Reply Brief — Crosetto v. Wisconsin State Bar

| Supremes Court, U.S. |

Mp.) FILED

‘4

7) | FEB 4 «(1997

) No. 96-975

CLER™

’ In THE

Supreme Court of the Gnited States

Ocroser Term, 1996

JOHN CROSETTO,

Petitioner,

vs.

STATE BAR OF WISCONSIN,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

REPLY TO BRIEF IN OPPOSITION

AMEDEO GRECO

Counsel of Record for Petitioner

6406 Masthead Drive

Madison, Wisconsin 53705

(608) 233-0017

TABLE OF CONTENTS

TABLE OF AUTHORITIES .........

I.

This Case Presents The Circuit Court

Split Identified In The Petition

A.

Respondent’s Manufactured

Conflict Is Not the Real Conflict

Between The Seventh Circuit And

The Other Circuits ..........

A Judgment Will Not Affect The

State Treasury Because

Respondent’s Funds Are Not

BURTON diuidcdundiactects

Not All Of The Issues Herein

Can Be Resolved In Regents of

the University of California v. Doe

Which Is Now Pending Before

WE bn dSwhwesvaanscene

Review Is Needed To Resolve

The Uncertainty Surrounding

Sovereign Immunity .........

This Case Presents Questions Left

Unaddressed In Keller ...........

A. Respondent Does Not Dispute

That Petitioner’s Pending

Constitutional Challenges Are

Identical To Those Raised In

iii

ii

1992 And That They Are Covered

By The Pretrial Order ........

B. No Court Has Ever Ruled On

The Substantive Merits Of These

CRONE ka vacesdewens

C. Respondent’s Other Practices Are

Unconstitutional ............

III. Review Is Needed To Determine

What Complaint Procedures Should

Be Followed After A Circuit Court

Raises A Sovereign Immunity Defense

At | BUSTT TT ey ree

IV. Respondent Is Not A State Entity

Under Keller And It Is Not The

COU AMEE 6 oe e FUSS ase es

CONCTARIION os scccnncneuecsauves

10

ee

iii

TABLE OF AUTHORITIES

Cases Page(s]

Crosetto v. State Bar of Wisconsin, 12 F.3d. 1396 (7th

Cir. 1993), cert. denied, _ U.S. __, 114 S. Ct. 2138

DE MECGUSGUGhs reed Céscecncdeieteeecese 8

Doe v. Lawrence Livermore Nat. Laboratory, 65 F.3d.

771 (9th Cir. 1995), cert. granted, 64 U.S.L.W. 3837

(June 17, 1996) (No. 95-1694) ................ 4,5

Esparza v. Valdez, 862 F.2d. 788 (10th Cir. 1988) ... 2

Foman v. Davis, 371 U.S. 178 (1962) ............ 9

Gary v. Laws, 51 F.3d. 426 (4th Cir. 1995) ........ 5

Hadley v. North Arkansas Community Technical

College, 76 F.3d. 1437 (8th Cir. 1996), petition for

cert. filed, 65 U.S.L.W. 3054 (June 24, 1996) (No.

95-2060) eeeoeveeeo eee ee eeeeeeeeeeeoeeeeeeeees 5, 6

Hess v. Port Auth. Trans-Hudson Corp., 115 S.Ct. 394

EE ae oe oe ee 5

Ns Rt BU dtnisals 6 ade vo RV RK b's oes 10

Keller v. State Bar of California, 496 U.S. 1 (1990) .. passim

Mancuso v. New York State Thruway Authority, 86

F.3d. 289 (2nd Cir. 1996), cert. denied, (Nov. 18,

SED iwe we dow awier e¥eveves dics 5

Page(s]

Matter of Discontinuation of Wis. State Bar, 93 Wis.

2¢. 385, 286 N.W. 2d 601 (1980) ...........605. 10

Mullaney v. Anderson, 342 U.S. 415 (1952) ........ 9

Sonnenfeld v. City and County of Denver, 100 F.3d.

PO4 (20R CR. IDPS). oo cnnss sodcewenvesvevens 2

Teachers v. Hudson, 475 U.S. 292 (1986) ......... passim

Thiel v. State Bar of Wisconsin, 94 F.3d. 399 (7th Cir.

| PPPET re eriit ee ci cre ) re Lye 6

CONSTITUTIONAL PROVISIONS

US. Comet. SOME AE cocncivcrswscevccauaee passim

RULES

Ped, R.. Cin. F.. 85. «svc ay 2hd vesiasiccent cindes 8

OTHER AUTHORITIES

48 Op. Atty. Gen. 30 (Wis. 1959) .............4. 4

75 Op. Atty. Gen. 153 (Wis. 1986) .............. 4

18 Wright, Miiler & Kane, Federal Practice &

Procedure § 4476 (1990) ......cccvcwccvcsdese 8

ot i ee eee,

Respondent’s Brief In Opposition ("Opp.") is a study in

avoidance.

