State of Wisconsin ex rel. Universal Processing Services of Wisconsin, LLC, Petitioner,
Circuit Court of Milwaukee County and the Honorable John J. DiMotto, presiding, Samuel B. Hicks and Merchant Card Services, Inc. Respondents.
ARGUMENT: November 1, 2016
Court Milwaukee County L.C. No. 2014CV7986 John J. DiMotto
the petitioners, there was a brief by Ryan M. Billings,
Robert L. Gegios, Melinda A. Bialzik and Kohner, Mann &
Kailas,, S.C., Milwaukee, and oral argument by Ryan M.
the respondent the cause was argued by David C. Rice,
assistant attorney general, with whom on the brief(s) was
Brad D. Schimel, attorney general.
the respondent, there was a brief by Joan M. Huffman, Paul R.
Erickson and Gutglasas, Erickson, Bonville & Larson,
S.C., Milwaukee, and oral argument by Joan M. Huffman.
JUSTICES: CONCURRED: CONCURRED/DISSENTED: ZIEGLER, J. concurs
and dissents (Opinion filed). BRADLEY, R.G., J. joined by
KELLY, J. concur and dissent (Opinion filed).
SHIRLEY S. ABRAHAMSON, J.
Universal Processing Services of Wisconsin, LLC d/b/a Newtek,
the plaintiff-petitioner, petitions this court, pursuant to
Wis.Stat. § (Rule) 809.71 (2015-16),  for a supervisory
writ. Newtek asks the court to exercise its constitutional
authority to vacate an order of the Circuit Court for
Milwaukee County, John J. DiMotto, Judge, appointing retired
Judge Michael Skwierawski as the referee and to vacate
unlawful orders of the referee issued pursuant to the
reference. Samuel Hicks and his Idaho company, Merchant Card
Services, are the defendants-respondents. The Circuit Court
for Milwaukee County and the Honorable John J. DiMotto,
presiding, are also named as respondents. The respondents
oppose the petition.
Newtek argues that the circuit court's order appointing
the referee expanded the role of referee into the role of de
facto circuit court judge in violation of the Wisconsin
Constitution and Wis.Stat. § (Rule) 805.06, a rule
adopted by this court. Newtek does not challenge the
constitutionality of Wis.Stat. § (Rule) 805.06,
governing references to a referee.
The dispute underlying this petition arises from a lawsuit
initiated by Universal Processing Services of Wisconsin, LLC
d/b/a Newtek (Newtek), a bankcard processing services
company, the plaintiff-petitioner, against one of its
independent sales agents, Samuel Hicks, and his Idaho
company, Merchant Card Services (collectively, Hicks), the
The following issues are presented:
1. Is Newtek's petition for a supervisory writ properly
before this court?
2. Has Newtek waived or forfeited its objection to the Order
of Reference, is it estopped from challenging the Order, or
has it impliedly consented to the Order?
3. Does the circuit court's Order of Reference contravene
Article VII, Section 2 of the Wisconsin Constitution vesting
judicial power of this state in a unified court system?
4. Does the circuit court's Order of Reference, including
the provision that the circuit court's review of the
referee's "rulings" shall be based only on the
referee's "erroneous exercise of discretion, "
contravene the Wisconsin Constitution and the Wisconsin
statutes and rules regarding circuit court and appellate
court authority and practice?
5. Does the circuit court's Order of Reference contravene
the parties' right to "obtain justice freely, and
without being obliged to purchase it, " guaranteed by
Article I, Section 9 of the Wisconsin Constitution, or to due
process of law, guaranteed by Article I, Section 1 of the
Wisconsin Constitution, or Newtek's right to a jury
trial, guaranteed by Article I, Section 5 of the Wisconsin
6. Should the orders of the referee to date be vacated and
should the parties be allowed to request substitution of the
judge on remand?
For the reasons set forth, we conclude as follows:
1. Newtek's petition for a supervisory writ does not meet
the requirements set forth in Wis.Stat. § (Rule) 809.71.
