News of the Day

Wisconsin High Court Upholds Cap on Noneconomic Medical Malpractice Damages

The Wisconsin Supreme Court upheld the state’s cap on noneconomic medical malpractice damages on Wednesday, reversing a lower-court ruling that awarded $15 million to a woman who had all four limbs amputated after a mishandled infection.

The court ruled 5-2 in a long-running case closely watched by doctors, hospitals and the insurance industry. Chief Justice Patience Roggensack wrote that the Legislature was rational in reasoning that the $750,000 cap would keep health care affordable while providing reasonable compensation for injured people.

“By enacting the cap, the Legislature made a legitimate policy choice, knowing that there could be some harsh results for those who suffered medical malpractice and would not be able to recover the full amount of their noneconomic damages,” Roggensack wrote.

The ruling stems from a case involving Ascaris Mayo. According to court documents, doctors didn’t tell the mother of four she was suffering from a septic infection in 2011. She fell into a coma and her arms and legs had to be amputated after gangrene set in.

Mayo and her husband sued the doctors and the state malpractice compensation fund, an account doctors pay into to cover malpractice awards.

A jury awarded the couple $25.3 million, including $15 million in noneconomic damages, defined as damages such as pain, suffering, inconvenience and disfigurement, and $1.5 million for her husband’s loss of companionship.

State Supreme Court End Administrative Agency Deference

The Wisconsin Supreme Court decision in Tetra Tech, Inc. v. Wisconsin Department of Revenue ends deference to agency conclusions of law in the state of Wisconsin.

WILL filed an amicus curiae brief with the Court arguing court deference to agency interpretations of state statutes is unconstitutional. The brief said, in part, “Collapsing the making of policy into its administration places that decision in the hands of an interested party and is inconsistent with the “auxiliary precautions” that underlie the separation of powers adopted by the framers of Wisconsin’s Constitution.”

WILL President and General Counsel Rick Esenberg said in response to the Court’s decision:

“Today’s decision limits the prerogatives of administrators and brings us a little closer to the system of government our founders envisioned. Basic American civics and the separation of powers require that each branch of government stay in its lane. Deferring to the legal conclusions of administrative agencies combined the executive and judicial powers in the hands of bureaucrats. The Court was correct to end it, as we argued in our amicus brief.”

Wisconsin courts for decades have chosen to defer to the interpretations of state statutes offered by administrative agencies, even when those agencies are enforcing those statutes against private citizens. They have often done so even when the agency interpretation was less reasonable than alternative readings of the law.  Although several of the Justices chose to avoid the constitutional issue and rule as a matter of judicial policy, the bottom line is that the Court acted today to ensure that the judicial power – including the power to have the final say on what a statute means – resides exclusively in the courts, not the executive branch.

Today’s decision is part of a broader reevaluation of agency deference occurring in both state and federal courts. For example, Mississippi’s high court recently ended agency deference. Federal courts are also beginning to grapple with the question.

This judicial reevaluation of agency authority is independent of, but consistent with, a more general re-examination of the administrative state, including legislative initiatives such as the REINS Act in Wisconsin. Both the federal and Wisconsin constitutions recognize that freedom is preserved not only by the delineation of individual rights but by structural limits on the power of government. The separation of powers – in which each branch “checks” and “balances” the others – is an important part of the way in which these limits act as, in James Madison’s words, “an auxiliary precaution” against the abuse of government power.

Harley, Stung by Tariffs, Shifts Some Production Overseas

Harley-Davidson, up against spiraling costs from tariffs, will begin to shift its production of motorcycles that are bound for Europe from the U.S. to factories overseas.

The European Union began on Friday to roll out tariffs on American imports like bourbon, peanut butter and orange juice. The EU tariffs on $3.4 billion worth of U.S. products come in retaliation to the duties the Trump administration has imposed on European steel and aluminum.

Harley-Davidson Inc. sold almost 40,000 motorcycles in the European Union last year. The revenue the company generated from those sales was second only to that generated in the United States, according to the Milwaukee company.

The motorcycle maker said in a regulatory filing on Monday that EU tariffs on motorcycles it exports from the U.S. have jumped by between 6 percent and 31 percent. That raises the cost of each motorcycle by $2,200 on average.

