Small-town victory: Justices say Dodgeville owes less interest on tax refund to Lands’ End

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The small city of Dodgeville has dealt the retail giant Lands’ End a defeat in court.

The Wisconsin Supreme Court handed down a ruling Tuesday finding that Lands’ End was demanding too high an interest rate on a property-tax refund from the city of roughly 5,000, where the clothing retailer has its corporate headquarters. At the heart of the dispute is a change in state law governing how much interest should be paid on certain court judgments.

Until 2011, state statutes had called for plaintiffs to be paid interest at a rate of 12 percent on court-ordered judgments that were handed down following the rejection of a settlement offer. The state Legislature, though, changed that formula to 1 percent plus the prime rate, which is the lowest rate banks offer to their best customers.

That change came about in the midst of a decade-long dispute over the methods Dodgeville officials were using to assess the tax value of Lands’ End’s headquarters, which occupies parts of six parcels of land in the city.

In the case the justices decided Tuesday, Lands’ End had specifically challenged the city’s 2008 assessment of the headquarters property. The company faulted Dodgeville officials for not taking steps to change their valuation methods after a previous court challenge had resulted in the city’s 2005 and 2006 assessments being deemed improper.

Lands’ End offered to settle its suit over the 2008 the assessment if the city would pay it $724,000. Dodgeville officials declined.

The dispute landed in Iowa County Circuit Court, where Judge William Dyke found for the city in 2010. Lands’ End responded with an appeal and, this time, was successful.

The District 2 Court of Appeals sent the case back to Iowa County and directed the circuit court to award Lands’ End $724,292.68 plus interest. The city appealed, but the high court chose not to grant a review.

By the time the case had wound its way through the court system, the Legislature had changed the law regarding the rate of interest owed on judgments after a settlement offer has been refused. Still, because Lands’ End had put forth its settlement proposal in 2009 — roughly two years before change in interest law — the company argued it was entitled to the previous rate of 12 percent.

City officials, on the other hand, noted that the judgment in the case was not handed down until after the law had been changed. For that reason, they argued, Lands’ End should only get 1 percent plus the prime rate.

In a ruling handed down in 2014, Iowa County Circuit Court Judge Craig Day sided with Dodgeville, finding the city should pay a rate of 4.25 percent.

Lands’ End once again appealed the decision. This time, though, Dodgeville responded with a request to bypass the court of appeals and go straight to the Wisconsin Supreme Court. The justices agreed in January to take up the case.

Lands’ End continued to argue that it should be paid interest at the rate of 12 percent. Company representatives contended that making the change in interest-rates law apply in their case would be unconstitutional because it would upend the company’s reasonable expectation of what could be recovered from its lawsuit.

Specifically, the company cited a District Two Court of Appeals decision from 2015 in the case of Johnson v. Cintas Corp. 2. The appeals court then found that because one of the parties in that case – Johnson – had made an offer to settle before the new interest-rate statute was enacted, the 12 percent rate applied. The court also found that it was unconstitutional for a court to apply the law change from 2011 retroactively.

The city, on the other hand, continued to note that Lands End obtained its favorable judgment in the case only after the law concerning interest rates had been changed.. It also contended that none of the arguments used in Johnson, a case involving insurance coverage in a car accident, were in line with those put forward in the Lands’ End case.

Robert Shumaker, an attorney for Lands’ End, had no comment on Tuesday. Ted Waskowski, an attorney for the city, could not be immediately reached.

The Supreme Court’s decision Tuesday in favor of Dodgeville was reached through a 4-2 vote. Chief Justice Pat Roggensack and Justice David Prosser dissented. Justice Annette Ziegler concurred, and Justice Rebecca Bradley did not participate.

The majority of the justices, upholding the lower court’s decision, found that the application of the new interest-rate law in Lands’ End’s case could not be deemed retroactive because the company’s judgement had not been entered before 2011. Also, the justices found that Craig’s decision to apply the new interest rate was constitutional because Land’s End had no reasonable expectation that the old interest would apply.

The majority also disagreed with Lands’ End’s argument that the higher interest rate was proper because the chief cause of the company’s inability to get a judgment before 2011 was a circuit court’s error.

“Although in the instant case there is arguably an identifiable point when Lands’ End should have recovered its judgment … other cases may present more complicated factual situations in which it would be difficult, if not impossible, to identify the point at which an offeror of settlement ‘should’ have recovered a judgment,” according to the decision. Follow @erikastrebel