The petition was not first filed in the court of appeals and
Newtek has failed to show that it was impractical to file the
petition in the court of appeals. We do, however, exercise
our constitutional superintending authority under Article
VII, Section 3(2) of the Wisconsin Constitution to determine
the validity of the Order of Reference. A declaration of
rights is an appropriate vehicle for an exercise of the
superintending authority over circuit courts constitutionally
granted to this court. See Part II, ¶¶36-50.
2. Regardless of whether Newtek has waived or forfeited its
right to challenge the Order of Reference, is estopped from
challenging the Order, or has impliedly consented to the
reference, this court may resolve the issue of the validity
of the Order of Reference under its constitutional
superintending authority. See Part III, ¶¶51-55.
3. The Order of Reference impermissibly delegated to the
referee judicial power constitutionally vested in
Wisconsin's unified court system. Accordingly, the Order
does not survive Newtek's constitutional challenge. See
Part IV, ¶¶56-82.
4. The circuit court's Order of Reference, including the
provision that the circuit court's review of the
referee's "rulings" shall be based only on the
referee's "erroneous exercise of discretion, "
contravenes the constitution and statutes or rules regarding
circuit court and appellate court authority and practice. It
infringes on the legislature's authority to define a
circuit court's appellate jurisdiction. See Part V,
5. We do not decide the instant case on the basis of Article
I, Section 9 of the Wisconsin Constitution, the due process
clause of Article I, Section 1 of the Wisconsin Constitution,
or the right to jury trial of Article I, Section 5 of the
Wisconsin Constitution, but we note that reference to a
referee is the exception, not the rule; that there are
constitutional limits on the powers of a referee; and that a
reference can jeopardize a litigant's access to the
justice system, due process, and right to a jury trial. The
Wisconsin Constitution requires the state to provide a
judicial system for the resolution of disputes. Access to
state courts for conflict resolution is thus implicit in the
state constitution. We express our concern that the use of
referees increases the costs of litigation and may cause
delay and, in certain cases, may deprive litigants of access
to courts. See Part VI, ¶¶89-103.
6. To the extent the parties have agreed to abide by an order
or ruling of the referee relating to discovery, that ruling
or order shall stand. To the extent either party has objected
to an order or ruling of the referee relating to discovery,
that ruling or order shall be vacated. Any ruling or order of
the referee on any dispositive motion is vacated. Either
party may request substitution of the judge under Wis.Stat.
§§ 801.58(1) and (7). See Part VII,
We begin in Part I by setting forth the procedural facts
relating to the appointment of the referee and the Order of
On August 27, 2014, after nearly a decade of successful
collaboration between Newtek and Hicks, Newtek terminated
Hicks' contract. On September 16, 2014, Newtek brought an
action against Hicks in the Circuit Court for Milwaukee
County, John J. DiMotto, Judge, alleging breach of contract,
tortious interference with contract, breach of fiduciary
duty, and misappropriation of confidential information and
trade secrets. Newtek demanded a jury trial.
The contract included restrictive covenants. The
enforceability of these restrictive covenants is central to
the underlying dispute. Hicks filed an answer to the
complaint, asserting affirmative defenses and counterclaims
and seeking nearly $17 million in damages.
Because the contract provided for injunctive relief, Newtek
promptly sought and received an ex parte temporary
restraining order from a duty judge just a few days after
filing the complaint. The circuit court (Judge DiMotto)
affirmed and reaffirmed the temporary restraining order.
Over the course of the next several months, the parties began
extensive discovery. The parties periodically appeared before
the circuit court for scheduling conferences and motion
In early 2015, Newtek moved to amend the scheduling order to
extend the deadlines for naming experts and providing expert
reports. Hicks opposed the extension and filed a motion to
On February 17, 2015, the circuit court held a hearing on
Newtek's motion to amend the scheduling order and decided
to appoint a referee to the case. At the hearing, Newtek
described the case as a "classic big case" with
numerous issues and production of a substantial number of
documents in discovery (50, 000 thus far):
[W]hen we appeared before you in November [everyone] was
overly optimistic in terms of what could be accomplished. In
particular, overly optimistic in where we slotted the expert
disclosures in relation to what . . . this litigation has
spawned by way of discovery. We're approaching just on
our side nearly 40, 000 pages of production, about which the
other side is still complaining. The other side has produced
. . . in the order of 10, 000 [pages], about which we're
complaining. . . .