Respondent tries to avoid review by incorrectly describing the

circuit court split identified in the Petition. That is why

Respondent’s Counterstatement to Question 1 (Opp. i) is so

generalized, as that enables Respondent to avoid dealing with

the precise question presented and the clear circuit split on that

question.

But, no matter how hard Respondent tries, it cannot avoid

one essential truth: the Seventh Circuit—unlike the First,

Second, Third, Fourth, Fifth, Sixth, Eighth, Ninth, Tenth, and

Eleventh Circuits—is the only circuit court to rule that

sovereign immunity can be granted to a claimed arm of the

State without inquiring whether a money judgment against

it—here about $3,000—will affect the state treasury.

This case thus presents an appropriate vehicle for the Court

to decide these conflicting principles of constitutional law

because they are not limited to the particular facts of this case.

Rather, this case presents a straight yes or no answer to a legal

question of national importance which is dividing the courts

below and which will go on dividing them until the Court

answers it.

This case also asks what procedural requirements unified bars

must follow under Keller v. State Bar of California, 496 U.S. 1

(1990), and Teachers v. Hudson, 475 U.S. 292 (1986). This issue

involves not only Wisconsin’s 18,000 attorneys, but also all

attorneys in the country’s 35 or so unified bars.

Respondent also avoids mentioning what will happen if

review is denied. Denial will enable Respondent to avoid

changing its dues reduction plan which violates Keller and

Hudson. Denial also will enable Respondent to avoid

Petitioner's prevailing party status through a simple technicality:

the Seventh Circuit’s flat-out refusal to let Petitioner on the

2

remand add nominal defendants to counter Respondent’s

sovereign immunity claim.

Given this experience, it is hardly likely that any other bar

members in Wisconsin will sue over these or any other

constitutional deprivations, just as it is unlikely that any

attorney will step forward to represent them. That, not review,

should be avoided.

I. This Case Presents The Circuit Court Split Identified In The

Petition

A. Respondent’s Manufactured Conflict Is Not The Real

Conflict Between the Seventh Circuit And The Other

Circuits

Respondent does not dispute that there is a circuit court split

between Seventh Circuit and the pirst, Second, Third, Fourth,

Fifth, Sixth, Eighth, Ninth, Tenth,“ and Eleventh Circuits over

whether the federal courts must inquire into whether sovereign

immunity can be granted to a claimed arm of the state if a

money judgment—here about $3,000—is not paid out of the

State treasury.” Respondent similarly does not dispute that the

I Respondent also tries to avoid the truth by challenging the accuracy of

Petitioner’s Statement of Facts (Opp. 1), but thereafter only challenges one

purported factual error. Opp. 7, n. 4. As related at pp. 9, 10, infra, it is

Respondent who errs on this point, not Petitioner. Hence, every fact in

Petitioner’s Statement of Facts is true and should be accepted by the Court.

Tenth Circuit ruled in Sonnenfeld v. City and County of Denver, 100

F.3d. 744, 749 (10th Cir. 1996), that: "The most important factor in

determining whether a governmental entity is entitled to Eleventh

Amendment immunity is whether a judgment against it would be paid from

the state treasury.” This decision supersedes Esparza v. Valdez, 862 F.2d. 788

(208, Ge. 1988), where the court reached a contrary conclusion. Pet. 18.

Respondent does not dispute that a money judgment against it wil] not

exceed about $3,000. Respondent instead only addresses the amount of

(continued...)

tte

3

Petition accurately reports the current circuit court thinking on

this issue and the Seventh Circuit’s minority position. Pet.

17-21.

Instead, Respondent seeks to obfuscate the need for review

by asserting that other circuit courts "have consistently held that

the impact of a judgment on the state treasury is not the only

factor to consider in determining whether a defendant is

entitled to immunity under the Eleventh Amendment and that

immunity may attach even in the absence of any fiscal impact

if other factors are present.” Opp. 11-12.

