Godfrey & Kahn Updates

"Wisconsin’s New Statute Governing Sanctions for Frivolous Lawsuits"
April 12, 2006

In an effort to bring Wisconsin state law into line with federal law, the Wisconsin Supreme Court repealed and recreated the state frivolous action statutes to reflect current federal law. The new law became effective July 1, 2005.

Wisconsin Supreme Court Repeals and Recreates the Law
In December 2003, the Wisconsin Supreme Court held a public hearing on a petition by the Wisconsin chapter of the American Board of Trial Advocates, Civil Trial Counsel of Wisconsin, the Wisconsin Academy of Trial Lawyers, and the Litigation Section of the State Bar of Wisconsin to repeal Wis. Stat. § 814.025 (Costs Upon Frivolous Claims and Counterclaims) and to adopt a revision of Wis. Stat. § 802.05 (Signing of Pleadings, Motions and Other Papers; Sanctions) that would accord with its federal counterpart, Federal Rule of Civil Procedure 11 (Signing of Pleadings, Motions and Other Papers; Representations to Court; Sanctions).

In March 2005, the Court granted the petition and repealed two frivolous action statutes, Wis. Stat. §§ 814.025 and 802.05, and recreated § 802.05 to accord with Rule 11. The new consolidated law, set forth at the end of this article, was effective as of July 1, 2005.

In making these revisions, the Court reasoned that § 802.05, when originally enacted in 1976, was patterned after its federal counterpart, Rule 11. While Rule 11 had undergone a series of revisions, § 802.05 remained antiquated. The Court wished to harmonize the pleading, practice and procedure in judicial proceedings and to promote the speedy determination of litigation on the merits. The Court stated that it wished to provide Wisconsin courts with additional tools to deal with the frivolous filing of pleadings and other papers. It also specifically advised that Wisconsin courts will now be able to use comparable federal decisions on Rule 11 as persuasive authority.

The Court used its authority under Wis. Stat. § 751.12 (Rules of Pleading and Practice) to enact this revision. While, generally, revisions of state statutes are left to the state legislature, the legislature enacted Wis. Stat. § 751.12(1) to recognize the Supreme Court’s inherent power to make rules relating to the pleading, practice and procedure in judicial proceedings.

Differences Between New Statute and Previous Statutes
There are two major differences between the amended statute and the previous statutes. First, while both versions provide that courts may impose an "appropriate sanction" on a party who violates the rule, the nature of the sanction that may be imposed has significantly broadened. The original statute allowed the Court to award a monetary sanction, but it was limited to an award of the reasonable expenses incurred because of the filing of the pleading, motion or other paper, including reasonable attorneys’ fees. The new statute goes into much more detail and provides for the possibility of more lenient monetary sanctions, including a small penalty paid to the court. Furthermore, § 802.05 now specifically mandates that "[a] sanction imposed for violation of this rule shall be limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated." (emphasis added)

Second, the new version of § 802.05 requires that a motion for sanctions cannot be filed with a court until 21 days after serving the motion on the opposing party, in order to give the opposing party an opportunity to withdraw the challenged claim or pleading. Consequently, the filing party has 21 days to withdraw the offending claim or pleading before a court may consider a motion for sanctions.

Effects of the New Statute
Some of the practical effects of this new statute will be to delay and possibly reduce the direct monetary benefits to a party seeking sanctions for a frivolous pleading. The statute’s "safe harbor" will make parties have to wait at least 21 days after service of a motion for sanctions before filing it with the court, and getting one’s attorneys’ fees for preparing the motion is no certainty if the motion is successful. Even if the court grants the motion, it could easily order a monetary fine be paid into the court instead of to the moving party.

On the other hand, courts now have more flexibility in determining sanctions awards, and these revisions also make the pleading and practice under this statute more streamlined. There is a much larger body of case law construing Rule 11 of the Federal Rules of Civil Procedure than the former state statutes. Being able to draw from this body of case law will likely make motions for sanctions easier to litigate and more predictable in the consequences for all parties.

Recent Developments
It is also worth noting that the state legislature is considering an amendment to this new rule. See 2005 Assembly Bill 855. This bill would effectively restore much of the former sections 802.05 and 814.025 by mandating that trial courts award full attorney fees if it finds any complaint, counterclaim, defense, or cross claim to be frivolous. It also would remove the option of assessing penalties into the court. As of April 1, 2006, this bill has been passed by the Assembly and is headed to the Senate for a full vote.

