Mary E. Marlowe v. IDS Property Casualty Insurance Company

2013 WI 29SUPREME COURT OF WISCONSIN
CASE NO.: 2011AP2067
COMPLETE TITLE: Mary E. Marlowe and Leslie R. Marlowe,
Plaintiffs-Respondents-Petitioners,
v.
IDS Property Casualty Insurance Company,
Defendant-Appellant.
REVIEW OF A DECISION OF THE COURT OF APPEALS
Reported at 340 Wis. 2d 594, 811 N.W.2d 894(Ct. App. 2012 – Published)
PDC No: 2012 WI App 51OPINION FILED: April 5, 2013
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: October 4, 2012
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Brown
JUDGE: Donald R. Zuidmulder
JUSTICES:
CONCURRED: ABRAHAMSON, C.J., BRADLEY, J., concur (opinion
filed).
CONCUR & DISSENT: PROSSER, J., concurs in part/dissents in part
(Opinion filed).
NOT PARTICIPATING:
ATTORNEYS:
For the plaintiffs-respondents-petitioners, there were
briefs by Ralph J. Tease Jr. and Rhonda L. Lanford, and Habush,
Habush & Rottier, S.C., Green Bay, and oral argument by Mr.
Tease.
For the defendant-appellant, there were briefs by Michael
P. Konz and Erik L. Fuehrer, and Gabert, Williams, Konz &
Lawrynk, LLP, Appleton, and oral argument by Mr. Konz.
An amicus curiae brief was filed by James Friedman and
Dustin B. Brown, and Godfrey & Kahn, S.C., Madison, on behalf of
the Wisconsin Insurance Alliance, and oral argument by Mr.
Brown.
2
2013 WI 29NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2011AP2067
(L.C. No. 2011CV502)
STATE OF WISCONSIN : IN SUPREME COURT
Mary E. Marlowe and Leslie R. Marlowe,
Plaintiffs-Respondents-Petitioners,
FILED
v.
APR 5, 2013
IDS Property Casualty Insurance Company,
Diane M. Fremgen
Defendant-Appellant. Clerk of Supreme Court
REVIEW of a decision of the Court of Appeals. Modified and
affirmed and, as modified, cause remanded to the arbitration
panel with instructions.
¶1 MICHAEL J. GABLEMAN, J. We review a published
decision of the court of appeals1 reversing the Brown County
Circuit Court's declaratory judgment2 limiting discovery in an
arbitration proceeding to that allowed by Wis. Stat. § 788.07
1
Marlowe v. IDS Property Cas. Ins. Co., 2012 WI App 51, 340
Wis. 2d 594, 811 N.W.2d 894.
2
The Honorable Donald R. Zuidmulder presiding.
No. 2011AP2067
(2009-10).3 Mary E. Marlowe and Leslie R. Marlowe (the Marlowes)
filed a claim with their insurer, IDS Property Casualty
Insurance Company (IDS), for underinsured motorist benefits
after a car accident. The parties were unable to agree on a
settlement and, pursuant to a provision of the insurance policy,
submitted the dispute to an arbitration panel. Prior to the
anticipated arbitration hearing a conflict over discovery arose,4
in which IDS sought broad discovery under Wis. Stat. ch. 804,
the general civil procedure chapter, while the Marlowes refused
to comply with such discovery on the grounds that § 788.07, the
discovery provision designed specifically for arbitration,
controlled, and permitted only the taking of certain
depositions.5 Interpreting the policy's arbitration provision in
light of our decision in Borst v. Allstate Ins. Co., 2006 WI 70,
291 Wis. 2d 361, 717 N.W.2d 42, the arbitration panel decided
3
All subsequent references to state and federal statutes
are to the versions in effect in 2010, when the dispute giving
rise to this case began, unless otherwise indicated.
4
Due to the conflict and the subsequent appeals, the
hearing never took place.
5
The differences between Wis. Stat. § 788.07 and Wis. Stat.
ch. 804 are significant. Section 788.07, which pertains only to
arbitration, limits discovery in arbitration to "the taking of
depositions to be used as evidence before the arbitrators, in
the same manner and for the same reasons as provided by law for
the taking of depositions in suits or proceedings pending in the
courts of record in this state." By contrast, ch. 804, which
applies to civil litigation in the circuit courts, allows for a
wide range of discovery tools, including interrogatories,
production of documents, physical and mental examinations of
parties, inspection of medical documents, and requests for
admissions. See generally ch. 804.
2
No. 2011AP2067
that IDS was entitled to ch. 804 discovery. Unsatisfied, the
Marlowes successfully filed for declaratory judgment in the
circuit court, obtaining an order reversing the arbitration
panel's determination and directing that arbitration discovery
would proceed within the narrow parameters set by § 788.07. The
court of appeals reversed, concluding that the Marlowes were not
permitted to pursue relief from the circuit court before the
panel rendered a final decision on the award, and that full ch.
804 discovery was available to IDS.
¶2 We consider two issues: 1) whether the Marlowes were
permitted to seek a declaratory judgment concerning the
discovery dispute before the arbitration panel ruled on whether
an award was appropriate and, if so, its amount; and 2) whether
the panel properly established discovery procedures outside
those outlined in Wis. Stat. § 788.07. Because no unusual
circumstances justified an interlocutory appeal, we hold that
the Marlowes' action in circuit court was premature. As to the
second question, the legislature has set forth, in the form of
§ 788.07, a narrow scope of discovery for arbitration
proceedings in the absence of an explicit, specific, and clearly
drafted arbitration clause to the contrary. IDS failed to
include any such language in its policy and we therefore
instruct the panel to limit discovery to that provided for in
§ 788.07. Accordingly, we affirm the court of appeals insofar
as it declined to allow the Marlowes an interlocutory appeal.
However, insofar as the court of appeals granted IDS the benefit
of full Wis. Stat. ch. 804 discovery, we modify its decision and
3
No. 2011AP2067
instead direct the panel to cabin discovery to the depositions
contemplated in § 788.07, i.e., "depositions to be used as
evidence before the arbitrators." Thus, the decision of the
court of appeals is modified, and as modified, affirmed, and the
cause is remanded to the arbitration panel with instructions.
I. BACKGROUND
¶3 The relevant facts are few and straightforward. In
2007, Mary Marlowe was involved in a car accident with an
underinsured driver. At the time of the accident, she was
insured by IDS, under a policy that contained a section
providing underinsured motorist coverage. Within that section,
under the heading, "Arbitration," the policy provided that
"[u]nless both parties agree otherwise, arbitration will take
place in the county in which the insured lives. Local rules of
law as to procedure and evidence will apply." (Bold in
original.) The Marlowes submitted a claim to IDS and, after
fruitless settlement discussions, the parties agreed, in
accordance with the policy, that an arbitration panel would
determine whether an award was appropriate and, if so, its
amount.
¶4 To prepare for the arbitration hearing, IDS requested
various types of discovery materials, including interrogatories,
the production of documents, the procurement of medical,
employment, and income tax records, several depositions, and an
independent medical examination. As IDS read the policy, it was
entitled to such materials because the "local rules" referred to
in the arbitration provision were located in Wis. Stat. ch. 804,
4
No. 2011AP2067
which authorizes each of the aforementioned discovery tools.
The Marlowes refused to comply with the request, explaining that
they believed the "local rules" provision was ambiguous, and
consequently understood Borst to limit discovery to the far
narrower boundaries drawn in Wis. Stat. § 788.07, a provision
allowing only for "the taking of depositions to be used as
evidence before the arbitrators."6
¶5 After considering the parties' arguments on the issue,
the arbitration panel ruled in IDS's favor, giving it the
benefit of the broad arsenal of discovery devices described in
Wis. Stat. ch. 804. In the unanimous view of the three
arbitrators, "[t]he term 'local rules of procedure[,'] as the
policy employs it, is both clear and informative. It denotes
the civil rules of procedure that govern court proceedings daily
in local courtrooms." After the panel denied a motion to
reconsider, the Marlowes filed an action in circuit court
seeking a declaration under Wisconsin's Uniform Declaratory
Judgment Act, Wis. Stat. § 806.04, that they had a legal right
not to be subjected to the expansive discovery of ch. 804. The
circuit court agreed and issued the requested order. At the
6
At one point during the clash over the proper scope of
discovery, the Marlowes offered, "in the spirit of attempting to
reach an amicable resolution," to provide, in addition to the
depositions mentioned in Wis. Stat. § 788.07, authorizations for
all of Mary Marlowe's medical records dating back ten years from
the accident, and to make her available for a two hour
deposition. That concession has no bearing on our resolution of
the case, which hinges only on the type of discovery the law
requires, not that which it may allow parties to offer to avoid
unnecessary discord and delay.
5
No. 2011AP2067
hearing where it reached its determination, the circuit court
explained that IDS should have included a more specific
reference to the discovery it desired in its policy if it wanted
to later take advantage of the breadth of ch. 804.
¶6 When the case reached the court of appeals, the tide
returned to IDS's favor. In its decision, the court of appeals
prohibited the Marlowes from turning to the courts before the
arbitration proceedings were complete. Marlowe v. IDS Property
Cas. Ins. Co., 2012 WI App 51, ¶¶8-18, 340 Wis. 2d 594, 811
N.W.2d 894. Despite that prohibition, however, the court of
appeals decided to reach the merits of the discovery dispute and
affirmed both the panel's reading of the policy as well as its
understanding of the panel's authority to shape the scope of
discovery as it saw fit. Id., ¶¶19-27. On the first point——
that of the interlocutory appeal——the court of appeals looked
for guidance to federal cases addressing similar issues. Id.,
¶¶10-17. The court of appeals discerned in those cases a rule
that "interlocutory review of arbitration panels' intermediate
decisions" is available only "under limited and unusual
circumstances." Id., ¶14. Seeing no such circumstances in the
Marlowes' case, the court held that the circuit court should
have waited until the panel rendered its final decision before
weighing in on the discovery dispute. Id., ¶18.
¶7 The court of appeals framed the second issue as the
scope of the arbitration panel's authority. According to the
court, the panel had the "exclusive authority" to interpret the
"local rules" provision because it "arguably refer[red] to the
6
No. 2011AP2067
scope of discovery," a procedural matter within the sole
province of the panel under our opinion in Borst and that of the
court of appeals in Employers Ins. of Wausau v. Certain
Underwriters at Lloyd's London, 202 Wis. 2d 673, 552 N.W.2d 420(Ct. App. 1996). Id., ¶27.
¶8 The Marlowes petitioned this court for review. In
order to clarify several important features of the arbitration
system and its relationship to the courts, we granted that
petition.
II. STANDARD OF REVIEW
¶9 The first issue before us is whether the Marlowes'
action for a declaratory judgment constituted an interlocutory
appeal and, if so, whether it was permissible. Such an issue
presents a purely legal question, and we thus consider it
independently of the opinions by the circuit court and court of
appeals, though benefitting from their analyses. See generally
State ex rel. Hass v. Wis. Court of Appeals, 2001 WI 128, 248
Wis. 2d 634, 636 N.W.2d 707.
¶10 With respect to the second issue——whether the
arbitration panel was entitled to establish discovery procedures
outside those outlined in Wis. Stat. § 788.07——"[t]he scope of
judicial review of an arbitration decision is," generally
speaking, "very limited." Orlowski v. State Farm Mut. Auto.
Ins. Co., 2012 WI 21, ¶13, 339 Wis. 2d 1, 810 N.W.2d 775(citation omitted). As such, "[t]here is a strong presumption
of arbitrability where the contract in question contains an
arbitration clause," and "[a]ny doubts concerning the scope of
7
No. 2011AP2067
arbitrable issues should be resolved in favor of arbitration."
Cirilli v. Country Ins. & Fin. Servs., 2009 WI App 167, ¶14, 322
Wis. 2d 238, 776 N.W.2d 272 (citation omitted). Pursuant to the
same deferential standards, an arbitrator's decision concerning
an award will not be overturned unless "perverse misconstruction
or positive misconduct is plainly established, or if there is a
manifest disregard of the law, or if the award itself is illegal
or violates strong public policy." City of Madison v. Madison
Prof'l Police Officers Ass'n, 144 Wis. 2d 576, 586, 425 N.W.2d 8(1988) (internal quotation marks, brackets, and citation
omitted). But where, as here, a dispute implicates the scope of
an arbitration panel's authority concerning discovery, an issue
the legislature has spoken on, the standard of review is less
deferential. As we explain in detail below, an arbitration
panel's decision will be reversed when it allows for discovery
different from that granted in § 788.07 unless the agreement
between the parties contains an explicit, specific, and clearly
drafted clause adopting or spelling out a different set of
discovery guidelines. See generally Borst, 291 Wis. 2d 361.
III. DISCUSSION
¶11 We hold as follows. As no unusual circumstances were
present to justify an interlocutory appeal, the circuit court
erred in declaring the Marlowes' rights on a procedural matter
before the arbitration panel satisfied its responsibilities and
settled the question of compensation. However, given that there
was no explicit, specific, and clearly drafted agreement in the
policy detailing the discovery procedures to follow, the panel
8
No. 2011AP2067
should not have granted IDS the use of Wis. Stat. ch. 804's full
range of discovery mechanisms. Consequently, we return the
action to the panel with instructions to limit discovery to the
section enacted by the legislature for precisely these
situations: Wis. Stat. § 788.07.
A. The Interlocutory Appeal
¶12 We consider first whether the Marlowes improperly
sought interlocutory relief. The Marlowes contend that they did
not seek such relief and, if they did, that it was permitted.
Consistent with well-reasoned precedent from other jurisdictions
and with the fundamental and crucial purposes of arbitration, we
find that they did seek interlocutory relief, and that it was
barred.
1. The Marlowes Sought Interlocutory Relief
¶13 To ascertain whether the Marlowes improperly pursued
interlocutory relief, we must, as a threshold matter, determine
whether they pursued interlocutory relief at all. Applying
basic principles of appellate procedure, we have no difficulty
in answering that they did.
¶14 The Marlowes' argument for why their filing in circuit
court did not represent an interlocutory appeal hinges on their
belief that the arbitration panel was not empowered to order
Wis. Stat. ch. 804 discovery. As the Marlowes see it, since the
panel had no authority to issue that order, its order was null
and void ab initio, that is, from the beginning, and the circuit
court was not reviewing the order at all, let alone on an
interlocutory basis. The Marlowes' position is founded on
9
No. 2011AP2067
several fundamental misunderstandings of the law, and we cannot
accept it.