So what? Respondent knows that that is not the issue before

the Court. Petitioner has never claimed that this is the only

factor that all other circuit courts must consider. Rather, review

is needed because the Seventh Circuit below, unlike every other

circuit court, refuses to even consider this factor in determining

whether an entity is entitled to sovereign immunity. Pet. 17-18.

That is the real issue presented for review and that is the

source of the circuit court split identified here.

Respondent therefore engages in a gross mischaracterization

in baldly asserting: "The lack of meaningful conflict among the

circuits is not surprising.” Opp. 13. Since the phony conflict

addressed by Respondent is not the real conflict raised in the

Petition, its straw man is not relevant to the issue pending

before the Court—an issue Respondent has chosen to duck by

disingenuously raising a bogus issue and by thereby refusing to

correctly identify the real circuit court split referenced in the

Petition.

B. A Judgment Will Not Affect The State Treasury

Because Respondent’s Funds Are Not State Funds

3(...continued)

damages initially in dispute when class certification was being sought on

behalf of Wisconsin’s approximately 18,000 attorneys. Opp. 2.

4

Respondent errs in arguing that its funds are, state funds and

that review is not needed. Opp. 9, 15-16, n. 6.4

They are private funds. That is shown by Respondent’s

admissions that it purchased about $217,000 in private bonds

with its own funds and without any state authorization; that it

spent about $850,000 of its own funds in remodeling its building

without any state authorization; that the state does not disburse

any funds to it; that its funds are not part of the state budget;

that it does not receive any general revenue funds from the

state; and that membership dues are its prime source of income.

(R. 510) Is 60-61. Hence, Respondent can use its own private

funds to pay the approximately $3,000 money judgment sought

here without affecting the state treasury.

C. Not All Of The Issues Herein Can Be Resolved In

Regents of the University of California v. Doe Which Is

Now Pending Before The Court

Respondent asserts that review should not be granted here

because the Court in Regents (Case 95-1694) can "clarify how

the impact on a state treasury figures into Eleventh

Amendment jurisprudence .. ..” Opp. 14-15, n. 6.

That, though, is not necessarily true. There is no dispute in

that case that the University of California is an arm of the state

4Respondent cites 48 Op. Atty. Gen. 30 (Wis. 1959) and 75 Op. Atty.

Gen. 153 (Wis. 1986) in support of its claim that these are state funds. Opp.

9, 15. However, since Wisconsin’s Attorney General has sometimes

represented Respondent in the past, its opinions cannot be given much weight

particularly where, as here, Respondent’s status is a "federal question.” Keller,

496 U.S. 11 (1990). In addition, Respondent’s reliance on 75 Op. Atty. Gen.

is wholly misplaced. It states: "In December of 1983, the Bar petitioned the

Court to set up the State Bar as an ‘official arm’ of the court, acting in a

quasi-judicial capacity .. .. The supreme court denied the petition .. .” /d. at

157. Hence, that denial establishes that Respondent is not an “official arm”

of the Wisconsin Supreme Court. That being so, its funds are not state funds.

5

and that a legal judgment would run against the state. Here, on

the other hand, Respondent has admitted: The bar is not a

ity’ (Emphasis in original) (R. 510).

Furthermore, Petitioners in Regent sought review over a circuit

court split which centers on the effect of indemnification

agreements and whether "the immunity of State entities under

the Eleventh Amendment should be based solely on the legal

liability of the state entity for the judgment" or whether "the

immunity of State entities must be based on a prediction of the

likely financial impact of a particular judgment on State

resources."> Pet. 9.

Here, the Court is not being asked to review the circuit court

split regarding indemnification agreements. Hence, there is no

assurance that the Court will rule on this issue in Regents.

Furthermore, review is still needed to address the other two

Questions Presented which are not raised in Regents.

D. Review Is Needed To Resolve The Uncertainty

Surrounding Sovereign Immunity

Respondent errs in asserting that there is no uncertainty over

this issue. Opp. 13-14.

The Second Circuit in Mancuso v. New York State Thruway

Authority, 86 F.3d. 289, 293 (2nd Cir. 1996), cert. denied, (Nov.

18, 1996), (No. 96-381), stated: "The jurisprudence over how to

apply the arm-of-the-state doctrine is, at best confused.” The

Fourth Circuit in Gray v. Laws, 51 F.3d. 426, 431 (4th Cir.

