Will a Wisconsin Benefit Corporation Benefit Your Start-Up?

Certified B Corp LogoThis semester in Professor Lisa Mazzie’s Advanced Legal Writing: Writing for Law Practice seminar, students are required to write one blog post on a law- or law school-related topic of their choice. Writing blog posts as a lawyer is a great way to practice writing skills, and to do so in a way that allows the writer a little more freedom to showcase his or her own voice, and—eventually for these students—a great way to maintain visibility as a legal professional. Here is one of those blog posts, this one written by 3L Nikki Paterson.

As a student associate in Marquette’s Law and Entrepreneurship Clinic, I see many start-up companies struggle with entity selection. It can be a difficult decision because founders have to consider liability, management structure, employee compensation, formation formalities, future investments, and tax implications, among other things.

As of February 26, 2018, the decision-making process got even harder. That is when 2017 Wisconsin Act 77 took effect, which recognized a new type of entity: benefit corporations. Far from being a trailblazer, Wisconsin was the 34th state to adopt such legislation.

So what is a benefit corporation? A benefit corporation is a type of corporation that places social and environmental values on equal footing with profits; in other words, a corporation with a “triple bottom line.” Chapter 204 of the Wisconsin Statutes specifies the process and requirements of incorporating a benefit corporation.

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Foxconn Deal Tips the Scales of Justice

Photo of the front of the building that houses the U.S. Supreme Court, with an inscription above th doorway that reads "equal justice under the law."

The following opinion piece appears in the Milwaukee Journal Sentinel: 

 

Our system of justice rests upon two pillars: equal treatment and independent judgment.  Every person who appears before our state courts expects to be treated equally to every other litigant.  In addition, every party to a lawsuit expects to have his case heard by a judge who is free to exercise their own independent judgment.  Recently, the state legislature in Madison and Governor Walker approved legislation – a $3 billion package luring Foxconn Technology Group to build a flat-screen TV factory in Racine County — that seriously undermines these two fundamental principles.

The principle of equal treatment commands that the same rules should apply to all parties appearing before the court.  No one should receive special status.  It is true that the two sides in a case might not be evenly matched, and that one might have more financial resources or a more skilled legal team.  But, even then, both parties in the case should be subject to the same set of laws and procedures, and have the same opportunity to argue that the law supports their claim.

The Foxconn legislation creates special treatment for Foxconn whenever that corporation is sued in Wisconsin courts.  The law forces the Wisconsin Supreme Court to directly take appeals involving “Electronics and Information Technology Manufacturing Zones” (EITM) from the circuit courts. By law there is only one such zone, and that zone is home to Foxconn. Typically, the high court would hear appeals at their discretion, and then only after the case was heard by an intermediate court.  The reason for placing cases involving Foxconn on a “fast-track” to the Wisconsin Supreme Court should be obvious.  That Court currently boasts a majority of Justices who were elected with the financial support of Wisconsin’s largest trade and manufacturing lobbyists.  The drafters of the legislation expect these Justices to be sympathetic to the concerns of manufacturers like Foxconn.

We expect our state court judges to be free to exercise their independent judgment when deciding the merits of a case.  It is the trial judge that hears the facts and the evidence, and who determines the appropriate remedy should the plaintiff prevail.  It is not the state legislature’s job to decide which party in a case should win, or what remedy should be imposed in an individual case.

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Completing the Revolution

Painting depicting a Revolutionary War scene of a young drummer boy, an older man, and another soldier playing the fife as all three march across a battle fleld. Prof. David Strifling rightly draws our attention to what he terms “the quiet revolution” taking place in Wisconsin administrative law.  As deputy legal counsel for the governor several years ago, I was privileged to be a foot soldier in that revolution, which sought to reinvigorate core constitutional principles around the separation of powers, government transparency, and executive responsibility.  Thus far, the revolution has primarily been fought in the legislature (primarily through 2011 Act 21 and 2017 Act 57) and the executive branch (especially the Governor’s Executive Order 50 and the Attorney General’s opinion 01-16).

The Wisconsin Supreme Court will soon have its opportunity to join and accelerate the revolution when it hears and decides Tetra Tech v. DOR (Court of Appeals decision) and LIRC v. DWD (Court of Appeals decision) (scheduled for argument Friday, December 1).  These cases both present core questions of agency deference, institutional competence, and judicial power – in short, the opportunity for the Court to supplant its current doctrine with a new approach.  As evidence of the sea change that these cases could mark, consider that the Wisconsin Institute for Law & Liberty, Wisconsin Manufacturers & Commerce (leading 10 other business groups), and the Wisconsin Utilities Association all have filed amicus briefs in Tetra Tech making thoughtful arguments as to the value and validity of agency deference.

I have recently posted to SSRN a paper that delves into the past and future of deference in Wisconsin’s jurisprudence.  Originally intended to complete my trilogy of Marquette Law Review articles on interpretation of the Wisconsin Constitution and Wisconsin statutes, the timeliness of these cases has instead prompted a shorter essay which tackles the important questions raised in Tetra Tech with an eye toward the fundamental principles which should guide the Court’s decision.  Ultimately I conclude that the current scheme conflicts with constitutional first principles, the statutes, and common sense.  I believe the Court should deep-six its doctrine and start anew with the standards set forth in Wisconsin’s administrative procedures act (Ch. 227).  Please read the essay to see why.  And we’ll all be watching closely as these cases move forward.  Just because the revolution won’t be televised (I’ve never seen an episode of Law & Order or Suits concerning administrative law) doesn’t mean it won’t have significant implications for law in our state.

Daniel Suhr is a 2008 graduate of the Marquette University Law School.

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