We have the classic big case with lots of issues now. We have
more than one case in the sense that we have filed a
complaint with numerous causes of action but there is a
counter complaint. The counterclaims have been filed by the
other side, and discovery is occurring with regard to both of
those pleadings. . . .
And so we are doing our best to produce without coming to the
court . . . . And it has been a production that has gotten to
the point of something like a thousand pages . . . that we
are producing per day. That's what the average is since
The circuit court granted Newtek's request for extension
in part and also gave Hicks an extension. The circuit court
expressed frustration with the already cumbersome discovery,
especially the attorneys' conduct, stating:
Well you know, the one thing that I put a real high value on
are [sic] attorneys being reasonable. Quite frankly, it seems
to me that both sides here are not being--at least
they're not being reasonable . . . .
Explaining that the circuit court had "some 450
cases" on its docket, the circuit court stated that it
was "not going to expend a lot of time dealing with [the
parties'] discovery bickering." Accordingly, the
circuit court appointed retired Judge Michael Skwierawski as
the referee under Wis.Stat. § (Rule) 805.06, explaining
the appointment as follows:
I am going to be appointing . . . retired Judge Michael
Skwierawski as the Special Master in this case under 805.06.
. . . [Y]ou'll have to deal with him with respect to
discovery disputes, etcetera, because I'm not going to
waste precious court time that I can give to other cases to
be your personal slave to your discovery disputes. So I just
want you to know that. So the more reasonable you are with
each other, the less likely you're going to need to pay
the fees of retired Judge Michael Skwierawski. And he
doesn't come cheap when it comes to being a Special
Master. So I encourage you to be cooperative in your
discovery, help each other out, get this case to mediation
sooner than later. (Emphasis added.)
Although the circuit court uses the phrase "Special
Master, " this opinion uses the word "referee,
" adhering to Wis.Stat. § (Rule) 805.06, which uses
the term "referee." The term "master" had
such a pejorative connotation in 1848 at the time of
statehood, as we shall explain later,  that the word
"referee" has been used in Wisconsin.
The circuit court explained that it would call retired Judge
Michael Skwierawski to ask him if he would accept the
appointment. The circuit court also explained that the
referee would draft the Order Appointing Special
Master/Referee (Order of Reference or Order) because the
referee has a list of things that he requires. Neither party
objected to the circuit court's decision to appoint the
The circuit court directed Newtek to draft a proposed order
memorializing the outcome of the February 17 hearing,
including the referee's appointment. Newtek's counsel
contacted the referee on February 18 to confirm his
availability before drafting this order. The referee said he
was available and that he had already submitted a proposed
Order of Reference to the circuit court; the referee directed
counsel from each side to submit any objections to the
Newtek told the referee that it was reviewing the Order of
Reference and would submit objections, if any, as soon as
possible. Less than a day after counsel received the Order,
the circuit court informed the parties that it had entered
the Order. Thus, neither side was able to submit any
objections before the Order of Reference was signed.
The Order of Reference pertained to more than discovery
issues. In addition to authority to manage discovery, the
Order granted authority over nearly all aspects of the case
and provided for limited review by the circuit court. The
reference provided, inter alia:
• All motions, whether discovery or dispositive, were to
be heard and decided initially by the referee.
• The referee's written rulings would be adopted and
entered as the rulings of the court, automatically and
without hearing, unless a party filed an exception within
• The referee could certify matters to the circuit
court, and the circuit court could refuse to decide these
• The circuit court retained the power to modify or set
aside a referee's ruling, but the circuit court could
only do so if the ruling were based on an erroneous exercise
• The parties were to compensate the referee at $450 per
hour plus reasonable and necessary expenses. The parties were
to divide the cost of the referee equally. (The total cost of
the referee thus far has been about $45, 000.)
