MELVIN D REED, Complainant
HEISER FORD, INC, Respondent
An administrative law judge (ALJ) for the Equal Rights Division of the Department of Workforce Development issued a decision in this matter granting the respondent's motion for sanctions under Wis. Stat. § 227.483. The complainant filed a timely petition for review.
Background of this case
Melvin Reed filed a complaint with the Equal Rights Division (ERD) on November 2, 2005 against Heiser Ford, alleging that it refused to hire him because of his race. During the investigation in the ERD, Reed did not respond to the investigator's requests for information in support of his complaint. The investigator issued an initial determination finding no probable cause to believe that Heiser Ford violated the Wisconsin Fair Employment Act (WFEA). Reed appealed, and in his appeal he stated that he chose not to submit any material to support his claim during the investigation, because he opted to use the discovery process to get the information necessary to support his claim. The case was certified for hearing on May 24, 2006, and the parties were permitted to conduct discovery as of that date.
A notice of hearing was sent to the parties on December 29, 2006, setting the hearing for April 26, 2007. Reed started his discovery on January 4, 2007 by sending a letter to Heiser Ford indicating that he intended to serve discovery on it. An attorney then appeared on behalf of Heiser. On or about February 16, 2007 Heiser served discovery requests on Reed, and on or about March 20, 2007 Reed served discovery requests on Heiser. Heiser also served Reed with a notice that it would take his deposition on April 11, 2007.
Reed's answers to Heiser's discovery were due on or about March 19, 2007. He did not answer the discovery by that time, and Heiser filed a motion to compel on March 30, 2007. The ALJ considered the motion premature because it did not show that Heiser had engaged in sincere efforts to resolve the discovery dispute before filing the motion. On April 5, 2007, Reed served his answers to discovery, but objected to a request to identify other complaints, lawsuits, etc. that he filed alleging race discrimination. On April 9, 2007 Heiser's attorney sent Reed a letter arguing that his objection to this request (among others) was unfounded. In the letter, Heiser's attorney also renewed a question she had asked Reed a week earlier-whether Reed intended to go forward with the hearing on April 26th. Reed had refused to answer that question, and insisted that he had a right to decide whether to withdraw up until the last minute before the hearing. In the letter, Heiser's attorney asked Reed to tell her by April 18th of his intention regarding the hearing, and warned that if he did not tell her by then, Heiser would seek sanctions against Reed.
At Reed's deposition on April 11th, Reed was asked about his other lawsuits. He initially refused to answer, but in a series of telephone conferences with the ALJ during the deposition, the ALJ required him to answer questions about his other complaints alleging race discrimination. Reed did not dispute the assertion that he has filed employment discrimination claims against at least 30 employers over a 20-year period, and stated that before he retires, the number could be 40, "who knows?" Reed's answers to questions at his deposition revealed that he filed his complaint against Heiser based on a suspicion but did not possess facts to support his suspicion.
Again on April 12, 2007, Heiser's attorney sent a letter to Reed asking him to state whether he intended to proceed with the hearing, and warning him that it would move for sanctions if he withdrew his complaint at the hearing.
On April 18, 2007, Reed filed two motions. The first was to supplement his witness and exhibit list after the 10-day deadline, due to the fact that Heiser's answers to his discovery requests would not be due until a few days before the hearing. The second motion asked that Reed be permitted to have his attempts to get hired by Heiser in 2004 be considered timely under a continuing violation theory, even though they occurred more than 300 days prior to the filing of his complaint.
In a letter to Reed dated April 18, 2007, Heiser's attorney asserted that it had become clear from Heiser's investigation and discovery that Reed was pursuing a claim without factual or legal basis, in bad faith, and that Heiser would file a motion for sanctions under Wis. Stat. § 227.483 if Reed continued to pursue his complaint. (1)
The ALJ informed the parties that she would rule on Reed's April 18th motions at the April 26th hearing.