¶15 First, the Marlowes' premise flows from an untenably
theoretical and impractical characterization of judicial
mechanics. Even if we suspend disbelief and assume with the
Marlowes that an order exceeding an arbitration panel's power
vanishes when the order is questioned in court, that does not
change the fact that the filing in circuit court interrupts an
ongoing proceeding before the panel. That is, regardless of
whether the panel's discovery order was null or not, there was
nevertheless an arbitration in progress at the time it was
issued. It is this fact——not the correctness or validity of the
order——that renders the action interlocutory. See, e.g., Brown
v. Argosy Gaming Co., L.P., 360 F.3d 703, 706 (7th Cir. 2004)
(defining an interlocutory action as "one that merely gives
pause to the ongoing proceedings to resolve one issue in a
larger, ongoing dispute . . . .") (Emphasis added.)
¶16 In any event, the arbitration panel indisputably had
the authority to issue an order relating to discovery, the only
complaint the Marlowes raise is whether it issued the correct
discovery order. Throughout the course of this controversy, it
has never been suggested by any party or decision-maker that the
arbitration panel was forbidden from determining the boundaries
of discovery. Rather, the Marlowes simply assert that the panel
erroneously set those boundaries in accordance with one chapter
of the statutes instead of another. It follows, then, as amicus
Wisconsin Insurance Alliance helpfully points out, that from the
10
No. 2011AP2067
Marlowes' perspective, the panel would have acted within its
jurisdiction if it had ordered discovery in line with Wis. Stat.
§ 788.07 but exceeded its jurisdiction by ordering discovery in
line with Wis. Stat. ch. 804. If that were true, a panel would
have jurisdiction only if the outcome happened to turn out to be
right in the judgment of the courts. That is not how
jurisdiction works. See, e.g., Gen. Comm. of Adjustment v. Mo.-
Kan.-Tex. R.R Co., 320 U.S. 323, 337 (1943) ("When a court has
jurisdiction it has of course authority to decide the case
either way.") (emphasis added) (citation and internal quotation
marks omitted). For the foregoing reasons, there can be no
doubt that the circuit court's declaration of the Marlowes'
rights granted them interlocutory relief.
2. Interlocutory Relief Was Not Available to the Marlowes
¶17 Having shown why the Marlowes' action in circuit court
was interlocutory, we must now confront the question of whether
they were permitted to seek such relief. In view of the
important and well-established purposes of arbitration, they
were not so permitted.
¶18 We start, as the court of appeals before us did, with
the recognition that this issue is one of first impression in
Wisconsin. Fortunately, though, it is far from that elsewhere.
In the absence of binding authority construing the Wisconsin
Arbitration Act, we look for guidance to decisions from other
jurisdictions interpreting similar provisions of their own
arbitration acts. Borst, 291 Wis. 2d 361, ¶30. Wisconsin Stat.
§§ 788.10 and 788.11 set forth the circumstances in which a
11
No. 2011AP2067
court can take action on an arbitrator's decision, and thus form
the bases for our inquiry into the availability of interlocutory
relief on an arbitration ruling. The same role is performed in
the Federal Arbitration Act by 9 U.S.C. §§ 10 and 11, which
contain nearly identical language to the corresponding Wisconsin
provisions. We therefore consult the non-binding cases
addressing the issue as persuasive authority, and in this
instance we find them especially persuasive.
¶19 A number of other jurisdictions have held that
intermediate relief from arbitrators' decisions is not typically
available. See Kristen M. Blankley, Did the Arbitrator
"Sneeze"?--Do Federal Courts have Jurisdiction over
"Interlocutory" Awards in Class Action Arbitrations?, 34 Vt. L.
Rev. 493, 506 (2010) ("The courts, when usually confronted with
non-final awards, claim that they should generally refrain from
intervention and allow arbitration to run its course."). These
decisions are based on the sound theory that the courts must
facilitate as much as possible the primary aims of arbitration:
providing a forum to resolve disputes more quickly, efficiently,
and cheaply than courts can. See Compania Panemena Maritima San
Gerassimo, S.A. v. J.E. Hurley Lumber Co., 244 F.2d 286, 289 (2d
Cir. 1957)(noting that challenges to intermediate arbitration
decisions "result only in a waste of time, the interruption of
the arbitration proceeding, and encourage delaying tactics in a
proceeding that is supposed to produce a speedy decision.");
Travelers Ins. Co. v. Davis, 490 F.2d 536, 544 (3d Cir. 1974)
(declining to allow an interlocutory appeal of an interim
12
No. 2011AP2067
arbitration decision because "[p]iecemeal litigation would
result"). In Wisconsin, as much as in the federal system,
arbitration is designed to facilitate the speedy, efficient
resolution of disputes without encumbering parties with all of
the expenses and formalities associated with civil litigation in
the courts. See, e.g., Franke v. Franke, 2004 WI 8, ¶24, 268
Wis. 2d 360, 674 N.W.2d 832 ("[P]ublic policy favors arbitration
as promoting the efficient resolution of disputes, and as giving
the parties what they bargained for, that is, an arbitrator's,
not a court's decision."). Those advantages accrue not only to
parties but to the circuit courts, which experience a lightening
of their substantial dockets, saving the taxpayers money and
litigants both money and time. See, e.g., Balt. & Ohio Chi.
Terminal R.R. Co. v. Wis. Cent. Ltd., 154 F.3d 404, 409 (7th
Cir. 1998) (Posner, J.) (remarking that one purpose of
arbitration "is to lighten the pressure on the courts")
(citation omitted). It is self-evident that any rule
encouraging parties to shuttle their cases to and from court in
the midst of an arbitration proceeding would substantially slow
down the arbitration process and impose significant costs on the
parties, thereby defeating the most central objectives of
arbitration. We therefore adopt the sensible rule followed by
the authorities cited above, and hold that in Wisconsin a party
involved in an arbitration proceeding must ordinarily wait until
the arbitrators have reached a final decision on the award to be
given, if any, before turning to the circuit courts.
13
No. 2011AP2067
¶20 Those courts that have permitted interlocutory review
during an arbitration proceeding have done so only in rare
circumstances that present a compelling reason to depart from
the normal practice. For instance, interlocutory appeals have
been entertained when the intermediate ruling could subject the
aggrieved party to irreparable harm, Aerojet-General Corp. v.
Am. Arbitration Ass'n, 478 F.2d 248, 251 (9th Cir. 1973)
(regarding the fixing of venue), or when such review is
necessary to preserve assets pending a final ruling from the
arbitrator on the award. Yasuda Fire & Marine Ins. Co. v.
Cont'l Cas. Co., 37 F.3d 345, 347-48 (7th Cir. 1994). Again, we
embrace the unassailable logic underlying these cases, as they
properly balance the need for efficient and orderly arbitration
proceedings with the need for an occasional exception to
accommodate especially urgent or potentially irreparably
prejudicial matters that demand the immediate attention of the
courts.
¶21 The Marlowes do not suggest that the discovery dispute
at arbitration was unusual in such a way as to justify
intermediate intervention by the circuit court, and we see no
evidence to that effect. On the contrary, there has been no
showing that the request for limited discovery was either
especially urgent or that it posed the threat of irreparable
injury. Tellingly, in the only Wisconsin case involving a
similar discovery dispute, we remanded the cause back to the
arbitration panel after it had allowed overbroad discovery and
issued an award, Borst, 291 Wis. 2d 361, ¶4, thus indicating
14
No. 2011AP2067
that such disputes can be effectively resolved within the course
of the ordinary appellate process, without resorting to
inefficient, time-consuming practices which defeat the very
purpose of arbitration. While certainly not dispositive of the
matter, this precedent underscores why the arbitration panel
here was entitled to fully discharge its duties before being
second-guessed on an intermediate matter by the circuit court.7
As a result, we affirm the court of appeals decision insofar as
it correctly held that the Marlowes' action for declaratory
relief constituted an improper interlocutory appeal.
B. The Discovery Dispute
¶22 Although it seems at first blush incongruous for us to
first hold that the Marlowes were not permitted to seek
interlocutory relief and then grant such relief, we do so
because the court of appeals unnecessarily and incorrectly
addressed the merits of the discovery dispute before us. The
court of appeals elected to address the discovery dispute while
recognizing that it did not need to reach the question after
holding that an intermediate appeal was barred. Marlowe, 340
7
As it is unnecessary to the resolution of this case, we do
not demarcate today the full range of situations in which
intermediate relief may be available to a party challenging an
adverse decision made at arbitration. See State v. Smith, 2012
WI 91, ¶62 n.19, 342 Wis. 2d 710, 817 N.W.2d 410 (reminding
"that the court resolves the facts before it, and does not issue
advisory opinions or address hypothetical facts") (citation
omitted), cert. denied, 568 U.S. __, 133 S. Ct. 635 (2012). We
caution that other circumstances may arise in which such appeals
may be appropriate, and they should be considered on their own
facts, under the same broad principles we enunciate here.
15
No. 2011AP2067
Wis. 2d 594, ¶19 n.8. As we will show, the court of appeals
erred in concluding that the arbitration panel had the exclusive
authority to dictate the discovery procedures to follow, and the
arbitration panel erred in ordering full Wis. Stat. ch. 804
discovery. Therefore, if we were to limit our review to the
issue of interlocutory relief, we would allow an erroneous rule
to retain the force of law, not only in this case, but in all
others. Moreover, further delay of the issue's ultimate
resolution would impede even further the efficient disposition
the parties bargained for by agreeing to arbitration. Lastly,
we will be required to answer the important question presented
by the discovery dispute sooner or later. It would only
frustrate judicial economy were we to unnecessarily put the
question off for another day, particularly when we would thereby
cause arbitration in this case to proceed under the wrong
statute in violation of a clear legislative dictate. With that
in mind, we choose to take up the question sooner rather than
later.8
8
As the concurrence sees it, our reasoning on this point
"justif[ies] judicial intervention by the circuit court . . . ."
Concurrence, ¶67 (emphasis added). Phrased differently, the
concurrence believes that the unusual circumstances present here
warranted interlocutory relief at every level of the court
system. As should be clear from our analysis, though, the
reasons requiring us to reach the discovery dispute——the fact
that the court of appeals erroneously reached and decided the
question, the gross and perverse inefficiency of further delay,
and the inevitability of our ultimate consideration of the
issue——are reasons that apply with special force here, and have
little to no relevance to the circuit court. That court, unlike
our own, was not required to correct an erroneous, published
appellate opinion, because the case had not yet arrived at the
16
No. 2011AP2067
¶23 As we demonstrate below, a fair reading of the policy,
under our binding and well-reasoned case law, prohibited the
arbitration panel from ordering full Wis. Stat. ch. 804
discovery. That same case law allows for judicial correction of
the panel's error. Accordingly, we instruct the arbitration
panel to limit discovery to that provided for in Wis. Stat.
§ 788.07.
1. Discovery Should Have Been Limited to Wis. Stat. § 788.07
¶24 From the onset of this dispute, the central importance
of one decision has been acknowledged by all involved: our
opinion in Borst. Upon review of that case, we find its
appellate level and because it would not have been empowered to
do so. In addition, there was far less of a demand for
expeditiousness in the circuit court's disposition than ours, as
the case had been pending for a significantly shorter period at
that time and was undergoing its first stage of judicial review,
not its third. Finally, it was not so urgent as a state-wide
matter for the circuit court to resolve the question, as its
opinion bound only the parties and not, like our own, all
Wisconsin contract-drafters, contract-signers, and courts. See
Raasch v. City of Milwaukee, 2008 WI App 54, ¶8, 310
Wis. 2d 230, 750 N.W.2d 492 (Ct. App. 2008) ("[A]lthough
circuit-court opinions may be persuasive because of their
reasoning, they are never 'precedential.'") (emphasis in
original) (citation omitted). To the extent the concurrence
believes that some unique circumstance justified the circuit
court's interlocutory intervention, we see no persuasive
reasoning to that effect in the concurrence itself, and no
reasoning to justify that result at all in our own discussion,
in the briefs, or in any authority that has been brought to our
attention. The concurrence observes that it is incongruous not
just at first blush, but at "second[] or third blush" to find
judicial relief from the circuit court premature while granting
it here. Concurrence, ¶67. That may be, but the concurrence
cannot resolve the incongruity either, no matter how much
blushing it does.
17
No. 2011AP2067
application here clear. If IDS desired to utilize Wis. Stat.
ch. 804 discovery, it was required to expressly, clearly, and
specifically say so in its policy. Because it did not, the
panel erred in ordering such discovery and Borst compels us to
correct the error.
a) Borst Is Clarified and Reaffirmed
¶25 Although we do not share IDS's view that the facts of
Borst are particularly helpful to our decision here, in light of
its unequivocal holding, we briefly recite the relevant details
to provide context and to address IDS's argument. In Borst, the
plaintiff was injured in a car accident with an uninsured
motorist and filed a claim for compensation with his insurer,
Allstate Insurance Company (Allstate). 291 Wis. 2d 361, ¶5.
After settlement negotiations failed, the claim was submitted to
arbitration pursuant to a provision in the policy that was
silent on the question of the scope of discovery. Id., ¶8. In
anticipation of the arbitration hearing, Allstate asked Borst
for answers to written interrogatories, document production, and
medical authorizations. Id., ¶10. Borst refused to comply,
instead filing a motion to quash the discovery. Id.
Eventually, Borst sued Allstate in circuit court on claims of
breach of contract, bad faith, and fraud and misrepresentation.
Id., ¶12. Borst also sought a permanent injunction enjoining
further arbitration. Id. After the circuit court remanded the
matter back to the arbitrators, the panel allowed Allstate's
requested broad discovery and decided the award, the circuit
18
No. 2011AP2067
court confirmed that award, and the court of appeals then
certified the case to this court.
¶26 As for the most important aspect of Borst——its
holding——this court unanimously ruled in that case that the
panel erred in permitting extensive discovery and should instead
have confined it to the depositions afforded in Wis. Stat.