“Harley-Davidson maintains a strong commitment to U.S.-based manufacturing which is valued by riders globally,” the company said in prepared remarks. “Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe. Europe is a critical market for Harley-Davidson.”

Harley-Davidson said it’s trying to avoid raising its prices to avert “an immediate and lasting detrimental impact” on sales in Europe. It will instead absorb much of the higher costs, at least in the short term. Company officials said they expect the cost for the rest of the year to run from $30 million to $45 million.

Harley-Davidson said it could take anywhere between nine and 18 months to complete its plan to move some of its production operations from the U.S. to factories overseas.

The company is already struggling with declining sales. In January, it said it would take its operation in Kansas City, Missouri, and move it to a plant in York, Pennsylvania. U.S. motorcycle sales peaked at more than 1.1 million in 2005 and dropped quickly during the recession.

Asked about Harley’s decision Monday, Gov. Scott Walker talked about tariffs in general but did not specifically discuss the company’s situation.

“The ultimate goal, if we could get there, is no tariffs or if anything few tariffs on anything,” said Walker, a Republican. “That’s what I’m going to push for, ways that we can get to a level playing field then we don’t have this tit for tat on any number of products out there.”

Wisconsin Could Reap $187 million a year from Internet Sales Tax

On Thursday the Supreme Court’s 5-4 ruling, which did not split along ideological lines, overturned the 1992 decision and said states can tax internet sales.

The ruling doesn’t mean such a sales tax will begin immediately in Wisconsin as it will in many other states that have laws where the court decision automatically triggers a sales tax collection for online sales.

Walker’s office, the state Department of Revenue and the Legislative Fiscal Bureau are still reviewing the decision and declined to comment before completing the review. So it’s unclear if new legislation is needed or whether the Walker administration can collect the tax from out-of-state companies through regulatory changes.

Walker and the Legislature enacted a law in 2013 requiring income tax rate cuts corresponding to any potential online sales tax revenue collections “as a result of any federal law to expand the state’s authority to require out-of-state retailers” to collect the tax. But that law doesn’t refer to U.S. Supreme Court decisions.

Rep. John Macco, R-Ledgeview, chairman of the Assembly Ways and Means Committee, said state DOR officials told him the additional revenue could be about $160 million per year.

The state should act quickly to begin collecting sales tax on online purchases from out-of-state retailers, Macco said. But he added it’s not yet clear if it could do so under existing law or if a new law is needed. “It would be my intention that if we need legislation, we draft it right away,” Macco said.

Rep. Dale Kooyenga, R-Brookfield, who helped lead Assembly Republicans in crafting previous tax policy proposals, including the 2013 budget language, also said any new revenues should go toward cutting income tax rates. Kooyenga said he expects Walker agrees, based on his longstanding opposition to tax increases.

“This is really an opportunity for tax reform,” Kooyenga said.

Macco and Kooyenga also said they oppose requiring very small businesses to collect and remit tax for online sales. Both said they favor setting a “high” threshold for the amount of online sales a business would make in Wisconsin before they would be required to start collecting sales tax.

“Our concern is this: to be no burden on small businesses, but to catch the big fish,” Macco said.

 

Supreme Court Decides Wayfair Online Sales Tax Case

Yesterday, The U.S. Supreme Court handed down its anticipated decision in South Dakota v. Wayfair.

The case challenges South Dakota’s application of its sales tax to internet retailers who sell into South Dakota but have no property or employees in the state. At issue is the case Quill Corp. v. North Dakota from 1992, which set the property or employees standard for sales taxes using the Court’s (debated) dormant commerce clause power to restrict state taxation of interstate commerce.

Drumroll…South Dakota won. The Court laid out why South Dakota’s law is no burden to interstate commerce but made clear that more complex or overreaching laws would be. This was not too surprising, as during oral argument the justices expressed such frustration with the issue that it’s easy to see why they wouldn’t want this to be just the first of many cases. Better to articulate the rule well here.