On April 24, 2007 Reed filed three documents. The first was a "Motion for the Court's Intervention," in which Reed stated that he had received Heiser's answers to discovery and considered them to be incomplete, but did not have time to get compliance from Heiser prior to the hearing date; he asked for the ALJ to intervene to resolve the issue. The second document was entitled "Complainant's Objection for the Record." In it Reed objected to the ALJ's rulings requiring him to answer questions at his deposition, and stated that the ALJ should recuse herself if she could not act fairly and impartially. The third document was a motion to postpone the hearing because of the unresolved issues between the parties, and because of the death of Reed's half-brother, which had occurred on April 11th.
The ALJ denied Reed's April 24th motions by a letter dated April 24th, but indicated a willingness to reconsider the motion for postponement if Reed submitted, by April 26th, a letter from a treating psychiatrist or psychologist opining that Reed was unable to proceed with the hearing because of the death of his half-brother.
Heiser filed its motion for sanctions after business hours on April 25, 2007.
The parties appeared at the hearing on April 26th. The ALJ denied Reed's motion to apply the continuing violation theory. Reed asked about his motion for postponement of the hearing, having not received the ALJ's April 24th denial of that motion. The ALJ provided a copy of her April 24th rulings to Reed. After reading the letter, Reed asked to withdraw his complaint, with a reservation of his right to pursue federal remedies, and signed and submitted a withdrawal form. Heiser's attorney then asked for a ruling on Heiser's motion for sanctions. The ALJ declined to rule on the motion, stating that she did not have the authority to entertain such motions once the complainant withdraws.
Heiser appealed the ALJ's refusal to rule on its motion for sanctions. On December 7, 2007, the commission remanded the case to the ALJ for further proceedings on the motion for sanctions, holding that a complainant's submission of a notice of withdrawal does not deprive an ALJ of jurisdiction to rule on an outstanding motion for sanctions. Reed v. Heiser Ford, Inc., ERD Case No. 200504107 (LIRC Dec. 7, 2007).
Upon remand, the ALJ sent a letter to the parties dated March 6, 2008, asking them to inform her by March 17th if they are requesting a hearing on the motion. Heiser responded that it did not believe a hearing was necessary, and that the motion could be decided based on the records and briefs filed. Reed did not respond by March 17th.
In a letter dated March 25, 2008, the ALJ informed the parties that she had decided to issue a decision on the motion "based on the record in this matter and the briefs already filed by the parties in this matter." (2)
Nothing of substance happened in this matter until August 8, 2011, when the ALJ sent a letter to the parties stating:
I am sending the Complainant, Respondent and the Respondent's attorney, Ms. Meyer, supplemental documents that I have placed in the file in this matter as part of the decision that I will be issuing on the Respondent's motion to have the Complainant's complaint determined to be frivolous and for sanctions for filing a frivolous claim. I anticipate that the actual decision will be issued by the end of the week. Thank you for your patience in waiting for this decision.
If you have any questions, please contact me at the Equal Rights Division.
The supplemental documents consisted of LIRC and ERD records involving 16 cases filed by Reed, a copy of the April 11, 2007 deposition in Reed's case against Heiser, with the deposition exhibits, and a recording of two hearings in Reed v. Aramark, ERD Case No. 199903591. For the most part, the LIRC and ERD records were copies of orders and decisions, beginning in 1986. In a few cases, however, the records included other file documents in addition to decisions and orders. (3)
On August 12, 2011, the ALJ issued a non-final decision, concluding that Reed commenced, used and continued his WFEA discrimination complaint against Heiser in bad faith, solely for purposes of harassing or maliciously injuring the respondent, under paragraph (3)(a) of the statute. (4) After Heiser filed a petition for attorney's fees, the ALJ issued a final decision awarding about $20,663.85 in fees and costs to Heiser.