§ 788.07. We began our consideration of the issue with a
summary, in a paragraph worth quoting in full for reasons that
will soon be apparent, thusly:
We conclude that arbitrators have no inherent
authority to dictate the scope of discovery, and
absent an express agreement to the contrary, the
parties are limited to depositions as spelled out in
Chapter 788. We agree with the State Bar that parties
would be well-served to either: (1) explicitly address
the scope of discovery and the procedures to resolve
disputes regarding discovery; or (2) reference a set
of established [Alternative Dispute Resolution]
provider rules that specify how discovery should be
handled.
Id., ¶56.
¶27 To reach that result, the Borst court first examined
the text of Wis. Stat. § 788.07 and the Wisconsin Arbitration
Act as a whole, concluding that neither mentioned any type of
discovery other than "depositions to be used as evidence before
the arbitrators." Id., ¶58 (quoting § 788.07). "To allow for
the amount of discovery Allstate seeks," the court went on, "we
would have to read more into § 788.07 than is present in the
statutory language," an approach that would transgress
established rules of statutory construction. Id. (citation
omitted).
19
No. 2011AP2067
¶28 Continuing its analysis, Borst observed that because
arbitration is a matter of contract, the "parties can contract
to allow arbitrators a wide amount of latitude in managing the
arbitration, subject to the constraints of the law." Id., ¶59
(citing Employers, 202 Wis. 2d 673). Justice Wilcox, speaking
for the court, therefore determined that "absent a contractual
provision specifying how discovery will be handled, the parties
are limited to the discovery procedures provided in" Wis. Stat.
§ 788.07. Id. In support of that conclusion, the court
reasoned that a grant of inherent authority to arbitrators to
order broader discovery where the policy is silent on the scope
of discovery "would give us pause as we do not want to turn the
arbitration process into another trial system," with all of its
attendant formalities and expenses. Id., ¶¶60, 61. Stated
differently, "[a]rbitrators have no inherent authority to
dictate the scope of discovery and absent an express agreement,
the parties are limited to the procedure for depositions, as
described in Wis. Stat. § 788.07." Id., ¶63. "[T]he better
approach," we therefore concluded, "is to leave it to the
parties, in the future, to ensure arbitration agreements are
clearly drafted, and detail the necessary components and
procedures of the desired arbitration." Id., ¶60. Turning to
the facts at hand, we explained that "there were no set
provisions in the insurance contract that detailed the terms of
the discovery in the arbitration. Therefore, if the parties
decide to conduct another arbitration, discovery will be limited
20
No. 2011AP2067
to depositions as detailed in Wis. Stat. § 788.07." Id., ¶62
(footnote omitted).
¶29 Given the overwhelming significance of Borst to the
case at bar, we pause to clarify its holding and reaffirm its
soundness. Borst was not as precise as it might have been on
what is required of an arbitration clause in order for the
parties to have access to discovery broader than that
contemplated in Wis. Stat. § 788.07. To be sure, the opinion
did use a number of terms with roughly similar, if not
identical, meanings: "express," "explicitly," "specify,"
"clearly drafted," "detail," and so on. Yet as IDS fairly
observes, most of these terms are not presented as formulations
of the holding, and some are not even formulated as
requirements. For example, the Borst court indicated "that
parties would be well-served to . . . explicitly address the
scope of discovery," id., ¶56 (emphasis added), not that they
had to. Likewise, the court advised that "the better approach
is to leave it to the parties, in the future, to ensure
arbitration agreements are clearly drafted," id., ¶60 (emphasis
added), but stopped short of announcing that inferior approaches
would necessarily deprive parties of Wis. Stat. ch. 804's
discovery tools.
¶30 We need not be detained by such ambiguity long, for we
conclude that Borst's several formulations of the standard
cohere to form a single holding: for a party in arbitration to
enjoy discovery outside of Wis. Stat. § 788.07, the insurance
policy must provide for it expressly, explicitly, specifically,
21
No. 2011AP2067
and in a clearly drafted clause. To begin, the various
iterations of the standard set forth in Borst are plainly not in
conflict with one another. That is to say, a provision may
plainly be express, explicit, specific, and clearly drafted all
at the same time. More importantly, if an arbitration panel has
no inherent authority to order Wis. Stat. ch. 804 discovery in
the absence of a policy provision to the contrary, and if that
is in part because the legislature has enacted a statute to
address this narrow area of law, it naturally follows that the
discovery provision must be "express," "explicit," "specific,"
and "clearly drafted."9 Without that requirement, as we explain
shortly, § 788.07 would lose all force, and we cannot treat
legislative commands so cavalierly. For purposes of summary and
clarification, everything we said in Borst about how a policy
can authorize discovery broader than that envisioned by
§ 788.07, whether hortatory or mandatory, is the law: to permit
such discovery, the policy must provide for it explicitly,
specifically, and in a clearly drafted clause.10
9
Because the words "express" and "explicit" have similar
meanings, and because we believe "explicit" covers the same
ground as "express" and more, in the interest of simplicity we
henceforth omit the word "express" from the standard. See The
American Heritage Dictionary 626 (5th ed. 2011) (indicating that
"express" is synonymous with "explicit").
10
The concurrence/dissent characterizes these requirements
as "tough new conditions" set by today's opinion. Dissent,
¶114. They may be tough, but they are certainly not new, as
each word appears in Borst v. Allstate Ins. Co., 2006 WI 70, 291
Wis. 2d 361, 717 N.W.2d 42. For ease of reference, we will
henceforth refer to the concurrence/dissent as simply "the
dissent."
22
No. 2011AP2067
¶31 Understood in these terms, the holding of Borst is as
vital today as it was at the time the case was decided. In
short, arbitration must remain a speedy, cost-efficient
alternative to conventional litigation, not an equally slow,
cumbersome process that simply happens to take place in front of
an arbitration panel rather than a circuit court judge. Id.,
¶60 ("[W]e do not want to turn the arbitration process into
another trial system."); cf. Franke, 268 Wis. 2d 360, ¶24
("[P]ublic policy favors arbitration as promoting the efficient
resolution of disputes, and as giving the parties what they
bargained for, that is, an arbitrator's, not a court's
decision."). With Wis. Stat. ch. 804 discovery, arbitration
proceedings become, quite literally, the mirror image of civil
litigation, at least as respects discovery. As Borst
recognized, arbitration is a creature of contract, and if
parties desire to engage in the same time-consuming and
burdensome discovery tactics that lengthen delays and increase
costs in the circuit courts, that is their prerogative. 291
Wis. 2d 361, ¶59 ("[P]arties can contract to allow arbitrators a
wide amount of latitude in managing the arbitration . . . .")
(Emphasis added.) But that is a far cry from an ever-present
legal entitlement to such tactics in a proceeding designed to do
without them.11
11
In its ruling on the discovery dispute, the arbitration
panel insisted that, "[if] the purpose of arbitration is to
achieve an expedited, efficient decision that ultimately
determines the truth, more, not less, preparation for hearing is
the most sensible way to achieve that . . . ." We do not grasp
the panel's reasoning. Certainly an argument could be made that
23
No. 2011AP2067
¶32 The second, and related, strain of reasoning
underpinning Borst is equally persuasive to us now: the
legislature has provided a boundary for the scope of discovery
in arbitration to serve as the default, and, in the absence of
any contractual agreement to the contrary, that boundary should
be given effect. We fully agree with Borst that we would
insufficiently respect our co-equal branch were we to allow
arbitrators to ignore a legislative dictate at will. 291 Wis. 2d
361, ¶58 ("To allow for the amount of discovery Allstate seeks,
we would have to read more into § 788.07 than is present in the
statutory language."). If arbitrators could order discovery
outside the confines of § 788.07 whenever they chose, regardless
of what the policy provided, the statute would lose all force,
an outcome we are loath to sanction. See State ex rel. Kalal v.
Cir. Ct. for Dane Cnty., 2004 WI 58, ¶44, 271 Wis. 2d 633, 681
N.W.2d 110 ("It is, of course, a solemn obligation of the
judiciary to faithfully give effect to the laws enacted by the
legislature . . . ."). And, as should be evident already, we
believe the legislature's approach to discovery in arbitration
was eminently reasonable, as it is entirely in keeping with the
more expansive discovery better facilitates a search for the
"truth," but we fail to understand how broader discovery could
possibly be regarded as more "expedited" or "efficient."
Similarly, the panel took pains to note that Wis. Stat. ch. 804
does "not contemplate unfettered discovery," but rather
discovery "that is quick and efficient, [and] cost effective."
That may be, but it surely does contemplate discovery that is
less fettered than that authorized by Wis. Stat. § 788.07, as
well as less quick, less efficient, and less cost effective,
which is exactly the point.
24
No. 2011AP2067
fundamental goals of the system: efficient, inexpensive
resolution of disputes.
¶33 There is one other aspect of Borst that requires
clarification. To repeat language we have already quoted, the
Borst court remarked that "parties would be well-served to
either: (1) explicitly address the scope of discovery and the
procedures to resolve disputes regarding discovery; or (2)
reference a set of established [Alternative Dispute Resolution]
provider rules that specify how discovery should be handled."
291 Wis. 2d 361, ¶56 (emphasis added). As suggested by our
emphasis, it is important that Borst phrased this as an
either/or proposition. That is, parties can make available
discovery that differs from the depositions contemplated by Wis.
Stat. § 788.07 without necessarily referring to a set of
discovery guidelines established elsewhere, so long as the
parties spell out the discovery guidelines themselves in the
arbitration agreement. In other words, rather than providing,
say, that "Wis. Stat. § 788.07 will govern all discovery in
preparation for the arbitration hearing," a policy could instead
enumerate the types of discovery the parties would have access
to in arbitration, such as interrogatories, medical
examinations, and so on. However, if a policy takes that
approach, it must meet the same standard that applies when an
arbitration clause adopts a set of guidelines articulated
25
No. 2011AP2067
elsewhere: it must express the types of discovery explicitly,
specifically, and in a clearly drafted clause.12
¶34 Before turning to the application of Borst here, one
final point must be made. Wisconsin Stat. § 788.06(2)
authorizes arbitrators and parties' representatives to issue
subpoenas under Wis. Stat. § 805.07, the general subpoena
statute in the code of civil procedure. In contradistinction to
the dissent, we do not understand § 788.06(2) to expand the
scope of arbitration discovery because the provision relates to
the arbitration hearing itself, not the discovery that may
precede it. The heading of the statute confirms our
interpretation, as it reads, "Hearings before arbitrators;
12
The dissent rejects this rule, but it is not clear
exactly why or in favor of what. In places, the dissent
suggests that Borst was wrongly decided. Dissent, ¶111
("Borst's interpretation of Wis. Stat. § 788.07 created a
restrictive rule, but that rule disregarded the adjacent
statute . . . ."). Elsewhere, the dissent instead pins the
blame on today's majority, accusing it of injecting a novel
misunderstanding into the law. See, e.g., id., ¶114 (describing
the "explicit, specific, and clearly drafted" test as imposing
"tough new conditions . . . .") (emphasis added); ¶88 ("[T]he
majority opinion undercuts the contractual authority of
arbitrators and creates a serious disincentive for parties to
agree to arbitration.") (Emphasis added.) Both cannot be true.
Although the dissent somewhat ambiguously proposes that the
"court should pursue" the "options" of "clarify[ing],
modif[ying], or distinguish[ing]" Borst "on the facts," dissent,
¶100, the dissent's bottom-line, that the "explicit, specific,
and clearly drafted" test be discarded, is fundamentally
incompatible with Borst's unequivocal holding and its underlying
reasoning. We see no way in which those words and the rationale
behind them can be "clarified, modified, or distinguished" out
of the opinion. However it chooses to couch the issue, the
dissent would essentially have us overrule Borst, and for the
reasons stated, we decline to do so.
26
No. 2011AP2067
procedure."13 (Emphasis added.) See Pure Milk Prods. Coop. v.
Nat'l Farmers Org., 64 Wis. 2d 241, 253, 219 N.W.2d 564 (1974)
("Although the title is not part of the statute it may be
persuasive of the interpretation to be given the statute.").
Presumably, the parties, the arbitration panel, and the court of
appeals all acknowledged this fact, as none mentioned
13
In a passing footnote, the dissent intimates that the
appearance of the word "Hearings" in the heading is
inconsequential on account of the semicolon and text that
follow: "Hearings before arbitrators; procedure." Dissent, ¶106
n.7. According to the dissent, the "Hearings" goes with Wis.
Stat. § 788.06(1), whereas the "procedure" goes with (2). Id.
In line with that reading, the dissent flatly asserts that
"[t]he procedure applies to more than hearings because of the
references to Wis. Stat. § 805.07." Id. But the following
sections are as much about arbitration procedure as are the
subpoena provisions. See Wis. Stat. § 788.07 (dealing with
depositions in arbitration); Wis. Stat. § 788.08 (requiring that
awards be in writing and signed by a majority of the arbitration
panel); Wis. Stat. § 788.09 (setting forth the procedure for
confirming arbitration awards in court); Wis. Stat. § 788.10
(establishing the mechanisms for vacating awards and obtaining a
rehearing by the arbitrators). And as the dissent implies, at
least some of § 788.06(2) is unquestionably about hearings,
namely its references to "the circuit court for the county in
which the hearing is held" and to "[w]itnesses and interpreters
attending before an arbitration." (Emphasis added.) If the
legislature intended to enact two unrelated provisions, one
about hearings and one covering subpoenas with no connection to
hearings, it presumably would have made § 788.06(1) its own
section, and entitled it "Hearings before arbitrators," and
given § 788.06(2) its own section and entitled it "Subpoenas,"
much as it did with the very next section, which is entitled
"Depositions" and discusses, unsurprisingly, depositions. We
prefer to begin with the assumption that the legislature's
organizational scheme and choice of headings matters, rather
than discounting it out of hand. See, e.g., State v. Leitner,
2002 WI 77, ¶33, 253 Wis. 2d 449, 646 N.W.2d 341 (reiterating
that the court presumes that the legislature acted carefully in
drafting laws).
27
No. 2011AP2067
§ 788.06(2) or the subpoena power at any stage of the
proceedings.14 Borst did not consider § 788.06(2) either, we
assume for the same good reasons, namely, that everyone involved
in the case tacitly recognized that the provision dealt with
hearings, not discovery.15
¶35 The statutory history of Wis. Stat. § 788.06(2)
confirms our interpretation of its significance. See State v.