The New Statute
The new statute, as presently enacted by the Court, reads as follows:

802.05. Signing of pleadings, motions, and other papers; Representations to court; Sanctions.

(1) Signature. Every pleading, written motion, and other paper shall be signed by at least one attorney of record in the attorney’s individual name, or, if the party is not represented by an attorney, shall be signed by the party. Each paper shall state the signer’s address and telephone number, and state bar number, if any. Except when otherwise specifically provided by rule or statute, pleadings need not be verified or accompanied by affidavit. An unsigned paper shall be stricken unless omission of the signature is corrected promptly after being called to the attention of the attorney or party.

(2) Representations to Court. By presenting to the court, whether by signing, filing, submitting, or later advocating a pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, all of the following:

(a) The paper is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

(b) The claims, defenses, and other legal contentions stated in the paper are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law.

(c) The allegations and other factual contentions stated in the paper have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.

(d) The denials of factual contentions stated in the paper are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.

(3) Sanctions. If, after notice and a reasonable opportunity to respond, the court determines that sub. (2) has been violated, the court may impose an appropriate sanction upon the attorneys, law firms, or parties that have violated sub. (2) or are responsible for the violation in accordance with the following:

    1. How initiated.

1. ‘By motion.’ A motion for sanctions under this rule shall be made separately from other motions or requests and shall describe the specific conduct alleged to violate sub. (2). The motion shall be served as provided in s. 801.14, but shall not be filed with or presented to the court unless, within 21 days after service of the motion or such other period as the court may prescribe, the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected. If warranted, the court may award to the party prevailing on the motion reasonable expenses and attorney fees incurred in presenting or opposing the motion. Absent exceptional circumstances, a law firm shall be held jointly responsible for violations committed by its partners, associates, and employees.

2. ‘On court’s initiative.’ On its own initiative, the court may enter an order describing the specific conduct that appears to violate sub. (2) and directing an attorney, law firm, or party to show cause why it has not violated sub. (2) with the specific conduct described in the court’s order.

(b) Nature of Sanction; Limitations. A sanction imposed for violation of this rule shall be limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated. Subject to the limitations in subds. 1. and 2., the sanction may consist of, or include, directives of a nonmonetary nature, an order to pay a penalty into court, or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of some or all of the reasonable attorneys’ fees and other expenses incurred as a direct result of the violation subject to all of the following:

1. Monetary sanctions may not be awarded against a represented party for a violation of sub. (2)(b).

2. Monetary sanctions may not be awarded on the court’s initiative unless the court issues its order to show cause before a voluntary dismissal or settlement of the claims made by or against the party that is, or whose attorneys are, to be sanctioned.

(c) Order. When imposing sanctions, the court shall describe the conduct determined to constitute a violation of this rule and explain the basis for the sanction imposed.

(4) Prisoner litigation. (a) A court shall review the initial pleading as soon as practicable after the action or special proceeding is filed with the court if the action or special proceeding is commenced by a prisoner, as defined in s. 801.02(7)(a)(2).

(b) The court may dismiss the action or special proceeding under par. (a) without requiring the defendant to answer the pleading if the court determines that the action or special proceeding meets any of the following conditions:

    1. The action or proceeding is frivolous, as determined under sub. (b).
    2. The action or proceeding is used for any improper purpose, such as to harass, to cause unnecessary delay or to needlessly increase the cost of litigation.
    3. The action or proceeding seeks monetary damages from a defendant who is immune from such relief.
    4. The action or proceeding fails to state a claim upon which relief may be granted.

(c) If a court dismisses an action or special proceeding under par. (b) the court shall notify the department of justice or the attorney representing the political subdivision, as appropriate, of the dismissal by a procedure developed by the director of state courts in cooperation with the department of justice.

(d) The dismissal of an action or special proceeding under par. (b) does not relieve the prisoner from paying the full filing fee related to that action or special proceeding.

(5) Inapplicability to Discovery. Subsections (1) to (3) do not apply to disclosures and discovery requests, responses, objections, and motions that are subject to ss. 804.01 to 804.12.

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