90-C-PUBLIC RECORDS
La.R.S. 44:1 et seq.
The drug test results of an individual, who agrees to submit to drug testing as a condition of misdemeanor probation and who submits such test results to a probation officer situated within the office of the clerk of court, are subject to production under the Public Records Act when the court has not placed such results under a protective order. However, any confidential information must be redacted before producing the record.
Ms. Susan Ordoyne Clerk of Court City Court of Slidell Wards 8 and 9
501 Bouscaren Street Slidell, LA 70458
JAMES D. "BUDDY" CALDWELL, Attorney General
Dear Ms. Ordoyne:
Our office received an opinion request from you concerning a public records request you received involving drug tests submitted to the court pursuant to a court order. More particularly, your request involves an individual who was tried and convicted for a violation of La.R.S. 14:34.4, battery of a school or recreational official, on August 20, 2009. He was sentenced on September 1, 2009, and was given a six-month suspended sentence and two years of active probation. As a condition of the probation, the individual in question was required to submit to drug testing and substance abuse counseling if deemed appropriate.
As the Clerk of Court, you received a public records request for the results of the drug screening, and you have asked our office whether this information is a public record subject to disclosure under the Public Records Act, or whether the information is protected from disclosure by the Health Insurance Portability and Accountability Act (HIPAA).
You have further provided that the drug test results are submitted to a probation officer that is situated within the office of the clerk. If the probation officer receives a positive test result, he may file a rule to revoke or modify the current sentence, or he may determine there is a need for substance abuse counseling.
It is noted that battery of a school or recreational official is classified as a misdemeanor with a maximum sentence of incarceration of up to six months. See La.R.S. 14:34.4(B)(1). An offender placed on probation upon conviction for this crime therefore would not be subject to the jurisdiction of the Division of Probation and Parole of the Department of Corrections. See La.C.Cr.P. art. 894(A)(1). As a consequence, any records generated or received in connection with the court-ordered misdemeanor probation would not fall within the category of records made confidential by La.R.S. 15:574.12, which pertains to "information and data gathered by the staffs of the boards of pardons and parole." La.R.S. 15:574.12(A).
The right of access to public information is guaranteed by La.Const. art. XII, § 3, which provides, "[n]o person shall be denied the right to observe the deliberations of public bodies and examine public documents, except in cases established by law." The Public Records Act, which can be found at La.R.S. 44:1 et seq., was enacted by the Louisiana Legislature to protect and define the constitutional right of access to public documents. The Louisiana Supreme Court has instructed liberal construction of the Public Records Act, with any doubt being resolved in the favor of access. Unless an exception to the Public Records Act is applicable, a custodian has the responsibility and duty to provide access to public records, and the public has a right to copy, inspect or reproduce public records.
Title Research Corp. v. Rausch, 450 So.2d 933 (La. 1984); Landis v. Moreau, 00-1157 (La. 2/21/01), 779 So.2d 691.
La.R.S. 44:31.
A public record is defined by La.R.S. 44:1(A)(2)(a) as including:
All books, records, writings, accounts, letters and letter books, maps, drawings, photographs, cards, tapes, recordings, memoranda, and papers, and all copies, duplicates, photographs, including microfilm, or other reproductions thereof, or any other documentary materials, regardless of physical form or characteristics, including information contained in electronic data processing equipment, having been used, being in use, or prepared, possessed, or retained for use in the conduct, transaction, or performance of any business, transaction, work, duty, or function which was conducted, transacted, or performed by or under the authority of the constitution or laws of this state, or by or under the authority of any ordinance, regulation, mandate, or order of any public body or concerning the receipt or payment of any money received or paid by or under the authority of the constitution or the laws of this state.
As we understand the facts, the drug test results are not received by the clerk of court, but rather by the misdemeanor probation officer situated within the office of the clerk of court. The drug test results are not kept in the same file as a defendant's other court records unless a failed drug test prompts the probation officer to file a motion to revoke or modify the ruling. If the probation officer receives negative test results, or positive test results which result in substance abuse counseling, the probation officer keeps those records separate from the other records. However, as previously noted, the probation officer is situated within the office of the clerk of court. We note that the circumstances in this situation, e.g. the fact that the probation officer is situated within the office of the clerk of court, precludes an analysis of whether the records requested could be exempt from production pursuant to La.R.S. 44:3 since the clerk of court is not an entity enumerated by La.R.S. 44:3.
La.R.S. 44:3(A)(1) exempts records pertaining to criminal litigation until such litigation has been finally adjudicated or otherwise settled when such records are held by the office of the attorney general, district attorneys, sheriffs, police departments, Department of Public Safety and Corrections, marshals, investigators, public health investigators, correctional agencies, communications districts, intelligence agencies, or publicly owned water districts of the state.