In the ALJ's introductory remarks in her decision, she explained what she relied on in arriving at her decision:
In making a decision in this matter, the Administrative Law Judge has relied on the full record in this matter, including the letters and briefs of the parties, exhibits submitted by the parties and the Complainant's deposition and deposition exhibits. The Administrative Law Judge has also taken administrative notice of the United States 7th Circuit Court of Appeals decision in Reed v. Great Lakes Companies, Inc., 330 F.3d 931 (7th Cir. 2003) and the ERD's own records concerning the Complainant's litigation record before the ERD in making a decision in this matter. The Administrative Law Judge notes that finding the full record of the Complainant's prior litigation history before the ERD has not been possible because of the ERD's record retention policy. However, the Administrative Law Judge has attempted to find as many records of the Complainant's litigation history before the ERD as she could find. In addition to the Division's record retention policy, the Administrative Law Judge notes that finding information about the Complainant's litigation history before the ERD has also been hampered by the lack of a research tool to search the opinions of the LIRC. Despite these limitations, the Administrative Law Judge determines that she has been able to put together a sufficient record concerning the Complainant's litigation history before the ERD to make a decision on the issue of whether the Complainant's claim in this matter is frivolous. Copies of the ERD's decisions and relevant records involving the Complainant's prior litigation history are being placed in the ERD file in this matter for use on review. Copies of the decisions and relevant records placed in the ERD file will also be sent to the parties.
Forty-eight of the 129 findings of fact in the ALJ's decision have to do with cases other than Reed's complaint against Heiser. Those paragraphs either describe the decision, order or other document that the ALJ took into the record, or they generalize about patterns of behavior that the documents showed. The major pattern that the ALJ divined from the record that she created was that prior to 1998 Reed litigated his complaints through the hearing stage, but from 1998 on, Reed generally ceased litigating his complaints at hearing, and used various means to prolong the prehearing proceedings as long as possible until either his complaint was dismissed for cause or he requested to withdraw to pursue federal claims. (Finding of Fact No. 115). The ALJ found that Reed's complaint against Heiser fit the post-1998 pattern. (Finding of Fact No. 122).
The ALJ did not state how critical her historical findings were to her decision that Reed's complaint against Heiser was in bad faith, but given the effort that it must have taken to gather and include all the records and make all the findings, it is fair to say they were important to her conclusion.
Standard of review
The commission has recognized that it does not have the authority to make findings under Wis. Stat. § 227.483 -- only the hearing examiner (ALJ) does. See, Henderson v. State of Wisconsin, Dept of Corrections, ERD Case No. 200304180 (LIRC March 19, 2009); Kutschenreuter and Schoenleber v. Roberts Trucking, Inc., ERD case Nos. 200501465 & 200501422 (LIRC April 21, 2011). As a result of that recognition, in Henderson the commission declined to entertain a motion for sanctions under Wis. Stat. § 227.483 because no motion was filed prior to the issuance of the final decision of the ALJ; and in Kutschenreuter the commission reasoned that:
...the scope of the issues arising under this statute in any particular case will be defined by the scope of the argument the party made to the ALJ when presenting the request to them. While LIRC can review the ALJ's ruling on any such request, it cannot act on any new request made for the first time before LIRC. What this means is that the commission must start by identifying specifically what the complainants argued to the ALJ were the claims or defenses that were supposedly made frivolously. LIRC can review the ALJ's rulings on those arguments.
In Kutschenreuter, the commission then reviewed the ALJ's decision not to grant the complainants' request for sanctions under § 227.483, and affirmed the ALJ's decision, concluding that the ALJ reasonably declined to grant the complainants' request.
