Universal Processing Services v. Circuit Court of Milw. Co. ( 2017 )

2017 WI 26
SUPREME COURT OF WISCONSIN
CASE NO.: 2016AP923-W
COMPLETE TITLE: State of Wisconsin ex rel. Universal Processing
Services of Wisconsin, LLC,
Petitioner,
v.
Circuit Court of Milwaukee County and the
Honorable John J. DiMotto, presiding, Samuel B.
Hicks and Merchant Card Services, Inc.
Respondents.
SUPERVISORY WRIT BEFORE THE SUPREME COURT
OPINION FILED: March 29, 2017
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: November 1, 2016
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Milwaukee
JUDGE: John J. DiMotto
JUSTICES:
CONCURRED:
CONCURRED/DISSENTED: ZIEGLER, J. concurs and dissents (Opinion
filed).
BRADLEY, R.G., J. joined by KELLY, J. concur
and dissent (Opinion filed).
DISSENTED:
NOT PARTICIPATING:
ATTORNEYS:
For the petitioners, there was a brief by Ryan M. Billings,
Robert L. Gegios, Melinda A. Bialzik and Kohner, Mann & Kailas,,
S.C., Milwaukee, and oral argument by Ryan M. Billings.
For the respondent the cause was argued by David C. Rice,
assistant attorney general, with whom on the brief(s) was Brad
D. Schimel, attorney general.
For the respondent, there was a brief by Joan M. Huffman,
Paul R. Erickson and Gutglasas, Erickson, Bonville & Larson,
S.C., Milwaukee, and oral argument by Joan M. Huffman.
2
2017 WI 26
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2016AP923-W
(L.C. No. 2014CV7986)
STATE OF WISCONSIN : IN SUPREME COURT
State of Wisconsin ex rel. Universal Processing
Services of Wisconsin, LLC,
Petitioner, FILED
v.
MAR 29, 2017
Circuit Court of Milwaukee County and the
Honorable John J. DiMotto, presiding, Samuel B. Diane M. Fremgen
Clerk of Supreme Court
Hicks and Merchant Card Services, Inc.,
Respondents.
PETITION for supervisory writ. Dismissed. Rights
Declared.
¶1 SHIRLEY S. ABRAHAMSON, J. Universal Processing
Services of Wisconsin, LLC d/b/a Newtek, the plaintiff-
petitioner, petitions this court, pursuant to Wis. Stat.
§ (Rule) 809.71 (2015-16),1 for a supervisory writ. Newtek asks
the court to exercise its constitutional authority to vacate an
1
All subsequent references to the Wisconsin Statutes are to
the 2015-16 version unless otherwise indicated.
No. 2016AP923-W
order of the Circuit Court for Milwaukee County, John J.
DiMotto, Judge, appointing retired Judge Michael Skwierawski as
the referee and to vacate unlawful orders of the referee issued
pursuant to the reference. Samuel Hicks and his Idaho company,
Merchant Card Services, are the defendants-respondents. The
Circuit Court for Milwaukee County and the Honorable John J.
DiMotto, presiding, are also named as respondents. The
respondents oppose the petition.
¶2 Newtek argues that the circuit court's order
appointing the referee expanded the role of referee into the
role of de facto circuit court judge in violation of the
Wisconsin Constitution and Wis. Stat. § (Rule) 805.06, a rule
adopted by this court.2 Newtek does not challenge the
constitutionality of Wis. Stat. § (Rule) 805.06, governing
references to a referee.3
2
In adopting Wis. Stat. § (Rule) 805.06 in 1975, the court
adopted the pre-2003 version of Federal Rule of Civil Procedure
53 with minor modifications. The Wisconsin legislature amended
the language of Wis. Stat. § 805.06(1), (3), (4), and (5) set
forth in the supreme court order, making editorial, non-
substantive changes. Laws of 1975, ch. 218, §§ 158-164.
3
This court asked the parties to address in letter briefs
whether the circuit court's Order of Reference comports with or
contravenes the Wisconsin Constitution to the extent that the
Order comports with Wis. Stat. § (Rule) 805.06. In view of our
holding, we need not, and do not, address the constitutionality
of § (Rule) 805.06 or the extent to which a circuit court's
Order of Reference must comply with or may differ from the
provisions of § 805.06.
2
No. 2016AP923-W
¶3 The dispute underlying this petition arises from a
lawsuit initiated by Universal Processing Services of Wisconsin,
LLC d/b/a Newtek (Newtek), a bankcard processing services
company, the plaintiff-petitioner, against one of its
independent sales agents, Samuel Hicks, and his Idaho company,
Merchant Card Services (collectively, Hicks), the defendants-
respondents.
¶4 The following issues are presented:
1. Is Newtek's petition for a supervisory writ properly
before this court?
2. Has Newtek waived or forfeited its objection to the
Order of Reference, is it estopped from challenging
the Order, or has it impliedly consented to the Order?
3. Does the circuit court's Order of Reference contravene
Article VII, Section 2 of the Wisconsin Constitution
vesting judicial power of this state in a unified
court system?
4. Does the circuit court's Order of Reference, including
the provision that the circuit court's review of the
referee's "rulings" shall be based only on the
referee's "erroneous exercise of discretion,"
contravene the Wisconsin Constitution and the
Wisconsin statutes and rules regarding circuit court
and appellate court authority and practice?
5. Does the circuit court's Order of Reference contravene
the parties' right to "obtain justice freely, and
without being obliged to purchase it," guaranteed by
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Article I, Section 9 of the Wisconsin Constitution, or
to due process of law, guaranteed by Article I,
Section 1 of the Wisconsin Constitution, or Newtek's
right to a jury trial, guaranteed by Article I,
Section 5 of the Wisconsin Constitution?
6. Should the orders of the referee to date be vacated
and should the parties be allowed to request
substitution of the judge on remand?
¶5 For the reasons set forth, we conclude as follows:
1. Newtek's petition for a supervisory writ does not meet
the requirements set forth in Wis. Stat.
§ (Rule) 809.71. The petition was not first filed in
the court of appeals and Newtek has failed to show
that it was impractical to file the petition in the
court of appeals. We do, however, exercise our
constitutional superintending authority under Article
VII, Section 3(2) of the Wisconsin Constitution to
determine the validity of the Order of Reference. A
declaration of rights is an appropriate vehicle for an
exercise of the superintending authority over circuit
courts constitutionally granted to this court.4 See
Part II, ¶¶36-50.
2. Regardless of whether Newtek has waived or forfeited
its right to challenge the Order of Reference, is
4
State ex rel. Memmel v. Mundy, 75 Wis. 2d 276, 281, 249
N.W.2d 573 (1977).
4
No. 2016AP923-W
estopped from challenging the Order, or has impliedly
consented to the reference, this court may resolve the
issue of the validity of the Order of Reference under
its constitutional superintending authority. See Part
III, ¶¶51-55.
3. The Order of Reference impermissibly delegated to the
referee judicial power constitutionally vested in
Wisconsin's unified court system. Accordingly, the
Order does not survive Newtek's constitutional
challenge. See Part IV, ¶¶56-82.
4. The circuit court's Order of Reference, including the
provision that the circuit court's review of the
referee's "rulings" shall be based only on the
referee's "erroneous exercise of discretion,"
contravenes the constitution and statutes or rules
regarding circuit court and appellate court authority
and practice. It infringes on the legislature's
authority to define a circuit court's appellate
jurisdiction. See Part V, ¶¶83-88.
5. We do not decide the instant case on the basis of
Article I, Section 9 of the Wisconsin Constitution,
the due process clause of Article I, Section 1 of the
Wisconsin Constitution, or the right to jury trial of
Article I, Section 5 of the Wisconsin Constitution,
but we note that reference to a referee is the
exception, not the rule; that there are constitutional
limits on the powers of a referee; and that a
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No. 2016AP923-W
reference can jeopardize a litigant's access to the
justice system, due process, and right to a jury
trial. The Wisconsin Constitution requires the state
to provide a judicial system for the resolution of
disputes. Access to state courts for conflict
resolution is thus implicit in the state constitution.
We express our concern that the use of referees
increases the costs of litigation and may cause delay
and, in certain cases, may deprive litigants of access
to courts. See Part VI, ¶¶89-103.
6. To the extent the parties have agreed to abide by an
order or ruling of the referee relating to discovery,
that ruling or order shall stand. To the extent
either party has objected to an order or ruling of the
referee relating to discovery, that ruling or order
shall be vacated. Any ruling or order of the referee
on any dispositive motion is vacated. Either party
may request substitution of the judge under Wis. Stat.
§§ 801.58(1) and (7). See Part VII, ¶¶104-110.
¶6 We begin in Part I by setting forth the procedural
facts relating to the appointment of the referee and the Order
of Reference.
I
¶7 On August 27, 2014, after nearly a decade of
successful collaboration between Newtek and Hicks, Newtek
terminated Hicks' contract. On September 16, 2014, Newtek
brought an action against Hicks in the Circuit Court for
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No. 2016AP923-W
Milwaukee County, John J. DiMotto, Judge, alleging breach of
contract, tortious interference with contract, breach of
fiduciary duty, and misappropriation of confidential information
and trade secrets. Newtek demanded a jury trial.
¶8 The contract included restrictive covenants. The
enforceability of these restrictive covenants is central to the
underlying dispute. Hicks filed an answer to the complaint,
asserting affirmative defenses and counterclaims and seeking
nearly $17 million in damages.
¶9 Because the contract provided for injunctive relief,
Newtek promptly sought and received an ex parte temporary
restraining order from a duty judge just a few days after filing
the complaint. The circuit court (Judge DiMotto) affirmed and
reaffirmed the temporary restraining order.
¶10 Over the course of the next several months, the
parties began extensive discovery. The parties periodically
appeared before the circuit court for scheduling conferences and
motion hearings.
¶11 In early 2015, Newtek moved to amend the scheduling
order to extend the deadlines for naming experts and providing
expert reports. Hicks opposed the extension and filed a motion
to compel discovery.
¶12 On February 17, 2015, the circuit court held a hearing
on Newtek's motion to amend the scheduling order and decided to
appoint a referee to the case. At the hearing, Newtek described
the case as a "classic big case" with numerous issues and
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No. 2016AP923-W
production of a substantial number of documents in discovery
(50,000 thus far):
[W]hen we appeared before you in November [everyone]
was overly optimistic in terms of what could be
accomplished. In particular, overly optimistic in
where we slotted the expert disclosures in relation to
what . . . this litigation has spawned by way of
discovery. We're approaching just on our side nearly
40,000 pages of production, about which the other side
is still complaining. The other side has
produced . . . in the order of 10,000 [pages], about
which we're complaining. . . .
We have the classic big case with lots of issues now.
We have more than one case in the sense that we have
filed a complaint with numerous causes of action but
there is a counter complaint. The counterclaims have
been filed by the other side, and discovery is
occurring with regard to both of those
pleadings. . . .
And so we are doing our best to produce without coming
to the court . . . . And it has been a production that
has gotten to the point of something like a thousand
pages . . . that we are producing per day. That's
what the average is since this began.
¶13 The circuit court granted Newtek's request for
extension in part and also gave Hicks an extension. The circuit
court expressed frustration with the already cumbersome
discovery, especially the attorneys' conduct, stating:
Well you know, the one thing that I put a real high
value on are [sic] attorneys being reasonable. Quite
frankly, it seems to me that both sides here are not
being——at least they're not being reasonable . . . .
¶14 Explaining that the circuit court had "some 450 cases"
on its docket, the circuit court stated that it was "not going
to expend a lot of time dealing with [the parties'] discovery
bickering." Accordingly, the circuit court appointed retired
8
No. 2016AP923-W
Judge Michael Skwierawski as the referee under Wis. Stat.
§ (Rule) 805.06, explaining the appointment as follows:
I am going to be appointing . . . retired Judge
Michael Skwierawski as the Special Master in this case
under 805.06. . . . [Y]ou'll have to deal with him
with respect to discovery disputes, etcetera, because
I'm not going to waste precious court time that I can
give to other cases to be your personal slave to your
discovery disputes. So I just want you to know that.