Whether positive or negative, kept with the other court records or separate, the subject drug test results are records obtained in connection with business conducted by a public office under the laws of this state and pursuant to misdemeanor probation ordered by the court. These records are, by definition, public records which must be produced pursuant to a public records request, unless there is an exception which prevents such records from being subject to disclosure.
HIPAA prevents the disclosure of protected health information (PHI) by covered entities. "Health information" is defined by HIPAA as any information that:
(1) is created or received by a health care provider, health plan, public health authority, employer, life insurer, school or university, or health care clearinghouse; and
(2) relates to the past, present, or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past, present, or future payment for the provision of health care to an individual.
45 C.F.R. § 160.103.
Covered entities, as defined by HIPAA, include health plans, most health care providers, and health care clearinghouses. The court is not considered a covered entity under HIPAA; therefore the privacy rules of HIPAA are not applicable to information held by a clerk of court. However, although the court is not a covered entity under HIPAA, there are privacy interests that must be considered whenever a public body is asked to reveal medical information.
45 C.F.R. § 160.103.
See Fox v. City of Alexandria, 07-810 (La.App.3 Cir. 2007), 971 So.2d 468, 470, where the court held that although the plaintiff had no cause of action under HIPAA, as the regulations of HIPAA do not apply to the City of Alexandria, the plaintiff did have a cause of action for invasion of privacy under La.Const. Art. I, § 5 when her employer revealed to her mortgage lender that she had been on extended sick leave.
In previous opinions, our office has recognized as a well-settled principle both in Louisiana and throughout the United States that "an individual's personal medical records are both privileged and confidential records as to that individual." Further, "access to an individual's medical records cannot be gained through use of the Public Record Act."
La. Atty. Gen. Op. No. 79-1465. See also La. Atty. Gen. Op. Nos. 88-372, 93-615, 93-285 and 07-0461.
La. Atty. Gen. Op. No. 04-0461, Citing La. Atty. Gen. Op. Nos. 93-615 and 93-285.
The analysis then turns to whether court-ordered drug test results are medical records subject to privacy under La.Const. art. I. § 5. The right to privacy has been described as the right to be let alone and free from unnecessary scrutiny. However, as courts analyzing a privacy interest have pointed out, the right to privacy may be lost in many ways, such as by express or implied waiver or consent, or by a course of conduct which prevents its assertion. The right to privacy is qualified by the rights of others, and is limited by society's right to be informed about subjects of public interest. In ascertaining whether or not an individual has a constitutionally recognized privacy interest in certain information, the court first looks at whether the individual has an actual or subjective expectation of privacy. The court then proceeds to make an objective determination of that expectation of privacy, and examines whether the individual's expectation of privacy is one that society at large is prepared to recognize as reasonable. If both a subjective and objective expectation of privacy is found, the court then weighs the privacy interest against the public's right to know. This analysis is done on a case-by-case basis, depending on the particular facts and circumstances at issue in each situation.
See Copeland v. Copeland, 07-0177 (La. 10/16/07), 966 So.2d 1040; Capital City Press v. East Baton Rouge Parish Metro Council, 96-1979 (La. 7/1/97),.696 So.2d 562, 566; East Bank Consolidated Special Service Fire Protection District v. Crossen, 04-838 (La.App. 5 Cir. 2004), 892 So.2d 666; Local 100, Service Employees, International Union v. Smith, 36, 454 (La.App. 2 Cir. 10/23/02), 830 So.2d 417, writ not considered 02-2858 (La.1/31/03), 836 So.2d 75.
See above referenced cases in Footnote 8 concerning the application of La.Const. art. I, § 5 as an exception to the Public Records Act.
Does an individual have a subjective or objective expectation of privacy in the results from a court-ordered drug test? Your letter indicates that, as a condition of probation, the individual in question must submit to drug testing and substance abuse counseling if deemed appropriate. It is the opinion of this office that in this limited situation, where the court has ordered, and the individual has agreed to, drug testing as a condition of misdemeanor probation, there is no expectation of privacy in the results of that drug test. If there is any confidential information contained within the file, such as the individual's social security number, this would need to be redacted. It could be argued that any privacy interest was waived when the individual agreed, in a public forum, to be subjected to drug testing as a condition of probation. In this particular situation, where an individual has agreed to undergo drug testing as a condition of probation, and submit such results to a probation officer who is situated within the office of the clerk, this course of conduct could result in a loss of privacy.
It is the opinion of this office that even if an argument could be made that there was a subjective expectation of privacy, which is unlikely considering that the individual agreed to undergo drug testing as a condition of probation, a court would unlikely find that there was an objective expectation of privacy, one that society at large is prepared to recognize as reasonable. When an individual commits a crime, and agrees to certain conditions to resolve the charges against him or her, absent a court order finding that the particular records should be kept secret, there is no individual right to privacy which should shield these records from disclosure. Although not binding in Louisiana, the following jurisprudence is persuasive in making the above determination. In Carrelli v. Ginsburg, the Sixth Circuit determined that the Ohio State Racing Commission, which is charged with regulating the horse racing industry for the state of Ohio, did not violate a licensee's constitutional right of privacy when it published his positive drug test results in conjunction with an adjudicatory proceeding. The Court pointed to the fact that a positive test result exhibited noncompliance with the rules and regulations of the Ohio State Racing Commission, and that the positive test result was "not `private' in the constitutional sense."
