JusticePoint files appeal in cancellation of Milwaukee Municipal Court contract case

By Gretchen Schuldt

A Milwaukee County judge acted with “apparent antipathy” toward a state law designed to protect businesses from unfair treatment when he ruled the law did not apply to a contract between Milwaukee Municipal Court and JusticePoint, a nonprofit that provides services to indigent defendants, the organization alleges in an appeals brief.

Circuit Judge J.D. Watts “disregarded the factual record, made unsupported factual findings, and erroneously interpreted and applied the law to find that the relationship between JusticePoint and the City does not qualify as a dealership under the WFDL,” attorneys Jeffrey Mandel, Erin K. Deeley, and Rachel E. Snyder wrote on behalf of JusticePoint.

The WFDL is the Wisconsin Fair Dealership Law, the 50-year-old statute designed to protect businesses from unfair and arbitrary actions by entities issuing contracts.

The appeal seeks reversal of Watts’ ruling, a remand to circuit court, and a temporary injunction while the case is litigated there.

JusticePoint qualifies for WFDL protection and the city must show that it met certain requirements in ending the contract, they wrote. The city must show it had good cause to end the relationship, that it issued proper notice, and that it provided JusticePoint an opportunity to correct any performance problems. 

“The city admits to making no effort to comply with any of these three requirements, relying instead on a ‘convenience’ clause as its sole justification for terminating JusticePoint’s contract,” they wrote. “This is patently insufficient under the WFDL.”

JusticePoint’s agreement to provide Milwaukee Court Alternatives Program (MCAP) services was terminated at the behest of two of the three Milwaukee Municipal Court judges without explanation, under a “convenience” clause that allows the city to end a contract for any reason with 10 days' notice. The city notified JusticePoint of the termination in May 2023, giving the organization until mid-July to finish its work.
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Municipal Court officials did not name any successor provider program and said the court would seek bids sometime in the future. That meant that without JusticePoint, Municipal Court defendants would lose the assistance the organization provides for completing community service requirements, handling inability-to-pay forfeiture cases, or finding various social services. 

JusticePoint sued over the termination, alleging that it violated the WFDL, and Circuit Judge Hannah Dugan temporarily placed the contract cancellation on hold. Watts took over the case after that, ruling against JusticePoint after an October hearing on the matter.

The city contended that, applied to a municipality, the WFDL should protect only businesses with a profit motive or a business offering, to protect public procurement law, the JusticePoint lawyers said. 

“Its concern was not a concrete one in this instance but an abstract fear of a potential slippery slope,” they said. The city also argued that applying the WFDL would lead the city to violate competitive procurement regulations, but “admitted this might be an illusory issue because it ‘may be accurate’ to say that the instant case has no bearing on procurement regulations.“

“Though the city maintained its consistent agreement that JusticePoint distributes city MCAP Services, the trial court at numerous points attempted to steer the city into making arguments contrary to that position — and inconsistent with the factual record,” they said. 

Minutes after the October hearing ended, the attorneys wrote, Watts “presented a single-spaced, 11-page written decision that disregarded the city’s arguments and the undisputed factual record, concluding instead that: 1) the relationship between JusticePoint and the City was not a dealership protected under the WFDL because JusticePoint was distributing its own, rather than the City’s, services; and 2) there could be no community of interest between the parties in the absence of a ‘joint undertaking’ and shared profitability.”

Watts then prompted the city to seek dismissal of the entire case, which he granted, they said.

Appellate Judge M. Joseph Donald issued a stay pending appeal, maintaining the suspension of the contract termination.

At the trial court level, Watts “made a series of legal errors in applying the law to the undisputed facts of this case, fundamentally narrowing the purview of the WFDL in contravention of both statutory text and binding precedent,” the JusticePoint attorneys said.

Watts held, for example, that the “WFDL cannot apply outside of conventional franchise-franchisee, profit-driven, commercial relationships,” an error appellate courts have consistently warned against, they wrote. 

“To the contrary, JusticePoint’s delivery of services on behalf of the City fits soundly in the ambit of the WFDL under the uncontested facts before this Court,” they said. The nonprofit qualifies for protection under the law because it has an agreement with the city, distributes city services, and shares a community of interest with the city, they said.

While the city effectively conceded that JusticePoint distributed city services, Watts found differently, ruling that JusticePoint was distributing its own services. Watts found it dispositive that the city “ ‘did not have the services’ themselves and . . . Municipal Court defendants do not directly pay JusticePoint for the MCAP Services those defendants receive,” the lawyers wrote.

The law does not require that, however, they said. It simply requires that a dealer sell or distribute the grantor’s — in this case the city’s — goods or services.

“If WFDL protection applied only if JusticePoint was selling city services, the agency could charge a penny meeting Watts’ “atextual, invented requirement” but not making JusticePoint profitable or defraying city expenses for MCAP services, they said.

Watts’ misinterpretation also would effectively block charitable nonprofits from WFDL protection if they provide services free of charge for recipients, they wrote.

Watts also misread the law’s “community of interest” provision to require JusticePoint to maintain a commercial business enterprise receiving revenue and setting prices, the JusticePoint attorneys said.

Under state Supreme Court precedent, a community of interest exists when there is continuing financial interest and interdependence, they said. A “ ‘continuing financial interest’ contemplates a ‘shared financial interest in the operation of the dealership or the marketing of a good or service,’ while ‘interdependence' is the ‘degree to which the dealer and grantor cooperate, coordinate their activities and share common goals in their business relationship,’ ” they wrote.

Watts also “arbitrarily rejected the uncontested factual record” to find that there was "no coordination of activities” between the city and the nonprofit. He found that JusticePoint’s investments in staff and computer programming infrastructure needed to run its program were not substantial compared to its overall expenses, despite there being no evidence of overall expenses offered, the lawyers said.

While JusticePoint does not charge clients for its services, it saves the city money and has a financially interdependent relationship with the city, they wrote. The city’s own goal for the program, as stated in its most recent request for proposals to operate the program, is to “ ‘ultimately reduce Milwaukee County Criminal Justice Facility and House of Correction populations and reduce the associated cost to the City of housing these offenders.’ “

The agency also works closely with Municipal Court and other city officials in its program operations, they said.