So the more reasonable you are with each other, the
less likely you're going to need to pay the fees of
retired Judge Michael Skwierawski. And he doesn't come
cheap when it comes to being a Special Master. So I
encourage you to be cooperative in your discovery,
help each other out, get this case to mediation sooner
than later. (Emphasis added.)
¶15 Although the circuit court uses the phrase "Special
Master," this opinion uses the word "referee," adhering to Wis.
Stat. § (Rule) 805.06, which uses the term "referee." The term
"master" had such a pejorative connotation in 1848 at the time
of statehood, as we shall explain later,5 that the word "referee"
has been used in Wisconsin.6
¶16 The circuit court explained that it would call retired
Judge Michael Skwierawski to ask him if he would accept the
appointment. The circuit court also explained that the referee
would draft the Order Appointing Special Master/Referee (Order
of Reference or Order)7 because the referee has a list of things
5
See ¶65, infra.
6
Federal Rule of Civil Procedure 53 uses the word "master."
7
The court order appointing a referee and describing the
referee's powers is called a "reference" or an "order of
reference." Ehlinger v. Hauser, 2010 WI 54, ¶77, 325
Wis. 2d 287, 785 N.W.2d 328; Wis. Stat. § (Rule) 805.06(5)(a).
9
No. 2016AP923-W
that he requires. Neither party objected to the circuit court's
decision to appoint the referee.
¶17 The circuit court directed Newtek to draft a proposed
order memorializing the outcome of the February 17 hearing,
including the referee's appointment. Newtek's counsel contacted
the referee on February 18 to confirm his availability before
drafting this order. The referee said he was available and that
he had already submitted a proposed Order of Reference to the
circuit court; the referee directed counsel from each side to
submit any objections to the proposed order.
¶18 Newtek told the referee that it was reviewing the
Order of Reference and would submit objections, if any, as soon
as possible. Less than a day after counsel received the Order,
the circuit court informed the parties that it had entered the
Order. Thus, neither side was able to submit any objections
before the Order of Reference was signed.
¶19 The Order of Reference pertained to more than
discovery issues. In addition to authority to manage discovery,
the Order granted authority over nearly all aspects of the case
and provided for limited review by the circuit court. The
reference provided, inter alia:
• All motions, whether discovery or dispositive, were to be
heard and decided initially by the referee.
• The referee's written rulings would be adopted and
entered as the rulings of the court, automatically and
without hearing, unless a party filed an exception within
five days.
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No. 2016AP923-W
• The referee could certify matters to the circuit court,
and the circuit court could refuse to decide these
matters.
• The circuit court retained the power to modify or set
aside a referee's ruling, but the circuit court could
only do so if the ruling were based on an erroneous
exercise of discretion.
• The parties were to compensate the referee at $450 per
hour plus reasonable and necessary expenses. The parties
were to divide the cost of the referee equally. (The
total cost of the referee thus far has been about
$45,000.)
¶20 Three relevant provisions of the Order of Reference
are as follows (emphasis added):
4. The [referee] shall have the full authority of
the Court in coordinating and establishing all
pretrial procedures. The [referee] shall also have
the full authority of the Court to hear and decide,
subject to Court review as set forth below, any other
matters assigned to him by the Court. All motions
filed, whether discovery or dispositive, shall
initially be heard and decided by the [Referee],
subject to review processes available as described
below.8
7. If the [referee] is of the opinion that a
specific issue presented by the parties is of such
fundamental importance to the progress or outcome of
the case that effective case management would not be
furthered by having the [referee] render a decision in
8
Requiring all motions to be filed with the referee was not
part of the referee's usual form order; this provision was added
at the circuit court's request.
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No. 2016AP923-W
the first instance, the [Referee] may at his
discretion certify that issue to the Court. As the
final arbiter of case management, the Court may, but
need not, accept the certification. . . .
8. Exceptions to any decisions made by the [referee]
may be taken to this Court and must be filed with the
Court within five (5) business days of the issuance of
the decision. Review by the Court shall be based on
the materials and record before the [referee]. No
additional filings will be permitted unless good cause
and exceptional circumstances are demonstrated by the
requesting Party. The Court has full authority to
modify or set aside the ruling of the [referee] but
will do so only if the ruling is based on an erroneous
exercise of discretion. Unless an exception is taken,
any ruling by the [referee] shall automatically and
without hearing be adopted and entered as a ruling of
the Court within five (5) business days of submission
by the [referee] to the Court and parties. All
decisions made by the [referee] shall be appealable
after the final disposition of this case, to the full
extent as if made by this Court. A party need not
take exception to a decision by the [referee] in order
to preserve the issue for appeal, either on an
interlocutory basis or as an appeal of a final order.
¶21 A copy of the complete order appointing the referee is
attached as Attachment A.
¶22 Shortly after the referee's appointment, Hicks moved
to vacate the temporary injunction previously issued by the
circuit court. As counsel for both parties and the referee were
e-mailing back and forth about this motion and scheduling
issues, the circuit court (copied on the e-mail chain by the
referee) told the referee to handle this motion and any others
that would arise.
¶23 The circuit court explained to the referee: "I
appointed you to serve as [referee] because I anticipated
extensive motion practice and discovery issues/disputes that
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No. 2016AP923-W
would need [to be] addressed more quickly than I could do with
my 400+ case calendar. I would like you to resolve these, and
all, pretrial motions/discovery issues."
¶24 The parties briefed the issue of vacating the
temporary injunction; the referee heard oral argument and issued
a written order that granted Hicks' request to vacate the
temporary injunction. Newtek subsequently filed an exception to
this decision with the circuit court; the circuit court affirmed
the referee's decision.
¶25 After vacating the temporary injunction, the referee
ruled on more than 15 discovery motions and a few motions for
sanctions (related to discovery conduct) over the course of
several months. Newtek objected to several of these orders, all
of which the circuit court affirmed without a hearing.
¶26 In 2015, the referee was asked to decide multiple
dispositive motions. In July 2015, Hicks filed two motions for
summary judgment; in October 2015, Newtek filed its own motion
for summary judgment. These motions for summary judgment
primarily involved the enforceability of the restrictive
covenants and claims or discovery issues related thereto. Hicks
also sought a motion in limine barring Newtek from introducing
evidence at trial relating to the restrictive covenants.
¶27 Both parties submitted briefs and evidentiary
materials on these motions and participated in a hearing before
the referee. The referee recommended partially granting each
side's motion for summary judgment and granting Hicks' motion in
limine. The referee recommended, inter alia, that summary
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No. 2016AP923-W
judgment be granted to Newtek on certain of Hicks' counterclaims
and found that some restrictive covenants upon which Newtek
relied were unreasonable, invalid, and unenforceable under Wis.
Stat. § 103.465.
¶28 Newtek filed exceptions to these rulings, requesting
leave to submit additional briefing or evidence to the circuit
court regarding the referee's decisions. Newtek also asked the
circuit court to review the referee's orders de novo (rather
than under the Order's prescribed "erroneous exercise of
discretion" standard of review) because the "magnitude of errors
that have plagued this case, if uncorrected, will necessitate an
interlocutory appeal."
¶29 Newtek also declared that "[a]s the parties were never
afforded an opportunity to object to the scope and terms of the
[referee's] appointment, Newtek will also seek to brief the
issue of the appointment of the [referee]."
¶30 The circuit court agreed to review the referee's
recommendations on the dispositive issues de novo. In regard to
Newtek's other requests——to brief the dispositive issues
further, submit additional evidence, and brief the issue of the
appointment of the referee——the record is silent. Newtek claims
that the circuit court denied these requests at an off-the-
record status conference in chambers on January 12, 2016.
¶31 On January 21, 2016, the circuit court issued a
lengthy order on the parties' cross-motions for summary judgment
and on the exceptions taken to the referee's recommendations.
The circuit court agreed with most of the referee's
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recommendations, granting partial summary judgment to each party
and limiting the evidence that Newtek could present at trial to
prove its claims.
¶32 Although the circuit court's opinion states that it is
based on a de novo review of the record and the parties'
submissions, Newtek contends that the circuit court did not
actually conduct a de novo review.9
¶33 On February 4, 2016, Newtek filed a petition with the
court of appeals for leave to appeal from the circuit court's
order granting partial summary judgment and limiting evidence at
trial.
¶34 In its February 2016 petition for leave to appeal,
Newtek detailed problems relating to the referee's appointment,
role, and lack of control by the circuit court, but it did not
request the court of appeals to vacate the referee's
appointment, to consider any constitutional issues, or to
determine the referee's authority to find facts, make legal
conclusions, and issue orders. Newtek's major argument focused
on substantive legal issues; Newtek argued that the circuit
court and the referee ignored the record and misstated the law.
¶35 On April 6, 2016, the court of appeals denied the
petition for leave to appeal on a usually stated ground that the
"petition fails to satisfy the criteria for permissive appeal.
See Wis. Stat. § 808.03(2) (2013-14) . . . ." Newtek did not
9
Brief of Petitioner at 24.
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No. 2016AP923-W
petition this court for review of the court of appeals' order
denying the petition for leave to appeal. See Wis. Stat.
§ (Rule) 809.62. Nor did Newtek petition the court of appeals
for a supervisory writ under § (Rule) 809.51 to vacate the
circuit court's order appointing the referee. Instead, Newtek
sought a supervisory writ in this court on May 6, 2016.
II
¶36 The first issue presented is whether Newtek's
petition for a supervisory writ asking the court to vacate a
circuit court order appointing retired Judge Michael Skwierawski
as the referee is properly before this court. We conclude that
the petition is not properly before this court, but we exercise
our superintending authority to vacate the Order of Reference.
¶37 The Wisconsin Constitution grants three separate
powers to this court: appellate and original jurisdiction; the
power to issue all writs necessary in aid of its jurisdiction;
and superintending authority over all courts. Wis. Const. art.
VII, § 3.10
10
State ex rel. Reynolds v. County Court, 11 Wis. 2d 560,
564, 105 N.W.2d 876 (1960).
The original Article VII, Section 3 of the 1848 Wisconsin
Constitution provides as follows:
The supreme court, except in cases otherwise provided
in this constitution, shall have appellate
jurisdiction only, which shall be coextensive with the
state; but in no case removed to the supreme court
shall a trial by jury be allowed. The supreme court
shall have a general superintending control over all
inferior courts; it shall have power to issue writs of
habeas corpus, mandamus, injunction, quo warranto,
(continued)
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¶38 We begin with the court's power to issue supervisory
writs. Wisconsin Stat. §§ (Rules) 809.71 and 809.51 govern writ
practice.
¶39 Wisconsin Stat. § (Rule) 809.71 authorizes a person to
request the supreme court to exercise its supervisory
jurisdiction over a court and the judge presiding therein by
filing a petition in accordance with § (Rule) 809.51. Section
(Rule) 809.51 governs the contents of the petition and
supporting memorandum and provides that the court may grant or
deny the petition or order such additional proceedings as it
considers appropriate. According to § (Rule) 809.71, a person
seeking a writ in the supreme court shall first file a petition
certiorari, and other original and remedial writs, and
to hear and determine the same.
In April 1977, Article VII, Section 3 of the Wisconsin
Constitution was revised to read as follows:
(1) The supreme court shall have superintending and
administrative authority over all courts.
(2) The supreme court has appellate jurisdiction over
all courts and may hear original actions and
proceedings. The supreme court may issue all writs
necessary in aid of its jurisdiction.
(3) The supreme court may review judgments and orders
of the court of appeals, may remove cases from the
court of appeals and may accept cases on certification
by the court of appeals.
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for a supervisory writ in the court of appeals unless it is
impractical to do so.11
¶40 Wisconsin Stat. § (Rule) 809.71, governing supervisory
writs in this court, provides as follows:
809.71 Rule (Supervisory writ). A person may request
the supreme court to exercise its supervisory
jurisdiction over a court and the judge presiding
therein or other person or body by filing a petition
in accordance with s. 809.51. A person seeking a
supervisory writ from the supreme court shall first
file a petition for a supervisory writ in the court of
appeals under s. 809.51 unless it is impractical to
seek the writ in the court of appeals. A petition in
the supreme court shall show why it was impractical to
seek the writ in the court of appeals or, if a
petition had been filed in the court of appeals, the
disposition made and reasons given by the court of
appeals.