956 F.2d 598 (6thCir.1992).
Id. at 607.
In an unpublished opinion from the District Court in Georgia, a comparable issue was addressed when plaintiff, an employee of Forsyth County, sued the County after defendants asked him to submit to a drug test and was subsequently terminated from his job for positive drug test results. In response to public records requests, defendants released information including the Separation Notice informing that personnel action was taken due to drug testing results, and plaintiff brought suit claiming, among other things, an invasion of privacy. When asked to determine whether or not plaintiff had a claim for invasion of privacy, the court considered the fact that defendants disclosed the results of plaintiffs drug test results, i.e., that he tested positive and that there was no evidence that the defendants released any medical records. The court found plaintiff had no legitimate expectation of privacy in his drug test results because they were not medical records and because they implied criminal activity.
Gooden v. Carson, 2006 WL 1209923 (N.D.Ga. 2006).
Id.
Id. at *7, See Carrelli v. Ginsburg, 956 F.2d 598 (3d Cir. 1992) (no constitutional right to privacy in results of drug test); Hedges v. Musco, 33 F.Supp.2d 369, 382 (D.N.J. 1999), aff'd on other grounds, 204 F.2d 109 (3d Cir. 2000).
In conclusion, it is the opinion of this office that the results of a court ordered drug test performed as a condition of misdemeanor probation, which is provided to a misdemeanor probation officer within the Clerk of Court's office but is not subject to a protective order, must be produced pursuant to a public records request. Any private or confidential information, such as a social security number, must be redacted from the records.
We hope that this opinion has adequately addressed the legal issues you have raised. If our office can be of any further assistance, please do not hesitate to contact us.
With best regards,
JAMES D. "BUDDY" CALDWELL ATTORNEY GENERAL
BY: __________________________ Emalie A. Boyce Assistant Attorney General
JDC: EAB
ibutions from the WRS surpluses, reasoning that they had a property interest in having the WRS surpluses distributed according to statute.
Retired Teachers Ass'n, 207 Wis.2d 1 at 19-20. Like the participants in
Retired Teachers Ass'n, the health care providers have a vested right to have their rates set according to the factors outlined in Wis. Stat. § 655.27(3)(a).
¶ 92. This right is more than a "mere expectancy"; it is directly set out in the statute. Although the Fund can, and based on the actuarial assessment in the record, presumably would raise rates to restore its solvency, the provision that fees be assessed based on "[t]he past and prospective loss and expense experience" provides the health care providers with a clear right to have their rates set according to standard, enumerated considerations. See id.; see also Moran, 534 P.2d at 1288 (employers participating in Oklahoma worker's compensation fund "had a vested legal right . . . to rely upon this trust being maintained and administered in accordance with" the applicable law). The right to faithful administration of the law is infringed when the diversion of Fund money for other state purposes forces the board and commissioner to (1) allow the Fund to operate at a deficit, potentially requiring future assessment increases when the Fund cannot pay excess judgments; or (2) raise assessments to restore the Fund's solvency.
¶ 93. Our conclusion on this point is again supported by the decisions of the New Hampshire Supreme Court and Commonwealth Court of Pennsylvania. In Tuttle, the court referred to two possible uses of surpluses: apply them against future assessments or distribute them. Tuttle, 992 A.2d at 638. It reasoned that "[u]nder either option, the policyholders have a direct financial interest, and not a mere expectancy, in any excess surplus." Id. The same is true here. The health care providers have a vested right in the Fund's surplus because it will either be returned to them in the form of lower assessments or reinvested for the Fund's future security.
¶ 94. Similarly, the Pennsylvania court determined that health care providers had equitable title, amounting to a vested right, in statutory abatements. Pa. Med. Soc'y, 2010 WL 1491269, at *9. Although Wis. Stat. § 655.27(3) does not provide for mandatory abatements, it provides a right to have the assessments set according to the statutory factors. In either case, the health care providers have vested rights in the management and use of their assessments for proper purposes.
¶ 95. Secretary Morgan contends that the State could constitutionally remove all money from the Fund except for the amounts necessary to pay claimants that had already made claims. If this theory were correct, the State could deplete the Fund on an ongoing basis, requiring the board to continually raise assessments by the statutory maximum each year in an attempt to replenish the Fund to compensate proper claimants. Surely this would violate the health care providers' rights as beneficiaries. Yet, ongoing transfers would differ from the transfer here only in the gravity of the constitutional deprivation. See Ass'n of State Prosecutors, 199 Wis.2d at 561 ("[t]he gravity of a property deprivation is irrelevant to the question of whether" a constitutional violation occurred). Therefore, the health care providers have a property interest in the entire net worth of the Fund because any removal of money from the Fund infringes upon their right to have their assessments set according to the factors in the statute. See id.
