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Searching for Articles published in July 2017.
Found 10 Results.

Recent Bankruptcy Decision from the Western District of Wisconsin Discusses Negative Equity, Car Loans, and the Chapter 13 Cram Down

Posted on July 19, 2017, Authored by Christopher M. Seelen, Filed under Banking and Financial Matters

A quick introduction for those of you who are not bankruptcy nerds.  For certain types of collateral, Chapter 13 allows a Debtor to reduce a secured creditor’s claim down to the value of the collateral.  This is called “cram down.”  But, there are certain limits on the Debtor’s “cram down” powers.  For example, the Debtor can’t cram down the value of a claim secured only by a security interest in the Debtor’s principal residence.  See 11 U.S.C. section 1322(b)(2).  Similarly, the Debtor cannot cram down a purchase money security interest in a personal use motor vehicle acquired within 910 days of the bankruptcy filing date.  See the “hanging paragraph” in 11 U.S.C. 1325(a). So, imagine a typical situation in which a Debtor trades in a vehicle with negative equity (meaning that the value of the trade-in vehicle was less than the debt owed on the trade-in vehicle) and obtains a loan to purchase another vehicle.  In this situation, the new loan includes both the negative equity from the trade-in vehicle and the purchase price of the new vehicle.  Now, imagine the Debtor files for bankruptcy within 910 days of obtaining that loan.  Can the Debtor cram down the negative equity?  That was the situation faced by the Bankruptcy Court for the Western District of Wisconsin in In re: Manor (Western District of Wisconsin Bankruptcy Court Case No. 17-10248). In a decision dated June 27, 2017, the Bankruptcy Court held that the Debtor could not cram down the negative equity.  In other words, the negative equity was held to be part of the purchase money loan and therefore the Debtor could not cram down that negative equity on a personal-use motor vehicle purchased within 910 days of the bankruptcy filing date.  The Manor decision does not break new ground.  Indeed, the Court noted that similar decisions were reached by the Seventh Circuit and the Sixth Circuit in 2010 and by the other Circuit Courts as well. But, the moral of the story is to pay close attention to the details of your car loan whenever a Debtor files a Chapter 13 bankruptcy case.  Was your loan made within 910 days?  Was it a purchase money loan?  Is it a personal use vehicle?  If so, the Debtor can’t cram down your loan, not even the negative equity.  Remember there are strict deadlines in Chapter 13 cases.  So, secured creditors with questions about the Debtor’s plan should make sure they contact their counsel immediately.

Wisconsin Court Re-affirms Employment At Will Principles

Posted on July 27, 2017, Authored by Dean R. Dietrich, Filed under Employment

A recent decision from the Wisconsin Court of Appeals has upheld the concept of “employment-at-will” and determined that an employment-at-will provision in an employment contract superseded company policies that provided alternative procedures to be followed when investigating inappropriate conduct of an employee.  In a recent decision of the District IV Court of Appeals, the Court held that the employment-at-will provision in a written employment agreement between a physician and Dean Health Systems, Inc. was the controlling principle when a legal challenge was filed to the termination of the physician (Bukstein v. Dean Health Systems, Inc. (Case No. 2016AP920)). The physician was employed by Dean Health Systems, Inc. under a written employment agreement indicating that the physician was employed at-will and could be terminated at any time “without cause.”  The Clinic terminated the employment of the physician after conducting an investigation regarding allegations of inappropriate conduct by the physician when interacting with patients.  The physician argued that the Clinic had adopted a “management policy” that described the procedure that would be followed by the Clinic when investigating conduct of an employee, and that such policy should supersede the at-will employment provision in the employment agreement.  The argument was made that the Clinic violated the management policy when it failed to properly comply with all aspects of the policy and that the policy created a duty of good faith and fair dealing when considering the termination of an employee.  The ultimate conclusion of the Court of Appeals was that the management policy did not supersede the employment contract and did not modify the right of the Clinic to terminate the employee under the at-will provision.  The Court of Appeals reaffirmed the at-will employment rule holding that “at-will employees are terminable at will, for any reason, without cause and with no judicial remedy.”  The Court of Appeals did acknowledge that an employment at-will provision could be modified under the “only when” rationale which holds that an employment-at-will relationship may be altered “only when” the management policy (as described in a handbook manual or procedure) contains express provisions from which it can be reasonably inferred that the parties intended to bind themselves to a different employment relationship other than the employment-at-will relationship.  The Court held that the “only when” rule must be very clear in the management policy adopted by the company so that there was a definite intention to modify the at-will relationship by the adoption of such a policy. The importance of this decision is a recognition of the employment-at-will relationship and a clarification of when that relationship may be altered by other actions taken by the company.  The Court of Appeals also noted that there was no automatic good faith requirement when terminating an employee that is subject to an at-will employment provision in an employment agreement.  Employers are again informed that an at-will employment provision is enforceable provided the employer has not adopted other policies or procedures that are designed to modify that relationship.