¶41 Newtek did not first file a petition for a supervisory
writ in the court of appeals as required by Wis. Stat.
§ (Rule) 809.71. Newtek claims that it was impractical to seek
the writ in the court of appeals because the court of appeals
denied its petition for leave to file an appeal, and that its
petition for leave to file an appeal sought the assistance of
the court of appeals for reasons similar to those offered in its
petition in this court for a supervisory writ.
11
See also Judicial Council Committee's Note, 1981, Wis.
Stat. § (Rule) 809.71 ("The supreme court will not exercise its
supervisory jurisdiction where there is an adequate alternative
remedy. Unless the court of appeals is itself the object of the
supervisory writ, usually there is an adequate alternative
remedy of applying to the court of appeals under Rule 809.51 for
the supervisory writ.").
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¶42 Newtek's interlocutory appeal to the court of appeals
primarily focused on the substantive merits of the summary
judgment and on limiting evidence at trial, and only
tangentially raised objections to the Order of Reference. The
court of appeals gave no specific explanation other than its
usually stated ground that the "petition fails to satisfy the
criteria for permissive appeal. See Wis. Stat. § 808.03(2)
(2013-14) . . . ." We therefore do not know why the court of
appeals denied the petition for leave to appeal.
¶43 The grounds for the court of appeals to grant a
petition for leave to appeal12 are not necessarily the same as
the grounds for granting a supervisory writ.13 On this record,
12
The grounds for the court of appeals to grant leave to
appeal are set forth in Wis. Stat. § 808.03(2) as follows:
(2) APPEALS BY PERMISSION. A judgment or order not
appealable as a matter of right under sub. (1) may be
appealed to the court of appeals in advance of a final
judgment or order upon leave granted by the court if
it determines that an appeal will:
(a) Materially advance the termination of the
litigation or clarify further proceedings in the
litigation;
(b) Protect the petitioner from substantial or
irreparable injury; or
(c) Clarify an issue of general importance in the
administration of justice.
13
A party seeking a supervisory writ must demonstrate that:
1. An appeal is an inadequate remedy;
2. Grave hardship or irreparable harm will result;
(continued)
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we cannot determine the ground on which the court of appeals
denied Newtek's petition for leave to appeal or whether it was
impractical for Newtek to seek a supervisory writ in the court
of appeals that focused on the validity of the Order of
Reference.
¶44 We decline to extend our supervisory writ
jurisprudence and cast doubt on the continued vitality of the
"impracticality" requirement of Wis. Stat. § (Rule) 809.71. We
therefore decline to hold that Newtek has shown that it was
impractical for it to seek a supervisory writ in the court of
appeals and that Newtek's petition for a supervisory writ
complies with Wis. Stat. § (Rule) 809.71.
¶45 In the alternative, Newtek asks that we use our
constitutional power of "superintending authority" over all
Wisconsin courts, Wis. Const. art. VII, § 3(1), to review the
validity of the Order of Reference.
¶46 We can and should decide the issue of the validity of
the Order of Reference using our constitutional superintending
authority under the circumstances of this case. The validity of
the Order of Reference is an important issue for Wisconsin
courts and the public.
3. The duty of the trial court is plain and it must
have acted or intended to act in violation of that
duty; and
4. The request for relief is made promptly and
speedily.
20
No. 2016AP923-W
¶47 The superintending authority provision of the
Wisconsin Constitution endows this court "with a separate and
independent jurisdiction, which enables and requires it in a
proper case to control the course of ordinary litigation
in . . . inferior courts . . . ."14 The nature and scope of the
superintending authority of this court has been before this
court numerous times since at least 1853.15 The scope of this
authority is "as broad and as flexible as necessary to insure
the due administration of justice in the courts of this state."16
"In exercising this power of superintending control, this court
is not restricted to the use of common-law writs and is limited
See State ex rel. Three Unnamed Petitioners v. Peterson, 2015 WI
103, ¶26, 365 Wis. 2d 351, 875 N.W.2d 49; State ex rel. Two
Unnamed Petitioners v. Peterson, 2015 WI 85, ¶¶100-132, 363
Wis. 2d 1, 866 N.W.2d 165.
14
State ex rel. Fourth Nat'l Bank of Philadelphia v.
Johnson, 103 Wis. 591, 613, 79 N.W. 1081 (1899)).
15
See, e.g., Attorney General v. Blossom, 1 Wis. 317
(1853).
16
Madison Teachers, Inc. v. Walker, 2013 WI 91, ¶16, 351
Wis. 2d 237, 839 N.W.2d 388 (quoting In re Kading, 70
Wis. 2d 508, 520, 235 N.W.2d 409 (1975)).
21
No. 2016AP923-W
only by the necessities of justice."17 But the superintending
authority of the court is not to be used lightly.18
¶48 The question of exercising the constitutional grant of
superintending authority is one of judicial policy rather than
one relating to the power of this court. To convince this court
to exercise this constitutional grant of power, a party must
establish that an appeal from a final judgment is inadequate and
that grave hardship will follow a refusal to exercise the
power.19
¶49 Whether an erroneously ordered compulsory reference
creates such a hardship is judged on the facts of the case. The
following circumstances compel the exercise of our
superintending authority over circuit courts in the instant
case:
17
State ex rel. Reynolds v. County Court, 11 Wis. 2d 560,
565, 105 N.W.2d 876 (1960). See also State v. Ernst, 2005 WI
107, ¶19, 283 Wis. 2d 300, 699 N.W.2d 92; Arneson v. Jezwinski,
206 Wis. 2d 217, 225, 556 N.W.2d 721 (1996).
18
See State ex rel. Hustisford Light, Power, & Mfg. Co v.
Grimm, 208 Wis. 366, 370, 371, 243 N.W. 763 (1932) (citing State
ex rel. Tewalt v. Pollard, 112 Wis. 232, 87 N.W. 1107 (1901);
State ex rel. City of Milwaukee v. Ludwig, 106 Wis. 226, 82 N.W.
158 (1900); State ex rel. Fourth Nat'l Bank of Philadelphia v.
Johnson, 105 Wis. 164, 83 N.W. 320 (1899); State ex rel. Meggett
v. O'Neill, 104 Wis. 227, 80 N.W. 447 (1899); State ex rel. v.
Nat'l Bank of Philadelphia v. Johnson, 103 Wis. 591, 612, 79
N.W. 1081 (1899)).
19
Hustisford, 208 Wis. at 370.
22
No. 2016AP923-W
• The Order of Reference broadly delegates to the
referee the authority to decide all motions, whether
discovery or dispositive.
• The Order of Reference is apparently used with some
frequency in Milwaukee County, and the appointment of
referees may become an increasingly common practice in
the circuit courts.
• This court has not recently reviewed the permissible
scope of references under Wisconsin law.
• The case presents significant state constitutional
issues having statewide importance relating to core
functions of the circuit courts and access to the
courts.
• If this court does not review the validity of the
Order of Reference at this time, the parties will
endure great hardship; they will have to submit to a
long and expensive reference and then trial before
being afforded the opportunity to seek relief on
appeal. And after trial and appeal if the reference
is held invalid, the parties will again be at the
discovery stage.20
20
Hustisford, 208 Wis. at 371-72 (holding that a
postjudgment appeal regarding a compulsory reference justifies
this court's exercise of supervisory power and issuance of a
writ of mandamus); Killingstad v. Meigs, 147 Wis. 511, 517, 133
N.W. 632 (1911) (holding that an unauthorized compulsory
reference is a material and reversible error).
23
No. 2016AP923-W
¶50 We therefore use our constitutional superintending
authority to declare the rights of the parties in the instant
case.
III
¶51 Hicks argues that Newtek has sat on its rights too
long by participating in proceedings with the referee for about
a year without objection to the Order of Reference and then
objecting only after it received an adverse summary judgment
ruling. The argument is that Newtek has waived or forfeited its
right to challenge the Order, is estopped from challenging the
Order, or has impliedly consented to the Order.21 We now turn to
whether this court should address the validity of the Order of
Reference regardless of whether Newtek has not promptly
challenged the Order.
¶52 Hicks raises an important point: Litigants should
object to an Order of Reference promptly. Otherwise, litigation
will become more protracted and costly. "If a party wishes to
contest the reference, it should move the court to revoke the
reference." Ehlinger v. Hauser, 2010 WI 54, ¶77, 325
Wis. 2d 287, 785 N.W.2d 328.
¶53 Newtek offers reasons for its delay in objecting to
the reference. We need not decide, however, whether Newtek was
justified in failing to object more promptly. Rules of
21
For a discussion of the concepts of waiver and
forfeiture, see State v. Ndina, 2009 WI 21, ¶29, 315
Wis. 2d 653, 761 N.W.2d 612.
24
No. 2016AP923-W
forfeiture and waiver are rules of judicial administration, and
thus, a reviewing court may disregard a waiver or forfeiture and
address the merits of an unpreserved issue in an appropriate
case.22
¶54 Hicks urges that Newtek's participation in proceedings
before the referee and Newtek's failure to seek relief from the
Order of Reference promptly were tantamount to Newtek's
impliedly consenting to the reference and estop Newtek. Newtek
responds that it is not estopped, that affirmative consent——
which it never gave——is necessary to bind a party to non-
judicial dispute resolution (such as arbitration), and that
implied consent cannot provide a referee with authority the law
prohibits a referee from having, citing AT&T Technologies, Inc.
v. Communications Workers of Am., 475 U.S. 643, 648 (1986)
(explaining that arbitration requires affirmative agreement);
and Jovine v. FHP, Inc., 64 Cal. App. 4th 1506, 1531, 76 Cal.
Rptr. 2d 322 (1998) (holding that a party must explicitly
consent to a referee's making substantive rulings). See also In
re L.J., 157 Cal. Rptr. 3d 197, 207 (Cal. Ct. App. 2013)
(explaining that unauthorized referee orders are void and
consent is irrelevant).
¶55 When the constitutional limitations of Article VII,
Section 2 of the Wisconsin Constitution on reference are at
22
See, e.g., State v. McKellips, 2016 WI 51, ¶47, 369
Wis. 2d 437, 881 N.W.2d 258; Vill. of Trempealeau v. Mikrut,
2004 WI 79, ¶17, 273 Wis. 2d 76, 681 N.W.2d 190; Bradley v.
State, 36 Wis. 2d 345, 359–359a, 153 N.W.2d 38 (1967).
25
No. 2016AP923-W
issue, notions of waiver, forfeiture, estoppel, and consent
should not be dispositive. The constitutional limitations on
reference serve institutional and public interests that should
be protected.23 Because the issue presented is significant to
the functioning of the Wisconsin court system and to the public,
and because an important constitutional issue is presented, we
do not treat Newtek's failure to object more promptly as a
waiver, forfeiture, or estoppel to object to the validity of the
reference, or as implied consent to the reference. Rather, we
address the merits of the issues presented under our
constitutional superintending authority.
IV
¶56 We turn now to decide whether the circuit court's
Order of Reference contravenes Article VII, Section 2 of the
Wisconsin Constitution, which vests the "judicial power" of this
state in a unified court system as follows:
Art. VII. Sec. 2. The judicial power of this state
shall be vested in a unified court system consisting
of one supreme court, a court of appeals, a circuit
court, such trial courts of general uniform statewide
jurisdiction as the legislature may create by law, and
a municipal court if authorized by the legislature
under section 14.
¶57 The phrase "judicial power" is not defined in the
Wisconsin Constitution. Nor does the Wisconsin Constitution
vest "judicial power" in a referee. Newtek contends that the
23
Cf. Commodities Futures Trading Comm'n v. Schor, 478 U.S.
833, 848-49 (1986) (discussing Article III of the United States
Constitution).
26
No. 2016AP923-W
Order of Reference in the instant case enables the referee to
impermissibly wield constitutional "judicial power."