1995), stated that Hess v. Port Auth. Trans-Hudson Corp., 115

S.Ct. 394 (1995), is "an opinion that is certain to generate

confusion.” In the Eighth Circuit, the dissenting opinion (Lay,

J.) in Hadley v. North Arkansas Community Technical College, 76

Petitioners in Regents thus assert as their main argument that immunity

does not depend on whether a state entity has a claim for reimbursement or

indemnification agains? @ “ied party. Pet. Br. 12.

6

F.3d. 1437, 1442 (1996), petition for cert. filed, 65 U.S.L.W.

3054 (June 24, 1996) (No. 95-2060), stated: "Today’s decision

amplifies the disarray of approaches applied by the lower courts

when confronted with the defense of Eleventh Amendment

immunity by state-created entities." Review is needed to answer

such questions.

Il. This Case Presents Questions Left Unaddressed In Keller

Keller held that unified bars should adopt "the sort of

procedures described in Hudson," but it did not spell them out.

496, U.S., at 17. Review thus is needed to determine whether

Respondent’s plan is unconstitutional.

A. Respondent Does Not Dispute That ~Petitioner’s

Pending Constitutional Challenges Are Identical To

Those Raised In 1992 And That They Are Covered

By The Pretrial Order

Respondent does not deny that its dues plan violates Keller

and Hudson because of its unlawful preclusion and exhaustion

requirements. Pet. 27. Respondent also does not deny that

these two constitutional challenges were first raised before the

District Court in 1992 and that they are covered by the Pretrial

Order. Pet. 27-29. Hence, they are not "new" claims.®

SRespondent asserts that the District Court properly denied Petitiones’s

amendment because it raised new claims and new challenges to the current

dues reduction plan. Opp. 18. However, Respondent does not identify these

supposed claims or challenges for a very good reason: they do not exist. But,

even if they did, they do not involve these two claims which have been

pending since 1992. Respondent also asserts that these supposed new claims

were already the subject of a parallel proceeding in Thiel v. State Bar of

Wisconsin, 94 F.3d. 399 (7th Cir. 1996). Opp. 16-19. Respondent knows that

is not true because Thiel did not involve the unconstitutional preclusion and

exhaustion requirements found here. Hence, Petitioner could not have

received the same legal relief in Thiel that he seeks here.

en

7

B. No Court Has Ever Ruled On The Substantive Merits

Of Petitioner’s Two Challenges

Respondent has not presented a counterstatement to

Question 3. Opp., p. i, n.1. Instead, Respondent misleads the

Court by asserting that the two challenges were decided

adversely to Petitioner on his first appeal. /d In fact,

Respondent has stipulated that these challenges were dismissed

on procedural grounds (i.c., that they were "moot" or not "ripe")

and that neither the District Court nor the Seventh Circuit ever

addressed their substantive merits. (R. 509), 16. Review

therefore is needed because Respondent today is subjecting

Wisconsin’s approximately 18,000 attorneys to _ its

unconstitutional dues reduction-arbitration plan.

C. Respondent’s Other Practices Are Unconstitutional

Respondent does not dispute its record-keeping practices. Pet

5. It, instead, asserts that they are constitutional Opp. 10.

Petitioner disagrees. It is manifestly absurd to claim that proper

time records can be maintained when bar employees are not

required to fill in and file their personal time sheets until up to

42 days after the fact.’ Review thus is needed to determine

whether unified bars under Keller can maintain such sorry

practices.

III. Review Is Needed To Determine What Complaint

Procedures Should Be Followed After A Circuit Court

Raises A Sovereign Immunity Defense Sua Sponte

This issue involves all cases where, as here, a federal court

raises a sovereign immunity defense sua sponte and then rules

that a plaintiff cannot amend a complaint by naming nominal

7 Respondent admits that no auditor independently verified employee

time records until after Petitioner raised this issue and that its auditor relies

on Respondent's claims that its records are being properly kept. (R. 510) 711.

8

defendants for the purpose of preserving subject matter

jurisdiction. The Seventh Circuit’s decision here is manifestly

unjust because it fails to recognize that a plaintiff in such a

situation has the right to amend under Fed. R. Civ. P. 15 and

because it prevents Petitioner from being declared a prevailing

party.

Thus, Respondent does not dispute that Petitioner has

brought needed changes in Respondent’s unconstitutional

record-keeping, time-keeping, and auditing practices and that

it fired one of its employees because of the abuses uncovered

in this litigation.® Pet. 5, 24-27.

Respondent similarly does not dispute that Petitioner needs

to add the nominal defendants to the Complaint only to

counter Respondent’s belated sovereign immunity defense and

to preserve his prevailing party status. It similarly does not

dispute that all of those nominal defendants were nominal

defendants in Thiel and that their addition here as nominal

defendants is a "routine, ministerial task." Pet. 25.