Ordinarily, the commission's review of an ALJ's decision is de novo, and it has the power to affirm, reverse or modify the findings or order of the ALJ in whole or in part. Wis. Stat. § 111.39(5)(b). But in review of an ALJ's rulings on procedural issues and discovery motions, the commission applies a deferential standard, in which it simply asks whether the ruling was a reasonable exercise of discretion or an abuse of discretion. (5) See, Silva v, City of Madison, ERD Case No. 90002000 (LIRC Nov. 12, 1993) (motion to withdraw without prejudice); Reed v. Heiser Ford, Inc., ERD Case No. 200504107 (LIRC Dec. 7, 2007) (motion for postponement of hearing); Anderson v. Columbia-St. Mary's Hospital, ERD case No. 201201503 (LIRC April 16, 2013) (motion for sanctions for failure to comply with discovery).
The commission did not explicitly adopt the deferential standard in reviewing the ALJ's ruling denying sanctions under Wis. Stat. § 227.483 in Kutschenreuter, supra, but its use of the phrase "the ALJ reasonably declined to grant the request" suggests that it applied the deferential standard. The deferential standard is the reasonable standard to apply to rulings on sanctions under Wis. Stat. § 227.483. First, as with the issue of discovery sanctions, the question of whether a party is pursuing a claim in bad faith is often played out in pre-hearing interactions between the parties and the ALJ, and the ALJ is therefore likely to be in the best position to judge the parties' motivations in pursuing their claims. See, Wells, ftnt. 5 above. Second, because the commission was not given authority in Wis. Stat. § 227.483 to make its own findings, if it were to perform its normal de novo consideration of rulings on frivolous claim motions it would run afoul of that statute, because it would be making its own findings on sanctions.
The commission therefore reviews this decision under an "abuse of discretion" standard. Under this standard, the question is whether the trial court (or agency) "examined the relevant facts, applied a proper standard of law, and, using a demonstrated rational process, reached a conclusion that a reasonable judge could reach." Loy v. Bunderson, 107 Wis.2d 400, 415, 320 N.W.2d 175 (1982); Paytes v. Kost, 167 Wis.2d 387, 393, 482 N.W.2d 130 (Ct. App. 1992) (cited by LIRC in Kutschenreuter and Schoenleber v. Roberts Trucking, Inc., ERD Case Nos. 200501465 & 200501422 (LIRC April 21, 2011). A conclusion that the decision-maker abused his or her discretion does not necessarily mean that he or she had some ulterior motive, engaged in arbitrary conduct or willfully disregarded the rights of a litigant; abuse of discretion can exist where prejudice results from a failure to apply principles of law applicable to a situation. Endeavor-Oxford Union Free High School District v. Walters, 270 Wis. 561, 569, 72 N.W.2d 535 (1955).
Analysis
Section 227.483 of the Wisconsin Statutes requires the hearing examiner to make certain findings of fact. In the paragraph relevant to this case, 3(a), the ultimate finding in support of sanctions must be that a party commenced or continued a complaint "in bad faith, solely for purposes of harassing or maliciously injuring another." Normally, an evidentiary hearing is required to make such a finding. In Estate of Bilsie, 100 Wis.2d 342, 356, 302 N.W.2d 508 (Ct. App. 1981), the court was applying Wis. Stat. § 814.025, a provision (since repealed and replaced by Wis. Stat. § 802.05) allowing costs to be assessed against a party for commencing or pursuing a frivolous claim in court. (6) The court reasoned:
A trial court may be able to make a finding as to frivolousness at or before rendering judgment, but in many instances, as here, the court may wish to consider the matter after judgment and to give the party and attorney against whom the charge is levelled [sic] an opportunity to be heard. A finding of frivolousness may not be predicated on the fact that the party against whom the charge is levelled [sic] lost the case. That party may, for example, have possessed evidence which was unavailable at the trial. To deny the party or an attorney a hearing on the issue of frivolousness would raise a serious question as to denial of due process. "The essence of due process is the requirement that 'person in jeopardy of serious loss (be given) notice of the case against him and the opportunity to meet it.' " Mathews v. Eldridge, 424 U.S 319, 348, 96 S.Ct. 893, 909, 47 L.Ed.2d 18 (1976) (citation omitted).