3. Right to the Payment of Excess Judgments
¶ 96. The third right that flows from the health care providers' equitable title in the Fund is a right to have judgments in excess of their required insurance paid on their behalf. By maintaining primary insurance and meeting the requirements of ch. 655, a health care provider's liability for malpractice is limited to the amount of his or her primary insurance. Wis. Stat. § 655.23(5). The Fund pays the excess. Wis. Stat. § 655.27(1). Under this arrangement, the Fund's payment of excess judgments benefits the health care providers because the payments are, in essence, made on the health care providers' behalf. They have a property interest in the payment of these excess judgments.
¶ 97. We recognize that the liability limitation provision under § 655.27(5) is not contingent on the Fund's payment of the excess judgment, and the board itself is immune from liability for any obligation of the Fund. Wis. Stat. § 619.04(9). However, if the Fund were unable to pay excess judgments, proper claimants would be left without any recourse, except to challenge the constitutionality of the statutory scheme. Proper claimants are beneficiaries of the Fund. Therefore, even if we accepted the proposition that the removal of money from the Fund would not directly infringe upon the health care providers' right to enjoyment of and distribution from the Fund, that acceptance would not address the infringement of the proper claimants' property interests.
¶ 98. Secretary Morgan argues that there is no evidence the Fund cannot meet its obligations, and points to the $100 million supplemental appropriation contained in the Act. We are not persuaded. First, a $100 million appropriation after a $200 million transfer from the Fund is, at a minimum, a net taking of $100 million. Second, the $100 million appropriation is illusory; no money has actually been set aside and the $100 million pledge could be withdrawn by the legislature as easily as the $200 million was transferred from the Fund. Third, even if we accept Secretary Morgan's factual assertion that the Fund's soundness was not jeopardized by this diversion of funds, that fact is irrelevant because of the health care providers' interest in the security and integrity of the Fund. See Ass'n of State Prosecutors, 199 Wis.2d at 560 ("Any pension plan's ability to meet its obligations can be jeopardized when funds are taken from it, since every dime is arguably part of a management strategy . . ."). Furthermore, while the transfer may not immediately threaten the Fund's beneficiaries, "the precedent set by such a transfer certainly could." Id. at 562. The transfer was a taking, regardless of the transfer's actuarial significance. Id. at 561.
Section 212p of the Act created Wis. Stat. § 20.145(2)(a), reading:
20.145 (2) (a) Supplement for claims payable. A sum sufficient, not to exceed $100,000,000, for paying any portion of a claim for damages arising out of the rendering of health care services that the injured patients and families compensation fund under s. 655.27 is required to pay under ch. 655 but that the injured patients and families compensation fund is unable to pay because of insufficient moneys.
2007 Wis. Act 20, § 212p.
Although the gravity of the actuarial impact on the Fund is irrelevant to whether a taking occurred, it bears noting that the Actuarial Assessment in the record and the March 2010 audit both suggest that the transfer significantly affected the Fund's soundness.
¶ 99. In sum, any removal of money from the Fund for an improper purpose is an unconstitutional taking of the health care providers' property interest in the Fund because it infringes upon their rights to the security and integrity of the Fund, to realize the Fund's investment earnings, and to have excess judgments paid to proper claimants. When money is improperly taken from the Fund, the health care providers are deprived of their right to have that money managed on their behalf. Furthermore, any such removal of money will almost certainly result in an increase in health care providers' assessments. If assessments are not raised, the solvency of the Fund is jeopardized, increasing the risk that the Fund will be unable to pay excess judgments. If the Fund becomes unable to pay excess judgments, the cost of those judgments will have to be borne by either the health care providers or the proper claimants, both of whom are the express beneficiaries of the Fund.
¶ 100. We emphasize again that the nature of the health care providers' interest must be understood in light of the statutory determination that the Fund is held in "irrevocable trust" for the "sole benefit" of the beneficiaries. This declaration codifies a private property interest that a future legislature is not free to confiscate.
¶ 101. We would be hard pressed to say that the legislature could not discontinue the Injured Patients and Families Compensation Fund prospectively, provided that it honored all loss liabilities created up to the date of discontinuation. The Fund is not immutable in its present form. But we are frankly taken aback by the Secretary's position that the legislature could discontinue the Fund and seize all its assets, save only those assets necessary to pay off existing claims, and renege on the loss liabilities to existing victims whose claims are not yet perfected. This is not only the logical extension of the Secretary's position, it is the actual articulation of the Secretary's position, both to the circuit court and before this court. A failure on our part to recognize the property interests at stake in the Fund would be an open invitation to the legislature to take money from the Fund at will.
