Wisconsin Supreme Court Clears the Path to the Courtroom for Member-Driven LLC Litigation

Wisconsin’s Supreme Court issued an important decision last week in Marx v. Morris, 2019 WI 34, holding that “[c]orporate principles of derivative standing do not apply to the distinct business form of an LLC.” Id. ¶ 4.

In a 4-3 decision written by Chief Justice Patience Roggensack, the court explained that the statutory scheme applicable to LLCs does not distinguish between direct and derivate claims and that the court would not “judicially import” one from the corporation statutes. Id. ¶¶ 40-41. The pass-through nature of LLCs also played a role in the decision; the court observed that there is “a much closer financial connection between harm to an LLC and harm to its members than between harm to a corporation and harm to its shareholders.” Id. ¶ 45.

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Appellate Briefs Are Not the Place to Incorporate Material from Someplace Else by Reference

Buried in a footnote in the February 7 opinion in a criminal appeal is a helpful reminder for all advocates in the Seventh Circuit, including those handling civil appeals. In United States v. Moody, No. 18-1837 (7th Cir. Feb. 7, 2019), Mr. Moody sought to incorporate an argument by reference from the appellate brief of a trial court co-defendant whose appeal had not been consolidated with his.

The court declined to consider the argument, in part because, in the absence of consolidated appeals, “Moody was not permitted to incorporate by reference his codefendant’s arguments.” Slip op. at 2, n.1.

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Plain Language vs. Purpose: The Seventh Circuit Debates Statutory Interpretation

Last week, in an 8-4 en banc decision, the Seventh Circuit held that the Age Discrimination in Employment Act does not provide a cause of action for outside job applicants on a “disparate impact” theory. Kleber v. CareFusion Corp., No. 17-1206 (Jan. 23, 2019). Beyond the result, the court sharply divided over how to interpret the statute. Writing for the court, Judge Michael Scudder held that “plain language” dictated the outcome of the case, while Judge David Hamilton’s principal dissent aggressively defended a purposivist approach to statutory interpretation.

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The Need for a Marks Rule in Wisconsin

This article is the fourth and final installment in our series on the Wisconsin Supreme Court’s recently completed 2017-18 term. For previous installments, see here, here, and here.

Last term, the United States Supreme Court was expected to clarify its decision in Marks v. United States, 430 U.S. 188 (1977), which adopted a rule governing the precedential value of 4-1-4 decisions of the Court. Under Marks, the Court adopted the following rule (which had been proposed by three Justices the previous year):

When a fragmented Court decides a case and no single rationale explaining the result enjoys the assent of five Justices, ”the holding of the Court may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds . . . .”

Hughes v. United States, ___ S. Ct. ___ (June 4, 2018), which concerned the eligibility of a criminal defendant to receive a sentence reduction after entering a binding plea agreement with a recommended sentence length, seemed to present the opportunity to revisit the Marks rule, because a 4-1-4 split in Freeman v. United States, 564 U.S. 522 (2011), left unclear what rule applied. In Freeman, Justice Sotomayor largely agreed with the four-justice dissent’s rationale, but concurred in the judgment announced by the four-justice plurality for reasons separately stated with which none of the eight other Justices agreed. Though Hughes seemed to give the Court the chance to clarify the application of Marks, ultimately a majority of the Court was able to decide the sentencing issue on the merits, making it unnecessary to revisit Marks.

Hughes got us thinking about the fact that Wisconsin has no Marks rule. And the Wisconsin court in recent years has increasingly been unable to agree on a majority rationale for decisions. Nevertheless, the court continues its practice of issuing so-called “lead opinions.” A lead opinion is the first in the series of opinions published in a given case, but it commands no majority. A couple of the justices have been thinking about this issue, especially since the decision in State v. Lynch, 2016 WI 66 (2016), in which five of the seven agreed that the Court of Appeals ought to be reversed, but no four agreed on a rationale for reversal. In this context, Lynch generated an interesting mandate: “As a result of a divided court, the law remains as the court of appeals has articulated it.

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Tetra Tech EC, Inc. v. Wisconsin Department of Revenue

This article is the third installment in our series on the Wisconsin Supreme Court’s recently completed 2017-18 term.  For previous installments, see here and here.

One decision of the past term merits special attention: Tetra Tech EC, Inc. v. Wis. Dep’t of Revenue, 2018 WI 75. As we predicted (see prior post), Tetra Tech was the court’s chosen vehicle to revisit and restrict, on its own motion, previously mandated judicial deference to Wisconsin administrative agency decisions.  Wisconsin courts before Tetra Tech deferred to administrative agency decisions often and extensively.  But the “sea change” in the law forewarned by Justice Ziegler in the previous term arrived in June.

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