As Justice Kennedy’s opinion states:

That said, South Dakota’s tax system includes several features that appear designed to prevent discrimination against or undue burdens upon interstate commerce. First, the Act applies a safe harbor to those who transact only limited business in South Dakota. Second, the Act ensures that no obligation to remit the sales tax may be applied retroactively. S. B. 106, §5. Third, South Dakota is one of more than 20 States that have adopted the Streamlined Sales and Use Tax Agreement. This system standardizes taxes to reduce administrative and compliance costs: It requires a single, state-level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules. It also provides sellers access to sales tax administration software paid for by the State. Sellers who choose to use such software are immune from audit liability. See App. 26–27. Any remaining claims regarding the application of the Commerce Clause in the absence of Quill and Bellas Hess may be addressed in the first instance on remand.

The majority opinion, which twice cited the Tax Foundation’s brief, was authored by Justice Anthony Kennedy, joined by Justices Clarence Thomas, Samuel Alito, Ruth Bader Ginsburg, and Neil Gorsuch. Justice Thomas concurred to write that he should have joined the Quill dissent in 1992. Justice Gorsuch concurred, joining the majority in full and adding that he questions Commerce Clause doctrine. Four justices (Chief Justice John Roberts, Justice Stephen Breyer, Justice Sonia Sotomayor, and Justice Elena Kagan) dissented, agreeing that the Court got it wrong before but arguing that Congress should fix it.

President Trump Angers Biz Groups with $200B Tariff Threat

President Trump’s plans to hit China with $200 billion more in tariffs is roiling global markets, angering business groups and putting lawmakers on edge in an important election year.

Trump doubled down on Tuesday, telling a group of business leaders it is time for the U.S. to get tough on China for its unwillingness to change aggressive and unfair trade policies.

“We’re going to get smart, and we’re going to do it right,” Trump told the National Federation of Independent Business in Washington.

Trump said China could still reach out to make a deal, but he saw no signs that would happen.

“We have no choice with China, it’s time folks, it’s time,” he insisted.

Trump’s comments come after he directed U.S. Trade Representative Robert Lighthizer on Monday to identify $200 billion worth of Chinese goods for a 10 percent import tax.

Business groups, which have expressed open frustration with Trump’s trade policies, called on lawmakers to quickly intervene and take more oversight on tariff decisions.

The National Foreign Trade Council (NFTC) was one of a wide range of business groups — from footwear to bankers, oil and automakers — blasting the threatened tariffs and calling for greater congressional control over Trump’s trade policies.

“We strongly believe that, in order to change the current path that the administration has chosen to take on trade, Congress must reassert itself and oversee our country’s trade policy, especially the use of unilateral tariffs,” said Rufus Yerxa, president of the NFTC, in a letter to trade lawmakers signed by more than 60 of the group’s members.

The National Retail Federation also urged lawmakers to act to prevent a trade war. President and CEO Matthew Shay said the tariffs “threaten to sap the energy out of the strong U.S. economy just as most Americans are starting to enjoy the benefits of historic tax reform.”

 

Department of Labor Finalizes Association Health Plan Expansion

The Department of Labor (DOL) has issued a final rule that expands consumer availability of association health plans (AHPs) starting on September 1, 2018.

The rule comes months after President Trump and the DOL proposed executive changes that allow consumers, employer groups, and contractors to sponsor AHPs, which may be more affordable but offer fewer consumer protections than plans compliant with the Affordable Care Act.

AHPs are not required to provide the essential health benefits (EHBs) package included in the ACA. The plans have been intended to provide less expensive options for small businesses, regional collectives, and industry groups that may not be able to purchase insurance through the public exchanges.

Secretary of Labor Alexander Acosta believes the final rule will allow more families and employee groups to purchase affordable health plans and avoid rising costs in the individual market.

Under the rule, only a “bona fide group or association” can create an AHP.  The rule prohibits payers from developing AHP offerings. Providers and related healthcare professionals would also be prohibited from establishing an AHP as a bona fide group. However, the rule does allow payers and related organizations to consult or help develop AHPs by providing claims administration, formulary guidance, and provider network design.