Protect Your Assets - Medical Assistance & Long-term Care Planning Fall 2017 - Wausau, WI

Posted on July 21, 2017, Authored by ,

Holiday Inn & Suites Rothschild, WI The Need for Planning Who Is Eligible for Medical Assistance Planning?  Protection of the House and Vacation Home  Permitted Transfers of Assets  Using Trusts to Protect Your Assets This seminar is presented at no charge - refreshments are included. It is offered at both 9:00 a.m. and 5:30 p.m. Please specify a time when registering. To register please contact Shannon Jacobson at: sjacobson@ruderware.com or (715) 845-4336. Online registration is also available. Morning Session - 9:00 am Evening Session - 5:30 pm

A Seemingly Important Win for Wisconsin Worker’s Compensation Insurance Carriers and Employers

Posted on July 11, 2017, Authored by Russell W. Wilson, Filed under Employment

On its face the decision of the Wisconsin Supreme Court in Flug v. LIRC, 2017 WI 72 (decided on June 30, 2017), is a clear, important win for the employer side in common injuries that involve pre-existing degenerative conditions.  The general circumstances presented in Flug are familiar.  In that case, a forty-three year old retail store supervisor was changing merchandise prices with the use of a hand-held scanner, a device of negligible weight.  Although she had never before experienced severe, sudden pain in her neck that radiated down her right arm, she did have that experience while scanning shoe boxes located above the level of her head.  Diagnostic tests revealed the presence of pre-existing degenerative arthritis in her cervical spine. The employee’s course of treatment led to surgery, a discectomy in the cervical spine.  After the surgery her pain subsided and her lifting restrictions were gradually lifted.  Her post-surgical permanent partial disability rating to the body as a whole, however, was rated at 22 percent. The employer initially conceded and paid for medical expenses and temporary total disability indemnity.  After the employee had her surgery, however, the employer obtained an independent medical evaluation (“IME”).  According to the IME report, nothing more than a temporary neck strain resulted from the shoe scanning incident, but not the need for surgery (and its attendant permanent partial disability rating to the total body) to remove a disc in the arthritic cervical spine.  Prior to the Supreme Court ruling, the administrative law judge (“ALJ”), the Labor and Industry and Review Commission (“LIRC”), and the circuit court had ruled in favor of the employer.  By contrast, the Wisconsin Court of Appeals had ruled partially in favor of the employee by remanding the case to LIRC for further hearing to determine whether the employee had undertaken the invasive surgical procedure in good faith.  In a 4 to 3 decision authored by Justice Kelly, a majority of the Wisconsin Supreme Court held that “[b]ecause Ms. Flug’s surgery treated her pre-existing condition, not her compensable injury, her claim must be disallowed.”  The majority further held that “. . . an employee is not eligible for benefits under Wis. Stat. § 102.42(1m) if the disability-causing treatment was directed at treating something other than the employee’s compensable injury.” Chief Justice Roggensack thoroughly analyzed her view of the deficiency of the majority opinion in her dissenting opinion.  