Gilbert, 2012 WI 72, ¶16, 342 Wis. 2d 82, 816 N.W.2d 215 ("[A]
review of statutory history is part of a plain meaning
analysis.") (citation and internal quotation marks omitted),
cert. denied, 568 U.S. __, 133 S. Ct. 560 (2012). The first
version of the statute appeared in 1931. Compare Wis. Stat. ch.
298 (1929) with Wis. Stat. ch. 298 (1931). At that time, only
the arbitrators, not the parties, were empowered to issue
subpoenas. See Wis. Stat. § 298.06 (1931). Moreover, the
statute contained several indications that the subpoena power
related only to the hearing, not to pre-hearing discovery. For
example, § 298.06 authorized the arbitrators to "summon in
writing any person to attend before them or any of them as a
14
The circuit court did refer to Wis. Stat. ch. 788's
subpoena powers at several times during the hearing, but chiefly
to make the point that IDS never applied to the panel to use
such powers.
15
In its briefs here and in the court of appeals in Borst,
Allstate mentioned Wis. Stat. § 788.06(2) in passing, purely so
as to distinguish the dispute from a federal case addressing the
question of whether arbitration panels are empowered to subpoena
third parties. Allstate, like IDS, never asked us to construe
§ 788.06(2) as expanding the scope of discovery at arbitration.
28
No. 2011AP2067
witness . . . ." Id. (Emphasis added.) The statute also
instructed that subpoenas in arbitration would "be served in the
same manner as subpoenas to appear and testify before the
court." (Emphasis added.) Such language strongly reinforces
the view that the subpoena power related to hearings, not to
discovery.
¶36 In 1985, the arbitration subpoena statute, by then
renumbered Wis. Stat. § 788.06, took on its current form. See
1985 Wis. Act 168, § 1. The principal substantive change in the
statute was the extension of the subpoena power from solely the
arbitrators to the arbitrators and the parties (through their
representatives). See Wis. Stat. § 788.06(2) (1985).
Presumably as part of the effort to modernize, condense, and
clarify the statute, however, the language quoted above
referring to hearings was removed. However, two significant
additions were made that demonstrate the subpoena power
continued to relate only to hearings. First, the statute was
now entitled, "Hearings before arbitrators; procedure." Id.
(Emphasis added.) Equally importantly, the legislature inserted
the following sentence into § 788.06(2): "If any person so
served neglects or refuses to obey the subpoena, the issuing
party may petition the circuit court for the county in which the
hearing is held to impose a remedial sanction . . . in the same
manner provided for witnesses in circuit court." Id. (Emphasis
added.) It would be peculiar, to say the least, for a discovery
statute to refer to a hearing that might never occur as though
it were inevitable. See, e.g., Bell Atlantic Corp. v. Twombly,
29
No. 2011AP2067
550 U.S. 544, 559 (2007) (noting that "the threat of discovery
expense will push cost-conscious defendants to settle even
anemic cases before reaching those proceedings.").16
16
Because Wis. Stat. § 788.06 is unambiguous, we need not
consult any extrinsic sources to ascertain the intent behind it,
such as legislative history. See, e.g., State v. Lamar, 2011 WI
50, ¶23, 334 Wis. 2d 536, 799 N.W.2d 758 ("If the language [of a
statute] is ambiguous, however, we look beyond the language and
examine extrinsic sources of statutory interpretation, such as
the legislative history of the statute.") (citation omitted).
Even if it were accepted, arguendo, that the statute was
ambiguous, however, the legislative history would reaffirm our
reading. Concededly, the language from the 1931 statute more
directly conveyed the fact that it was limited to hearings than
does the current statute, given that it explicitly cabined the
subpoenas to summons to "any person to attend before [the
arbitrators] . . . as a witness . . . ." Wis. Stat. § 298.06
(1931) (emphasis added). By contrast, the current incarnation
of the statute does not so precisely define the proceedings to
which the subpoenas apply. See § 788.06. Nevertheless, the
only notes in the sparse legislative materials for 1985 Wis. Act
168, § 1 that shed any light on the purpose of the alterations
focus exclusively on the expansion of the subpoena power to
parties' representatives; they say nothing about an expansion of
the statute from hearings to discovery. See Drafting File, 1985
Wis. Act 168, Judicial Council Note on A.B. 498, Legislative
Reference Bureau, Madison, Wis. ("The revised section permits
arbitration subpoenas to be issued by any arbitrator or by an
attorney for a party who has been delivered blank subpoenas by
an arbitrator. It conforms arbitration subpoena practice to
that followed in circuit court.") (emphasis added); Drafting
File, 1985 Wis. Act 168, Fiscal Estimate by the Director of
State Courts on A.B. 498, Legislative Reference Bureau, Madison,
Wis. ("This bill would allow arbitration subpoenas to be issued
by any arbitrator or by an attorney for a party who has been
delivered blank subpoenas by an arbitrator. Presently, a
majority of the arbitrators sitting at the hearing must sign the
summons.") (Emphasis added.) It can only be inferred from this
single-minded focus that the legislature had no desire to expand
subpoenas from the hearing context to that of discovery.
30
No. 2011AP2067
¶37 There is no cause to apply Wis. Stat. § 788.06(2)
here, and there was no cause to do so in Borst.17
¶38 For the stated reasons, Borst was rightly decided and
it remains good law. We now apply it to the present case.
b) The Policy Did Not Satisfy Borst's Requirements
¶39 Reviewing the policy under the well-reasoned Borst
decision, we hold that the arbitration panel erred in ordering
broad discovery when the policy contained no explicit, specific,
and clearly drafted clause making such discovery available.
¶40 There are two pertinent passages from the policy. As
noted, the one that has been at the crux of this dispute, and
therefore the one on which most of our analysis will focus,
provides that "[l]ocal rules of law as to procedure and evidence
will apply" at arbitration. Before we get to that clause,
however, there is another provision that warrants examination.
That provision indicates that "[a] person seeking any coverage
must: . . . [c]ooperate with [IDS] in the investigation,
settlement or defense of any claim or suit" and "[s]ubmit, as
often as [IDS] reasonably require[s] . . . [t]o physical exams."
IDS does not contend in its brief here that this provision
17
The dissent complains that it "makes little sense" that
Wis. Stat. § 788.06 is confined to hearings. Dissent, ¶106.
Maybe so, but it was the legislature's decision, not ours, and
we do not sit in judgment of its wisdom. See, e.g., Progressive
Northern Ins. Co. v. Romanshek, 2005 WI 67, ¶60, 281
Wis. 2d 300, 697 N.W.2d 417 ("When acting within constitutional
limitations, the legislature settles and declares the public
policy of a state, and not the court.") (internal quotation
marks and citation omitted).
31
No. 2011AP2067
imposes a freestanding requirement independent of the
arbitration clause that the Marlowes violated by refusing to
engage in full Wis. Stat. ch. 804 discovery. Asked at oral
argument whether that was his position, counsel for IDS
responded that such an argument had been made to the arbitration
panel, and that if IDS had sought a medical examination pursuant
to the provision that the Marlowes "would have" refused. We
decline to entertain an argument that has not been properly
submitted to our consideration, and we decline to base our
ruling on a hypothetical series of events. State v. Smith, 2012
WI 91, ¶62 n.19, 342 Wis. 2d 710, 817 N.W.2d 410 (reminding
"that the court resolves the facts before it, and does not issue
advisory opinions or address hypothetical facts") (citation
omitted), cert. denied, 568 U.S. __, 133 S. Ct. 635 (2012).
¶41 Nevertheless, for purposes of illuminating and
clarifying the rule established by Borst, we note that such a
provision would not, even if properly preserved and argued,
allow for full Wis. Stat. ch. 804 discovery. Most
significantly, the language gives no indication, either by
content or context, that it speaks to discovery, let alone to
discovery preceding arbitration. Such an omission is even more
fatal juxtaposed with the fact that the policy does contain a
provision under the explicit heading of "Arbitration," a
provision that says nothing about physical examinations or
anything of the sort. For a policy to adequately describe the
discovery mechanisms to be used at arbitration it must, at the
very least, indicate in the policy that the mechanisms are in
32
No. 2011AP2067
fact discovery mechanisms, and that they are meant to be
available at arbitration. Anything short of that plainly does
not qualify as explicit, specific, or clearly drafted, and thus
does not satisfy the Borst standard.18
¶42 Moving to the heart of the dispute, we next review the
arbitration clause itself, which provides that "[l]ocal rules of
law as to procedure and evidence will apply." The arbitration
panel thought this cursory clause "clear and informative." It
is neither, and it consequently does not come remotely close to
satisfying the bar established by Borst.
¶43 Beginning with the most obvious point, the sentence
says nothing about discovery whatsoever, let alone which
discovery rules the drafter had in mind; it mentions only
"procedure and evidence." Such broad and amorphous terms could
connote any number of things. Perhaps most problematically,
18
"[I]t is imperative" to the dissent "for the majority to
explain why the discovery sought by IDS was not explicitly
authorized" by this language in the policy. Dissent, ¶123. It
is imperative to us as well, and that is why we have explained
it in detail: because IDS is not relying on the language
(something the dissent neglects to mention) and because the
language says nothing about discovery in a policy that
specifically addresses the issue. The language may represent
"explicit, specific, and clear" guidelines, id., ¶43, but they
are far from "explicit, specific, and clear" guidelines
governing discovery, and that is precisely what the law
requires. See Borst, 291 Wis. 2d 361, ¶62 ("[T]here were no set
provisions in the insurance contract that detailed the terms of
the discovery in the arbitration. Therefore, if the parties
decide to conduct another arbitration, discovery will be limited
to depositions as detailed in Wis. Stat. § 788.07.") (emphasis
added); ¶63 ("Arbitrators have no inherent authority to dictate
the scope of discovery and absent an express agreement, the
parties are limited to" § 788.07) (emphasis added).
33
No. 2011AP2067
they could easily be understood to relate only to the hearing
itself, not to anything that preceded it. We begin, therefore,
with the uncontested premise19 that the language in question is
ambiguous. See Folkman v. Quamme, 2003 WI 116, ¶13, 264
Wis. 2d 617, 665 N.W.2d 857 ("Insurance policy language is
ambiguous if it is susceptible to more than one reasonable
interpretation.") (citation and internal quotation marks
omitted).
¶44 The ambiguity is deepened by the fact that the phrase
"local rules of law as to procedure and evidence" does not,
contrary to the assumption shared by both IDS and the
arbitration panel, give any indication that those rules are to
be found in one particular chapter of the statutes rather than
another. In fact, the phrase gives no indication that the rules
are to be found in the statutes at all. Quite to the contrary,
"local rules" might easily and plausibly be read as a reference
to the rules of the circuit court of the county in which the
claim is brought, or the local federal district court, both of
19
In its brief, IDS repeatedly notes that the Marlowes have
"conceded" that the arbitration clause is ambiguous, and IDS
nowhere asserts that the phrase "local rules" is unambiguous.
Amicus Wisconsin Insurance Alliance likewise suggested at oral
argument that it believes the clause to be ambiguous. We
therefore assume that it is now undisputed that the clause is
ambiguous.
34
No. 2011AP2067
which may promulgate such rules.20 See, e.g., Drow v. Schwarz,
225 Wis. 2d 362, ¶16, 592 N.W.2d 623 (1999) (referring to
circuit court rules as "local rules"); State ex rel. Mitsubishi
Heavy Indus. Am., Inc. v. Cir. Ct. for Milwaukee Cnty., 2000 WI
16, ¶37, 233 Wis. 2d 1, 605 N.W.2d 868 (Abrahamson, C.J.,
concurring) (referring to federal district court rules as "local
rules"). This possibility is especially likely given that we
read the disputed ambiguous provision, as always, within the
context of the policy as a whole. See, e.g., Wadzinski v. Auto-
Owners Ins. Co., 2012 WI 75, ¶16, 342 Wis. 2d 311, 818
N.W.2d 819. Outside the disputed arbitration clause, the policy
twice refers to Wis. Stat. ch. 34421 with specific, formal legal
citations.22 If the drafters intended to refer to ch. 804, they
20
In its opinion denying the Marlowes' motion for
reconsideration, the panel dismissed this possibility because
circuit court rules are meant only to supplement the statutes
and because the Brown County Circuit Court happened not to have
promulgated any rules regarding evidence. Neither explanation
is persuasive. A party may well want the benefit of the more
comprehensive set of procedures that court rules, in conjunction
with the statutes they supplement, provide. Moreover, policies
are presumably drafted to cover a wide range of circumstances,
and the fact that this particular dispute wound up in a circuit
court with no local rules concerning evidence is neither here
nor there when it comes to the provision's significance.
21
Wisconsin Stat. ch. 344 is a chapter of Wisconsin's
Financial Responsibility law concerning vehicles.
22
It may be instructive to note that the policy's reference
to Wis. Stat. ch. 344 is a good example of an explicit,
specific, and clearly drafted arbitration clause within the
meaning of Borst. Had the policy referred to ch. 804 in a
similar fashion, there would be no question that IDS was
entitled to employ the discovery devices described in the
chapter.
35
No. 2011AP2067
obviously knew how to use similarly clear and comprehensible
language, rather than the opaque phrase, "local rules."23
¶45 Even if we take the considerable leap IDS asks of us
and accept, for the sake of argument, that "local rules" refers
to the Wisconsin statutes, we are still left with an even more
difficult and even more important question, the question that
lies at the root of this entire case: which statute? There is
23
Without citation or explanation, the dissent posits that
"it is not plausible that the" parties "intended to mean that
arbitrators are bound by rules of procedure and evidence
established by the circuit courts——county by county——but need
not follow the procedural and evidentiary rules embodied in
state law." Dissent, ¶130. There are two problems with this
argument. First, it proposes a choice that does not exist.
Circuit court rules cannot conflict with state law, see, e.g.,
Hefty v. Strickhouser, 2008 WI 96, ¶46, 312 Wis. 2d 530, 752
N.W.2d 820, and there is no contention here that anyone is free
to disregard the Wisconsin statutes. Second, we do not find it
so implausible that a policy might adopt local court rules
concerning arbitration discovery. Implausibility may be partly
in the eye of the beholder, but if such a tack is implausible,
there are at least a few parties around the country behaving
implausibly. See, e.g., Dan Ryan Builders, Inc. v. Nelson, 737
S.E.2d 550, 553 n.1 (W. Va. 2012) (quoting an arbitration clause
that included the provision that "[e]ach party shall be entitled
to full discovery in accordance with the local rules of court in
the event that arbitration is invoked . . . .") (emphasis
added); Shainin II, LLC v. Allen, No. C06-420P, unpublished slip
op., 2006 WL 2473495, at *8 (W.D. Wash. Aug. 28, 2006) (making
reference to arbitration agreements that "provide for discovery
'as provided by the United States Federal Rules of Civil
Procedure as modified by the Local Rules for the Western
District of Washington.'") (quoting the agreements); Sprint
Commc'ns Co. L.P. v. Mushahada Int'l USA, Inc., No. Civ.A. 05-
2168-KHV, unpublished slip op., 2005 WL 1842845, at *1 (D. Kan.