¶58 Constitutional judicial power was discussed in State
v. Williams, 2012 WI 59, 341 Wis. 2d 191, 814 N.W.2d 460. In
Williams, we addressed whether a circuit court commissioner's
issuance of a search warrant was an exercise of the judicial
power vested in the unified court system by Article VII, Section
2 of the Wisconsin Constitution. We described the
constitutional "judicial power" as the "ultimate adjudicative
authority of courts to finally decide rights and
responsibilities as between individuals." Williams, 341
Wis. 2d 191, ¶36. Recognizing, however, that the Wisconsin
Constitution contemplated unelected officers (like court
commissioners) exercising certain, limited judicial functions,
we concluded that a court commissioner's issuing a search
warrant was not an impermissible exercise of constitutional
"judicial power."
¶59 No party in the instant case questions the power of a
circuit court to appoint a referee.24 Used properly, a circuit
court's power to appoint and assign functions to a referee is
not unconstitutional and allows circuit courts to provide more
efficient dispute resolution to litigants.
24
Although there is no similar Wisconsin precedent, the
United States Supreme Court has declared that federal courts
have an inherent authority to appoint masters "to aid judges in
the performance of specific judicial duties, as they may arise
in the progress of a cause." Ex parte Peterson, 253 U.S. 300,
312 (1920).
27
No. 2016AP923-W
¶60 Indeed, the power of circuit courts to appoint
referees to assist courts with limited functions can be traced
to Wisconsin's territorial days. This historical role of
referees informs our decision.
¶61 Wisconsin's territorial statutes recognized the use of
special masters in any cause requiring the examination of a
"long account."25 "Actions at law which involved the examination
of a long account might be compulsorily referred ever since the
constitution was adopted, and for a long time before."26
¶62 After adoption of the Wisconsin Constitution, statutes
authorized the appointment of referees to assist trial courts
with matters of long account and limited pretrial functions.
Actions not within the governing statutes could not be referred
to a referee.27
25
See Bd. of Supervisors of Dane Cty. v. Dunning, 20 Wis.
221 (*210), 228 (*216) (1866) ("In Wisconsin, a compulsory
reference was provided for in actions at law requiring the
examination of such accounts, as early as 1839. Stat. 1839, p.
209, § 84.").
The Supreme Court of the Territory of Wisconsin declared
that a reference to a panel of referees to examine a long
account did not violate the United States Constitution's
guarantee of trial by jury. See Rooker v. Norton, 1 Pin. 195
(1842).
26
Killingstad v. Meigs, 147 Wis. 511, 517, 133 N.W.2d 632
(1911).
27
Brown v. Runals, 14 Wis. 755, 761 (1861); Killingstad,
147 Wis. at 514-15.
28
No. 2016AP923-W
¶63 Shortly after adoption of the Wisconsin Constitution,
this court declared that limited use of referees was
constitutional because their use dated to pre-constitution
days.28 The state constitution "did not take away this right of
reference, but only provided that the right of trial by jury
should remain as it was before . . . ."29
¶64 Although these early cases recognized that a reference
was not a per se violation of the Wisconsin Constitution and
that a referee had only the functions conferred by the order of
reference,30 the cases also recognized that appointment of a
referee is for the exceptional case,31 and that the power to
refer was not limitless. For example, a referee's report was
28
Dunning, 20 Wis. at 228 (*216).
29
Dunning, 20 Wis. at 228 (*216); Stilwell v. Kellogg, 14
Wis. 499, (1861).
30
Best v. Pike, 93 Wis. 408, 414, 67 N.W. 697 (1896); Knips
v. Stefan, 50 Wis. 286, 6 N.W. 877, 880 (1880); Stone v.
Merrill, 43 Wis. 72 (1877).
31
Knips v. Stephan, 50 Wis. 286, 290, 6 N.W. 877 (1880)
("The right to have the issues determined by a referee and the
court, against the consent of either party, is the
exception . . . .").
See also Ehlinger v. Hauser, 2010 WI 54, ¶89, 325
Wis. 2d 287, 785 N.W.2d 328.
29
No. 2016AP923-W
not self-executing and required a court order to have the force
of law.32
¶65 Furthermore, Article VII, Section 19 barred the office
of masters in chancery entirely.33 Historically, masters in
chancery in equity cases had their functions balloon as courts
referred entire matters to them, and every proceeding before the
master carried a fee. This use of masters to decide cases for
fees led to substantial abuses that increased the costs of
litigation and caused delays. Prohibitive costs and time-
consuming delay were viewed as violating a litigant's right to a
speedy trial as much as no trial at all. As a result, the 1848
Wisconsin Constitution banned masters in chancery.34
32
Fairbanks v. Newton, 46 Wis. 644, 645, 1 N.W. 335 (1879)
("[T]he report of itself entitles neither party to
judgment. . . . It is the duty of the circuit court thereupon,
before judgment, to hear the parties, and to make an order
sustaining or overruling the exceptions, and confirming, setting
aside or modifying the report.").
33
Article VII, Section 19 of the pre-1977 Wisconsin
Constitution provided: "The testimony in causes in equity shall
be taken in like manner as in cases at law, and the office of
master in chancery is hereby prohibited."
This provision was repealed in April 1977 when Wisconsin
adopted the unified court system. See 1975 J.R. 13, 1977 J.R.
6.
34
For discussions of the history of the abuses of masters
in chancery in state and federal courts relating to expense and
delay, see Simpson v. Canales, 806 S.W.2d 802, 806-08 (Tex. Dt.
Ct 1991); Linda J. Silberman, Masters and Magistrates Part II:
The American Analogue, 50 N.Y.U. L. Rev. 1297 (1975); Irving R.
Kaufman, Masters in the Federal Courts: Rule 53, 58 Colum. L.
Rev. 452, 452 n.4 (1958).
30
No. 2016AP923-W
¶66 Not all references were (or are) barred by the
Wisconsin Constitution. The use of referees serves as a
valuable adjunct to the judicial process. As judicial adjuncts,
however, referees have to be supervised by the circuit court and
their functions restricted. The history of the masters in
chancery teaches that we must guard against the unsupervised and
unrestricted use of referees.
¶67 The United States Supreme Court and federal courts of
appeal have recognized that judges bear primary responsibility
for the work of the courts and that a reference that would serve
to relieve a court of its primary judicial powers is not
permitted under Article III of the United States Constitution.35
35
La Buy v. Howes Leather Co., 352 U.S. 249, 256 (1957)
(appointment of a master to try a case "amounted to little less
than an abdication of the judicial function depriving the
parties of a trial before the court on the basic issues involved
in the litigation."); Ex parte Peterson, 253 U.S. 300, 312
(1920). See also Webster Eisenlohr, Inc. v. Kalodner, 145 F.2d
316 (3d Cir. 1944), cert. denied, 325 U.S. 867 (1945), and
federal court of appeals cases cited by 9 James Wm. Moore &
Joseph C. Spero, Moore's Federal Practice § 53.03[3], n.13 (3d
ed. 2016).
Courts have expressed concern over the appointment of
masters to consider dispositive pretrial motions. The Federal
Advisory Committee Note to Federal Rule of Civil Procedure 53
states: "At the extreme, a broad delegation of pretrial
responsibility as well as a delegation of trial responsibilities
can run afoul of Article III [of the United States
Constitution]."
(continued)
31
No. 2016AP923-W
Article III preserves to litigants their interest in an
impartial and independent federal adjudication of claims within
the judicial power of the United States and serves as a
significant part of the constitutional system of checks and
balances, preventing legislative transfer of jurisdiction to
emasculate the constitutional courts.36
¶68 Federal courts have attempted to delineate when a
master assists a federal judge versus when a master
unconstitutionally displaces a federal judge as adjudicator.
¶69 In La Buy v. Howes Leather Co., 352 U.S. 249 (1957),
the Court affirmed the Seventh Circuit's issuance of a writ of
mandamus directing the district court to vacate a reference to a
special master. The reference essentially transferred the
For discussions of the use and limitations of masters in
the federal courts, see Margaret G. Farrell, The Function and
Legitimacy of Special Masters: Administrative Agencies for the
Courts, 2 Widener L. Symp. J. 235 (1997); Irving R. Kaufman,
Master in the Federal Courts: Rule 53, 58 Colum. L. Rev. 452
(1958); 9C Charles A. Wright & Arthur R. Miller, Federal
Practice and Procedure 2601-15 (3d ed. 2008); 9 James Wm. Moore
& Joseph C. Spero, Moore's Federal Practice ch. 53 (3d ed.
2016).
For a discussion of Article III courts and the
congressional power to create legislative courts, see Erwin
Chemerinsky, Federal Jurisdiction ch. 4 (7th ed. 2016).
For discussions of referees in Wisconsin and Wis. Stat.
§ (Rule) 805.06, see 3A Jay E. Grenig, Wisconsin Practice
Series: Civil Procedure § 506.1-.8 (4th ed. 2010); Patricia
Graczyk, The New Wisconsin Rules of Civil Procedure Chapters
805-807, 59 Marq. L. Rev. 671, 680-85 (1976).
36
Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833,
850 (1986).
32
No. 2016AP923-W
entire case, including the trial, to the master. Giving such
broad duties to a special master "amounted to little less than
an abdication of the judicial function depriving the parties of
a trial before the court on the basic issues involved in the
litigation." La Buy, 352 U.S. at 256. The Court noted that
while masters could "aid judges" in the performance of limited
duties, they could not be permitted to "displace the court." La
Buy, 352 U.S. at 256.
¶70 Although the issue in La Buy was a trial conducted by
a special master, the language and reasoning of the opinion have
been applied by federal and state courts to the use of special
masters or referees at all stages of litigation. These courts
have scrutinized appointments of special masters or referees to
prevent them from replacing the judge in settings beyond the
trial itself.
¶71 When a federal district judge "referred an apparently
urgent and contentious civil controversy to a special master,
virtually for all purposes," the federal Court of Appeals for
the District of Columbia Circuit instructed the district judge
to revise the order of reference and "not delegate to the
special master [ ] the core function of making dispositive
rulings, including findings of fact and conclusions of law on
issues of liability."37 The D.C. Circuit Court of Appeals struck
down this broad reference because trial courts "ha[ve] no
37
In re Bituminous Coal Operators' Ass'n, 949 F.2d 1165,
1166 (D.C. Cir. 1991).
33
No. 2016AP923-W
discretion to impose on parties against their will 'a surrogate
judge,' a substitute from the private bar charged with
responsibility for adjudication of the case."38
¶72 The concern that a master will effectively replace the
trial judge is especially apt when the master decides
dispositive motions. "Determining bottom-line legal questions
is the responsibility of the court itself."39
¶73 In United States v. Microsoft Corp., 147 F.3d 935,
954-955 (D.C. Cir. 1998), the federal Court of Appeals for the
District of Columbia Circuit vacated a reference to a special
master to determine compliance under a consent decree. The
court of appeals rejected the United States' argument that
having a special master oversee the implementation of a consent
decree is a "well-established tradition." Microsoft Corp., 147
F.3d at 954. Reasoning, instead, that the special master's
duties involved interpretation and were "no more 'remedial' than
would be those of any total referral of a contract case," the
court held that the reference was fatally flawed because it
38
In re Bituminous Coal Operators Ass'n, 949 F.2d at 1168;
Stauble v. Warrob, 977 F.2d 690, 695 (1st Cir. 1992) ("Because
Rule 53 cannot retreat from what Article III requires, a master
cannot supplant the district judge. Determining bottom-line
legal questions is the responsibility of the court itself."
(citation omitted)).
39
Stauble v. Warrob, Inc., 977 F.2d 690, 695 (1st Cir.
1992); accord Prudential Ins. Co. v. U.S. Gypsum Co., 991 F.2d
1080, 1084 (3rd Cir. 1993) (explaining that summary judgment and
other dispositive motions "must be resolved prior to trial" and
"traditionally have been decided by judges").
34
No. 2016AP923-W
turned on the "determination of rights . . . ." "[S]pecial
masters may not decide dispositive pretrial motions." Microsoft
Corp., 147 F.3d at 954 (citing In re United States, 816 F.2d
1083, 1090 (6th Cir. 1987)).40
¶74 Several state courts also have not permitted circuit
courts to delegate authority to a non-judge to decide
dispositive motions or make legal determinations of rights.