Three relevant provisions of the Order of Reference are as
follows (emphasis added):
4. The [referee] shall have the full authority of the Court
in coordinating and establishing all pretrial procedures. The
[referee] shall also have the full authority of the Court to
hear and decide, subject to Court review as set forth below,
any other matters assigned to him by the Court. All motions
filed, whether discovery or dispositive, shall initially be
heard and decided by the [Referee], subject to review
processes available as described below.
7. If the [referee] is of the opinion that a specific issue
presented by the parties is of such fundamental importance to
the progress or outcome of the case that effective case
management would not be furthered by having the [referee]
render a decision in the first instance, the [Referee] may at
his discretion certify that issue to the Court. As the final
arbiter of case management, the Court may, but need not,
accept the certification. . . .
8. Exceptions to any decisions made by the [referee] may be
taken to this Court and must be filed with the Court within
five (5) business days of the issuance of the decision.
Review by the Court shall be based on the materials and
record before the [referee]. No additional filings will be
permitted unless good cause and exceptional circumstances are
demonstrated by the requesting Party. The Court has full
authority to modify or set aside the ruling of the [referee]
but will do so only if the ruling is based on an erroneous
exercise of discretion. Unless an exception is taken, any
ruling by the [referee] shall automatically and without
hearing be adopted and entered as a ruling of the Court
within five (5) business days of submission by the [referee]
to the Court and parties. All decisions made by the [referee]
shall be appealable after the final disposition of this case,
to the full extent as if made by this Court. A party need not
take exception to a decision by the [referee] in order to
preserve the issue for appeal, either on an interlocutory
basis or as an appeal of a final order.
A copy of the complete order appointing the referee is
attached as Attachment A.
Shortly after the referee's appointment, Hicks moved to
vacate the temporary injunction previously issued by the
circuit court. As counsel for both parties and the referee
were e-mailing back and forth about this motion and
scheduling issues, the circuit court (copied on the e-mail
chain by the referee) told the referee to handle this motion
and any others that would arise.
The circuit court explained to the referee: "I appointed
you to serve as [referee] because I anticipated extensive
motion practice and discovery issues/disputes that would need
[to be] addressed more quickly than I could do with my 400
case calendar. I would like you to resolve these, and all,
pretrial motions/discovery issues."
The parties briefed the issue of vacating the temporary
injunction; the referee heard oral argument and issued a
written order that granted Hicks' request to vacate the
temporary injunction. Newtek subsequently filed an exception
to this decision with the circuit court; the circuit court
affirmed the referee's decision.
After vacating the temporary injunction, the referee ruled on
more than 15 discovery motions and a few motions for
sanctions (related to discovery conduct) over the course of
several months. Newtek objected to several of these orders,
all of which the circuit court affirmed without a hearing.
In 2015, the referee was asked to decide multiple dispositive
motions. In July 2015, Hicks filed two motions for summary
judgment; in October 2015, Newtek filed its own motion for
summary judgment. These motions for summary judgment
primarily involved the enforceability of the restrictive
covenants and claims or discovery issues related thereto.
Hicks also sought a motion in limine barring Newtek from
introducing evidence at trial relating to the restrictive
Both parties submitted briefs and evidentiary materials on
these motions and participated in a hearing before the
referee. The referee recommended partially granting each
side's motion for summary judgment and granting
Hicks' motion in limine. The referee recommended, inter
alia, that summary judgment be granted to Newtek on certain
of Hicks' counterclaims and found that some restrictive
covenants upon which Newtek relied were unreasonable,
invalid, and unenforceable under Wis.Stat. § 103.465.
Newtek filed exceptions to these rulings, requesting leave to
submit additional briefing or evidence to the circuit court
regarding the referee's decisions. Newtek also asked the
circuit court to review the referee's orders de novo
(rather than under the Order's prescribed "erroneous
exercise of discretion" standard of review) because the
"magnitude of errors that have plagued this case, if
uncorrected, will necessitate an interlocutory appeal."