July 29, 2005) (paraphrasing an agreement which provided "that
in the event a dispute under the agreement is submitted to
arbitration . . . , any discovery would be governed by the local
rules of the District of Kansas.").
36
No. 2011AP2067
nothing in the clause at issue even intimating that "local
rules" means Wis. Stat. ch. 804 and not Wis. Stat. § 788.07. It
is axiomatic that where a more specific law on a given subject
is potentially in conflict with a more general one on the same
subject, the former controls. See, e.g., Pruitt v. State, 16
Wis. 2d 169, 173, 114 N.W.2d 148 (1962). Although this case
presents a somewhat atypical example of that rule (because we do
not have a statutory conflict so much as uncertainty as to which
of two consistent statutes apply), we believe the canon still
cuts against IDS's interpretation. Chapter 804 applies to all
civil litigation in the Wisconsin courts. By contrast, ch. 788
applies to arbitration only. In the literal sense, then,
§ 788.07 is the local rule as respects discovery in arbitration
proceedings, if the "locality" is considered the entire state,
as IDS itself contends.24
¶46 Resisting that conclusion, the arbitration panel
wrote, in its ruling on the motion for reconsideration, that
"[t]he few courts which have interpreted the phrase [i.e.,
"local rules of law as to procedure and evidence,"] have
24
In its denial of the Marlowes' motion to reconsider, the
arbitration panel discounted the suggestion that "local rules"
could signify Wis. Stat. § 788.07 because that statute "is
certainly no more a 'local rule' than [Wis. Stat. ch.] 804 is."
We could not agree more with the premise, but we do not see how
the panel used it to draw its conclusion. If Borst means
anything, it means that there is a presumption in favor of
§ 788.07. For reasons it did not articulate, the arbitration
panel appeared to apply the opposite presumption. The question
is whether Wis. Stat. ch. 804 is "any more a 'local rule'" than
§ 788.07, not vice versa, and the answer is indisputably no.
37
No. 2011AP2067
suggested, as this panel has, that it means the rules of civil
procedure as applied in state courts." In support, the panel
cited five cases, none of which are apposite. Beginning with
the citation least helpful to the panel's position, Workman v.
Superior Court reaches the opposite conclusion from the
arbitrators here, holding that an arbitration clause providing
that "local rules of law as to procedure and evidence" would
apply did not require compliance with the state's code of civil
procedure. 176 Cal. App. 3d 493, 501 n.3 (Ct. App. 1986).
Three of the remaining cases relied upon by the panel to
interpret the phrase "local rules" are distinguishable from the
present matter, as those cases examined only the phrase so as to
resolve disputes concerning choice of law or forum. They did
not even purport to determine whether a court statute prevailed
over an arbitration statute. See Miller v. Allstate Ins. Co.,
763 A.2d 401, 403 (Pa. Super. Ct. 2000); Costello v. Liberty
Mut. Fire Ins. Co., 876 N.E.2d 115, 120-21 (Ill. App. 2007);
Brown v. Great N. Ins. Co., No. Civ.A. 3:05-CV-1791, 2006 WL
538186, unpublished slip op. at *1-2 (M.D. Pa. Mar. 2, 2006).25
¶47 The only Wisconsin precedent cited by the arbitration
panel is just as easily distinguishable. As the arbitrators saw
it, Lukowski v. Dankert, 184 Wis. 2d 142, 515 N.W.2d 883 (1994)
25
Brown does make a passing reference to "state procedural
rules" in two cursory sentences that include no analysis or
citations, and does not, at any rate, say anything about
favoring trial procedure over arbitration procedure. Brown v.
Great N. Ins. Co., No. Civ.A. 3:05-CV-1791, 2006 WL 538186,
unpublished slip op. at *1-2 (M.D. Pa. Mar. 2, 2006).
38
No. 2011AP2067
confirmed that "Wisconsin procedural rules" should be applied in
circumstances like these. At the risk of repeating ourselves,
Wis. Stat. § 788.07 is a Wisconsin procedural rule, as evidenced
by the fact that it is found in the same code as Wis. Stat. ch.
804. Additionally, Lukowski made only one statement regarding
"local rules of law," namely, that it created "a legitimate
expectation that the governing law would be followed and applied
properly." Id. at 152 (footnote omitted). In finding that the
panel acted within its discretion, the Lukowski court did not
suggest that there was any dispute between the parties as to
what the governing law was, the issue at the heart of the
present matter. We have no quarrel with this uncontroversial
statement by Lukowski but it is, like all of the cases cited by
the panel, off-point.26 To summarize, none of the decisions
relied upon by the panel involved a statute designed to
26
We are uncertain as to what significance the dissent
ascribes to Lukowski v. Dankert, 184 Wis. 2d 142, 515 N.W.2d 883(1994). It includes a fairly lengthy exposition of the case,
but places it in a section denominated "Factual Background."
Dissent, ¶¶84-87. Like the arbitration panel, the dissent
emphasizes that the Lukowski court interpreted the phrase "local
rules of law as to procedure and evidence" as a reference to
Wisconsin law. Id., ¶85 ("All parties in Lukowski interpreted
this language to refer to Wisconsin law.") (emphasis in
original); id., ¶86 ("The governing law on procedure and
evidence was deemed to be Wisconsin law in statutes and
cases."). We do not disagree, but cannot perceive the relevance
of this fact. As in Lukowski, it is obvious that Wisconsin law
governs the instant matter. That gets us nowhere, however, as
the real question is which Wisconsin law. Lukowski happened to
involve the same few words in an arbitration contract, but it
did not consider any remotely similar legal question and
consequently does not assist our inquiry here.
39
No. 2011AP2067
delineate the discovery procedures available at arbitration.
Deference to the legislature was consequently not a factor in
those cases, and it is a factor we cannot dismiss out of hand
here in light of § 788.07's clear directive.
¶48 Lastly, we consider all of the above with reference to
another well-established rule of contract law, that ambiguities
are resolved against the drafter. See, e.g., Hirschhorn v.
Auto-Owners Ins. Co., 2012 WI 20, ¶23, 338 Wis. 2d 761, 809
N.W.2d 529 ("[A]mbiguities are construed against the insurer,
the drafter of the policy.") (citations omitted). That rule has
particular force here, as Borst specifically requires the
drafter to use care in making clear its intention to resort to
arbitration discovery more expansive than that provided in Wis.
Stat. § 788.07.
¶49 In light of the foregoing, it cannot be said that the
"local rules" provision was an explicit, specific, and clearly
drafted reference to Wis. Stat. ch. 804, or to any other
discovery rules, as required by Borst. The clause was none of
40
No. 2011AP2067
those things.27 The panel erred in ruling to the contrary, and
should instead have limited discovery to the confines of Wis.
Stat. § 788.07.
2) The Arbitration Panel Did Not Have the Exclusive Authority To
Determine the Discovery Procedure
¶50 The court of appeals held that the "local rules"
provision "arguably refers to the scope of discovery," Marlowe,
340 Wis. 2d 594, ¶27, thereby endowing the arbitration panel
with the "exclusive authority," id., ¶22, to control discovery,
free from any judicial review. To justify that conclusion, the
court of appeals misconstrued our precedent, and we therefore
hold that the panel did not have the sole power to regulate
discovery.
¶51 As with the preceding issue, our examination of the
arbitration panel's authority vis-à-vis the courts centers on
Borst. The court of appeals discerned in Borst the proposition
that the construction of an arbitration provision that "arguably
27
At oral argument, counsel for amicus Wisconsin Insurance
Alliance suggested that "express," as used in Borst, "doesn't
mean that it's not ambiguous, it means that there is some
language, direct language in the contract . . . that addresses
this issue." If that were true, the word would have no real
meaning. "Express" has a far stronger connotation: "directly
and distinctly stated or expressed rather than implied or left
to inference: not dubious or ambiguous." Webster's Third New
International Dictionary 803 (2002) (emphasis added). Of
course, the "local rules" provision was by no stretch of the
imagination "directly and distinctly stated," at least not in
any sense relating to its supposed reference to Wis. Stat. ch.
804. Thus, even under the narrowest reading of Borst's holding,
the policy would not suffice to entitle IDS to ch. 804
discovery.
41
No. 2011AP2067
refers to the scope of discovery" lies within the exclusive
province of the panel. Marlowe, 340 Wis. 2d 594, ¶27. Borst
said no such thing. The policy at issue there was "silent as to
the terms of discovery." Borst, 291 Wis. 2d 361, ¶53. Neither
the word "arguably" nor any other synonym appears in the
decision. The Borst court declared, emphatically, "that
arbitrators have no inherent authority to dictate the scope of
discovery, and absent an express agreement to the contrary, the
parties are limited to depositions as spelled out in Chapter
788." Id., ¶56 (emphasis added). The court of appeals turned
that clear directive on its head in this case by creating a rule
that an ambiguous policy that arguably demonstrates an agreement
to go outside of Wis. Stat. § 788.07 insulates the panel's order
from judicial review. For reasons we have already surveyed, the
Borst rule is a sensible one and, at any rate, it is not for the
court of appeals to insert a qualification into our decision
that we did not place there ourselves.
¶52 Part of the court of appeals' confusion on this point
stemmed from its reading of Employers. In that case, an
arbitration agreement provided that each party was to "'submit
its case' to the arbitrators within thirty days of the
arbitrators' appointment." Employers, 202 Wis. 2d at 684.
After the thirty days elapsed, Employers sought further
discovery, which the panel declined to grant. When the matter
reached it, the court of appeals considered the question of
whether "submit its case" meant "submit all factual materials
and arguments" or just "submit all arguments." As the court of
42
No. 2011AP2067
appeals read the agreement, if the phrase "submit its case"
signified "submit all arguments," the panel would have enjoyed
the discretion to allow discovery after the lapsing of the 30-
day deadline. In a passage that caught the attention of the
court of appeals in this case, the Employers court wrote:
Because the language in the agreement is vague and
indefinite as to exactly what procedures should be
used to arrive at that determination, it is within the
province of the arbitration panel, as the interpreter
of the contract language, to devise such procedures as
it considers necessary to reach a decision, as long as
those procedures are compatible with the contract
language and do not violate the law.
Id. at 686.
¶53 In the present matter, the court of appeals collapsed
the quoted rule from Employers with the rule articulated in
Borst, holding that "under Borst and Employers, the panel was
entitled to interpret the phrase and determine the scope of
discovery it allowed." Marlowe, 340 Wis. 2d 594, ¶27 (emphasis
added). Borst and Employers, however, set forth very different
rules, almost diametrically opposed rules, and only one applies
here. We resolved the question implicated by the dispute
between the Marlowes and IDS in Borst. That question was, in a
nutshell, what does a policy need to say in order to allow for
discovery outside of Wis. Stat. § 788.07? The answer, we
repeat, is: an explicit, specific, and clearly drafted reference
to another set of discovery guidelines. When such language is
not included in the policy, we made clear in Borst, the courts
have not just the option, but the duty to correct a panel that
43
No. 2011AP2067
refuses to apply the statute, lest the judiciary neglects its
responsibility to enforce the duly-enacted laws of the
legislature.
¶54 Employers answered a different, narrower question,
and with substantially different facts before it: can an
arbitration panel extend the time for submissions when the
contract is ambiguous on the subject? Crucially, the court of
appeals in Employers was not addressing an issue that the
legislature had already addressed, so there was no default rule
to apply in the case of ambiguity. The court of appeals
therefore properly resorted to the more deferential standard
that governs judicial review of arbitration rulings in the
absence of any legislation on point. Equally importantly, the
arbitration clause under review in Employers informed the panel
that it was "relieved of all judicial formalities and may
abstain from following the strict rules of law," a factor the
court emphasized in its opinion. Id. at 686 ("Given the broad
power the clause gives to the panel in controlling procedure, we
will defer to its interpretation of an ambiguous phrase
regulating procedure.") (Emphasis added.)
¶55 Seen in this light, the Employers court correctly fell
back on the general principle that an arbitration panel should
have exclusive authority to dictate procedure where the
arbitration clause allows it to and where the legislature has
provided no on-point default rule. See, e.g., City of Madison,
144 Wis. 2d at 586 (holding that the courts will uphold an
arbitrator's decision on whether an award is warranted, and if
44
No. 2011AP2067
so, its size, unless "there is a manifest disregard of the law,
or if the award itself is illegal or violates strong public
policy."). Notwithstanding the dissent's protestations to the
contrary, the panel here had no such luxury. For the
arbitration clause under consideration, far from relieving the
panel of "judicial formalities and . . . strict rules of law,"
required the panel to apply such rules, it simply did not
specify which rules. Furthermore, the legislature has addressed
the type of discovery procedure to be employed in arbitration
proceedings and we must defer to its choice. Simply put,
Employers answered a different question, under different facts,
and with far different legal considerations being brought to
bear. Both Borst and Employers were rightly decided, and there
is no tension between them. Borst controls this case, and it
requires us to instruct the panel to apply Wis. Stat. § 788.07,
as the legislature has directed.
¶56 Following a similar path to that of the court of
appeals, the dissent takes exception to our treatment of the
panel's decision, opining that we "misstate[]" the standard of
review and accord its ruling insufficient deference. Dissent,
¶¶124-132. To the dissent, the more deferential Employers-type
standard applies, and under that standard we "would be hard
pressed to argue that there is no reasonable basis for the
panel's construction of the" policy. Id., ¶130. For starters,
the question under the approach advocated by the dissent would
not be whether there was a "reasonable basis for the panel's
construction," it would be the far narrower and more restrictive
45
No. 2011AP2067
question of whether it constituted a "perverse misconstruction."
