State Ex Rel. Universal Processing Services, LLC v. Circuit Court of Milwaukee County
2017 WI 26
| Wis. | 2017Background
- Newtek (plaintiff) sued its former independent sales agent Hicks and his company alleging breach of contract, tortious interference, breach of fiduciary duty, and misappropriation; Newtek demanded a jury trial.
- The circuit court (Judge DiMotto) appointed retired Judge Michael Skwierawski as a referee under Wis. Stat. § 805.06 to manage discovery and other pretrial matters; Newtek did not object at the time.
- The Order of Reference gave the referee authority to hear and decide all motions (discovery and dispositive), adopted referee rulings as court orders unless excepted within five days, and limited circuit-court review to correcting an "erroneous exercise of discretion." Parties were to split referee fees (~$450/hr).
- The referee issued numerous discovery rulings, vacated a temporary injunction, and recommended partial summary judgment rulings; the circuit court affirmed most recommendations and issued its own order after stating it reviewed de novo.
- Newtek sought interlocutory review in the court of appeals (denied) and then petitioned the Wisconsin Supreme Court for a supervisory writ to vacate the Order of Reference and referee orders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction/procedural properness of Newtek's writ | Newtek sought supervisory relief in the supreme court arguing impracticality of filing first in court of appeals | Respondents argued Newtek failed to follow Wis. Stat. § 809.71 and should have sought relief in the court of appeals first | Supreme Court denied the supervisory writ as procedurally improper but exercised constitutional superintending authority to decide the merits |
| Waiver/forfeiture/estoppel from delay in objecting | Newtek argued its delay did not extinguish constitutional challenge to an impermissible reference | Hicks argued Newtek implicitly consented/waived by participating for ~1 year without objection | Court held it would reach the constitutional issue despite delay because the matter raises significant institutional concerns and public interest |
| Delegation of judicial power to referee | Newtek argued its rights were denied because the referee effectively exercised judicial power; appointment was improper in scope | Respondents argued the referee appointment and the Order complied with Rule 805.06 and circuit court reviewed de novo | Court held the Order impermissibly delegated core judicial power (including dispositive rulings) to the referee in violation of Art. VII, § 2 of the Wisconsin Constitution; the Order is invalid |
| Standard and scope of review of referee rulings | Newtek sought de novo review and preservation of objections; argued the limited-review clause deprived parties of judicial protection | Respondents argued circuit court review under "erroneous exercise of discretion" and appellate procedures sufficed | Court held the Order's provision limiting court review to "erroneous exercise of discretion" contravenes constitutional and statutory limits (it improperly grants appellate-like review power to circuit court and restricts court's independent adjudicative function) |
Key Cases Cited
- La Buy v. Howes Leather Co., 352 U.S. 249 (U.S. 1957) (special masters may aid judges but cannot displace the court or usurp core adjudicative functions)
- United States v. Microsoft Corp., 147 F.3d 935 (D.C. Cir. 1998) (vacating broad referral where special master would determine rights; special masters may not decide dispositive pretrial motions)
- Stauble v. Warrob, Inc., 977 F.2d 690 (1st Cir. 1992) (warning against reference of fundamental liability issues to a master; masters cannot supplant judges)
- In re United States, 816 F.2d 1083 (6th Cir. 1987) (dispositive matter references are extremely rare and generally inappropriate)
- Peter v. Progressive Corp., 986 P.2d 865 (Alaska 1999) (high master's fees may deny meaningful access to courts; master fees can implicate access-to-justice and due process concerns)
- Jovine v. FHP, Inc., 64 Cal. App. 4th 1506 (Cal. Ct. App. 1998) (referees may not decide dispositive motions without parties' express consent; delegation to private adjudicators is constitutionally limited)
- State v. Williams, 341 Wis. 2d 191 (Wis. 2012) (defining "judicial power" as the ultimate adjudicative authority to finally decide rights and responsibilities)