Instead, Respondent argues phantom facts and wrongly

asserts that the District Court did not abuse its discretion in

denying this necessary amendment. This is a bogus argument.

The Seventh Circuit ruled that, as a matter of law, the District

Court had no discretion to exercise because: "Amendment

would have been inconsistent with our mandate which required

the resolution of one specific issue.” Pet. App. 2a. The Seventh

Sespondent asserts that Petitioner is precluded from raising these issues

because the District Court decided that they were without merit and that its

ruling is the “law of the case.” Opp. 10. Its claim is without merit because this

Court gave no reason for denying Petitioner’s first petition for a writ of

certiorari and thus never addressed the merits of Petitioner’s claims. Hence,

"questions that may have been decided do not become law of the case merely

because they could have been decided . . .” 18 Wright, Miller & Kane,

Federal Practice & Procedure § 4478 (1900;,

9

Circuit did not offer an explanation as to why an amendment

was prohibited on the remand after it raised a sovereign

immunity defense sua sponte. Pet. App. 32a, n. 10. Its refusal to

do so is in conflict with Foman v. Davis, 371 U.S. 178, 182

(1962) which requires such an explanation.

It also conflicts with Mullaney v. Anderson, 342 U.S. 415, 417

(1952), where the Court allowed such an amendment under

similar circumstances. Indeed, Mullaney is so on point that

Respondent does not even try to distinguish it or even mention

it.

IV. Respondent Is Not A State Entity Under Keller And It Is

Not The Court’s Agent

While Respondent now asserts that it is a state entity (Opp.

9-10) and that it is an agent of the court (Opp. 4-9), it does not

dispute that it previously has represented: "The bar is not a

governmental entity.” (Emphasis in original.) (R. 509).

Respondent also admits that its funding does not come from

the state legislature, but rather, through membership dues; that

it does not admit, disbar, or suspend anyone from the practice

of law; and that it does not have ultimate power to adopt a

code of ethics. (R. 509) In short, it does not meet any of the

criteria set forth in Keller, 496 U.S., at 11, for being a state agency.”

Respondent «misrepresents the record by labeling as "false" (Opp. 7, n.

4) Petitioner’s representation that Respondent “has never been told by the

Wisconsin Supreme Court that it is free to disregard those procedures” which

govern all Wisconsin state entities. Pet. 8. In fact, Respondent’s Executive

Secretary Stephen L. Smay, (“Smay"), was asked at his June 8, 1995,

deposition: "And there is nothing in any of the [Supreme Court Rules] as far

as you know that says the State Bar does not have to follow the other

requirements established for other state agencies, isn’t that correct?”

A I think that’s correct. (R. 509), (Tab 30, p. 187).

(continued...)

10

Respondent’s other assertion that it was an agent of the

Wisconsin Supreme Court when it engaged in the activities in

dispute was blown apart by Smay’s admissions at another

deposition. He admitted there were no Supreme Court Rules,

decisions, or orders which authorized Respondent to establish

LAWPAC, its political action committee; to conceal its

LAWPAC activities; to force Petitioner to financially support

LAWPAC; to maintain its record-keeping, time-keeping, and

auditing practices; or to promulgate the exhaustion and

preclusion requirements in issue.! oR. 503), (pp. 8-12).

CONCLUSION

For the foregoing reasons and those stated in the Petition,

Petitioner respectfully submits that the Petition for a writ of

certiorari should be granted.

AMEDEO GRECO

Attorney for Petitioner

6406 Masthead Drive

Madison, Wisconsin 53705

(608) 233-0017

FEBRUARY 3, 1997

9(...continued)

Smay also admitted that there are no documents filed with either the state

or federal governments which identify Respondent as a state entity and that

there are no Rules promulgated by the Wisconsin Supreme Court which

identify it as a state agency. Id pp. 186-187.

established LAWPAC after it was told by the Wisconsin

Supreme Court that it was precluded from engaging in partisan politics and

it continued its unlawful LAWPAC activities for three more years after the

Wisconsin Supreme Court ruled they were "proscribed." In re Regulation of

the Bar of Wisconsin, 81 Wis. 2d xxxv, xxxix (1978); Matter of Discontinuation

of Wis. State Bar, 93 Wis. 2d 385, 387, 286 N.W. 2d 601, 606 (1980).