AHPs can also only be formed if there is a “commonality of interest” among individuals looking to form a group. A commonality would include individuals who have similar geographical locations and professions, for example. AHPs can not discriminate enrollment against individuals if they meet commonality requirements.

In a DOL example, if an association offers benefits to restaurant employees in a specific area, then it cannot exclude the employees of a certain restaurant if the business’s employees have higher-than-expected care costs.

DOL also stated that an individual’s health conditions and their part- or full-time employment status cannot be used to discriminate against plan members. States will have discretion around limiting AHP enrollment in relation to other non-health factors.

“States maintain significant authority to impose additional rating rules on insured AHPs through regulation of the underlying insurance policies obtained by AHPs to fund the benefits they provide, and may also impose similar requirements for self-insured AHPs,” DOL said.

The final rule effectively allows AHPs to be separate from the ACA health exchanges and operate as an independent market. DOL said removing AHPs from the ACA market will allow the plans to scale and provide affordable benefits.

“AHPs’ flexibility to offer products and premiums that more closely align with their members’ preferences is a significant benefit for those members,” DOL said.

“That flexibility also frees AHPs from some regulatory overhead, and may enable some AHPs to achieve the scale necessary for administrative efficiency and market power. States retain discretion to regulate AHPs. For these reasons, this final rule does not subject AHPs to the ACA’s individual and small group market rules.”

Expansion of AHPs could lead to mass migration by consumers from the individual health plan market to the AHP market. The DOL and the Congressional Budget Office estimate that nearly 400,000 individuals will seek to enroll in newly expanded AHPs.

 

WEDC Launches Campaign to Bring Alumni Back to Wisconsin

Wisconsin has some of the lowest unemployment numbers the state has seen in decades.

But despite those numbers, there is also a low numbers of workers in the workforce says the Wisconsin Economic Development Corporation.

“We realized we needed to start attracting more workers to Wisconsin and the workforce shortage is real and it’s what we hear as the number one concern from businesses across the state. So we really needed to be more aggressive and talking about Wisconsin’s stories and the opportunities that are here,” said WEDC Deputy Secretary and COO Tricia Braun.

The WEDC is launching a $6.8 million campaign, in part, to encourage alumni to stay in Wisconsin after school.

The campaign will run through June 2019, and hopes to bring workers back to what Braun calls the best kept secret in the country.

Wisconsin Motorists to Spend More for Gas This Summer

Wisconsin summer travel plans aren’t expected to slow despite predictions that motorists in the state will be spending more for gasoline this summer, according to AAA Wisconsin.

Wisconsin motorists are expected to spend an average of $65 more a month for gasoline this summer compared to last year, the Wisconsin State Journal reported . That could add up to $250 for the whole summer.

About 4 percent of Wisconsin gas stations have gas at or above $3 a gallon this month, compared to no gas stations above that amount in June 2017.

The increase in prices likely won’t reduce the number of summer trips, said Nick Jarmusz, the AAA Wisconsin director of public affairs. Instead, families may take shorter trips or choose to participate in free activities.

Gas prices could continue to increase if demand remains high all summer, according to AAA. Gas prices could also be affected by OPEC production, hurricanes that could potentially shut down refineries and how much gasoline the U.S. exports to Mexico.

Legislature’s Budget Committee Approves Federal Funding For I-94, Local Roads

The Legislature’s budget committee has approved splitting $67 million in new federal transportation money between a stretch of interstate near the site of Wisconsin’s Foxconn plant and other Wisconsin bridges and highways.

Under the plan approved Thursday, the state Department of Transportation will spend about $22 million of the new federal funding on the reconstruction of I-94 North-South in Kenosha, Racine and Milwaukee counties.

A state fund for highway and local bridge improvements would get about $38.6 million, while another $6.7 million would go to other state highway projects.

Construction on the I-94 expansion, which began in 2009, involves rebuilding existing lanes and adding a fourth lane in each direction from Milwaukee County to the Illinois state line.

In addition to the funding approved Thursday, Walker recently announced the state had won an additional $160 million in federal highway money for I-94 North-South.

The nonpartisan Legislative Fiscal Bureau said the project would still need additional state funding to be completed by 2021, the year discussed when the Foxconn bill was passed.