¶ 102. We are sensitive to the changing needs of state government and the basic principle that one legislature cannot bind another. But that cannot mean that anything goes, that recognized property interests evaporate when the winds shift. The legislature created a "trust" for health care providers and their patients and families', and it pronounced that trust "irrevocable." We take the legislature at its word.
IV CONCLUSION
¶ 103. We conclude that the health care providers have a constitutionally protected property interest in the Fund. Wisconsin Stat. § 655.27(6) defines the Fund as an irrevocable trust, and the structure and purpose of the Fund satisfy all the elements necessary to establish a formal trust. Because the health care providers are specifically named as beneficiaries of the trust, they have equitable title to the assets of the Fund.
¶ 104. The health care providers' equitable title in the Fund provides them with at least three corresponding rights. First, they have a right to the security and integrity of the Fund. Second, they have a right to realize the Fund's investment earnings to moderate, perhaps even lower, their assessments. Third, health care providers and proper claimants have rights to have excess judgments paid to the proper claimants. Any transfer of money from the Fund for an improper purpose infringes upon these three rights.
¶ 105. Because health care providers have protected property interest in the Fund, we conclude that 2007 Wis. Act 20, § 9225 authorized an unconstitutional taking of private property without just compensation.
¶ 106. Accordingly, we reverse the circuit court's order granting summary judgment in favor of Secretary Morgan and dismissing the Medical Society's suit. We remand with directions that the circuit court issue (1) an order requiring Secretary Morgan to replace the money removed from the Fund, together with lost earnings and interest that has been charged to the Fund; and (2) a permanent injunction prohibiting Secretary Morgan from transferring money out of the Fund pursuant to 2007 Wis. Act 20.
By the Court. — The order of the circuit court is reversed and the cause is remanded to the circuit court.
¶ 107. SHIRLEY S. ABRAHAMSON, C.J. (dissenting).
"It's not fair," or "I don't like it," might be the first reactions to the legislature's removal of $200 million from the Fund, which is made up of assessments paid by health care providers and used to pay out claims of victims of medical malpractice. I do not necessarily disagree with these sentiments, but they are not responsive to the question at hand.
¶ 108. The counter-reaction to "it's not fair" and "I don't like it" is that those sentiments do not render the legislation "unconstitutional." Well-settled principles of constitutional law, and of trust law, should not be distorted to accommodate a generalized sense of unfairness.
¶ 109. The standards and burdens of constitutional challenges to legislative action are familiar and well established: Challengers to the constitutionality of a statute have a heavy burden. As Justice Prosser aptly noted: "Our form of government provides for one legislature, not two. This court is not meant to function as a `super legislature,' constantly second-guessing the policy choices made by the legislature and governor . . . ultimately, legislators make a judgment. If the people who elected the legislators do not like the solution, the voters have a good remedy every two years: retire those who supported laws the voters disfavor." In our three-branch system of government, statutes are presumed constitutional. A party who attacks the constitutionality of a legislative enactment in the courts must prove beyond a reasonable doubt that the statute is unconstitutional. Our review of the acts of the other branches of government "is independent but deferential. Our duty is to uphold a legislative act if at all possible."
Ferdon ex rel. Petrucelli v. Wis. Patients Compensation Fund, 2005 WI 125, ¶ 204, 284 Wis.2d 573, 701 N.W.2d 440 (Prosser, J., dissenting) (internal quotation and citations omitted).
Ass'n of State Prosecutors v. Milwaukee County, 199 Wis.2d 549, 557, 544 N.W.2d 888 (1996) (citing State v. Hart, 89 Wis.2d 58, 277 N.W.2d 843 (1979)).
Id. (citing In matter of E.B., 111 Wis. 2d 175, 180, 330 N.W.2d 584 (1983). A budget bill enjoys the same strong presumption of constitutionality as any other legislative enactment. Wis. Retired Teachers Assn. v. Employee Trust Fund Bd., 207 Wis.2d 1, 18, 558 N.W.2d 83 (1997).
Lightbourn, 243 Wis.2d at 561, ¶ 63.
¶ 110. In the present case, the legislature made a judgment. It may seem unfair, and neither the Medical Society nor members of this court may like or agree with that judgment. But the remedy for disliking the legislature's judgment is not found in this court unless the challenger has met the high standards established for proving a statute unconstitutional. Because the majority's analysis of the property interests at stake leaves great room for doubt and because the majority must strain principles of trust law to reach its result, I conclude that the Medical Society has not met the heavy burden of proving the unconstitutionality of the transfer of assets from the Fund beyond a reasonable doubt.
¶ 111. The relevant threshold inquiry in the present case is whether either the health care providers or victims of medical malpractice have a vested private property interest at stake in the Fund. In other words, because it is their burden, the health care providers must demonstrate beyond a reasonable doubt they have a property interest, an entitlement to the assets which the Legislature transferred out of the Fund.