See, e.g., Salt Lake City v. Ohms, 881 P.2d 844, 848 (Utah 1994)
(referees cannot "exercise th[e] judge's ultimate judicial
power, for such is a nondelegable core judicial function");
Jovine v. FHP, Inc., 64 Cal. App. 4th 1506, 1509, 1523-24 (1998)
(deciding dispositive motions is beyond a referee's authority;
the responsibility to decide cannot be delegated without the
express consent of the parties; the state constitution governs
delegation of judicial power); Russell v. Thompson, 619 P.2d
537, 539 (Nev. 1980) (a general reference by the circuit court
of nearly all contested issues, giving the master the authority
to decide substantially all issues in the case, as well as to be
the fact finder, resulted in "the trial court's function [being]
reduced to that of a reviewing court" and "this type of blanket
40
See also Beazer East, Inc. v. Mead Corp., 412 F.3d 429,
442 (3rd Cir. 2005) (holding that a special master could not
perform CERCLA equitable allocation involving "a complex and
delicate determination of equities"); Burlington N.R.R. v. Dept.
of Rev. of Wash., 934 F.3d 1064, 1073 (9th Cir. 1991) (district
court's wholesale reference of the entire case to a master and
rubber stamping of the master's order was abdication of judicial
responsibility and violation of Article III of the United States
Constitution).
35
No. 2016AP923-W
delegation approaches an unallowable abdication by a jurist of
his constitutional responsibilities and duties;" although the
master's report must be confirmed by the court before it is
final, the reference is not saved "because the scope of review
is so limited.").
¶75 Our court, however, has not decided the outer limits
placed by the state constitution on the use of referees. But
the Wisconsin Supreme Court very early declared that referees
may share in judicial labor but cannot assume the place of the
judge. "[C]onstitutional judges . . . can take [no power] from
the legislature, to subdelegate their judicial functions."41
41
In Van Slyke v. Trempealeau Co. Farmers' Mut. Fire Ins.
Co., 39 Wis. 390, 392, 396 (1876), the court stated:
It seems too manifest for discussion that, under the
constitution, no one can hold a circuit court but a
circuit judge. . . . If the statute before us could be
upheld, we do not see why one could not which should
assume to give to the parties, in all actions, in all
courts, power to stipulate the judges off the bench,
and private persons into their seats. Judicial power
is one of the attributes of sovereignty, necessarily
delegated in its exercise. The constitution does not
leave the delegation loose at the discretion of the
legislature. It delegates the judicial power to
constitutional courts, to be held by constitutional
judges. And these constitutional judges take no power
from the constitution, can take none from the
legislature, to subdelegate their judicial functions.
. . . .
[T]he circuit judge might be likened to the
sun . . . and [the referee] to the moon . . . shining
with delegated jurisdiction. But the constitution
mars the comparison. For by the astronomical
constitution the sun appears to take power to delegate
(continued)
36
No. 2016AP923-W
¶76 Because courts cannot delegate their judicial power,
the reasoning of the federal and state cases barring courts from
delegating core judicial powers——that is, powers to conduct
trials, decide dispositive motions, or determine fundamental
rights——provides a compelling measuring stick to determine
whether the circuit court in the instant case impermissibly
delegated judicial power to the referee.
¶77 In the instant case, as we stated previously, the
Order of Reference enables the referee to hear and decide all
motions filed, whether discovery or dispositive, subject to
review under the standard of erroneous exercise of discretion.
We conclude that this Order impermissibly delegates
constitutional "judicial power" to a referee, prohibiting the
circuit court from freely rejecting the referee's rulings and
conducting its own independent inquiry and reducing the function
of the circuit court to that of a reviewing court.
¶78 Insofar as the Order of Reference in the instant case
gave the referee the "full authority of the [circuit] Court to
hear and decide" all motions filed, including the authority to
his functions of lighting the world; while the state
constitution tolerates no such delegation, and
appoints a sun only, without any moon, as luminary of
the circuit court, whose "gladsome light of
jurisprudence" must be sunshine only, not moonshine.
Commissioners, masters, referees, and like judicial
subordinates, may share in judicial labor and lighten
it; but they cannot change places with the judge on
the bench or share in the final judgments of the
court.
37
No. 2016AP923-W
hear and decide motions for injunctive relief, for partial
summary judgment, or to limit evidence at trial, counsel for the
circuit court and Judge DiMotto makes two arguments in the
Order's defense.
¶79 Counsel for the circuit court and Judge DiMotto first
argues that the circuit court decided these issues de novo even
though the Order of Reference declared that the circuit court
would use the erroneous exercise of discretion standard, and
that this de novo review of the referee's rulings cured any
constitutional defects. Second, counsel argues that this court
should postpone ruling on whether the Order of Reference is
valid in authorizing the referee to decide these issues until a
possible ultimate appeal on the merits.
¶80 We disagree with counsel. Although Newtek contends
that the circuit court did not actually exercise de novo review,
we need not decide the actual nature of the circuit court's
review of the referee's rulings. Our focus in the instant case
is on the validity of the Order, not on the conduct of the
circuit court.42
42
Some federal courts have concluded that an improper
delegation of traditional adjudicatory functions is not saved by
de novo district court review of the master's ruling. See
Microsoft Corp., 147 F.3d at 956 (citing Stauble v. Warrob,
Inc., 977 F.2d 690, 698 n.13 (1st Cir. 1992), and In re
Bituminous Coal Operators' Ass'n, 949 F.2d 1165, 1168 (D.C. Cir.
1991). See also Beazer East, Inc. v. The Mead Corp., 412 F.3d
429, 444-45 (3d Cir. 2005).
38
No. 2016AP923-W
¶81 We also are not willing to delay consideration of the
validity of the Order until after judgment is entered because,
as we previously explained, the parties will be irreparably
harmed should a decision on the validity of the Order of
Reference be delayed until after final judgment and appeal.
¶82 In sum, we conclude that the Order of Reference
impermissibly delegated to the referee judicial power
constitutionally vested in Wisconsin's unified court system. A
referee may share judicial labor, but the Order of Reference may
not allow a referee to assume the place of the judge.
Accordingly, the Order does not survive Newtek's constitutional
challenge.
V
¶83 We examine whether the provision in the circuit
court's Order of Reference that the circuit court's review of
the referee's "rulings" shall be based only on the referee's
"erroneous exercise of discretion" contravenes the constitution43
and statutes or rules44 regarding circuit court and appellate
court authority and practice.
¶84 The Order of Reference provides for circuit court
review of a referee's ruling under the erroneous exercise of
discretion standard.
43
See, e.g., Wis. Const. art. VII, §§ 2, 8.
44
See, e.g., Wis. Stat. ch. 808.
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¶85 This standard is not the same standard as a court's de
novo review. In a de novo review, the reviewing court reaches
whatever decision it would reach independently of the decision
of the prior decision maker. In contrast, a circuit court that
reviews a referee's ruling under the erroneous exercise of
discretion standard is using the standard of review an appellate
court ordinarily uses to review certain rulings of a circuit
court.
¶86 Under the erroneous exercise of discretion standard,
an appellate court may affirm the circuit court's ruling even
though the appellate court would not necessarily reach the same
decision independently of the prior decision maker. Thus, the
Order of Reference gives the appearance of an abdication of the
circuit court's responsibility to exercise independent judgment.
¶87 The Order of Reference further gives the appearance of
granting appellate authority to the circuit court when the
legislature has not granted such appellate authority. Article
VII, Section 8 of the Wisconsin Constitution provides that "the
circuit court shall have . . . such appellate jurisdiction in
the circuit as the legislature may prescribe by law." The
legislature has not granted the circuit courts appellate
jurisdiction over rulings by referees.
¶88 We therefore conclude that the provision in the
circuit court's Order of Reference that the circuit court's
review of the referee's "rulings" shall be based on the
referee's "erroneous exercise of discretion" contravenes the
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constitution, statutes, and rules regarding circuit court and
appellate court authority and practice.
VI
¶89 We turn to the question of whether the circuit court's
Order of Reference contravenes the parties' right to "obtain
justice freely, and without being obliged to purchase it"
guaranteed by Article I, Section 9 of the Wisconsin
Constitution, or with due process of law, guaranteed by Article
I, Section 1 of the Wisconsin Constitution, or with Newtek's
right to a jury trial, guaranteed by Article I, Section 5 of the
Wisconsin Constitution.45
¶90 Newtek argues that the Order of Reference deprived it
of its constitutional rights to present its claims and defenses
to a court of competent jurisdiction.
¶91 Wisconsin's constitutional framers, taking heed of
Article 40 of the Magna Carta,46 provided in Article I, Section 9
as follows:
45
Newtek asserts that the substantive rulings of the
referee regarding its property interests in confidential
information and its contractual rights to prevent Hicks from
improperly using Newtek's goodwill and proprietary information
deprived Newtek of property rights without due process, namely
the right to be heard by the circuit court. We need not reach
this issue.
46
Article 40 of the Magna Carta provides: "To none will we
sell, to none will we deny, or delay, right or justice".
(continued)
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Every person is entitled to a certain remedy in the
laws for all injuries, or wrongs which he may receive
in his person, property, or character; he ought to
obtain justice freely, and without being obliged to
purchase it, completely and without denial, promptly
and without delay, conformably to the laws.
Wis. Const. art. I, § 9.
¶92 The guarantee of Article I, Section 9 that "[e]very
person is entitled to a certain remedy in the laws" does not
mean a remedy that must be accompanied by a certainty of
recovery. This provision guarantees to every litigant a day in
a court of competent jurisdiction to present claims for judicial
relief; the litigant may either win or suffer defeat, according
to the case presented.47
See, e.g., Aicher ex rel. LaBarge v. Wis. Patients Comp.
Fund, 2000 WI 98, ¶42, 237 Wis. 2d 99, 121, 613 N.W.2d 849, 862
("Our decisions trace [art. I, § 9's] origin to Paragraph 40 of
the Magna Carta, which states: "To none will we sell, to none
will we deny, or delay, right or justice.") (citing Vol. I
Wisconsin Statutes 1898, Sanborn and Berryman's Annotations at
9).
47
New York Life Ins. Co. v. State, 192 Wis. 404, 412, 211
N.W. 288 (1926), error dismissed, 276 U.S. 602 (1928).
42
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¶93 Article I, Section 9 does not bar litigants from
having to pay reasonable court costs and fees, including referee
fees.48
¶94 Neither party argues that the $45,000 fee amounts to a
bribe or was unreasonable in amount. Neither party seeks a
partial or full refund of the fees paid.
¶95 The circuit court was right when it advised the
parties that the referee "doesn't come cheap." It encouraged
the parties to consider the cost of the referee in deciding
whether to raise issues and in making settlement decisions. A
referee's fees increase the costs of litigation and thus may
have a chilling effect on litigants. If the expenses are not
circumscribed, people with meritorious claims will be
48
For discussions of Article I, Section 9, see, e.g.,
Aicher v. Wis. Patients Comp. Fund, 2000 WI 98, ¶¶41-47, 237
Wis. 2d 99, 613 N.W.2d 849; Makos v. Wis. Masons Health Care
Fund, 211 Wis. 2d 41, 52-54, 59-68, 78-87, 546 N.W.2d 662
(1997); Treiber v. Knoll, 135 Wis. 2d 58, 72-74, 398 N.W.2d 756
(1987); Manitowoc v. Manitowoc & N. Traction Co., 145 Wis. 13,
18, 129 N.W. 925 (1911) (granting relief should not be made
dependent on ability to furnish bond); Reistad v. Manz, 11
Wis. 2d 155, 159, 105 N.W.2d 324 (1960), overruled on other
grounds by Hansen v. A.H. Robins, Inc., 113 Wis. 2d 550, 335
N.W.2d 578 (1983); Mulder v. Acme-Cleveland Corp., 95
Wis. 2d 173, 189, 290 N.W.2d 276 (1980); Portage Cty. v.
Steinpreis, 104 Wis. 2d 466, 476-77, 312 N.W.2d 731 (1981);
Christianson v. Pioneer Furniture Co., 101 Wis. 2d 343, 347-48,
77 N.W. 174 (1898); State ex rel. Baker v. Cty. Court of Rock
Cty., Branch I, 29 Wis. 2d 1, 12, 138 N.W.2d 162, 168 (1965)
(Article I, Section 9 "guarantees that persons will not have to
bribe or make arbitrary payments to officials in order to obtain
justice.").