Id., ¶133. It is true, as the dissent maintains, that the
answer would be negative, and that proves our point. Borst did
not mention, let alone employ, the "perverse misconstruction"
test. Instead, Borst taught, by example, that an arbitration
panel can order full Wis. Stat. ch. 804 discovery only when the
agreement contains an explicit, specific, and clearly drafted
clause allowing for such discovery, and that courts will reverse
where they disagree after exercising their own independent
judgment. 291 Wis. 2d 361, ¶62 ("In this case, there were no
set provisions in the insurance contract that detailed the terms
of the discovery in the arbitration. Therefore, if the parties
decide to conduct another arbitration, discovery will be limited
to depositions as detailed in Wis. Stat. § 788.07.") (footnote
omitted).
¶57 Imaginatively, the dissent endeavors to tie its
recommended standard of review to Borst itself, declaring that
it is proper "because Borst permits the scope of discovery to be
set out in the contract." Dissent, ¶128. Borst did permit as
much, but it also reversed a panel for ordering full discovery
while paying no deference to the panel's ruling. In the
pertinent section of its analysis, the Borst court did not even
mention the panel's reasoning. 291 Wis. 2d 361, ¶¶53-62.
Although Borst declared the contract "silent as to the terms of
discovery," it was debated in the briefs, the certification, and
the supreme court decision itself as to whether the policy
incorporated rules drawn up by the American Arbitration
46
No. 2011AP2067
Association ("AAA"), which arguably would have provided some
parameters for discovery. Id., ¶62 n.10. Notably, Borst did
not discuss whether it might have been a "perverse
misconstruction" or a "manifest disregard of the law" for the
panel to rely on the AAA rules, but rather said that "there were
no set provisions in the insurance contract that detailed the
terms of the discovery in the arbitration" and that it was
"unclear which set of arbitration rules promulgated by the AAA
would be applicable." Id., ¶62 & n.10 (emphases added). These
are not the words of a court looking for a "perverse
misconstruction" or a "manifest disregard of the law." They are
the words of a court doing exactly what it purports to be doing:
evaluating, for itself, whether a policy contains an explicit,
specific, and clearly drafted discovery clause.
¶58 Perhaps most to the point, if Borst really did share
the dissent's view of the law, it would have said something
about how a panel is largely insulated from judicial review in
fashioning discovery so long as the policy contains a provision
arguably on point, but enjoys no such insulation when the policy
is silent. It would have been wholly unnecessary to set a bar
for how a policy should address discovery. What is more, it
would be especially odd to set that bar with reference to its
own judicial analysis, rather than with reference to the
arbitration panels that supposedly enjoy an almost unlimited
freedom to interpret discovery clauses as they see fit. Surely
the seven members of the Borst court would have foreseen that
their opinion would be taken at face value, and that the
47
No. 2011AP2067
Wisconsin courts, our own included, would obey its instructions,
which offer no inkling that they are directed only at
arbitration panels and not also at the judiciary. Those
instructions are to look for explicit, specific, and clearly
drafted discovery clauses, and we follow them today. As before,
the dissent's critique of our standard of review is in reality a
call to overrule Borst, using one element of the decision, taken
out of context, as a reason to eviscerate the rest of it. We
are not persuaded by the call, and do not overrule Borst, either
explicitly or, as the dissent requests, sub silentio.
¶59 As a final point, it warrants mention that Borst's
requirement is far from onerous and that there is no reason to
fear the dissent's dark warnings about the dire consequences to
arbitration let loose by our decision. Dissent, ¶88 ("[T]he
majority opinion undercuts the contractual authority of
arbitrators and creates a serious disincentive for parties to
agree to arbitration."); ¶123 (under the majority decision,
"insurers will face a powerful disincentive to agree to
arbitration, and the arbitration of contractual disputes will
suffer a major setback."). Had IDS wanted the benefit of Wis.
Stat. ch. 804 discovery, it could simply have said, in the
policy it drafted, "discovery will be governed by Wis. Stat. ch.
48
No. 2011AP2067
804," or any number of equally clear and concise alternatives.28
Unlike the dissent, we do not believe contract-drafters are so
unskilled in their craft that the demand for these nine simple
words or other equally straightforward formulations poses any
danger of "supersed[ing] the parties' intentions." Id., ¶114.29
Borst placed IDS, along with all other Wisconsin insurers, on
notice that ambiguous provisions would not suffice to grant
recourse to expansive ch. 804 discovery. Such a modest demand
for clarity is not too much to ask when the legislature has
unequivocally expressed its own reasonable preference on the
matter.
IV. CONCLUSION
28
At the hearing where it announced its ruling, the circuit
court opined that the Marlowes would "be in the mud if [the
arbitration clause] said local discovery rules," rather than
just "local rules of law as to procedure and evidence."
(Emphasis added). We respectfully disagree. As stated, Wis.
Stat. § 788.07 is as much a "local discovery rule" as Wis. Stat.
ch. 804. Indeed, it is more of a local discovery rule as
respects arbitration than ch. 804, which says nothing about
arbitration. The phrase "local discovery rules" would have
suffered from the same fatal ambiguity as the phrase IDS
selected.
29
If the call we first issued in Borst and now reiterate
today——for clear statements about the scope of discovery in
arbitration agreements——does in fact have an adverse impact on
the ability of an insurer to resolve disputes in arbitration, as
the dissent worries, one can only conclude that it is because
the insured is hesitant to consent to the type of discovery
desired by the insurance company. And if that is the case, it
would not be so regrettable as the dissent alleges for fewer
claims to be arbitrated, as the reduction would simply reflect a
greater number of parties knowledgeably exercising their
independent bargaining power, a change we should welcome, not
dread.
49
No. 2011AP2067
¶60 We consider two issues: 1) whether the Marlowes were
permitted to seek a declaratory judgment concerning the
discovery dispute before the arbitration panel ruled on whether
an award was appropriate and, if so, its amount; and 2) whether
the panel properly established discovery procedures outside
those outlined in Wis. Stat. § 788.07. Because no unusual
circumstances justified an interlocutory appeal, we hold that
the Marlowes' action in circuit court was premature. As to the
second question, the legislature has set forth, in the form of
§ 788.07, a narrow scope of discovery for arbitration
proceedings in the absence of an explicit, specific, and clearly
drafted arbitration clause to the contrary. IDS failed to
include any such language in its policy and we therefore
instruct the panel to limit discovery to that provided for in
§ 788.07. Accordingly, we affirm the court of appeals insofar
as it declined to allow the Marlowes an interlocutory appeal.
However, insofar as the court of appeals granted IDS the benefit
of full Wis. Stat. ch. 804 discovery, we modify its decision and
instead direct the panel to cabin discovery to the depositions
contemplated in § 788.07. Thus, the decision of the court of
appeals is modified, and as modified, affirmed, and the cause is
remanded to the arbitration panel with instructions.
By the Court.—The decision of the court of appeals is
modified and affirmed, and, as modified, the cause is remanded
to the arbitration panel with instructions.
50
No. 2011AP2067
51
No. 2011AP2067.ssa
¶61 SHIRLEY S. ABRAHAMSON, C.J. (concurring). I agree
with the majority opinion's conclusion that Wis. Stat. § 788.07
sets forth a narrow scope of discovery for arbitration
proceedings in the absence of an explicit, specific, and clearly
drafted arbitration clause to the contrary.
¶62 I also agree with the majority opinion's conclusion
that parties to an arbitration can seek judicial intervention
prior to the arbitrators' rendering an award only under special
circumstances. These special circumstances are variously
described in the majority opinion as "unusual circumstances,"
"compelling reason(s)," circumstances that "subject the
aggrieved party to irreparable harm," "urgent or potentially
irreparably prejudicial matters that demand the immediate
attention of the courts," "especially urgent" circumstances, and
circumstances that pose a "threat of irreparable harm."
Majority op., ¶¶2, 20, 21, 60.
¶63 The majority then applies this rule to the present
case and concludes that the Marlowes' action in the circuit
court (and here) was premature because "no unusual circumstances
justified an interlocutory appeal." Majority op., ¶¶2, 11, 22,
60.
¶64 Indeed, the majority goes so far as to say that the
Marlowes did not suggest that the discovery dispute at
arbitration was unusual in such a way as to justify intermediate
intervention by the circuit court. Majority op., ¶21. On the
contrary, the Marlowes made the logical and convincing argument
that the arbitration panel's erroneous grant of broad discovery
1
No. 2011AP2067.ssa
subjected them to the full-blown, time-consuming and costly
burdens of litigation without the benefit of a jury trial and
without an adequate remedy.
¶65 The majority decides at ¶21 that the Marlowes'
judicial action is premature. As a matter of logic, the opinion
should end there. Surprisingly, it does not. It goes on for
another 39 paragraphs grappling with numerous issues, some
briefed and some not briefed.
¶66 The majority opinion's reasoning is internally
inconsistent. Or, as the majority opinion prefers to put it, it
"seems at first blush incongruous" to hold that Marlowe's court
action is premature and no relief should be granted and then to
give Marlowe the relief requested. Majority op., ¶22.
¶67 The inconsistency, or if you prefer, the "incongruity
at first," second, or third blush, is evident because the
reasons the majority uses to justify its deciding the
substantive discovery issue also justify judicial intervention
by the circuit court according to the rule set forth in the
majority opinion: the case presents "special circumstances,"
"unusual or especially urgent circumstances," and "compelling
reasons."
¶68 And what are the special, unusual or especially urgent
circumstances or compelling reasons the majority gives for
deciding the substantive issue in this premature action? To use
the majority opinion's own words, if we did not decide this
issue,
we would allow an erroneous rule to retain the force
of law, not only in this case, but in all others.
2
No. 2011AP2067.ssa
Moreover, further delay of the issue's ultimate
resolution would impede even further the efficient
disposition the parties bargained for by agreeing to
arbitration. Lastly, we will be required to answer
the important question presented by the discovery
dispute sooner or later. It would only frustrate
judicial economy were we to unnecessarily put the
question off for another day, particularly when we
would thereby cause arbitration in this case to
proceed under the wrong statute in violation of a
clear legislative dictate.
Majority op., ¶22 (emphasis added).
¶69 Prohibiting the Marlowes from obtaining immediate
judicial intervention at the circuit court on a clearly
erroneous arbitration decision relating to discovery, to use the
words of the majority opinion, "would allow an erroneous rule"
to have the force of law in the Marlowes' case; would cause
"further delay of the issue's ultimate resolution"; "would
impede even further the efficient disposition the parties
bargained for by agreeing to arbitration"; "would frustrate
judicial economy"; and would "cause arbitration . . . to proceed
under the wrong statute in violation of a clear legislative
dictate." Furthermore, the circuit court "will be required to
answer the important question presented by the discovery dispute
sooner or later." Majority op., ¶22.
¶70 For the very reasoning and analysis set forth in the
majority opinion, I conclude that the Marlowe matter presents
special circumstances and that the adjudication was not
premature at the circuit court or here.
¶71 For the reasons set forth, I write separately.
¶72 I am authorized to state that Justice ANN WALSH
BRADLEY joins this opinion.
3
No. 2011AP2067.dtp
¶73 DAVID T. PROSSER, J. (concurring in part, dissenting
in part). The court of appeals reversed the circuit court,
concluding that a party in an arbitration "generally may not
seek immediate circuit court review of an arbitration panel's
intermediate decision. Instead, the party must wait and
challenge that decision by seeking to vacate the panel's final
award, pursuant to Wis. Stat. § 788.10."1 The majority opinion
affirms this determination, and I join that portion of the
majority opinion that discusses the issue under the heading "The
Interlocutory Appeal."
¶74 The court of appeals also reversed the circuit court
by approving the arbitration panel's interpretation of a
sentence in the arbitration provision of an insurance contract
that arguably related to discovery. The majority opinion
rejects this part of the court of appeals determination.
Although I do not necessarily agree with all the language in the
court of appeals opinion, I believe the holding on the second
issue was essentially correct. Because the majority opinion
comes to a different conclusion, I respectfully dissent from
"The Discovery Dispute" portion of the opinion.
I. FACTUAL BACKGROUND
¶75 Mary and Leslie Marlowe (the Marlowes) were involved
in an automobile accident with an uninsured motorist. They made
a claim for uninsured motorist coverage from their insurer, IDS
Property Casualty Insurance Company (IDS). The Marlowes and IDS
1
Marlowe v. IDS Prop. Cas. Ins. Co., 2012 WI App 51, ¶18,
340 Wis. 2d 594, 811 N.W.2d 894 (footnote omitted).
1
No. 2011AP2067.dtp
agreed to arbitrate the claim as provided in the Marlowes'
insurance policy, and thereafter a three-member arbitration
panel was selected.
¶76 A discovery dispute soon developed. IDS says that it
sought discovery "to verify the existence and extent of the
Plaintiffs' various alleged injuries." It explained that:
Such discovery is necessary because it goes to the
essence of the claims that the Marlowes have put in
issue, namely the existence and extent of their
alleged injuries. The alleged injuries arise from a
rear-end vehicle accident with minimal damage to the
vehicle, but with claimed medical specials already
exceeding $60,000.00, and with a claim for permanent
injury.
¶77 The Marlowes asserted in the complaint that started
this case that IDS "attempted to pursue discovery of the
plaintiffs through the use of written interrogatories, requests
for production of documents, medical and employment
authorizations, income tax return releases, depositions of the
plaintiffs and treating healthcare providers, and defense
medical examinations." IDS admitted these allegations in its
answer.
¶78 The Marlowes refused to comply with IDS's discovery
demands.
¶79 IDS then asked the arbitration panel to interpret
language in the arbitration provision in relation to the
discovery dispute. IDS claimed that a sentence in the
provision——namely, "Local rules of law as to procedure and
evidence will apply"——authorized discovery pursuant to the
procedures in Wis. Stat. ch. 804, which is the chapter, in
2
No. 2011AP2067.dtp
Wisconsin's code of civil procedure, on "Depositions and
Discovery."
¶80 In October 2010 the arbitration panel issued a
unanimous decision interpreting the "Local rules of law"
sentence as applying to Chapter 804 of the Wisconsin Statutes.
The panel recognized that this court's decision in Borst v.