Similarly, in Radlein v. Ind. Fire & Casualty, 117 Wis.2d 605, 629, 345 N.W.2d 874 (1984), relating to frivolousness under the 3(b) language:
Normally, this court would require a special and separate hearing before the trial court on the issue of frivolousness. At that hearing, legal arguments could be made or the attorney or litigant could call other persons or professionals to testify regarding their knowledge of the law and their opinions, well explained and documented as to the proposition of whether the rule of law relied on is either presently the rule or whether if the rule has never been considered, it is a probable and predictable extension, modification or calls for a permissible reversal of existing law. The trial court would then make the finding of frivolousness or lack of it applying the reasonable attorney standard.
Of course, the ALJ isn't bound to have an evidentiary hearing; perhaps there are no disputed facts; or, as in this case, perhaps the parties waived their right to an evidentiary hearing. In her letter of March 6, 2008, the ALJ clearly gave the parties the opportunity to have a hearing; Heiser said it would stand on the record and briefs in the case; Reed didn't say anything. Under the "abuse of discretion" standard, the ALJ acted reasonably in offering an evidentiary hearing, and deciding, based on the responses of the parties, to base her decision on "the record in this matter and the briefs already filed by the parties in this matter." (ALJ's March 25, 2008 letter to the parties).
What the ALJ then did, however, was an abuse of discretion. During the years the motion was pending, she compiled a record consisting not only of the records in the case before her, but also of decisions in every case she could find involving Reed, and some extra file material from some of those cases, and she failed to give the parties a reasonable opportunity to object to any of these records, or to add any other evidence. She sent the material to the parties with a cover letter on August 8, 2011, with no invitation to make any reply, and issued her decision on August 12, 2011. The effect of this was to invalidate the parties' waiver of an evidentiary hearing -- it was impossible for them to knowingly waive their right to an evidentiary hearing because at the time they waived their right they were led to believe that the decision would be based on the record in the case, not on an unknown body of documents that the ALJ was going to compile. The ALJ indicated in her decision that she took in these records through administrative notice, which is certainly within her authority to do under Chapter 227 -- but only if she then gives the parties an opportunity to react to her inclusion of the records:
All evidence, including records and documents in the possession of the agency or hearing examiner of which the agency or hearing examiner desires to avail himself or herself, shall be duly offered and made a part of the record in the case. Every party shall be afforded adequate opportunity to rebut or offer countervailing evidence.
Wis. Stat. § 227.45(2). (7) Sending the records (a stack about three inches thick) four days prior to issuing the decision (after a three year gap in time) does not give the parties an adequate opportunity under § 227.45(2).
It might be argued that even if the failure to provide an adequate opportunity to present evidence was a mis-application of Wis. Stat. § 227.45(2), there was no prejudice to Reed because the documents that were added to the record (at least the decisions and orders of the ERD) were indisputable -- Reed should not be able to re-litigate prior decisions of the ERD, or the findings that were implicit in those decisions. The problem with that argument is that the documents themselves did not make findings of bad faith under Wis. Stat. § 227.483; the ALJ inferred from the documents a pattern of conduct that supported her conclusion that in this case Reed acted in bad faith. If Reed had been given an opportunity to be heard concerning these other cases, he might have been able to present evidence outside the content of the decisions and other records themselves, on the issue of whether his actions were motivated by bad faith, that might tend to rebut the inference that the ALJ made.
Accordingly, the commission vacates the decision of the ALJ and remands this matter for an evidentiary hearing on the respondent's motion, inasmuch as Reed has indicated in his brief to the commission a desire to add evidence in reaction to the ALJ's expansion of the record.
Dated and mailed May 31, 2013
reedmel . rrr : 107 : 5
BY THE COMMISSION:
/s/ Laurie R. McCallum, Chairperson
/s/ Robert Glaser, Commissioner
/s/ C. William Jordahl, Commissioner
cc:
Attorney Laurie Meyer
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