43
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discouraged from pursuing them in court because they cannot
afford to go to court.
¶96 A reference to a referee in effect requires litigants
to pay for the court system twice——once through the tax system
and a second time by paying fees to a referee for resolution of
their suit.
¶97 We need not decide this case on the basis of Article
I, Section 9. Nevertheless, we note that appointment of a
referee is for the exceptional case; it is not the general rule.
Furthermore, as Hicks correctly acknowledged, referee fees may
offend constitutional mandates "if they chill advocacy severely
enough to 'effectively end the litigation' or impose 'an
intolerable burden on a losing litigant,'" citing Peter v.
Progressive Corp., 986 P.2d 865, 873 (Alaska 1999). Hicks notes
that Newtek has not attempted to demonstrate that the referee's
fees in the instant case rise to this level. We therefore do
not rest our decision on Article I, Section 9 of the Wisconsin
Constitution.
¶98 The costs of litigation can price people out of the
constitutionally established state judicial system. Yet justice
should be available to all persons regardless of financial
means. The Wisconsin Constitution embodies the principle that
courts are an essential and integral part of Wisconsin's
government, open to the people, and the cost thereof is borne as
a public expense.
¶99 Circuit courts must heed the admonitions of the Alaska
Supreme Court, which warned of denying litigants the right of
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access to courts and due process by appointment of referees as
follows:
More fundamentally, all potential litigants——not just
those who are indigent——have a constitutional right in
Alaska of meaningful access to the justice system.
Prohibitively high master's fees could potentially
jeopardize such access. . . . Even if an imposition of
costs or fees is valid on its face, it may offend due
process because it operates to foreclose a particular
party's opportunity to be heard. We believe the
ultimate test . . . is whether the [cost] is so great
that it imposes an intolerable burden on a losing
litigant which, in effect, denies the litigant's right
of access to the courts.
Peter v. Progressive Corp., 986 P.2d 865, 872-73 (Alaska 1999)
(internal quotation marks and citations omitted). The
California court of appeals similarly stated:
Allowing trial courts routinely to shift their
responsibilities to private judges unfairly requires
the litigants, who are already paying taxes to fund
the operation of the courts, to also bear the very
substantial cost of private judges . . . . [S]uch a
burden ultimately could discourage . . . meritorious
claims . . . .
Jovine v. FHP, Inc., 64 Cal. App. 4th 1506, 1531 (1998).
¶100 In addition to raising Article I, Section 9 concerns
and access to justice concerns, Newtek also raises due process
issues. Basic to due process is procedural fairness——notice,
the opportunity to be heard, and the accurate and fair
adjudication of disputes. Delay and expense may deprive
litigants of the fair adjudication of their disputes guaranteed
by due process.
¶101 Newtek asserts that the substantive rulings of the
referee regarding its property interests in confidential
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information and its contractual rights to prevent Hicks from
improperly using Newtek's good will and proprietary information
deprived Newtek of property rights without due process, that is,
the right to be heard by the circuit court.
¶102 We need not and do not decide the instant case on the
due process clause of Article I, Section 1. It is important,
however, to take note of the court's statement in Piper v. Popp,
167 Wis. 2d 633, 644, 482 N.W.2d 353 (1992), describing the
constitutional creation of the court system and due process as
ensuring access to the courts as follows:
[W]e begin with the axiom that before the state may
deprive an individual of life, liberty or property,
the state must accord the individual a meaningful
opportunity to be heard. In other words, litigants
must be given their day in court. Access to the
courts is an essential ingredient of the
constitutional guarantee of due process. Whatever the
precise status of the right of access to the courts,
due process is satisfied "if the procedures provide an
opportunity to be heard at a meaningful time and in a
meaningful matter."49
¶103 Finally, Newtek asserts, inter alia, that the Order
contravenes Newtek's constitutional right to a trial by jury by
49
Piper v. Popp, 167 Wis. 2d 633, 644, 482 N.W.2d 353
(1992) (footnote omitted) (citing State ex rel. Strykowski v.
Wilkie, 81 Wis. 2d 491, 512, 261 N.W.2d 434 (1987) (citing
Mathews v. Eldridge, 424 U.S. 319, 335 (1976))). See also
Penterman v. Wis. Elec. Power Co., 211 Wis. 2d 458, ¶25, 565
N.W.2d 521 (1997) (the right of access to the courts is secured
by the First and Fourteenth Amendments and "exists where the
claim has a 'reasonable basis in fact or law'"; "Judicial access
must be 'adequate, effective and meaningful'" (quoted sources
omitted).).
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authorizing the referee to make binding determinations of fact,
citing In re Peterson, 253 U.S. 300, 310-11 (1920).50 In view of
our decision that the Order of Reference contravenes Article
VII, Section 2 of the Wisconsin Constitution, which vests
judicial power in the unified court system, we need not and do
not reach the issue of whether the Order comports with or
contravenes the right to jury trial guaranteed by Article I,
Section 5.51
VII
¶104 The last two issues we must address are whether any
orders of the referee survive and whether we should grant
Newtek's request that we direct that a new judge be assigned on
remand.
¶105 Certain discovery orders survive. Insofar as the
Order of Reference in the instant case authorized the referee to
supervise pretrial discovery disputes, the Order did not
contravene the Wisconsin Constitution's vesting of judicial
power in a unified court system. Discovery issues are often
50
The court held in In re Peterson, 253 U.S. 300, 310-11
(1920), that the appointment of an auditor by the federal judge
to make and file a report with a view to simplifying the issues
for the jury but not to finally determine any of the issues in
the action was not an unconstitutional interference with the
jury's determination of fact; the auditor's report was to be
admitted at the jury trial as evidence of the facts and findings
embodied therein.
51
We note that the 2003 revised version of Federal Rule of
Civil Procedure 53 permits appointment of a trial master in an
action to be tried by jury only if the parties consent.
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referred to a master in federal courts. 9C Charles A. Wright &
Arthur R. Miller, Federal Practice and Procedure § 2602.1 (3d
ed. 2008). Indeed, masters have been particularly helpful for
overseeing discovery in complex federal cases. 9 James Wm.
Moore & Joseph C. Spero, Moore's Federal Practice
§ 53.10[3][c][ii] (3d ed. 2016).
¶106 Accordingly, if neither party raised an objection to a
referee's ruling or order on discovery, that ruling or order
remains in full force and effect. If, however, either party
raised an objection to a referee's ruling or order on discovery
(whether or not reviewed by the circuit court), that ruling or
order is vacated.
¶107 Because the Order of Reference impermissibly
authorized the referee to rule on dispositive motions, any such
referee rulings and the circuit court's orders adopting the
referee's recommended rulings on dispositive motions, such as
the parties' motions for summary judgment, are vacated.
¶108 Finally, Newtek requests that we direct that a new
judge be assigned to the matter on remand. Counsel for the
circuit court objects, observing that Wis. Stat. § 801.58(7)
permits a party to request substitution of a judge, within 20
days after the remittitur is filed in the circuit court, "[i]f
upon an appeal from a judgment or upon a writ of error the
appellate court . . . reverses or modifies the judgment or
order . . . ."
¶109 True, the statute limits substitution to appeals and
writs of error, and a petition for a supervisory writ is neither
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an appeal nor a writ of error. But, as counsel for the circuit
court forthrightly explains, this court has stated that Wis.
Stat. § 801.58(7) "'creates an unqualified right to substitution
when further trial court proceedings are necessary after remand
from an appellate court.'" State ex rel. J.H. Findorff v.
Circuit Court for Milwaukee County, 2000 WI 30, ¶13, 233
Wis. 2d 428, 608 N.W.2d 679 (quoting State ex rel. Oman v.
Hunkins, 120 Wis. 2d 86, 91, 352 N.W.2d 220 (Ct. App. 1984)).
¶110 Because we reverse orders of the circuit court and
remand this matter to the circuit court for further proceedings,
and this matter seems to fall within the reach of Wis. Stat.
§ 801.58(7), we permit either party to seek a substitution of
judge pursuant to the procedures set forth in Wis. Stat.
§ 801.58(1) and (7). Because there is no record in this court
in the instant case to be remitted, the 20-day period provided
in Wis. Stat. § 801.58(7) should be triggered by this court's
transmittal of its judgment and opinion to the circuit court.
See Wis. Stat. § (Rule) 809.26(2).
¶111 For the reasons set forth, we conclude as follows:
1. Newtek's petition for a supervisory writ does not meet
the requirements set forth in Wis. Stat.
§ (Rule) 809.71. The petition was not first filed in
the court of appeals and Newtek has failed to show
that it was impractical to file the petition in the
court of appeals. We do, however, exercise our
constitutional superintending authority under Article
VII, Section 3(2) of the Wisconsin Constitution to
49
No. 2016AP923-W
determine the validity of the Order of Reference. A
declaration of rights is an appropriate vehicle for an
exercise of the superintending authority over circuit
courts constitutionally granted to this court.52
2. Regardless of whether Newtek has waived or forfeited
its right to challenge the Order of Reference, is
estopped from challenging the Order, or has impliedly
consented to the reference, this court may resolve the
issue of the validity of the Order of Reference under
its constitutional superintending authority.
3. The Order of Reference impermissibly delegated to the
referee judicial power constitutionally vested in
Wisconsin's unified court system. Accordingly, the
Order does not survive Newtek's constitutional
challenge.
4. The circuit court's Order of Reference, including the
provision that the circuit court's review of the
referee's "rulings" shall be based only on the
referee's "erroneous exercise of discretion,"
contravenes the constitution, statutes, and rules
regarding circuit court and appellate court authority
and practice. It infringes on the legislature's
authority to define a circuit court's appellate
jurisdiction.
52
State ex rel. Memmel v. Mundy, 75 Wis. 2d 276, 281, 249
N.W.2d 573 (1977).
50
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5. We do not decide the instant case on the basis of
Article I, Section 9 of the Wisconsin Constitution,
the due process clause of Article I, Section 1 of the
Wisconsin Constitution, or the right to jury trial of
Article I, Section 5 of the Wisconsin Constitution,
but we note that reference to a referee is the
exception, not the rule; that there are constitutional
limits on the powers of a referee; and that a
reference can jeopardize a litigant's access to the
justice system, due process, and right to a jury
trial. The Wisconsin Constitution requires the state
to provide a judicial system for the resolution of
disputes. Access to state courts for conflict
resolution is thus implicit in the state constitution.
We express our concern that the use of referees
increases the costs of litigation and may cause delay
and, as a practical matter, may deprive litigants of
access to the courts.
6. To the extent the parties have agreed to abide by an
order or ruling of the referee relating to discovery,
that ruling or order shall stand. To the extent
either party has objected to an order or ruling of the
referee relating to discovery, that ruling or order
shall be vacated. Any ruling or order of the referee
on a dispositive motion is vacated. Either party may
request substitution of the judge pursuant to Wis.
Stat. § 801.58(1) and (7).
51
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By the Court.—The petition for supervisory writ is denied.
Rights declared.
52
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ATTACHMENT A
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No. 2016AP923-W.akz
¶112 ANNETTE KINGSLAND ZIEGLER, J. (concurring in part,
dissenting in part). The court denies Newtek's petition for a
supervisory writ. I join that denial. I depart, however, from
the court's decision to nevertheless address broader underlying
issues because this court's determination should end with the
fact that Newtek's petition fails for procedural reasons. I
will now discuss why I depart from my colleagues.
¶113 Under Wis. Stat. § (Rule) 809.71:
A person seeking a supervisory writ from the supreme
court shall first file a petition for a supervisory
writ in the court of appeals under s. 809.51 unless it
is impractical to seek the writ in the court of
appeals. A petition in the supreme court shall show
why it was impractical to seek the writ in the court
of appeals . . . .
Wis. Stat. § (Rule) 809.71. Newtek did not first file a
petition for a supervisory writ in the court of appeals. Nor
did Newtek provide an adequate justification for its failure to
do so (Newtek points only to the fact that the court of appeals
denied its procedurally and substantively dissimilar request to
appeal from a nonfinal order).