Wis. Prof'l Police Ass'n, Inc. v. Lightbourn, 243 Wis.2d 512 (2001) (citing Retired Teachers, 207 Wis.2d at 18); see Bowen v. Pub. Agencies Opposed to Social Sec, 477 U.S. 41, 55 (1986)); majority op., ¶ 38-39.
See majority op., ¶ 42 ("A party has a property interest if he or she has a `legitimate claim of entitlement'. . . as opposed to an `abstract need or desire' or `unilateral expectation.'").
¶ 112. I agree with the circuit court. The Fund is a state-managed pool of money mandatorily contributed by health care providers to enable them to acquire protection against personal liability for medical malpractice claims. The Fund is a government trust account in the sense that the Fund's governing entity is required to manage the monies in a particular way, but future legislatures may change the applicable statutes.
¶ 113. The health care providers do benefit from the Fund insofar as they receive excess insurance coverage from it, but the health care providers had no vested property interest in the $200 million which the legislature transferred. Without having met their burden of establishing a vested property interest, the Medical Society cannot sustain its claim that the transfer of assets from the Fund was an unconstitutional taking. Accordingly I conclude, as did the circuit court, that the Medical Society's challenge to the transfer as an unconstitutional taking must fail.
¶ 114. In contrast, the majority concludes that the Fund is a private trust. According to the majority, the health care providers are the settlors and the beneficiaries of the Fund. The majority thus locates the health care providers' vested property interest in the assets of the Fund as trust beneficiaries. In reaching this result, the majority makes key missteps in its analysis of trust law. I disagree with this contrived analysis. Because the majority must force the issue to arrive at its conclusion, it has not given honest effect to the constitutional standard. "Wherever doubt exists as to a legislative enactment's constitutionality, it must be resolved in favor of constitutionality." Because the majority's analysis leaves serious doubts, the Medical Society has not met its burden, and I cannot join the majority's result.
Lightbourn, 243 Wis.2d at 561, ¶ 64 (quoting State ex rel. Hammermill Paper Co. v. La Plante, 58 Wis.2d 32, 46, 205 N.W.2d 784 (1973).
I
¶ 115. The majority opinion determines that in establishing the Fund the legislature established a formal trust, complying with the requirements of creating a private trust. According to the majority, the health care providers are thus beneficiaries of a private trust and have a vested property interest in the assets of the Fund because they have equitable title to the Fund.
Majority op., ¶¶ 61-62.
¶ 116. I conclude, as did the circuit court, that the Fund is not a formal trust. The Fund does have some characteristics of a trust, and the legislature uses the term "trust" in the statute. However, the Fund lacks key elements of a formal trust and therefore cannot be considered a formal trust in which the health care providers hold equitable title to the Funds assets.
See State ex rel. Strykowski v. Wilkie, 81 Wis. 2d 491, 261 N.W.2d 434 (1978).
¶ 117. Regarding the statutory language, the word "trust" in the statute does not create a legal relationship tantamount to a private trust for individuals. The word "trust" governs how the funds are managed. This is analogous to numerous other public trust funds the Wisconsin legislature has created in the statutes. Indeed, chapter 25 of the statutes sets forth a long list of such trust funds. These include such funds as the transportation fund (Wis. Stat. § 25.40), the petroleum inspection fund (Wis. Stat. § 25.47), the conservation fund (Wis. Stat. § 25.29), and the agricultural chemical cleanup fund (Wis. Stat. § 25.468). The legislature regularly transfers monies from such trust funds into unrelated trust funds or the general fund. The use of the label "trust fund" creates no vested property interest on the part of persons, organizations or causes who may contribute to or benefit from those programs.
¶ 118. Regarding the majority's designation of the Fund as a formal trust, the majority errs. The majority opinion characterizes health care providers as settlors and beneficiaries as those terms are used in private trust law. Neither contention survives scrutiny against the black-letter rules of trust law.
¶ 119. According to the majority, health care providers are the settlors of the Fund insofar as they are the ones who have transferred property to the Fund by the payment of assessments. According to private trust law, a settlor must have an intention to create a trust relationship for a trust to be established. The majority opinion discusses the legislature's intent in establishing the Fund, see majority op., ¶ 73. But because it is the health care providers who place assets into the Fund and who the majority treats as the settlors, the health care providers' intention to create a trust relationship is critical. The health care providers, however, did not intend to create a trust relationship. The health care providers have never properly manifested an intention to create a trust or to enter a trust relationship. The health care providers must pay assessments to gain the benefits of excess insurance coverage provided by the Fund and to avoid the repercussions of fines and "the deprivation of a provider's license to practice medicine in Wisconsin," which they might face if they did not pay assessments. See majority op., ¶¶ 13, 77.
Majority op, ¶ 76.
Restatement of Trusts (Third) § 13 ("A trust is created only if the settlor properly manifests an intention to create a trust relationship.").
