Frivolousness
rule is retroactive
But
only if application is not undue burden
By
David Ziemer
david.ziemer@wislawjournal.com
July
16, 2007
| What
the court held Case:
Trinity Petroleum, Inc., v. Scott Oil Co., Inc., No. 2005AP2837. Issue:
Is the new Rule 802.05 — governing frivolous actions — retroactive to cases pending
on its effective date, July 1, 2005? Holding:
Yes. Unless
retroactive would impose an unreasonable burden on the party seeking fees and
costs. Attorneys:
For Appellant:
Marcuvitz, Alan, Milwaukee; Ramirez, Juan S., Milwaukee; For Respondent: Rose,
Douglas W., Brookfield |
Rule
802.05 applies retroactively to suits already pending on July 1, 2005, the rule’s
effective date, the Wisconsin Supreme Court held last week, but only if its application
would not pose an unreasonable burden.
The
holding reverses a published decision of the court of appeals, which held the
rule retroactive to all cases, Trinity Petroleum, Inc. v. Scott Oil Co, Inc.,
2006 WI App 219, 266 Wis.2d 666, 724 N.W.2d 259.
Scott
Oil Co., Inc., and Trinity Petroleum, Inc., had a contractual agreement under
which Trinity would transport Scott Oil’s petroleum products. Scott Oil terminated
the contract and Trinity sued for breach of contract. On April 5, 2005, Scott
Oil moved for summary judgment. The court granted the motion on July 5.
After
the grant of summary judgment, Scott Oil moved for attorney fees on the grounds
that Trinity’s action was frivolous, pursuant to rules 802.05 and 814.025.
Waukesha
County Circuit Court Judge James R. Kieffer denied the motion, because the Supreme
Court had repealed the two statutes and recreated Rule 802.05, effective July
1.
The
court stated that it considered the plaintiff’s action frivolous, but held
that sanctions could not be imposed, because Scott Oil failed to comply with the
21-day “safe harbor” provision of the new rule.
The
safe harbor provision requires a party to give prior notice to the offending party;
only if the purportedly frivolous pleading is not withdrawn within 21 days, may
the party move the court for sanctions.
The
statute’s other significant change was to make the award of sanctions discretionary,
rather than mandatory, if frivolousness is found.
Scott
Oil appealed, but a divided court of appeals affirmed, holding that because the
rule change is procedural, it is retroactive. A dissent by Judge Daniel P. Anderson
agreed that the rule is retroactive, but concluded that, under the circumstances
of this case, it should not be retroactive.
The
Supreme Court granted review and reversed, in a July 5 decision by Chief Justice
Shirley S. Abrahamson. The majority agreed that the change was procedural, and
thus retroactive generally, but remanded to the circuit court to determine whether
retroactive application in this case would place an unreasonable burden on Scott
Oil.
Justice
Patience Drake Roggensack dissented, in an opinion joined by Justices David T.
Prosser and Jon P. Wilcox.
Writing
for the majority, Abrahamson noted that Supreme Court Order 03-06, which recreated
the new Rule 802.05 does not state whether it is retroactive or not.
However,
in adopting the rule, the court deliberated whether it was procedural or substantive,
and concluded that it was procedural. Thus, it is presumed to be retroactive.
In
addition, the rule is part of the state rules of civil procedure, which are designed
to be procedural, rather than substantive.
The
court further concluded that the former sec. 814.025 did not create a substantive,
vested right to costs and attorney fees on a finding of frivolousness.
Finally,
the rule is patterned after Rule 11 of the federal rules of civil procedure “a
well-known rule of procedure.” Accord-ingly, the court held the rule is procedural,
and thus, ordinarily retroactive.
However,
the court disagreed with the circuit court and the majority opinion at the court
of appeals that that is the end of the matter.
Instead,
the court applied Mosing v. Hagen, 33 Wis. 2d 636, 148 N.W.2d 93 (1967), which
holds that a rule adopted by the court applies retroactively unless it affected
a vested or contractual right, or imposed an unreasonable burden upon the party
attempting to comply with the procedural requirements.
For
the reasons above, the court concluded that retroactive application did not affect
any vested substantive right, and there was no question that it did not affect
any contractual right.
Thus,
the court looked only at whether it would impose an unreasonable burden.
For
guidance, the court looked to federal courts that considered retroactive application
after Rule 11 was adopted — applying the rule retroactively where “just
and practicable.”
The
court concluded that the two standards are “essentially the same.”
Among
the federal decisions the court relied on was Land v. Chicago Truck Drivers, Helpers
& Warehouse Workers Union, 25 F.3d 509, 516 (7th Cir. 1994).
The Seventh
Circuit declined to apply Rule 11 retroactively, because the old rule was still
in effect when the case was filed, and when the defendant moved for sanctions.
Agreeing
with the reasoning of the federal courts, and reaffirming Mosing, the Supreme
Court remanded the case to the circuit court to determine whether the new Rule
802.05 should apply to the case at bar.
Justice
Roggensack dissented, for the same reason that she and the other two dissenters
dissented from the initial adoption of the new Rule 802.05 — that the former
sec. 814.025 did create a substantive right to attorney fees and costs in frivolous
actions.
Roggensack
wrote, “Scott’s right to make a claim under Wis. Stat. Sec. 814.025
arose at the time of Trinity’s conduct of allegedly filing and continuing
a frivolous lawsuit. This occurred before July 1, 2005.
There
was no discussion at the rule-making hearing prior to the ‘repeal’ of
sec. 814.025 that the court intended to cut off rights of action that had accrued
before July 1, 2005.”
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here for Case Analysis.
David
Ziemer can be reached by email.