Allstate Insurance Co., 2006 WI 70, 291 Wis. 2d 361, 717
N.W.2d 42, "drastically circumscribe[d] the discovery that can
be taken in arbitration proceedings." However, the panel relied
upon an approved exception to the limited-discovery rule that
permits expanded discovery when the parties' contract expressly
provides for it. The panel concluded that the "Local rules of
law" sentence denoted "the civil rules of procedure that govern
court proceedings daily in local courtrooms." The panel
asserted that Chapter 804 does "not contemplate unfettered
discovery" but rather "discovery that is quick and efficient,
but cost effective." The panel put limitations on future
depositions and noted that a formal advance order would be
required for any physical examination of Mary Marlowe.
¶81 Significantly, the arbitration panel declared:
"Nothing in Borst, or any other decision cited, deprives the
panel of authority to implement the clear terms of the agreement
that govern the parties' relationship. Indeed, that is the
panel's responsibility."
¶82 Through their attorneys, the Marlowes filed a lengthy
and well-argued letter brief seeking reconsideration of the
panel's decision. Many of the points made in the brief are
3
No. 2011AP2067.dtp
adopted by the majority opinion. However, the Marlowes' brief
conceded that the panel's "construction of this ambiguous policy
language is one that could be reasonably made."
¶83 The panel responded by issuing a supplementary
decision affirming its ruling and answering the points in the
Marlowes' brief. The supplementary decision relied in part on
Lukowski v. Dankert, 184 Wis. 2d 142, 515 N.W.2d 883 (1994).
¶84 In Lukowski, the plaintiff suffered personal injuries
when the truck in which she was riding overturned and she was
ejected through the sunroof. Id. at 146. When the plaintiff
made a claim against her insurer for uninsured motorist
coverage, her claim was submitted to arbitration. Id. at 146–
47. The arbitration panel determined the full extent of the
plaintiff's damages but reduced her award by 40 percent because
the plaintiff had not been wearing a seatbelt. Id. at 147. In
other words, the panel found the plaintiff 40 percent causally
negligent for her injuries——and it did so without expert
testimony presented by the insurer, as was normally required
under Wisconsin case law. Id. at 147–48.
¶85 Ms. Lukowski's insurance policy contained the
identical language contained in the Marlowes' policy: "Local
rules of law as to procedure and evidence will apply."2 Id. at
152. All parties in Lukowski interpreted this language to refer
to Wisconsin law. The plaintiff asserted that the arbitration
2
The "Local rules of law" language was not present in the
policy at issue in Borst v. Allstate Insurance Co., 2006 WI 70,
291 Wis. 2d 361, 717 N.W.2d 42.
4
No. 2011AP2067.dtp
panel had not followed Wisconsin case law. Id. at 151. The
insurer insisted that the panel had acknowledged Wisconsin law
but distinguished the plaintiff's case from other cases on
grounds that expert testimony was not required when a party's
injuries resulted from her ejection from the vehicle because she
did not wear a seatbelt.
¶86 This court ratified the parties' interpretation of the
sentence on "Local rules of law": "[T]he parties had a
legitimate expectation that the governing law would be followed
and applied properly." Id. at 152 (footnote omitted). The
governing law on procedure and evidence was deemed to be
Wisconsin law in statutes and cases. See id. at 154.
¶87 In the present case, the arbitration panel construed
the "Local rules of law" sentence the same as the arbitration
panel, the court of appeals, and this court had construed it in
Lukowski. The Brown County Circuit Court overturned the panel's
construction, and the court of appeals then reversed the circuit
court. The majority now sides with the circuit court.
II. DISCUSSION
¶88 The majority opinion is grounded on the premise that
arbitrations are different from civil court trials. This
premise is unassailable. However, the majority uses the premise
to severely restrict arbitration discovery not only under the
arbitration statutes but also under the parties' insurance
contract——notwithstanding applicable language to the contrary.
In the process, the majority opinion undercuts the contractual
authority of arbitrators and creates a serious disincentive for
5
No. 2011AP2067.dtp
parties to agree to arbitration. In sum, despite its good
intentions, the majority opinion goes too far.
A. The Borst Certification
¶89 In the Borst case, the court of appeals certified
three questions including the following: "Other than the
deposition procedure outlined in Wis. Stat. § 788.07, is the
nature and extent of discovery during the arbitration process
governed by contract, the arbitrators' inherent authority, or a
combination of the two?" Borst, 291 Wis. 2d 361, ¶2. The Borst
court summarized its answer as follows: "Arbitrators have no
inherent authority to dictate the scope of discovery, and absent
an express agreement, the parties are limited to the procedure
for depositions, as described in Wis. Stat. § 788.07." Id., ¶3.
¶90 The question posed in the Borst certification was
provocative because of its reference to the "inherent authority"
of arbitrators. In Lukowski, the court had declared that "[a]n
arbitrator obtains authority only from the contract of the
parties and therefore is confined to the interpretation of that
contract." Lukowski, 184 Wis. 2d at 152; see also Nicolet High
Sch. Dist. v. Nicolet Educ. Ass'n, 118 Wis. 2d 707, 714, 348
N.W.2d 175 (1984); Milwaukee Prof'l Firefighters, Local 215 v.
City of Milwaukee, 78 Wis. 2d 1, 21, 253 N.W.2d 481 (1977).
Thus, the certified question posited an option that this court
had rejected repeatedly.
¶91 The certified question appears to have diverted the
court's attention from the possibility that the arbitration
statutes themselves provide authority for other discovery, and
6
No. 2011AP2067.dtp
led to the court's creation of non-statutory obstacles for
arbitrators in construing contracts that provide for
arbitration. These conclusions are admittedly much clearer to
me in hindsight than they were when I joined the Borst opinion
in 2006. They require explanation.
B. The Borst Decision
¶92 Looking solely at the arbitration statutes, one
perceives two sections that bear on discovery: Wis. Stat.
§§ 788.06 and 788.07. All the attention has been focused on
§ 788.07, which reads:
Depositions. Upon petition, approved by the
arbitrators or by a majority of them, any court of
record in and for the county in which such
arbitrators, or a majority of them, are sitting may
direct the taking of depositions to be used as
evidence before the arbitrators, in the same manner
and for the same reasons as provided by law for the
taking of depositions in suits or proceedings pending
in the courts of record in this state.
¶93 The Borst court explained the factual background of
that case when it interpreted Wis. Stat. § 788.07. Plaintiff
Borst was injured in an accident with an uninsured motorist.
Borst, 291 Wis. 2d 361, ¶5. The insurer believed that Borst was
50 percent liable for the accident. Id., ¶6. It requested that
all medical records related to the plaintiff's claim be
transmitted to it after Borst finished his treatment. Id.
Borst provided these records as well as records of his wage
loss. Id., ¶7.
¶94 After an arbitration panel was created, Allstate
served Borst with "a set of written interrogatories, a request
7
No. 2011AP2067.dtp
for document production, and medical authorizations." Id., ¶10.
These requests were resisted and challenged in a motion to the
arbitration panel to quash the discovery. Id. Allstate then
raised the stakes, asking the panel to approve a deposition and
to authorize a release of records. Id. The panel ultimately
ordered Borst to (1) give a deposition, (2) supply medical
authorizations, and (3) cooperate with other appropriate
discovery. Id. In its argument to the panel, Allstate relied
heavily on the proof of claim provisions in the insurance
policy. Id.
¶95 Borst refused to submit to a deposition, and Allstate
elected not to press that issue, although it did not waive its
"right" to a deposition of Borst. Id., ¶11. It did depose the
other driver involved in the accident, while Borst provided a
list of damages and confirmed the accuracy of all pre-
arbitration discovery. Id.
¶96 The Borst court summarized the parties' arguments:
Borst essentially contends that discovery in
arbitration is the exception and not the rule. Borst
argues that in an arbitration of a first party
insurance claim, and absent extraordinary
circumstances, the parties should simply submit their
cases to the arbitrators. Unfettered discovery, Borst
argues, defeats the general purposes of arbitration to
be faster, less formal, and less expensive. . . .
Furthermore, in this particular case, Borst maintains
that there was no real need for discovery, given that
there was no claim of permanent injury, the medical
records and bills had been supplied, and Allstate
claimed to have fully assessed liability before it
made its offer [of $5,000 to settle the case].
Id., ¶54 (emphasis added).
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No. 2011AP2067.dtp
¶97 Allstate argued that inasmuch as the legislature
allowed for the taking of depositions during arbitration, it
must have allowed for other less costly forms of discovery and
that arbitrators should have discretion, based on their
evaluation of the facts of the case, to determine the extent of
the discovery permitted. Id., ¶55.
¶98 The Borst court then said:
We conclude that arbitrators have no inherent
authority to dictate the scope of discovery, and
absent an express agreement to the contrary, the
parties are limited to depositions as spelled out in
Chapter 788. . . .
In our view, arbitrators do not have the inherent
authority to determine the necessity and scope of
discovery allowed because, quite simply, there is no
statutory authority providing for discovery outside of
the procedures for depositions enumerated in Wis.
Stat. § 788.07.
Id., ¶¶56–57.
¶99 The court asserted that Wis. Stat. § 788.07 did not
speak to "interrogatories, requests for production, or medical
authorizations. Indeed, even looking beyond this particular
section, the Wisconsin Arbitration Act does not speak to any
other form of discovery." Id., ¶58.3
3
Attorney Mark Frankel submitted an amicus brief in the
Borst case on behalf of the Alternative Dispute Resolution (ADR)
Section of the State Bar of Wisconsin. After the Borst decision
was issued, Frankel wrote an analysis of the case for the
Wisconsin Lawyer, observing that Borst's holding that
"arbitrators have no inherent ability to determine the necessity
and scope of allowable discovery" was a "surprise" to many
practitioners in the field of ADR. Mark A. Frankel, Borst
Clarifies Arbitration Procedures, Wis. Law., Dec. 2006, at 8,
11.
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No. 2011AP2067.dtp
¶100 There is no dispute that the Borst case is the
controlling law in Wisconsin and applies here unless it is
clarified, modified, or distinguished on the facts. In my view,
this court should pursue all these options.
C. The Applicable Statutes
¶101 The court should carefully review Borst's
interpretation of the arbitration statutes vis-á-vis discovery.
Borst did not consider any alternative interpretation of Wis.
Stat. § 788.07 and it did not interpret Wis. Stat. § 788.06 at
all.
¶102 Wisconsin Stat. § 788.07, by its terms, requires a
party to petition for a deposition. The petition must be
"approved by the arbitrators or by a majority of them," and then
submitted to "any court of record in and for the county in which
such arbitrators . . . are sitting." Wis. Stat. § 788.07. The
statute appears to set up a very rigorous process for obtaining
the deposition of either a party or a non-party because it
requires the party seeking a deposition to go to court.
¶103 In Employers Insurance of Wausau v. Jackson, 190
Wis. 2d 597, 610, 613, 527 N.W.2d 681 (1995), this court
observed that the basic tenet of arbitration is avoiding the
courts. Thus, Wis. Stat. § 788.07 can be viewed as setting up a
barrier to one of the most intrusive and expensive forms of
10
No. 2011AP2067.dtp
discovery, rather than precluding less costly forms that might
obviate the need for a deposition.4
¶104 This alternative view of the statute is arguably
inconsistent with the doctrine of expressio unius est exclusio
alterius ("the express mention of one matter excludes other
similar matters [that are] not mentioned"). See FAS, LLC v.
Town of Bass Lake, 2007 WI 73, ¶27, 301 Wis. 2d 321, 733
N.W.2d 287. But it is perfectly consistent with insurance
contracts that give an insurer broad authority to obtain "proof
of claim" information from its insured in processing a claim.5
That form of "discovery" does not require statutory authority.
In my view, it is difficult to explain why the law would permit
depositions but prohibit more modest, less costly means of
obtaining pre-hearing discovery.6
¶105 This alternative view also is consistent with a
reasonable interpretation of Wis. Stat. § 788.06(2), a provision
of the arbitration statutes that has heretofore been ignored.
That subsection provides:
4
See Carlson Heating, Inc. v. Onchuck, 104 Wis. 2d 175,
180, 311 N.W.2d 673 (Ct. App. 1981) (stating that adequate
preparation by counsel, "with full knowledge of the facts before
them[,]" will result in more orderly trials and in many
instances will avoid needless trials). The same principle
applies to depositions and to arbitration hearings.
5
See subpart D, infra.
6
Query: Does Wis. Stat. § 788.07 contemplate depositions
upon written questions, as authorized under Wis. Stat. § 804.06?
If it does, why would interrogatories be prohibited?
11
No. 2011AP2067.dtp
(2) Any arbitrator may issue a subpoena under
ch. 885 or may furnish blank forms therefor to a
representative for any party to the arbitration. The
representative may issue a subpoena under s. 805.07.
The arbitrator or representative who issues the
subpoena shall sign the subpoena and provide that the
subpoena is served as prescribed in s. 805.07(5). If
any person so served neglects or refuses to obey the
subpoena, the issuing party may petition the circuit
court for the county in which the hearing is held to
impose a remedial sanction under ch. 785 in the same
manner provided for witnesses in circuit court.
Witnesses and interpreters attending before an
arbitration shall receive fees as prescribed in s.
814.67.
¶106 The majority contends that neither an arbitrator nor
the representative of a party may issue a subpoena or a subpoena
duces tecum for anything connected with discovery. Majority
op., ¶34. It contends that all subpoenas issued under Wis.
Stat. § 788.06 must be for the hearing itself. Id. This makes
little sense. The attendance of witnesses at a deposition may
be compelled by subpoena. Wis. Stat. §§ 804.05(1), 805.07. A
subpoena may be served requiring a person to produce designated
materials. Wis. Stat. § 804.05(2)–(3). Although a deposition
may proceed without a subpoena, a subpoena may be necessary if a
witness fails to comply with other notice. If a subpoena may be
issued for a deposition, then Wis. Stat. § 788.06 is not limited
to subpoenas for hearings.7
7
The title of Wis. Stat. § 788.06——"Hearings before
arbitrators; procedure"——covers two subsections, the first
subsection related to hearings and the second subsection related
to procedure. The procedure applies to more than hearings
because of the references to Wis. Stat. § 805.07.
12
No. 2011AP2067.dtp
¶107 Wisconsin Stat. § 788.06 twice refers to Wis. Stat.
§ 805.07, which specifically includes subpoenas for depositions,
§ 805.07(1), as well as subpoenas requiring the production of
materials such as books, papers, and documents, § 805.07(2).