Pointing out that the IME report was obtained only after the employee had undergone surgery, Justice Roggensack concluded: Post-hoc examinations like Dr. Soriano’s are not relevant when determining whether Flug acted with a good faith belief at the time she undertook surgery that it would alleviate the pain she had suffered since her work-related injury on February 14, 2013.  Flug’s good faith belief is her state of mind at the moment when she undertook the invasive treatment.  And, it is her state of mind at the time she undertook surgery that the majority opinion avoids discussing. In a separate and equally persuasive dissenting opinion, Justice Ann Walsh Bradley highlighted that LIRC had concluded in clear error that the employee had not suffered any work-related injury.  “There is a reason that the court of appeals issued an unpublished opinion here.  And it likely is the messy record, which certainly does not represent LIRC’s finest hour.”  Both dissenting opinions would send the case back for further hearing before the ALJ to decide the issue of the employee’s good faith or lack thereof. Worker’s compensation insurance carriers and self-insured employers will likely redouble their efforts to seek post-surgical IMEs in cases that involve pre-existing arthritis.  They may press for recoupment of benefits paid after a retroactively-determined healing date.  Some employees might be deterred from seeking invasive treatment they otherwise would have pursued; others may be more inclined to undergo invasive treatment and proceed to hearing.  The import of Flug might not be as great as might appear from the majority’s decision.  It is likely lawyers for workers who, like Ms. Flug, had a clearly compensable injury initially will lay a careful evidentiary record of the employee’s subjective good faith in undergoing surgery.  What information did the employee have at that time?  What information was learned only after-the-fact of surgery?  What were the considerations, pro and con, for deciding to undergo an invasive procedure?  With a careful record established it is unlikely that LIRC would again erroneously conclude that no work-related injury had occurred.  Thereafter, it would be up to the courts to decide whether Flug will stand as a black-letter ruling on the one hand, or whether it may be distinguished on the facts on which it is based, on the other. To some extent Flug will become superseded.  The facts in Flug are based on a 2013 date of injury.  For injuries occurring on or after March 2, 2015, health care professionals (both treating and IME examiners) will be required to consider “other factors” (such as pre-existing degenerative arthritis) and allocate disability ratings between such other factors and those caused by work-related injuries or conditions. Yet even then it remains to be seen how Flug will be interpreted. Consider, for example, a work-related injury occurring after March 2, 2015.  Suppose the agency’s findings include that (1) it was pre-existing arthritis in the cervical spine that necessitated surgery rather than lifting a lightweight scanner overhead at work; (2) the employee thoroughly considered the pros and cons of undergoing surgery on her cervical spine and concluded in her good faith belief that it was for the purpose of relieving her pain from the work-related injury; and, (3) a bad surgical outcome, paralysis, occurred.  Would Flug be applied to deny compensation under that circumstance?  Or would Flug be limited to instances in which no work-related injury occurred (as LIRC erroneously concluded in Flug)?  This would appear to be an issue for the Wisconsin Supreme Court to decide.

Eligibility for Overtime Pay – Redo?