Newtek also declared that "[a]s the parties were never
afforded an opportunity to object to the scope and terms of
the [referee's] appointment, Newtek will also seek to
brief the issue of the appointment of the [referee]."
The circuit court agreed to review the referee's
recommendations on the dispositive issues de novo. In regard
to Newtek's other requests--to brief the dispositive
issues further, submit additional evidence, and brief the
issue of the appointment of the referee--the record is
silent. Newtek claims that the circuit court denied these
requests at an off-the-record status conference in chambers
on January 12, 2016.
On January 21, 2016, the circuit court issued a lengthy order
on the parties' cross-motions for summary judgment and on
the exceptions taken to the referee's recommendations.
The circuit court agreed with most of the referee's
recommendations, granting partial summary judgment to each
party and limiting the evidence that Newtek could present at
trial to prove its claims.
Although the circuit court's opinion states that it is
based on a de novo review of the record and the parties'
submissions, Newtek contends that the circuit court did not
actually conduct a de novo review.
On February 4, 2016, Newtek filed a petition with the court
of appeals for leave to appeal from the circuit court's
order granting partial summary judgment and limiting evidence
In its February 2016 petition for leave to appeal, Newtek
detailed problems relating to the referee's appointment,
role, and lack of control by the circuit court, but it did
not request the court of appeals to vacate the referee's
appointment, to consider any constitutional issues, or to
determine the referee's authority to find facts, make
legal conclusions, and issue orders. Newtek's major
argument focused on substantive legal issues; Newtek argued
that the circuit court and the referee ignored the record and
misstated the law.
On April 6, 2016, the court of appeals denied the petition
for leave to appeal on a usually stated ground that the
"petition fails to satisfy the criteria for permissive
appeal. See Wis.Stat. § 808.03(2) (2013-14) . . .
." Newtek did not petition this court for review of the
court of appeals' order denying the petition for leave to
appeal. See Wis.Stat. § (Rule) 809.62. Nor did Newtek
petition the court of appeals for a supervisory writ under
§ (Rule) 809.51 to vacate the circuit court's order
appointing the referee. Instead, Newtek sought a supervisory
writ in this court on May 6, 2016.
The first issue presented is whether Newtek's petition
for a supervisory writ asking the court to vacate a circuit
court order appointing retired Judge Michael Skwierawski as
the referee is properly before this court. We conclude that
the petition is not properly before this court, but we
exercise our superintending authority to vacate the Order of
The Wisconsin Constitution grants three separate powers to
this court: appellate and original jurisdiction; the power to
issue all writs necessary in aid of its jurisdiction; and
superintending authority over all courts. Wis. Const. art.
VII, § 3.
We begin with the court's power to issue supervisory
writs. Wisconsin Stat. §§ (Rules) 809.71 and 809.51
govern writ practice.
Wisconsin Stat. § (Rule) 809.71 authorizes a person to
request the supreme court to exercise its supervisory
jurisdiction over a court and the judge presiding therein by
filing a petition in accordance with § (Rule) 809.51.
Section (Rule) 809.51 governs the contents of the petition
and supporting memorandum and provides that the court may
grant or deny the petition or order such additional
proceedings as it considers appropriate. According to §
(Rule) 809.71, a person seeking a writ in the supreme court
shall first file a petition for a supervisory writ in the
court of appeals unless it is impractical to do
Wisconsin Stat. § (Rule) 809.71, governing supervisory
writs in this court, provides as follows:
809.71 Rule (Supervisory writ). A person may request the
supreme court to exercise its supervisory jurisdiction over a
court and the judge presiding therein or other person or body
by filing a petition in accordance with s. 809.51. A person
seeking a supervisory writ from the supreme court shall first
file a petition for a supervisory writ in the court of
appeals under s. 809.51 unless it is impractical to seek the
writ in the court of appeals. A petition in the supreme court
shall show why it was impractical to seek the writ in the
court of appeals or, if a petition had been filed in the
court of appeals, the disposition made and reasons given by
the court of appeals.