¶114 Even if Newtek had met Wis. Stat. § (Rule) 809.71,
under our precedent "[a] petition for a supervisory writ will
not be granted unless," inter alia, "the request for relief is
made promptly and speedily." Burnett v. Alt, 224 Wis. 2d 72,
96-97, 589 N.W.2d 21 (1999) (quoting State ex rel. Oman v.
Hunkins, 120 Wis. 2d 86, 91, 352 N.W.2d 220 (Ct. App. 1984) (per
curiam)). Newtek did not meet that condition in this case.
Instead, Newtek failed to take meaningful steps toward obtaining
relief for months while the referee ruled on numerous motions.
1
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¶115 Thus, the court is correct to deny Newtek's petition
for a supervisory writ, and that should be the end of the case.
Nonetheless, the court proceeds to address a number of
constitutional issues and ultimately grants Newtek relief
anyway. I do not agree with court's decision to do so. While
the court raises important issues, it finds itself in a less
than desirable position to fully address these issues. What,
precisely, occurred below was not adequately briefed or argued.
We remain without the benefit of all of the circuit court's
reasoning in its review of the referee's determinations. The
court proceeds to determine the underlying issues without
knowing whether the circuit court agreed or disagreed with the
referee or reached its own conclusions. If the judge did so
independently rule, it could be that it is, at most, harmless
error to have assigned such broad authority initially to the
referee. Because this case should be decided on more narrow
grounds and we are without a full record, I would not
unnecessarily delve into the many complex constitutional
questions the court feels compelled to address.
¶116 Newtek petitioned this court for a supervisory writ.
Simply stated, it did not meet the requirements for the issuance
of the writ. This should end the analysis. Because the court
continues further, I respectfully concur in part and dissent in
part.
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¶117 REBECCA GRASSL BRADLEY, J. (concurring in part,
dissenting in part). Universal Processing Services of
Wisconsin, LLC, doing business as Newtek, petitioned this court
for a supervisory writ only after first acquiescing to discovery
under the Order of Reference (the "Reference"), receiving an
adverse summary judgment decision, and failing to persuade the
court of appeals to grant interlocutory review. Now, Newtek
raises various challenges to the Reference, under which it
engaged in discovery without objection for nearly a year.
Because Newtek's objections are untimely and not properly before
this court, I concur in the majority's decision to deny the
petition for a supervisory writ.1
¶118 Nevertheless, I respectfully dissent from the
majority's declaration of rights pursuant to this court's
superintending authority under the Wisconsin Constitution.
Although I agree with the majority's conclusion that the
Reference impermissibly delegated the circuit court's
constitutionally vested judicial power to the referee,2 I
disagree with its decision to grant retrospective relief to a
party that sat on its rights and did not follow proper
1
Accordingly, I agree with and join the majority opinion’s
analysis in Part II to the extent it concludes "the petition is
not properly before this court." Majority op., ¶36.
2
I join parts I and V of the majority opinion.
Additionally, I join Part IV of the majority opinion, except its
determination that "the parties will be irreparably harmed
should a decision on the validity of the Order of Reference be
delayed until after final judgment and appeal." Majority op.,
¶81. I would not reach the issues discussed in Part VI of the
majority opinion.
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procedures when petitioning this court.3 The majority opinion,
in effect, grants the writ despite technically denying it. I
disagree with the majority's approach and would instead employ
this court's superintending authority to prospectively vacate
the Reference to the extent it violates the Wisconsin
Constitution.4
I
¶119 Two procedural deficiencies hamper Newtek's petition.
First, Newtek skipped the court of appeals without an adequate
justification and instead filed its petition first in this
court. Second, Newtek failed to timely object to the Reference.
Either deficiency alone provides a sufficient basis for denying
the writ; together, they prove fatal. See Burnett v. Alt, 224
Wis. 2d 72, 96, 589 N.W.2d 21 (1999).
A
¶120 Wisconsin Stat. § (Rule) 809.71 (2015-16)5 establishes
the procedure for asking this court to issue a supervisory writ:
A person may request the supreme court to exercise its
supervisory jurisdiction over a court and the judge
presiding therein or other person or body by filing a
petition in accordance with s. 809.51. A person
seeking a supervisory writ from the supreme court
3
I therefore agree with much of Part III of the majority
opinion, except that I would discuss the merits of the petition
prospectively only with respect to these parties, so as to
provide guidance to courts and litigants.
4
As a result, I do not join Part VII of the majority
opinion.
5
All subsequent references to the Wisconsin Statutes are to
the 2015-16 version unless otherwise indicated.
2
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shall first file a petition for a supervisory writ in
the court of appeals under s. 809.51 unless it is
impractical to seek the writ in the court of appeals.
A petition in the supreme court shall show why it was
impractical to seek the writ in the court of appeals
or, if a petition had been filed in the court of
appeals, the disposition made and reasons given by the
court of appeals.
In this case, Newtek did not file a petition for a supervisory
writ in the court of appeals before filing its petition in this
court; consequently, this court will grant the writ only if
Newtek "show[s] why it was impractical to seek the writ in the
court of appeals," as § (Rule) 809.71 requires. See Burnett,
224 Wis. 2d at 96. To justify ignoring the words of the statute
and filing with us first, Newtek explains it "determined that it
would be impractical to petition the court of appeals to issue a
writ directing the circuit court to vacate the appointment"
after "the court of appeals declined to review the referral on
Newtek's petition for interlocutory review."
¶121 Like the majority, I am not persuaded that the court
of appeals' denial of interlocutory review made it impractical
for Newtek to seek a supervisory writ from that court. See
majority op., ¶¶41-44. Interlocutory review and supervisory
writs are distinct procedural devices and implicate different
legal standards. The court of appeals may permit an
interlocutory appeal if it determines that immediate review of a
non-final order will "[m]aterially advance the termination of
the litigation or clarify further proceedings in the
litigation," "[p]rotect the petitioner from substantial or
irreparable injury," or "[c]larify an issue of general
importance in the administration of justice." Wis. Stat.
3
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§ 808.03(2)(a)-(c). By contrast, a "supervisory
writ . . . serves a narrow function: to provide for the direct
control of lower courts, judges, and other judicial officers who
fail to fulfill non-discretionary duties, causing harm that
cannot be remedied through the appellate review process." State
ex rel. Kalal v. Circuit Ct. for Dane Cty., 2004 WI 58, ¶24, 271
Wis. 2d 633, 681 N.W.2d 110.
¶122 Although both legal standards account for possible
irreparable harm in the absence of extraordinary review, they
otherwise diverge: a request for interlocutory review focuses
on efficient resolution of the litigation, whereas supervisory
writ proceedings evaluate whether a judicial officer complied
with obligations under the law. A circuit court's actions may
not warrant interlocutory review on the merits but could
nevertheless require correction by an appellate court exercising
its supervisory authority.
¶123 Newtek presents solely a conclusory claim that
petitioning the court of appeals for a supervisory writ was
impractical, and as the majority correctly holds, we should not
"cast doubt on the continued vitality of the 'impracticality'
requirement." Majority op., ¶44. Because Newtek failed to
follow the statutory procedure for issuance of a writ, this
court should deny the petition.
B
¶124 Also problematic for Newtek is its substantial delay
in raising any objection to the Reference. Even if this court
were to look past Newtek's failure to comply with the procedures
4
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in Wis. Stat. § (Rule) 809.71, Newtek's year-long compliance
with the Reference undermines the merits of its petition. To
obtain a supervisory writ, a party must make four showings: (1)
appeal is an inadequate remedy; (2) grave hardship or
irreparable harm will result from inaction; (3) the circuit
court's duty is plain, and the court violated or intends to
violate that duty; and (4) the request is prompt and speedy.
State ex rel. Two Unnamed Petitioners v. Peterson, 2015 WI 85,
¶80, 363 Wis. 2d 1, 866 N.W.2d 165 (citing Kalal, 271
Wis. 2d 633, ¶17).
¶125 Here, Newtek fails to satisfy the fourth criterion
because its request was neither prompt nor speedy. Instead of
challenging the Reference on the record as soon as the circuit
court entered the order, Newtek assented to discovery under the
referee's supervision for months, accepting many discovery
rulings without objection. Indeed, Newtek's only objections
came when it received unfavorable decisions from the referee:
it objected to some of the referee's discovery decisions under
the procedure specified in the Reference, and it aggressively
challenged the referee's summary judgment determinations in the
circuit court, the court of appeals, and now this court.
¶126 Newtek's delayed objection to the Reference
illustrates why a writ will issue only when a party makes a
prompt and speedy request for relief. In the absence of a
timely-request requirement, a strategic party could
intentionally wait to file a petition for a writ until after the
referee made an adverse decision. That way, the party could
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accept favorable decisions while preserving a method of
collaterally attacking an unacceptably unfavorable one. If the
party suspected or knew from the outset that constitutional
deficiencies marred the reference, it could then rely on a
supervisory writ to secure a "do-over," essentially using the
supervisory writ as an interlocutory appeal——even though a "writ
of supervision is not a substitute for an appeal." Kalal, 271
Wis. 2d 633, ¶17 (quoting State ex rel. Dressler v. Circuit Ct.
for Racine Cty., 163 Wis. 2d 622, 630, 472 N.W.2d 532 (Ct. App.
1991)).
¶127 Nothing prevented Newtek from petitioning the court of
appeals for a supervisory writ as soon as the circuit court made
the Reference. Newtek's counsel acknowledged as much during
oral arguments before this court. The serious problems we
identify with the Reference suggest Newtek likely possessed a
meritorious claim, had it promptly pursued a remedy. But it did
not do so. Because Newtek instead challenged the Reference only
after losing on summary judgment, it failed to timely seek
relief. This failure, coupled with its failure to seek relief
from the court of appeals before petitioning this court for a
supervisory writ, warrants denial of its petition and the
retrospective relief it requested.
II
¶128 Despite the procedural deficiencies in Newtek's
petition, I agree with the majority that this court should
address the merits of the constitutional questions raised by
this Reference. See Kalal, 271 Wis. 2d 633, ¶26 ("Although the
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Kalals have failed to establish the existence of a plain duty
and are not entitled to a supervisory writ, we will address the
statutory interpretation question presented by this case.").
Referees offer circuit courts a valuable tool for efficiently
allocating court time and resources, so questions about the
constitutionally permissible scope of an order of reference are
likely to continue to arise. After thorough briefing and
argument by adverse, interested parties, this petition offers
the court an opportunity to evaluate a particular order for
compliance with the referee statute. Examining the proper use
of statutorily permissible referees allows us to give guidance
to courts and litigants, thus mitigating uncertainty in
Wisconsin courts. In support of that endeavor, I write to
supplement the already comprehensive discussion in Part III of
the majority opinion.
¶129 Our evaluation of the Reference at issue here must
begin with the text of Wis. Stat. § 805.06, which authorizes the
appointment of referees, establishes the circumstances under
which a circuit court may make a reference, and delineates some
powers and tasks that a circuit court may permissibly delegate.
"A court in which an action is pending may appoint a referee,"
§ 805.06(1), but "[a] reference shall be the exception and not
the rule," § 805.06(2). Subsection (2) goes on to explain when
a court may appoint a referee:
In actions to be tried by a jury, a reference shall be
made only when the issues are complicated; in actions
to be tried without a jury, save in matters of account
and of difficult computation of damages, a reference
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shall be made only upon a showing that some
exceptional condition requires it.
Subsection (3) then lays out the referee's powers and the
circuit court's ability to describe and restrain them:
The order of reference to the referee may specify
or limit the referee's powers and may direct the
referee to report only upon particular issues or to do
or perform particular acts or to receive and report
evidence only and may fix the time and place for
beginning and closing the hearings and for the filing
of the referee's report. Subject to the
specifications and limitations stated in the order,
the referee has and shall exercise the power to
regulate all proceedings in every hearing before the
referee and to do all acts and take all measures
necessary or proper for the efficient performance of
duties under the order. The referee may require the
production of evidence upon all matters embraced in
the reference, including the production of all books,
papers, vouchers, documents, and writings applicable
thereto. The referee may rule upon the admissibility
of evidence unless otherwise directed by the order of
reference and has the authority to put witnesses on
oath and may personally examine them and may call the
parties to the action and examine them upon oath.