Posted on July 31, 2017, Authored by Dean R. Dietrich, Filed under Employment

Recent action taken by the Department of Labor has started to signal the likely “redo” of the Fair Labor Standards Act regulations regarding overtime pay and which employees are eligible for overtime pay.  The Department of Labor issued a Request for Information document that asks employers to respond to a series of questions on overtime pay eligibility and the exemptions from overtime pay requirements.  This is not the start of a new rulemaking process but rather a very preliminary move to request information that will be used to formulate a new rule on eligibility for overtime pay and what type of employees are exempt from overtime pay for hours worked. The questions posed by the Department of Labor are not specific enough to identify any detail of what might be a new rule on overtime pay eligibility.  The questions range from references to eliminating the salary test as part of the calculation to determine whether an employee is exempt to seeking input on whether the amount of salary under the salary test should be different based upon a geographical region or the type of industry the employer is in.  The suggestion from these questions is the Department of Labor is looking at a broad range of options ranging from eliminating the salary test in its entirety to modifying the salary test to be a lesser amount than what was proposed by the Obama Department of Labor.  It is far too early to give any guidance or direction to employers on what changes might take place although it is clear that the proposed overtime pay rule which raised the salary level to $47,500 will not become the law of the land. The legal challenge to the overtime pay rule change is pending in the Fifth Circuit Court of Appeals based upon a decision by a Texas federal judge.  The Department of Labor has continued to pursue a part of that case but not seek a court ruling that would allow the implementation of the new salary level to qualify an employee as exempt from FLSA overtime payments.  The issue being litigated in the Fifth Circuit Court of Appeals centers on the question whether the salary level requirement is actually allowed as part of the Department of Labor regulations because there is some suggestion that the original legislation never envisioned a salary level test as part of the determination of whether an employee is exempt from overtime pay requirements.  We can assume this matter will linger for a while but at least we know the Department of Labor is looking at this issue and that it is likely something will be proposed in the future.  Responses to the Request for Information are due over the next 90 days which may then start the rulemaking process for a new overtime pay exemption rule.

Protect Your Assets - Medical Assistance & Long-term Care Planning Fall 2017 - Eau Claire, WI

Posted on July 21, 2017, Authored by ,

The Need for Planning Who Is Eligible for Medical Assistance Planning?  Protection of the House and Vacation Home  Permitted Transfers of Assets  Using Trusts to Protect Your Assets This seminar is presented at no charge - refreshments are included. It is offered at both 9:00 a.m. and 5:30 p.m. Please specify a time when registering. Holiday Inn 94 South 4751 Owen Ayres Court, Eau Claire, WI To register please contact Monica Mohr at:  mmohr@ruderware.com or (715) 834-3425 Online registration is also available.Morning Session - 9:00 amEvening Session - 5:30 pm

Condominium Issue with Long-Term Tax-Exempt Bond Financing

Posted on July 5, 2017, Authored by Paul J. Mirr, Filed under Banking and Financial Matters

We recently helped a client complete long-term tax-exempt bond financing of a portion of a mixed-use condominium. These projects raise interesting issues. Long story short, if you find yourself in a similar situation, you need to be very careful as to how you document costs and how you define each condominium element. Quick, simplified background: The mixed-use project was originally owned by a limited liability company consisting of two members, a for-profit entity and a non-profit entity. Once construction was completed, the plan was to split the condo by deeding the commercial units to one member in exchange for surrendering its membership interest in the limited liability company. Thus, one member would own the commercial condominium unit outright, and the other member (as the now sole owner of the limited liability company) would own the other unit outright. The limited liability company had originally obtained conventional financing for the construction of the development. After the membership interest redemption took place, the tax-exempt member decided to re-finance their project costs with a long-term tax-exempt bond. This is where things got interesting since no portion of the tax-exempt bond could be used to reimburse costs incurred by a non-profit entity. A normally set up condominium has the internal portions of the respective units classified separately from the roof, exterior walls, vent pipes running from the first floor to the roof, and shared services (electrical, water, etc.) which make up the common elements. However, because a non-profit owned the residential unit, the exterior walls and roof of the building, among other items, could not be classified as common areas as the tax-exempt member wanted the bond funds to be used to finance most of those portions of the building that it was paying for, too. So, we had to first go through all of the building costs to trace and identify those costs and payments that were part of the building solely owned by the non-profit. Then, we also needed to revise the standard condominium documents to make the unit descriptions akin to a layered cake – most anything on a layer, whether or not the same is customarily a common element, had to be part of one unit or the other, so there could be very little common area. We were able to find solutions that worked for all of the parties, but it took a lot of detailed work and careful drafting to get things right. Moral of the story: If you’re going to be doing long-term tax-exempt bond financing for a condominium unit, try to anticipate the accounting and tax concerns before incurring costs. This will make drafting the condominium documents much easier later.