Section 788.06 also provides that if a subpoena is not obeyed,
"the issuing party [that is, the party that issued the subpoena]
may petition the circuit court for the county in which the
hearing is held to impose a remedial sanction." (Emphasis
added.) The emphasized language implies that the circuit court
does not normally issue the subpoena for a deposition. In
addition, it would be curious if arbitrators who had issued
subpoenas for the hearing had to petition the circuit court for
a remedy if their subpoenas were not obeyed.
¶108 The present Wis. Stat. § 788.06 became law in 1986.
See 1985 Wis. Act 168. The revised law, championed by the
Wisconsin Judicial Council, created a much more expansive
subpoena provision than the previous statute and was intended to
"conform[] arbitration subpoena practice to that followed in
circuit court." Judicial Council Committee Note, 1985, Wis.
Stat. § 788.06. Subpoena practice in circuit court includes
discovery.
¶109 Once again, the present section refers twice to Wis.
Stat. § 805.07; the previous section, Wis. Stat. § 788.06 (1983–
84), made no such reference. The present section extends the
subpoena power to the representative of a party (including but
not limited to an attorney), in addition to arbitrators. The
present section is not limited by its terms to the hearing, as
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No. 2011AP2067.dtp
the previous section was.8 In short, the majority's conclusion
that the statute applies only to subpoenas for hearings is
strained at best.
¶110 The previous Wis. Stat. § 788.06 mirrored 9 U.S.C.
§ 7, which is narrowly written.9 Nonetheless, § 7 of the Federal
8
Wisconsin Stat. 788.06 (1983–84) provided:
When more than one arbitrator is agreed to, all
the arbitrators shall sit at the hearing of the case
unless, by consent in writing, all parties shall agree
to proceed with the hearing with a less number. The
arbitrators selected either as prescribed in this
chapter or otherwise, or a majority of them, may
summon in writing any person to attend before them or
any of them as a witness and in a proper case to bring
with the person any book, record, document or paper
which may be deemed material as evidence in the case.
The fees for such attendance shall be the same as the
fees of witnesses in courts of general jurisdiction.
The summons shall issue in the name of the arbitrator
or arbitrators, or a majority of them, and shall be
signed by the arbitrator or arbitrators, or a majority
of them, and shall be directed to the said person and
shall be served in the same manner as subpoenas to
appear and testify before the court; if any person or
persons so summoned to testify shall refuse or neglect
to obey said summons, upon petition the court in and
for the county in which such arbitrators, or a
majority of them, are sitting may compel the
attendance of such person or persons before said
arbitrator or arbitrators, or punish said person or
persons for contempt in the same manner now provided
for securing the attendance of witnesses or their
punishment for neglect or refusal to attend in the
courts of this state.
(Emphasis added.)
9
9 U.S.C. § 7 provides:
The arbitrators selected either as prescribed in
this title or otherwise, or a majority of them, may
summon in writing any person to attend before them or
14
No. 2011AP2067.dtp
Arbitration Act has been interpreted to permit discovery, unless
the discovery involves non-parties.10 This could explain why
Wis. Stat. § 788.07, which has no parallel in the Federal
Arbitration Act, was created——namely, to make depositions more
difficult to obtain than other discovery.
¶111 In sum, Borst's interpretation of Wis. Stat. § 788.07
created a restrictive rule, but that rule disregarded the
adjacent statute and may have misinterpreted the purpose of the
deposition statute.
any of them as a witness and in a proper case to bring
with him or them any book, record, document, or paper
which may be deemed material as evidence in the case.
The fees for such attendance shall be the same as the
fees of witnesses before masters of the United States
courts. Said summons shall issue in the name of the
arbitrator or arbitrators, or a majority of them, and
shall be signed by the arbitrators, or a majority of
them, and shall be directed to the said person and
shall be served in the same manner as subpoenas to
appear and testify before the court; if any person or
persons so summoned to testify shall refuse or neglect
to obey said summons, upon petition the United States
district court for the district in which such
arbitrators, or a majority of them, are sitting may
compel the attendance of such person or persons before
said arbitrator or arbitrators, or punish said person
or persons for contempt in the same manner provided by
law for securing the attendance of witnesses or their
punishment for neglect or refusal to attend in the
courts of the United States.
10
See, e.g., Life Receivables Trust v. Syndicate 102 at
Lloyd's of London, 549 F.3d 210 (2d Cir. 2008); Stanton v. Paine
Webber Jackson & Curtis, Inc., 685 F. Supp. 1241 (S.D. Fla.
1988); Gabriel Herrmann, Note, Discovering Policy Under the
Federal Arbitration Act, 88 Cornell L. Rev. 779, 791–92 (2003)
("[C]ourts have generally construed [§ 7 of the Federal
Arbitration Act] as granting arbitrators the power to order the
parties to submit to pre-hearing discovery.").
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D. Insurance Contract Provisions
¶112 The Borst case does not explain the relationship
between statutory authority for discovery in an arbitration
proceeding and contractual provisions that require an insured to
provide information to its insurer. In Borst, the plaintiff's
medical records and bills and wage loss records were supplied to
the insurer. Borst, 291 Wis. 2d 361, ¶¶7, 54. Borst's initial
position was to resist a deposition, which was clearly
authorized by statute. The Borst court stated that "absent a
contractual provision specifying how discovery will be handled,
the parties are limited to the discovery procedures provided in
the statutes." Id., ¶59. But the decision does not explain
whether contractual provisions requiring such items as medical
records and even a medical examination are included in
"discovery."
¶113 The majority opinion in this case goes beyond Borst
because it appears to nullify clear and sensible requirements in
the insurance contract for the insured to supply information to
the insurer in those situations where the parties agree to
arbitration. The majority directs the arbitration panel, on
remand, "to cabin discovery to the depositions contemplated in
§ 788.07, i.e., 'depositions to be used as evidence before the
arbitrators.'" Majority op., ¶2; see also id., ¶11 ("[W]e
return the action to the panel with instructions to limit
discovery to the section enacted by the legislature for
precisely these situations: Wis. Stat. § 788.07."); id., ¶23
("[W]e instruct the arbitration panel to limit discovery to that
16
No. 2011AP2067.dtp
provided for in Wis. Stat. § 788.07."). The majority opinion
sums up its second holding:
[T]he legislature has set forth, in the form of
§ 788.07, a narrow scope of discovery for arbitration
proceedings in the absence of an explicit, specific,
and clearly drafted arbitration clause to the
contrary. IDS failed to include any such language in
its policy and we therefore instruct the panel to
limit discovery to that provided for in § 788.07.
Id., ¶2 (emphasis added).
¶114 The majority opinion appears to preclude the insurer
from resorting to any provision outside the arbitration section
of the insurance contract to obtain information that may be used
to prepare for a possible arbitration hearing, i.e., prehearing
discovery. Moreover, its tough new conditions——"explicit,
specific, and clearly drafted" authority in the arbitration
clause——provide a test that may supersede the parties'
intentions.
¶115 The IDS insurance contract with the Marlowes is
explicit, specific, and clear in this case:
What To Do In Case Of An Auto Accident Or Loss
. . . .
1. We must be notified promptly of how, when
and where the accident or loss happened. Notice
should also include the names and addresses of any
injured persons and any witnesses.
2. A person seeking any coverage must:
a. Cooperate with us in the investigation,
settlement or defense of any claim or suit.
. . . .
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No. 2011AP2067.dtp
c. Submit, as often as we reasonably
require:
(1) To physical exams by physicians we
select. We will pay for these exams.
(2) To answer questions under oath
when asked and by anyone we name. They shall do so
separately, outside the presence of any other person
who may be requested to answer questions under oath in
connection with the loss. They must also sign copies
of the answers.
d. Authorize us to obtain medical reports
and other pertinent records.
e. Submit a proof of loss when required by
us.
. . . .
Medical Expense Coverage
We will pay reasonable expenses for necessary
medical (including chiropractic) . . . services
incurred because of bodily injury sustained by an
insured and caused by an accident.
. . . .
We have the right to:
1. Obtain and use:
a. Peer reviews; and
b. Medical bill reviews
of the medical expenses and services to determine if
they are reasonable and necessary for the bodily
injury sustained.
2. Use a medical examination of the injured
person to determine if:
a. The bodily injury was caused by a motor
vehicle accident; and
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No. 2011AP2067.dtp
b. The medical expenses and services are
reasonable and necessary for the bodily injury
sustained.
¶116 Here, IDS sought:
(a) written interrogatories.
(b) requests for production of documents.
(c) medical and employment authorizations.
(d) income tax return releases.
(e) depositions of the plaintiff.
(f) depositions of treating healthcare providers.
(g) defense medical examinations.
¶117 Depositions of the plaintiffs and of the treating
healthcare providers are explicitly authorized by Wis. Stat.
§ 788.07.
¶118 A defense medical examination is authorized by the
contractual requirements to submit to "physical exams by
physicians we select" and "a medical examination of the injured
person."
¶119 Requests for production of documents and "medical and
employment authorizations" appear to overlap. These demands are
grounded in the contractual authority "to obtain medical reports
and other pertinent records," "proof of loss," and "[m]edical
bill reviews."
¶120 Requests for income tax return releases may be related
to plaintiff's medical expense deductions and/or plaintiff's
income over time. Such returns would have to be relevant and
might require justification to the arbitrators but they are
certainly not irrelevant per se.
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No. 2011AP2067.dtp
¶121 Written interrogatories can be construed as falling
under the requirement to "answer questions under oath when
asked."
¶122 This case is factually different from the Borst case.
Plaintiff Borst maintained that "there was no real need for
discovery, given that there was no claim of permanent injury,
the medical records and bills had been supplied, and Allstate
claimed to have fully assessed liability" before it made a
settlement offer. See ¶96, supra. Here, purportedly, there is
a claim of permanent injury, and a request for medical records
and bills that have not been supplied; furthermore, causation is
at issue. See ¶76, supra.
¶123 Consequently, I believe it is imperative for the
majority to explain why the discovery sought by IDS was not
explicitly authorized by the insurance contract. If an
insurer's agreement to participate in arbitration serves to
nullify the insurer's contractual rights to obtain information
from its insured, insurers will face a powerful disincentive to
agree to arbitration, and the arbitration of contractual
disputes will suffer a major setback.
E. Standard of Review
¶124 There is one additional concern. I believe the
majority opinion misstates the standard of review in relation to
the arbitration panel's discussion of discovery.
¶125 The arbitration panel based its discovery ruling on a
sentence in the arbitration provision of the insurance contract,
namely, "Local rules of law as to procedure and evidence will
20
No. 2011AP2067.dtp
apply." As the majority opinion notes, the panel declared that:
"The term 'local rules of [law as to] procedure[,'] as the
policy employs it, is both clear and informative. It denotes
the civil rules of procedure that govern court proceedings daily
in local courtrooms." Majority op., ¶5. The panel added that,
"If the purpose of arbitration is to achieve an expedited,
efficient decision that ultimately determines the truth, more,
not less, preparation for hearing is the most sensible way to
achieve that, a goal the contract contemplates."
¶126 When an arbitration panel interprets a provision in an
applicable contract, the panel's interpretation should be
afforded some deference in review by a court. Such deference is
captured by the concept of "perverse misconstruction."
¶127 "Courts will vacate an award when arbitrators exceeded
their powers through 'perverse misconstruction,' positive
misconduct, a manifest disregard of the law, or when the award
is illegal or in violation of strong public policy." Baldwin-
Woodville Area Sch. Dist. v. W. Cent. Educ. Ass'n, 2009 WI 51,
¶21, 317 Wis. 2d 691, 766 N.W.2d 591 (citations omitted). A
court must apply the standard of review that is appropriate for
the facts of the case.
¶128 An arbitration award involving the interpretation of a
contract will not be disturbed unless it is the product of a
perverse misconstruction of the contract, City of Oshkosh
(Public Library) v. Oshkosh Public Library Clerical &
Maintenance Employees Union Local 796-A, 99 Wis. 2d 95, 106, 299
N.W.2d 210 (1980) (citing cases), or unless the contract itself
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violates the law. Here, the appropriate standard is the
"perverse misconstruction" standard because Borst permits the
scope of discovery to be set out in the contract.
¶129 In Baldwin-Woodville, the court stated:
[W]e do not determine which construction——the
arbitrator's or the District's——is more reasonable.
See Lukowski, 184 Wis. 2d at 153 ("[T]his court will
not upset the award even if this court might have
decided the matter differently."). Instead, we will
uphold an award if there is "some reasonable
foundation for the interpretation of the contract
offered in the decision." Id.
Baldwin-Woodville, 317 Wis. 2d 691, ¶22.
¶130 The majority would be hard pressed to argue that there
is no reasonable basis for the panel's construction of the
"Local rules of law" sentence in the arbitration provision of
the contract. After all, the Marlowes' attorney conceded that
the construction was "reasonably made." Moreover, the sentence—
—which is not unique to the Marlowes' insurance contract——must
mean something, and it is not plausible that the sentence was
intended to mean that arbitrators are bound by rules of
procedure and evidence established by the circuit courts——county
by county——but need not follow the procedural and evidentiary
rules embodied in state law.
¶131 The majority's standard of review cites the perverse
misconstruction standard but then disregards it. Majority op.,
¶10.
¶132 Clearly, a contract may authorize prehearing discovery
in an arbitration proceeding. It is not manifest disregard of
the law or a violation of strong public policy to do so. The
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issue here is whether the contract's reference to "Local rules
of law" achieved this purpose. This court is required to give a
deferential review of the arbitration panel's construction of
the contract language, not rely on extraneous law.
¶133 Proper application of the perverse misconstruction
standard would put this case in a different light.
III. CONCLUSION
¶134 Once again, the theme that permeates the majority
opinion is that arbitrations are different from civil court
trials and thus discovery in arbitration should be wholly
different from discovery in court cases.
¶135 I agree that arbitration discovery should normally be
simpler and more streamlined than civil court discovery.
Arbitrators have a vested interest in making arbitration work as
intended. Thus, depriving arbitrators of virtually all
authority to manage prehearing discovery, consistent with the
goals of arbitration, and forcing the parties to discover
evidence and present evidence primarily at the arbitration
hearing, strike me as undercutting arbitration, not facilitating
it. After this decision, time will tell.
¶136 For the foregoing reasons, I respectfully concur in
part and dissent in part.
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