Sovereign Immunity – Property Tax

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WI Court of Appeals – District III

Case Name: Darrell Klein, et al., v. The Wisconsin Department of Revenue, et al.,

Case No.: 2018AP1133

Officials: Stark, P.J., Hruz and Seidl, JJ.

Focus: Sovereign Immunity – Property Tax

In response to a federal court decision, the Town of Sanborn (the “Town”) decided in 2007 to remove from its property tax rolls all land belonging to the Bad River Band of Lake Superior Tribe of Chippewa Indians (the “Bad River Band”) and its members. The Wisconsin Department of Revenue (the “Department”) subsequently issued guidance encouraging municipalities to review, on a property-by-property basis, whether Native American property qualified under federal law for property tax exemption. Nonetheless, the Town continued its blanket exemption for all Bad River Band tribal and member property until it was ordered to return those properties to the tax rolls as part of another lawsuit.

Darrell Klein and the other taxpayer plaintiffs (collectively, the “Taxpayers”) commenced this action against the Department after the Sanborn Town Board disallowed their claims regarding excessive and unlawful taxation. The Taxpayers alleged the Department had failed to act sufficiently to stop the Town’s unlawful taxation policy. As a result, they alleged the Department has allowed the non-uniform taxation of property. The Taxpayers asserted they were entitled to recover an alleged $1.5 million in excessive taxes from the Department on behalf of themselves and other taxpayers in Ashland County. They also sought damages for the alleged diminution of their property values, a town-wide reassessment, and a writ of mandamus compelling the Department to comply with its statutory obligations under WIS. STAT. ch. 73 (2017-18). The Taxpayers further sought attorney fees and declaratory relief.

The circuit court granted the Taxpayers’ summary judgment motion, and we agree with the Department that it erred by doing so. Instead, the Department was entitled to summary judgment because sovereign immunity bars the Taxpayers’ claims against it for damages and attorney fees, as a matter of law. When the action is one for the recovery of money from the State, as here, the State—including one of its agencies like the Department—may not be sued without its consent (i.e., an express directive by the legislature). The application of sovereign immunity here required the circuit court to dismiss all of the Taxpayers’ non-mandamus claims, including their request for attorney fees. Moreover, given the circumstances in this case, any claim for the recovery of unlawful taxes lies against the municipality that collected them, not with the Department.

As for the Taxpayers’ mandamus claim, we conclude they have failed to demonstrate that the Department had a “positive and plain duty” that it failed to perform. Rather, the duties the Taxpayers point to are investigative and prosecutorial functions that have long been treated as discretionary. Accordingly, we conclude that summary judgment was appropriate in the Department’s favor on all of the Taxpayers’ claims. We reverse and remand with directions for the circuit court to dismiss the claims against the Department.

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Derek A Hawkins is trademark corporate counsel for Harley-Davidson. Hawkins oversees the prosecution and maintenance of the Harley-Davidson’s international trademark portfolio in emerging markets.