Attempted End Run Around Wisconsin’s Exclusive Remedy of Worker’s Compensation Fails in Asbestos Litigation in the Seventh Circuit

Posted on July 13, 2017, Authored by Russell W. Wilson, Filed under Employment

Wisconsin’s exclusive remedy of worker’s compensation has long been a bulwark against civil suits brought by employees (subject to a few narrow exceptions not applicable here).  This bulwark has survived a creative attack in an asbestos case in Pecher v. Owens-Illinois, Inc. 859 F.3d 396 (2017), which was decided on June 6, 2017. The case involved six plaintiffs who sued in federal district court for the Western District of Wisconsin for compensation for mesothelioma. They had built fire-proof doors that incorporated asbestos-containing materials. Three of them (the “Weyerhaeuser plaintiffs”) were former Weyerhaeuser Company employees who asserted claims against Weyerhaeuser. The other three (the “Owens-Illinois plaintiffs”) were also former Weyerhaeuser employees, but they sought instead to impose liability on Owens-Illinois, Inc. by virtue of its status as the licensor of the patent on the fire-proof door.  The district court dismissed all of the claims, and the U.S. Court of Appeals for the Seventh Circuit upheld the dismissals. The focus of this article is on the background to the reasons for the dismissal, that background being Wisconsin’s exclusive remedy of worker’s compensation. Weyerhaeuser operated a plant in Marshfield, Wisconsin, from 1960 until 1978 at which it made fire-proof doors, some of which contained asbestos. The doors were made under a patent that Owens-Illinois licensed to Weyerhaeuser.  All six plaintiffs alleged that they developed mesothelioma not from exposure to asbestos fibers while at work in the factory, but rather from the ambient atmosphere in their homes or their community. While the Weyerhaeuser plaintiffs brought claims grounded in the law of nuisance against their former employer, the Owens-Illinois plaintiffs tried to impose liability against the licensor of the patent by which the asbestos-containing doors were made. The Seventh Circuit began its decision by noting: Each of the Weyerhaeuser plaintiffs worked at Weyerhaeuser for years in close contact with asbestos. Therefore, on the surface at least, it appears their claims should be limited to the procedures set out in Wisconsin’s Worker’s Compensation Act, which provides the “exclusive remedy against the employer” for work-related injuries. All six plaintiffs offered opinion testimony of experts that non-occupational exposure to asbestos fibers in the ambient atmosphere caused their mesothelioma.  In its role as the gatekeeper of opinion testimony, the district court determined that the individual circumstances of the Weyerhaeuser plaintiffs did not provide a sufficient basis on which reliable expert opinions on causation could be rendered. The Weyerhaeuser plaintiffs did not live close enough to the factory for a long enough period of time, so their expert opinion testimony was not admissible into evidence.  The Owens-Illinois plaintiffs had a bit stronger showing; their expert opinion testimony was admissible.  The end result for both groups, however, was the same. (The Seventh Circuit did not disturb the district court’s rulings on the admissibility of the opinion evidence since those decisions are reviewed only for abuse of discretion, and the appellate court observed that the district court’s evidentiary rulings did not meet that difficult standard of review.) The nuisance-based claims of the Weyerhaeuser plaintiffs were dismissed for reasons (apart from having no proof of causation) of the changed circumstances and the passage of time. To state a claim under Wisconsin’s law of nuisance, there must be a current interference with a property right, i.e. the use and enjoyment of one’s property.  At the time the Weyerhaeuser plaintiffs were allegedly exposed to non-occupational asbestos fibers in the ambient atmosphere, they had the full, unimpeded use and enjoyment of their respective properties.  They were first diagnosed with mesothelioma long after the plant had stopped manufacturing the fire-proof doors. Accordingly, their claims under nuisance theories were not recognized.  In addition, the six year statute of limitations had expired. As for the Owens-Illinois plaintiffs, the law does not recognize a claim against a party based solely on its status as the licensor of a patent.  (In fact, the claims of the Owens-Illinois plaintiffs were found to be frivolous.) I think it is fair to say that both the district and appellate courts were troubled by, and skeptical of, the obvious gambit to make an end run around the exclusive remedy of worker’s compensation.  Quoting the district court in regard to the Owens-Illinois plaintiffs, the Seventh Circuit stated: [t]he [district] court specified it could not “ignore the real possibility that any trier of fact might be unable to balance defendant’s right to exclude liability or damages for occupational exposure under compensation laws against the understandable, if unduly prejudicial, sympathy that would be engendered at trial in light of the inexorable pain and death that results from this disease.  (Emphasis in the original.) The Seventh Circuit went on to say that: One not need read between the lines to note that the district court was concerned that the expert testimony proffered by plaintiffs’ counsel was an attempt to avoid the exclusive remedy provisions of Wisconsin law, offering jurors a way to reward damages under a cause of action that should otherwise be foreclosed. While Pecher was not decided by direct application of Wisconsin’s exclusive remedy defense, it seems that the spirit of that important provision was very much at play.  Wisconsin’s exclusive remedy provision is part and parcel of the “grand bargain,” the quid pro quo, of worker’s compensation that has served this state well for more than a century. It is good to see recognition of that venerable doctrine when federal courts apply Wisconsin law.