¶ 120. Health care providers thus cannot be viewed as equivalent to the settlors of a private trust. The majority begins to admit that it has a problem in this regard. But rather than adhering to the proper standard for constitutional review, which calls for the court to "uphold a legislative act if at all possible," the majority goes to great lengths to offer a creative application of formal trust principles to a situation where, in my opinion, it is at best a stretch to make them fit. Because the majority must stretch the law in its attempt to locate a vested property interest, it is improperly reallocating the presumptions and burdens of proof in a constitutional challenge to legislative action.
Compare majority op., ¶ 61 ("the Fund is unambiguously a formal trust") (emphasis added) with ¶ 76 (`We recognize that the establishment of the fund diverges from traditional trust principles in one significant way").
Lightbourn, 243 Wis.2d at 561, ¶ 64.
¶ 121. The majority faces a similar problem in its analysis of health care providers as beneficiaries of a trust. Although health care providers benefit from the Fund insofar as they are entitled to excess insurance coverage from the Fund, they are not beneficiaries of the Fund in the private trust sense.
Thus Wis. Stat. § 655.27 provides that the Fund is for "the sole benefit of health care providers and claimants."
¶ 122. The health care providers benefit from the Fund because they are buying liability insurance coverage. They pay mandatory fees to the state in exchange for insurance coverage. Purchasers of insurance benefit from buying insurance, but they are not beneficiaries of an insurance trust and they do not have a vested property interest in the money they pay for insurance coverage.
¶ 123. As I see it, the Fund is simply a mandatory state insurance scheme entrusted to the care of the Fund's governing entity and the insurance commissioner. The statutory purpose of the fund is fulfilled by ensuring that excess malpractice coverage is provided and that proper claims are paid. The majority's description of the Fund at ¶¶ 9-12 describes the Fund for what it is, a mandatory legislative system of providing excess insurance. While studiously avoiding the use of the word "insurance," the majority acknowledges that the Fund is "part of a broad legislative scheme" that limits "the liability of the health care provider and his or her insurer" and under which the Fund "pays out that portion of any medical malpractice claim in excess" of the provider's other required coverage.
The Legislative findings in § 1, ch. 37, Laws of 1975 refer to "increased insurance costs" and "the cost and difficulty of obtaining insurance for health care providers."
¶ 124. That the health care providers benefit from the Fund created to perform these functions says nothing more than that they benefit from the statutory mandatory insurance program. That the health care providers reap benefits does not make them beneficiaries with a vested property right in the assets of the Fund within the meaning of trust law. The majority's argument that the health care providers have property rights from equitable title to the assets of the Fund fails.
¶ 125. The circuit court was correct in holding that the true nature of the Fund was that of a government trust account, requiring the monies to be managed in a particular way but allowing future legislatures to change the statutes as they saw fit. This is consistent with numerous other public trust accounts created by the legislature, see supra ¶ 14.
The majority attempts to get around the fact that this Fund is not a formal trust by pointing out characteristics that distinguish the Fund from other public trusts that are not formal trusts. Naturally each fund has different characteristics and different funding mechanisms. The fact that the Fund is distinguishable from other public trust funds does not give rise to vested property rights for the health care providers.
¶ 126. In summary, the health care providers are entitled to excess insurance coverage from the Fund, but this right cannot be transformed into a property interest in the Fund's assets and does not give rise to a constitutional takings claim.
II
¶ 127. The majority relies on Wisconsin Professional Police Association v. Lightbourn, 2001 WI 59, 243 Wis.2d 512, 627 N.W.2d 807, which according to the majority "provides the correct basic framework for determining whether a property interest exists." Majority op., ¶ 60. I will therefore compare Lightbourn and the present case.
¶ 128. In Lightbourn the court held that beneficiaries of the Wisconsin Retirement System had property rights. In the present case the court holds that the health care providers are the beneficiaries and have property rights.
¶ 129. The interests of the participants in the Wisconsin Retirement System are easily distinguished from the interests of health care providers in the assets of the Fund.
¶ 130. The genesis of the property rights of employees in the Retirement System is in the statute's reference to contractual rights. Because the Fund is in form and function a state-managed insurance fund, any rights in the assets of the Fund must be found through contract. In fact, the cases the majority cites in which the court found property rights all found a contractual relationship between the party and the state.
Tuttle v. N.H. Med. Malpractice Joint Underwriting Ass'n, 992 A.2d 624 (N.H. 2010) (holding a transfer unconstitutional on impairment-of-contract grounds); Fun `N Sun RV v. Michigan, 527 N.W.2d 468 (Mich. 1994) (upholding a provision that authorized the state to sell a state accident fund and retain the proceeds because participants had no specific contract or property right to the proceeds); State Teachers' Retirement Bd. v. Giessel, 12 Wis.2d 5, 106 N.W.2d 301 (1960) (holding that "the teachers have a contractual relationship with the state and a. vested right" in the retirement system); Wisconsin Retired Teachers Ass'n v. Employee Trust Funds Board, 195 Wis.2d 1001, 1025, 537 N.W.2d 400 (Ct. App. 1995) (holding that the Wisconsin Retirement System expressly provided for a "contractual right").
