntary funds. Insurance may therefore be required to protect Trustees [Committee members], staffs, claimants, and the volunteer lawyers who assist claimants in processing their claims.

SCR 12.13 Reimbursement from the Fund is discretionary.

The Fund's decision to pay claims is discretionary. Decisions of the Fund are not appealable.

DISCUSSION. This rule is patterned after Rule 15 of the American Bar Association's Model Rules for Lawyers' Funds for Client Protection. The Comments to the Model Rules state:

[1] Although these Rules establish procedures for the processing of claims seeking reimbursement from the Fund, they are not intended to create either substantive rights to reimbursement, compensation, damages or restitution for a lawyer's dishonest conduct, or procedural rights subject to judicial review with respect to determination of claims.

[2] The Fund is not a guarantor of honesty and integrity in the practice of law. Dishonest conduct by a member of the bar imposes no separate legal obligation on the profession collectively, or on the Fund, to compensate for a lawyer's misconduct. The Fund is a lawyer-financed public service, and payment by the Board is discretionary.

III. The Board of Governors of the State Bar of Wisconsin further petitions the Wisconsin Supreme Court to add SCR 21.16 Restitution as follows:

SCR 21.16 Discipline. (1) Any of the following may be imposed on an attorney as discipline for misconduct pursuant to the procedure set forth in SCR chapter 22:

(a) Revocation of license to practice law.

(b) Suspension of license to practice law.

(c) Public or private reprimand.

(d) Conditions on the continued practice of law.

(e) Monetary payment.

(f) Conditions on seeking license reinstatement.

(g) Restitution.

(2) When the Court orders restitution:

(a) The amount of restitution shall be determined in the related disciplinary proceeding.

(b) If the Wisconsin Lawyers' Fund for Client Protection makes payment on a claim as the result of related proceedings involving an attorney, the Court may order the attorney to reimburse the Fund. Upon ordering restitution to the Fund, a judgment and transcript of judgment shall be issued in favor of the Fund. The Fund may file and docket the judgment in any county and that judgment shall have the same effect as a judgment docketed under §§ 806.16 and 809.25, Stats.

(c) The amount of the restitution, either ordered or paid, does not affect the attorney's liability for damages in any civil action or proceeding.

DISCUSSION. Collection efforts by the Fund have been hampered by the inability to find collection counsel to take cases on a contingent fee basis. The vast majority of awards are made against disbarred or suspended attorneys. Collection counsel are concerned these attorneys would vigorously defend their cases. Allowing a restitution order to be reduced to judgment will help the Fund collect restitution from dishonest attorneys against whom awards have been made.

The restitution orders which will be reduced to judgment are those which will have been processed under the current disciplinary procedure. Therefore, due process requirements will be met.

Respectfully submitted on behalf of the Board of Governors of the State Bar of Wisconsin:

D. Michael Guerin, President,
State Bar of Wisconsin

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