Right-to-Work Law Upheld

Posted on July 17, 2017, Authored by Dean R. Dietrich, Filed under Employment

Without much fanfare, the Seventh Circuit Court of Appeals has upheld the Wisconsin Right-to-Work Law.  The Right-to-Work Law passed in Wisconsin is similar to a law passed in Indiana and holds that a company may not enter into a labor agreement with a union representing company employees that requires the employees to join the union or to have union dues withheld from their paycheck. The Seventh Circuit Court of Appeals, which oversees federal court matters for Wisconsin, held that the Wisconsin Right-to-Work Law was the same as the Indiana Right-to-Work Law that was previously found to be constitutional and that there was no basis for changing the prior Court of Appeals decision.  Unions had claimed that the Right-to-Work Law constituted a taking of union property rights (union dues) without due process and thus was a violation of the federal constitution.  The Court of Appeals held that this was not the case and the state legislature had the right to adopt this statute which limited the obligation of union membership for employees of a company. The fight regarding the Wisconsin Right-to-Work Law is now really focused on when the law becomes effective for each company which depends upon existing labor agreements and the language in the labor agreement.  Many companies have proceeded with implementing this new law and giving notice to new employees that they are not required to join a union or have union dues taken from their paycheck.  A company should still honor voluntary dues deduction requests by an employee, but it is no longer something that can be mandated under the terms of a labor agreement.

To Arbitrate or Not Arbitrate? House Weighs In on CFPB Arbitration Rule

Posted on July 26, 2017, Authored by Ruder Ware Attorneys, Filed under Banking and Financial Matters

Yesterday, the U.S. House of Representatives overwhelmingly passed House Joint Resolution 111 which would rescind the Consumer Financial Protection Bureau’s “Arbitration Rule”. Finalized on July 17, 2017, the Arbitration Rule places significant limitations on financial institutions’ ability to designate arbitration as the dispute resolution mechanism in its contracts with depositors and borrowers; additionally, the Rule requires financial institutions to report to the CFBP information and data about individual arbitrations that result from pre-dispute arbitration agreements. The House’s use of the Congressional Review Act to rescind the Arbitration Rule is welcome news to financial institutions of all sizes as the Rule would result in increased costs for and significant burdens on customers whose claims cannot be resolved through class actions, as it would require them to go to court for minor disputes.  Additionally, arbitration serves as a cost effective and efficient dispute resolution mechanism – when compared to the costly and time consuming class action and court alternatives.  Proponents of the Rule fear that financial institutions have unfair leverage in the negotiating power with customers and mandatory arbitration clauses infringe on customer’s constitutional rights. Despite yesterday’s vote in the House, the Arbitration Rule has not (yet) been rescinded, under the Congressional Review Act, both the House and Senate must vote to repeal the Rule, before being delivered to the President for approval.