¶ 131. The property right of public employees recognized in the Wisconsin Retirement System cases in substantial part arose from the contract rights granted to them. Without those contract rights, no unconstitutional taking would have been recognized.
¶ 132. In the present case, the Medical Society has no contractual property rights in the Fund. In enacting Wis. Stat. § 655.27(6), the legislature chose to delete any reference to contract rights before enacting the statute.
As the circuit court summarized:
[T]he legislative history suggests the legislature considered the idea and failed to expressly create a contract right when it amended § 655.27(6). 2003 Wis. Act 111 was originally introduced as 2003 Assembly Bill 487 with the language, "health care providers and claimants have contractual rights in all assets of the fund for these purposes." When Assembly Amendment 1 was passed and became, in part, the present § 655.27(6), the reference to "contractual rights" had been deleted and replaced with the insertion of "irrevocable" to modify trust.
¶ 133. Furthermore, the Wisconsin Retirement System can be distinguished from the Fund in that the participants in the Retirement System have their own private accounts. Every public employee who has been recognized as having a protectable property interest in the Wisconsin Retirement System has his or her own private account and will receive a dollar distribution calculated on his or her account. In contrast, health care providers do not have their own private accounts with the Fund, and they will not receive a dollar distribution from the Fund.
¶ 134. Moreover, in Lightbourn, all participants had a property interest in the entirety of the Retirement System fund, beyond the individual accounts. Because of their vested property rights in their own accounts, the participants in the Retirement System had an interest in ensuring that the retirement funds were used only for proper trust fund purposes and that the integrity and security of the trust funds were protected.
¶ 135. The statute creating the Fund does not create contractual obligations. Indeed, the majority does not base the health care providers' property rights to the assets of the Fund on a contractual relationship between the state and the health care providers.
¶ 136. In Lightbourn, despite the participants' vested property right in the Retirement System, the court nevertheless concluded that the legislative changes to funding the system did not constitute a taking. The majority in Lightbourn allowed the State to direct monies from the System for non-retirement purposes. The Lightbourn court declared that the participants in the Wisconsin Retirement System "do not have a legal right to veto legislative decisions about benefit funding without showing some tangible injury." Lightbourn, 243 Wis.2d 512, ¶ 179.
¶ 137. In contrast, in the present case, although there is not a contractual source of right as in Lightbourn, the majority surprisingly concludes that the legislative changes to funding the compensation system did constitute a taking. As I see it, the majority in the present case in effect adopts the position of the dissent in the Lightbourn case. The majority decision in Lightbourn and the majority decision in the present case are not consistent regarding the constitutionality of legislative changes in funding.
¶ 138. Unfortunately, an implication of the majority opinion's creating an "irrevocable" private trust in statutory form is that the legislature may be significantly limited in enacting future legislation. In contrast, in Lightbourn the court was very careful to give the legislature room to change the System in future years.
The drafting records note that the word "irrevocable" was added in 2003 and does not strip the legislature of its right to amend legislation in a future legislative session.
When a state is accused of impairing the obligations of its own contract, courts will scrutinize "the ability of the State to enter into an agreement that limits its power to act in the future." Lightbourn, 243 Wis.2d at 594, ¶ 149 (quoted source omitted).
¶ 139. Finally, in Lightbourn the court held that the possibility of future increases in employee contributions as a result of the diversion of funds in that case was too speculative to render the statute unconstitutional. Thus, the desire of the Medical Society members to protect themselves from increased assessments is too speculative here to hold the statute unconstitutional. A desire for the lowest possible insurance assessments is not a property interest within the meaning of the Takings Clause.
¶ 140. The majority erroneously locates vested property rights where none exist. The Fund must be viewed as part of an overall legislative scheme governing medical malpractice and malpractice claims. The legislature intended to adopt various provisions relating to medical malpractice to stabilize medical malpractice insurance rates, to provide an incentive to practice in Wisconsin, and to help insure quality medical care in Wisconsin. The legislature did not intend to give health care providers a vested property interest in the Fund.
¶ 141. The majority has gone to great lengths in its novel and creative attempt to re-craft the law of trusts to locate a nonexistent vested property interest in this case. In the end, the effort fails, but the mere fact that such an attempt was necessary reveals that the majority has wandered far away from the proper allocation of the burden of proof and the standard of constitutional review in this case. That $200 million was transferred out of the Fund does not sit easy, but neither does distorting the standard of constitutional review to reach the majority's result in the present case. Even with the benefit of the majority opinion's considerable efforts, the Wisconsin Medical Society has not met its burden of showing beyond a reasonable doubt that the transfer of money out of the Fund was unconstitutional.
¶ 142. For the reasons set forth, I dissent.
¶ 143. I am authorized to state that Justice ANN WALSH BRADLEY joins this opinion.