Newtek did not first file a petition for a supervisory writ
in the court of appeals as required by Wis.Stat. §
(Rule) 809.71. Newtek claims that it was impractical to seek
the writ in the court of appeals because the court of appeals
denied its petition for leave to file an appeal, and that its
petition for leave to file an appeal sought the assistance of
the court of appeals for reasons similar to those offered in
its petition in this court for a supervisory writ.
Newtek's interlocutory appeal to the court of appeals
primarily focused on the substantive merits of the summary
judgment and on limiting evidence at trial, and only
tangentially raised objections to the Order of Reference. The
court of appeals gave no specific explanation other than its
usually stated ground that the "petition fails to
satisfy the criteria for permissive appeal. See Wis.Stat.
§ 808.03(2) (2013-14) . . . ." We therefore do not
know why the court of appeals denied the petition for leave
The grounds for the court of appeals to grant a petition for
leave to appeal are not necessarily the same as the
grounds for granting a supervisory writ. On this
record, we cannot determine the ground on which the court of
appeals denied Newtek's petition for leave to appeal or
whether it was impractical for Newtek to seek a supervisory
writ in the court of appeals that focused on the validity of
the Order of Reference.
We decline to extend our supervisory writ jurisprudence and
cast doubt on the continued vitality of the
"impracticality" requirement of Wis.Stat. §
(Rule) 809.71. We therefore decline to hold that Newtek has
shown that it was impractical for it to seek a supervisory
writ in the court of appeals and that Newtek's petition
for a supervisory writ complies with Wis.Stat. § (Rule)
In the alternative, Newtek asks that we use our
constitutional power of "superintending authority"
over all Wisconsin courts, Wis. Const. art. VII, § 3(1),
to review the validity of the Order of Reference.
We can and should decide the issue of the validity of the
Order of Reference using our constitutional superintending
authority under the circumstances of this case. The validity
of the Order of Reference is an important issue for Wisconsin
courts and the public.
The superintending authority provision of the Wisconsin
Constitution endows this court "with a separate and
independent jurisdiction, which enables and requires it in a
proper case to control the course of ordinary litigation in .
. . inferior courts . . . ." The nature and scope of
the superintending authority of this court has been before
this court numerous times since at least 1853. The scope of
this authority is "as broad and as flexible as necessary
to insure the due administration of justice in the courts of
this state.""In exercising this power of
superintending control, this court is not restricted to the
use of common-law writs and is limited only by the
necessities of justice." But the superintending
authority of the court is not to be used
The question of exercising the constitutional grant of
superintending authority is one of judicial policy rather
than one relating to the power of this court. To convince
this court to exercise this constitutional grant of power, a
party must establish that an appeal from a final judgment is
inadequate and that grave hardship will follow a refusal to
exercise the power.
Whether an erroneously ordered compulsory reference creates
such a hardship is judged on the facts of the case. The
following circumstances compel the exercise of our
superintending authority over circuit courts in the instant
• The Order of Reference broadly delegates to the
referee the authority to decide all motions, whether
discovery or dispositive.
• The Order of Reference is apparently used with some
frequency in Milwaukee County, and the appointment of
referees may become an increasingly common practice in the
• This court has not recently reviewed the permissible
scope of references under Wisconsin law.
• The case presents significant state constitutional
issues having statewide importance relating to core functions
of the circuit courts and access to the courts.
• If this court does not review the validity of the
Order of Reference at this time, the parties will endure
great hardship; they will have to submit to a long and
expensive reference and then trial before being afforded the
opportunity to seek relief on appeal. And after trial and
appeal if the reference is held invalid, the parties will
again be at the discovery stage.
We therefore use our constitutional superintending authority
to declare the rights of the parties in the instant case. III
Hicks argues that Newtek has sat on its rights too long by
participating in proceedings with the referee for about a
year without objection to the Order of Reference and then
objecting only after it received an adverse summary judgment
ruling. The argument is that Newtek has waived or forfeited
its right to challenge the Order, is estopped from
challenging the Order, or has impliedly consented to the
Order. We now turn to whether this ...