Wisconsin Labor and Industry Review Commission --
Summary of Wisconsin Court Decision relating to Unemployment Insurance

Subject: Lakeshore Mental Health Inc. v. LIRC and DWD, Case 07 CV 1240 (Wis. Cir. Ct., Sheboygan Co., March 13, 2008 bench decision)

Digest Codes: PC 751.4

An initial determination held that Lakeshore was liable for UI tax contributions based on an audit which had found that certain individuals had provided services to Lakeshore for pay as its employees for purposes of the UI Law. After a hearing, at which the Department of Workforce Development appeared by counsel and argued in support of the determination, an Appeal Tribunal affirmed the holding that Lakeshore was liable. Lakeshore petitioned for commission review, and, after briefing by Lakeshore and DWD, the commission's decision affirmed the Appeal Tribunal.

Lakeshore timely commenced an action for judicial review of the commission’s decision, but it named only LIRC as a defendant. LIRC filed a motion to dismiss the action on the grounds that the court lacked competence to proceed because DWD was an adverse party but had not been made a defendant as is required by Wis. Stat. 102.23(1)(a). Lakeshore the filed an Amended Summons and Complaint making DWD a defendant; however, this Amended Summons and Complaint were filed and served after the 30-day period for commencing a judicial review action had expired.

Held: In a bench decision, the Court granted the motion to dismiss.

The Court concluded first that in this action, DWD was an “adverse party” within the meaning of Wis. Stat. 102.23(1)(a). The Court noted that the conclusion that DWD was an adverse party was appropriate under each of the three tests for “adverse party” status looked to by the Wisconsin Supreme Court in Miller Brewing Co. v. LIRC, 173 Wis. 2d 700, 495 N.W.2d 660 (1993), looking to whether a party is one in whose favor an award has been made, one whose interest is in conflict with the modification or reversal of the decision sought to be reviewed, or one whose interests were adverse to the appellant during the administrative proceedings.

The Court next concluded that Lakeshore’s failure to make DWD a party defendant in the action was a defect that traveled to the heart of the court’s power to act in the matter, requiring dismissal of the complaint. The Court held that Nigbor v. DILHR, 120 Wis. 2d 375, 355 N.W.2d 532 (1984), a WC case in which the defect was DILHR was made a defendant instead LIRC, and First Federal Savings Bank, La Crosse-Madison v. LIRC, 200 Wis. 2d 786, 547 N.W.2d 796 (Ct. App. 1996), a UI Status case in which DWD was not made a defendant but DWD had notice of and appeared in court by its own counsel in response to the complaint, were both distinguishable. In this case, DWD was not served and had no notice of the proceedings until the amended summons and complaint were served, and it was LIRC which appeared in court, by its own counsel, to challenge the commencement of the action, DWD’s counsel only making a special appearance after being served with the amended summons and complaint.

Finally, the Court held that the amended summons and complaint purporting to add DWD as a party defendant did not cure the defect because they were not filed and served within the 30-day period after the issuance of the commission’s decision. In order to properly invoke the authority of the court the steps required to commence an action under 102.23 must be taken within the 30-day time period described in that statute, and if this is not done the court does not have competence to proceed and cannot obtain it by attempts to cure the defect in commencement of the action after the 30-day period has run.

Please note that this is a summary prepared by staff of the commission, not a verbatim reproduction of the court decision.

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