High court ends great-weight deference to state agencies (UPDATE)

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The Wisconsin Supreme Court has decided to end the court’s long-standing three-tier system for deferring to state agencies’ interpretations of statutes.

For decades, Wisconsin courts have shown varying degrees of deference to state agencies’ interpretations of statutes. The greatest amount of deference that could be shown was called “great weight,” which judges used when an agency whose interpretations were being questioned had a considerable history of administering and interpreting a particular statute. The other two tiers were due-weight deference and no deference at all.

The justices had asked the parties in Tetra Tech v. Wisconsin Department of Revenue, as well as the litigants in two other administrative-law cases, to brief them on whether the courts’ deference practices comport with the Wisconsin Constitution. The justices heard oral arguments in all three cases on the same day in December, and released decisions in them on Tuesday.

The justices’ decision in the Tetra Tech case effectively eliminated the three-tier system, finding it unconstitutional. The two other decisions provided guidance on how the new procedures set out in the Tetra Tech case should be applied.

From now on, state courts will generally have to review challenges of agency decisions de novo, although they will still have to give some “due weight” consideration to state agencies, according to Tuesday’s lead opinion in the Tetra Tech case. That due-weight deference is required by the state’s administrative-procedures statutes.

The decision means lawyers handling matters before administrative agencies can challenge how those agencies interpret and apply statutes and regulations by arguing that the rules are not being applied as written, said Lisa Lawless, an appellate attorney at Husch Blackwell in Milwaukee.

“This also means that long-held agency interpretations of statutes can now be attacked to the extent they are contrary to the statute or they may be said to re-write the statute,” she said. “Tetra Tech gives a blank slate for those situations.”

In writing the lead opinion in the case, Justice Dan Kelly borrowed language from Justice Rebecca Bradley’s dissent in Operton v. LIRC, in which Bradley and others had called for ending the courts’ practice of giving great-weight deference to state agencies.

“We are leaving our deference doctrine behind because it is unsound in principle,” Kelly wrote. “It does not respect the separation of powers, gives insufficient consideration to the parties’ due-process interest in a neutral and independent judiciary, and ‘risks perpetuating erroneous declarations of the law.’”

The justices, though, did not agree on the reasons why the great-weight doctrine should be left by the wayside.

Justices Annette Ziegler, Ann Walsh Bradley and Michael Gableman all wrote concurring opinions. Roggensack joined both in the first part of Ziegler’s concurrence and in Gableman’s concurrence.

Ziegler and Gableman wrote that they agreed with the lead opinion that the court’s three-tier system of deferring to state agencies ought to be ended. But they objected to way that Kelly reached that conclusion.

Both agreed that there was no need to examine the constitutionality of the court’s three-tier system. Gableman, though, wrote that the system was established by a single case, Harnischfeger Corp. v. LIRC, and the court needed only withdraw language from that decision.

Ziegler meanwhile wrote that because the court had set up the system as a judicial-administration policy, it could eliminate the systsem without performing a constitutional analysis and without affecting previous cases.

Ann Walsh Bradley, joined by Justice Shirley Abrahamson, wrote that she disagreed with the lead opinion, calling it “legal error.” She agreed with Ziegler that the lead opinion put into question decades’ worth of cases in which the court had applied both great-weight and due-weight deference.

“What is the precedential value of these cases now?” Bradley wrote. “Are the principles they divine still good law even though they were reached through the application of a deference doctrine the court eschews today?”

However, Bradley agreed with the majority opinion’s position on the main question that the parties in the Tetra Tech case asked the court to weigh in on: Whether taxes should have been imposed a contractor involved in a Fox River cleanup project.

After being ordered by the Environmental Protection Agency to clean up the river, various paper companies created a separate company, Lower Fox River Remediation LLC, to oversee and conduct required remedial work. That company then hired the contractor Tetra Tech, which in turn hired several subcontractors to work on the cleanup.

One of the subcontractors, Stuyvesant Dredging Inc., was charged with both separating sand from polluted sediment dredged up from the river and with extracting water from that sediment.

The justices on Tuesday all agreed that Stuyvestant Dredging’s services fell under the category of “processing,” meaning they were subject to both use and sales taxes under Wis. Stat. 77.52(2)(a)11.

The ruling on Tuesday affirmed decisions handed down previously by the Court of Appeals and Brown County Circuit Court Judge Marc Hammer. Both found that the state Department of Revenue had properly determined in 2010 that Tetra Tech must pay sales taxes on Stuyvestant Dredging’s work and that Lower Fox River should have paid use taxes for the contractor’s services.

While the case answered the deference question the justices had been wanting to answer, Lawless noted that the court’s decision poses new questions, including whether previously entered final judgments can be reopened.

“If the outcome of a case would have been different without deference to the agency’s conclusions of law and under a proper application of the law, can a party argue to vacate an entered judgment under Wis. Stat. § 806.07, on the grounds of mistake, voidness or other reasons?” Lawless said. “Responding to other justices raising this concern, Justice Kelly’s decision says that could not occur.  However, a majority of justices did not join that part of the decision, so it is an open question.”

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