When a party so requests, the referee shall make a
record of the evidence offered and excluded in the
same manner and subject to the same limitations as a
court sitting without a jury.
Wis. Stat. § 805.06(3). Under the limited circumstances when a
reference is appropriate, § 805.06 affords the circuit court
significant flexibility in assigning responsibilities to the
referee.
¶130 When making a reference under Wis. Stat. § 805.06,
however, a circuit court must remain mindful of its
responsibilities under the Wisconsin Constitution. Cf. Marbury
v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803) ("[A]n act of the
legislature, repugnant to the constitution, is void."). In
Wisconsin, "The judicial power of this state shall be vested in
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a unified court system consisting of one supreme court, a court
of appeals, a circuit court, such trial courts of general
uniform statewide jurisdiction as the legislature may create by
law, and a municipal court if authorized by the
legislature . . . ." Wis. Const. art. VII, § 2. Analogizing to
the federal Constitution, this court has explained that "the
judicial power is the power to hear and determine controversies
between parties before courts," which means that "the judicial
power is the ultimate adjudicative authority of courts to
finally decide rights and responsibilities as between
individuals." State v. Williams, 2012 WI 59, ¶36, 341
Wis. 2d 191, 814 N.W.2d 460.
¶131 As the majority describes, "[a] referee may share
judicial labor, but the Order of Reference may not allow a
referee to assume the place of the judge" by exercising the
judicial power the constitution confers on circuit courts.
Majority op., ¶82. The judicial power vested in the circuit
courts by the constitution places an outer limit on the scope of
permissible delegation to referees. For help identifying that
constitutional boundary, federal appellate court decisions offer
two key insights.6
6
"It is a well-settled principle of Wisconsin law 'that
where a Wisconsin Rule of Civil Procedure is based on a Federal
Rule of Civil Procedure, decisions of the federal courts, to the
extent they show a pattern of construction, are considered
persuasive authority.'" J.L. Phillips & Assocs. v. E & H
Plastic Corp., 217 Wis. 2d 348, 356, 577 N.W.2d 13 (1998)
(quoting Neylan v. Vorwald, 124 Wis. 2d 85, 99-100, 368
N.W.2d 648 (1985)). The current language of Wis. Stat. § 805.06
parallels the language of Rule 53 as it existed before 2003.
See Fed. R. Civ. P. 53, 28 U.S.C. 782 (2000) (amended 2003).
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¶132 First, as the majority notes, an order of reference is
an improper delegation of the judicial power when it grants the
authority to make dispositive decisions. See majority op.,
¶67 n.35, ¶¶72-74. "The use of masters is to aid judges in the
performance of specific judicial duties . . . and not to
displace the court." La Buy v. Howes Leather Co., 352 U.S. 249,
256 (1957) (internal quotation mark omitted) (quoting Ex parte
Peterson, 253 U.S. 300, 312 (1920)). A court issuing an order
of reference must ultimately retain the adjudicative authority
implicated by the judicial power derived from the applicable
constitution. See United States v. Microsoft Corp., 147 F.3d
935, 954 (D.C. Cir. 1998) ("The concern about nonconsensual
references turns on the determination of rights . . . . It is
for this reason that special masters may not decide dispositive
pretrial motions."); Stauble v. Warrob, Inc., 977 F.2d 690, 696
(1st Cir. 1992) ("[R]eference of fundamental issues of liability
to a master for adjudication is not consonant with either Rule
53 or Article III."); Burlington N. R.R. Co. v. Dep't of
Revenue, 934 F.2d 1064, 1072 (9th Cir. 1991) ("[T]he district
court's 'rubber stamp' of the master's order is an inexcusable
abdication of judicial responsibility and a violation of article
III of the Constitution."); In re United States, 816 F.2d 1083,
1091 (6th Cir. 1987) ("[E]ven though the reference of
nondispositive discovery matters may be justified . . . , it
will be the extremely rare case where the reference of a
dispositive matter (be it a pretrial motion for summary judgment
or the actual trial) will be appropriate.").
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¶133 Second, the exceptional circumstances justifying an
order of reference do not exist where the trial court is merely
busy, dealing with a case involving a large number of parties,
or working with an unfamiliar area of law. Most federal
appellate courts point to the Supreme Court's opinion in La Buy
v. Howes Leather Co., 352 U.S. 249 (1957), which made quick work
of several proffered justifications. The Court first concluded
that "congestion [on a court's docket] in itself is not such an
exceptional circumstance as to warrant a reference to a master."
Id. at 259. Neither did the Court accept the case's "unusual
complexity of . . . both fact and law" as an exceptional
circumstance, observing that, "[o]n the
contrary, . . . [complexity] is an impelling reason for trial
before a regular, experienced trial judge rather than before a
temporary substitute appointed on an ad hoc basis." Id. "Nor,"
the Court added, "does . . . the great length of time [that]
trials will require offer exceptional grounds." Id.
¶134 In the decades since the Supreme Court decided LaBuy,
federal appellate courts have maintained a high bar to meet the
exceptional circumstances requirement. See, e.g., Prudential
Ins. Co. of Am. v. U.S. Gypsum Co., 991 F.2d 1080, 1086-87 (3d
Cir. 1993) (observing that no special masters employed in two
cases involving, respectively, 24 foreign electronics producers
and 30,000 school districts across 54 jurisdictions (first
citing In re Japanese Elec. Prods. Antitrust Litig., 723 F.2d
238 (3d Cir. 1983) (subsequent history omitted); then citing In
re Sch. Asbestos Litig., 977 F.2d 764 (3d Cir. 1992))); Stauble,
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977 F.2d at 695 (declining to "forge an 'exceptional condition'
test for cases of blended liability and damages"); In re United
States, 816 F.2d at 1089 ("[T]he interest in a quick resolution
of the case is simply an alternative way of asserting calendar
congestion and the possibility of a lengthy trial as exceptional
conditions . . . ."); Madrigal Audio Labs., Inc. v. Cello, Ltd.,
799 F.2d 814, 818 & n.1 (2d Cir. 1986) (rebuking trial judge for
appointing special master because the judge stated he did not
"understand anything about the merits of any patent or trademark
case" and was "not about to educate [himself] in that jungle");
Jack Walters & Sons Corp. v. Morton Bldg., Inc., 737 F.2d 698,
712 (7th Cir. 1984) (concluding no exceptional condition existed
in case involving "several thousand pages" of documents when
trial court felt it "did not have time for a long trial").
¶135 In light of these principles, the deficiencies in the
Reference here are readily apparent. When informing the parties
of its intent to appoint a referee, the circuit court cited the
450 cases on its docket, explaining that it did not want "to
expend a lot of time dealing with [the parties'] discovery
bickering" or be a "personal slave to [their] discovery
disputes." The court did not want to "waste precious court
time" that it could "give to other cases." On its face, the
final Reference granted the referee "the full authority of the
[c]ourt to hear and decide, subject to [c]ourt review . . . ,
any other matters assigned . . . by the [c]ourt. All motions
filed, whether discovery or dispositive, shall initially be
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heard and decided by the [referee], subject to review processes"
as described elsewhere in the Reference.
¶136 Put plainly, because the circuit court was busy and
did not want to deal with the parties, it gave the referee
authority over all matters in the litigation——including
dispositive pretrial motions. That delegation "amounted to
little less than an abdication of the judicial function
depriving the parties of a trial before the court on the basic
issues involved in the litigation." LaBuy, 352 U.S. at 256.
III
¶137 It is with regard to invocation of this court's
constitutional superintending authority that I depart most
significantly from the majority opinion. The Wisconsin
Constitution provides: "The supreme court shall have
superintending and administrative authority over all courts."
Wis. Const. art. VII, § 3. This court has interpreted its
superintending authority as "a grant of power" that is
"unlimited in extent" and "indefinite in character," State v.
Jerrell C.J., 2005 WI 105, ¶40, 283 Wis. 2d 145, 699 N.W.2d 110
(quoting State v. Jennings, 2002 WI 44, ¶13, 252 Wis. 2d 228,
647 N.W.2d 142), although the precise scope of that authority is
not without controversy, see id., ¶146 (Prosser, J., concurring
in part, dissenting in part).
¶138 Superintending authority is a power that the court
does not and should not use lightly. Arneson v. Jezwinski, 206
Wis. 2d 217, 226, 556 N.W.2d 721 (1996) (citing In re Phelan,
225 Wis. 314, 321, 274 N.W. 411 (1937)). At its core,
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superintending authority "enables the court to control the
course of ordinary litigation in the lower courts of Wisconsin."
Id. (first citing Phelan, 225 Wis. at 320-21; then citing State
ex rel. Fourth Nat'l Bank of Phila. v. Johnson, 103 Wis. 591,
613, 79 N.W. 1081 (1899)). Similar to the court's standard for
issuance of a supervisory writ, "to invoke the superintending
power to correct an error of the trial court, it is necessary to
establish that an appeal from a final judgment is inadequate,
and that grave hardship will follow a refusal to exercise the
power." State ex rel. Hutisford Light, Power & Mfg. Co. v.
Grimm, 208 Wis. 366, 371, 243 N.W. 763 (1932); see also Jerrell
C.J., 283 Wis. 2d 145, ¶145 (Prosser, J., concurring in part,
dissenting in part) ("The purpose of this ['superintending
control over inferior courts'] jurisdiction is to protect the
legal rights of a litigant where the ordinary processes of
action, appeal and review are inadequate to meet the situation,
and where there is need for such intervention to avoid grave
hardship or complete denial of rights." (alterations in
original) (quoting John D. Wickhem, The Power of Superintending
Control of the Wisconsin Supreme Court, 1941 Wis. L. Rev. 153,
161-62)).
¶139 Retrospective application of this court's
superintending authority is not appropriate in this case because
Newtek's delay in seeking relief from the Reference discredits
its claim of grave harm. By objecting to the Reference only
after the referee decided the motion for summary judgment,
Newtek showed its hand: it challenges the referee's authority as
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a means to achieving a different outcome on the merits.
Presumably, Newtek would not have pursued extraordinary relief
to vacate the Reference if the referee had decided summary
judgment and the other challenged discovery decisions in
Newtek's favor. Those decisions present questions reasonably
handled by means of an ordinary appeal, and Newtek should not
now receive extraordinary relief when it submitted to months of
decisions by the referee, protesting only after receiving an
adverse result.
¶140 At the same time, the circuit court's improper
delegation of the judicial power reflects an undeniable
constitutional deficiency in the Reference. Allowing the case
to proceed under the Reference without alteration could lead to
the nonsensical result of the parties completing pretrial
proceedings under an order that this court declared partially
unconstitutional. To the extent any additional proceedings
occur under the Reference, the right of all parties to an
adjudication by a circuit court vested with the judicial power
under the Wisconsin Constitution remains squarely at issue.
Accordingly, prospectively vacating the order to the extent it
contravenes the Wisconsin Constitution is an appropriate,
limited application of our superintending authority over
Wisconsin courts for the purpose of preserving the rights of
these parties going forward.
IV
¶141 On the whole, Wisconsin's circuit courts do an
admirable job of resolving complex disputes amidst crowded
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dockets, and the rules of civil procedure permit them to appoint
a referee to facilitate expeditious resolution of some of those
cases under exceptional circumstances. But when making a
reference as allowed by rule, the circuit courts must heed their
responsibilities under a higher authority, the Wisconsin
Constitution. By improperly delegating judicial power to the
referee, the Reference at issue here transgressed an important
constitutional limitation. Although I would deny the petition
for a supervisory writ because Newtek did not timely present it
in a procedurally proper manner, I conclude that the Reference's
constitutional infirmities require a limited exercise of this
court's superintending power to prospectively vacate the
Reference to the extent it denies these parties their
constitutional rights. I therefore respectfully concur in part
and dissent in part.
¶142 I am authorized to state that Justice DANIEL KELLY
joins this opinion.
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