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  • December 03, 2024

    Appeals Court Upholds Law Giving Legislature Power to Approve DOJ Settlements

    Legislation that required Joint Finance Committee (JFC) approval on settlements in cases prosecuted by the Wisconsin Department of Justice (DOJ) did not violate constitutional separation of powers between legislative and executive branches, an appeals court has concluded.

    Jay D. Jerde

    stock photo

    Dec. 3, 2024 – Legislation that required Joint Finance Committee (JFC) approval on settlements in cases prosecuted by the Wisconsin Department of Justice (DOJ) did not violate the constitutional separation of powers between legislative and executive branches, a majority of the Wisconsin Court of Appeals, District II has concluded.

    In Kaul v. Wisconsin State Legislature, 2022 AP 790 (Dec. 2, 2024), the three-judge panel reversed (2-1) the Dane County Circuit Court’s summary judgment orders, concluding the lower court erred in deciding the case in favor of Attorney General Josh Kaul, Gov. Tony Evers, Department of Administration Secretary Kathy Koltin Blumenfeld, and the DOJ.

    The Wisconsin Legislature, the Wisconsin State Legislature Joint Committee on Finance, and individual members of the legislature had appealed the circuit court’s decision.

    The Legislation

    It’s the second constitutional challenge to the amendment to Wis. Stat. section 165.08(1), which requires that “Any civil action prosecuted by the [DOJ] ... may be compromised or discontinued ... by submission of a proposed plan to the joint committee on finance” for the committee’s approval. “The compromise or discontinuance may occur only if the joint committee on finance approves the proposed plan.”

    Jay D. Jerde headshot Jay Jerde, Mitchell Hamline 2006, is a legal writer for the State Bar of Wisconsin, Madison. He can be reached by email or by phone at (608) 250-6126.

    The legislature passed and lame-duck Gov. Scott Walker signed 2017 Wis. Act 369, which contained the amendment, shortly after the 2018 election won by now Gov. Evers.

    A lawsuit quickly followed, raising a facial challenge to the Act’s constitutionality on separation-of-powers grounds.

    In Service Employees Internation Union (SEIU), Local 1 v. Vos, 2020 WI 67, the Supreme Court upheld the statute as constitutional, concluding the legislature may give itself the power to consent to such agreements “where its institutional interests are implicated.”

    A majority said the plaintiffs “have not met their high burden to demonstrate that the challenged provisions are unconstitutional in all of their applications.”

    DOJ’s Complaint

    The current case arose after a period of friction between DOJ and the JFC over “a settlement agreement process with a checklist” created by the legislature after the supreme court’s decision in SEIU v. Vos.

    The checklist process, which the DOJ declined to use, “specifically inquired whether appropriation of settlement funds was at issue and whether a matter was time sensitive.”

    The standstill resulted in the DOJ filing a complaint, arguing two provisions of Act 369 violated the separation of powers doctrine in two types of civil actions.

    The first involves “civil enforcement actions brought under statutes that the Attorney General is charged with enforcing.” These include, for example, environmental and consumer protection laws.

    The second group of cases covers civil actions the DOJ prosecutes, such as breach of contract or other harm suffered by executive branch agencies.

    This new challenge to Act 369 differed from the first in focusing on the Act’s effect on making settlements that would not require payments from the state.

    In addition, the DOJ argued Act 369 was more than facially unconstitutional but also unconstitutional as it applies to settlements of the two types of cases – a hybrid challenge to the statute.

    The DOJ argued that the statute unconstitutionally transferred a core executive power to the legislature. If the power to negotiate settlements is a shared power with the legislative branch, the DOJ argued in the alternative that the statute unduly burdened or substantially impaired its ability to function in its executive branch duties.

    The Majority Decision

    In the majority opinion drafted by Judge Maria S. Lazar and joined by Judge Shelley A. Grogan, the court of appeals found insufficient evidence that the statute infringed upon the executive branch.

    A statute is presumed constitutional. The party challenging the statute must prove it unconstitutional beyond a reasonable doubt.

    The majority relied primarily upon its analysis of core executive powers. This DOJ argument combined a challenge that the statute itself, and as it is applied, are unconstitutional.

    The legislature’s argument contended the statute is necessary for its core functions of appropriation – the power of the purse – and ensuring sufficient funding to cover the state’s budget. The power to settle, it claimed, is a power it shares with the executive branch.

    The settlements covered by the statute, although they don’t require state appropriations, do affect the appropriation process, especially when the settlements bring in large sums of money to state coffers. The legislature argued that those funds “belong[] to the state, not the DOJ.”

    In addition, settlements may come with strings attached, and the legislature argued that such settlements may implicate its “institutional interest” in “establish[ing] policy for the state.”

    “For instance, . . . settlements could contain provisions that would allow a defendant to perform a certain act or make a certain payment that would prohibit the state from collecting additional penalties for the general fund.” A settlement could establish a condition requiring the state to expend funds to implement a certain public policy.

    Given the strict standard for reversing a statute on constitutional grounds, the majority agreed with those arguments. Just one example in each category is enough to support the statute, the panel explained.

    Although the court did not need to address the DOJ’s “unduly burdensome” argument because of the majority’s conclusion, both existing supreme court precedent and the record yielded the same result.

    The DOJ complained the statute “stymi[ed]” its work because approval by the JFC “lacks confidentiality and real time authorization.” In some cases, the DOJ argued, it may avoid starting a civil action to avoid the “whim” of the JFC. The majority considered this “[u]nsubstantiated speculation.”

    Numerically, the evidence was slight. In 15 cases, the DOJ claimed the JFC failed to respond. The DOJ changed its strategy in these subrogation cases, appearing in a manner in which it was not the prosecutor.

    In only one case the DOJ referenced, a party refused settlement, requiring a trial, because of fears of JFC “gamesmanship” and confidentiality. And even the DOJ conceded that “in some matters, [the Joint Finance Committee] met fast enough for a matter to settle.” This record, three years after enactment, failed to impress the majority.

    Dissent

    Judge Lisa S. Neubauer dissented, finding the statute unconstitutional. “The legislature’s power ordinarily ends ... when it passes a law that is signed by the governor.” In contrast, “Enforcement of the law is the core power constitutionally assigned to the executive branch,” Judge Neubauer wrote.

    “[I]t is evident that the exercise of settlement authority in civil enforcement actions and actions brought on behalf of agencies that pertain to programs they are charged with administering is a core executive power,” Judge Neubauer wrote.

    “Litigation of such actions is a tool of enforcement; enforcement of the law is constitutionally assigned to the executive branch; and the specific authority transferred by Wis Stat. § 165.08(1) – the power to compromise or discontinue litigation – is an exercise of enforcement discretion that the separation of powers shields from interference by the other branches.”

    The legislature’s role in expenditures, budgeting, and taxation also does not reach to the executive branch, Neubauer explained. Settlements are a means of enforcement, not an intended revenue stream.

    Finally, the statute does not share powers because the JFC’s approval is not reversable. Referencing Evers v. Marklein, 2024 WI 31, Neubauer wrote, “Effectively, JFC members make the [settlement] decision – not the executive branch.”


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