Wisconsin Legislature Acts to Limit Recovery of Attorney’s Fees

Blog post by Anna M. Pepelnjak

Like a number of other so-called “fee-shifting” statutes, the Wisconsin Fair Employment Act enables a successful complainant to recover his/her actual attorneys’ fees. The availability of attorneys’ fees sometimes makes settling these cases problematic, because the fees can far exceed the recovery owed to the employee.

Under a bill recently passed by the Wisconsin State Senate and scheduled for a vote by the Wisconsin Assembly, attorney fees would be presumptively capped at three times the amount of compensatory damages, unless a Court orders otherwise. In order to overcome the presumption, the Court must address the following factors:

  1. The time and labor required by the attorney.
  2. The novelty and difficulty of the questions involved in the action.
  3. The skill requisite to perform the legal service properly.
  4. The likelihood that the acceptance of the particular case precluded other employment by the attorney.
  5. The fee customarily charged in the locality for similar legal services.
  6. The amount of damages involved in the action.
  7. The results obtained in the action.
  8. The time limitations imposed by the client or by the circumstances of the action.
  9. The nature and length of the attorney’s professional relationship with his or her client.
  10. The experience, reputation, and ability of the attorney.
  11. Whether the fee is fixed or contingent.
  12. The complexity of the case.
  13. Awards of costs and fees in similar cases.
  14. The legitimacy or strength of any defenses or affirmative defenses asserted in the action.
  15. Other factors the court deems important or necessary to consider under the circumstances of the case.

In a recent posting on the issue, State Bar of Wisconsin Government Relations Coordinator Adam Korbitz pointed out,

“…the bill will have unintended, adverse consequences for Wisconsin’s business community — on whose behalf the legislation was offered — by creating uncertainty and ambiguity in the law where none currently exists.

The new limits imposed by the bill may impact as many as 280 statutes and administrative rules, including many that are frequently brought by Wisconsin businesses against those who have violated the law. These statutes also are frequently used to successfully defend against frivolous claims brought against an innocent party by someone who has actually violated the law.”

Evidently, the proponents of this legislation decided that the benefits of capping attorney fee recovery in employment and consumer cases outweighed the risk of prolonged litigation and/or the inability for members of the business community to recover fees in appropriate cases. Because this legislation is expected to be passed and signed into law soon, we won’t have to wait long for both negative and positive repercussions to occur.

Budget Cuts for the IRS … Good or Bad?

Blog post by Robert Teuber

Recently, the Commissioner of Internal Revenue sent letters to the chairs of the House Ways and Means committee and the Senate Finance committee warning legislators of the impact of proposed IRS budget cuts. Current bills being circulated in Congress would cut $650 million (House bill) or $525 million (Senate bill) from the IRS budget. The Commissioner argues that budget cuts of this size would have a significant impact on the enforcement of the tax laws and the services provided by the IRS.

The letter explains that the IRS is a revenue generating agency that brings in approximately $2.5 trillion per year. In collecting this revenue, the IRS expenditures consist largely of labor costs (i.e. auditors and collection agents). By making substantial cuts to the IRS budget, the Commissioner projects that the staffing levels will have to decline resulting in a drop in revenue of $4 billion annually and that audits and collection activities would drop by 5-8%.

Fewer audits? Fewer collection activities? Sounds like a good thing right? Not necessarily.

The problem is that the budget cuts will reduce staffing levels. The IRS will be forced to do more with less. The files stacked on an auditor’s desk will grow taller and it will take longer to have the issues in a case addressed. Once the case is being considered, the IRS employee will have less time to deal with the matter. This means that employees assigned to a case will not have either the ability to act as quickly as a situation may require or the time needed to fully investigate the issues of a case. As a result, those clients that get caught up in audit and collection activities will likely find it more difficult to resolve their cases expediently or favorably.

Tax practitioners are already seeing increased delays in the processing time of seemingly straight forward adjustments, corrections to accounts, compromises or lien and levy releases. Budget cuts that require a significant reduction to staffing levels will only serve to increase the delays. Spending cuts are generally agreed to be necessary, however, cuts made to the IRS budget should be carefully balanced against both revenue generation and the ability of taxpayers to effectively address existing tax issues.

Disclaimer

The comments and opinions expressed in this blog are intended for informational purposes only and do not constitute legal advice. Reading or using the information in this blog does not create the existence of an attorney-client privilege. Due to the changing nature of the law, the blog posts may contain dated material. For an update on the current law and the application of the law to your particular facts and circumstances, consult a legal advisor. The information contained herein is not a substitute for obtaining legal advice from a qualified attorney licensed in your state.