author: DEININGER, P.J.

text:
    Mary E. Fazio, Plaintiff-Respondent, v. Department of Employee Trust Funds, Defendant-Appellant.

    Court of Appeals

      No. 04-0064.

      Submitted on briefs October 14, 2004.

    Decided March 24, 2005.

    2005 WI App 87
    (Also reported in 696 N.W.2d 563.)

      On behalf of the defendant-appellant, the cause was submitted on the briefs of L. Jane Hamblen, assistant attorney general, and Peggy A. Lautenschlager, attorney general.
    On behalf of the plaintiff-respondent, the cause was submitted on the brief of Robert L. Elliott of Law Offices of Robert L. Elliott, Milwaukee.

      Before Deininger, EJ., Lundsten and Higginbotham, JJ.

       Petition to review granted 6-1-2005.

   DEININGER, P.J.

¶ 1. The Wisconsin Department of Employee Trust Funds appeals an order for judgment entered in favor of Mary Fazio and other beneficiaries of deceased participants in the Wisconsin Retirement System. The circuit court concluded that the department's failure, for lump sum death benefits paid to beneficiaries under Wis. Stat. § 40.73(l)(c) (2003-04), to include interest or earnings accrued from the date of the participants' deaths until payments were made to the beneficiaries constituted a taking "for public use without just compensation," in violation of the Wis. Const, art. I, § 13. We conclude that no unconstitutional taking occurred because a beneficiary does not acquire a property interest in a lump sum death benefit under § 40.73(1)(c) until the beneficiary applies for a death benefit as required by Wis. Stat. § 40.71(3).

¶ 2. We also conclude that the circuit court erred by ordering the department to pay damages to certain other beneficiaries who were not members of the plaintiff class that the court had previously certified. Accordingly, we reverse the appealed order and remand for the entry of an order dismissing this action.

BACKGROUND

¶ 3. The Wisconsin Retirement System (WRS) provides benefits to participating public employees and retirees, and in some cases, to their survivors or beneficiaries. Wisconsin Stat. § 40.71(2) provides that a named beneficiary may request the payment of a death benefit as either an annuity or a lump sum payment, unless the deceased WRS participant had directed that a lump sum not be paid. The department makes lump sum payments to beneficiaries only after they have filed with the department a "copy of the death certificate of the participant or annuitant"; a "written application of the beneficiary for the benefit"; and "any additional evidence deemed necessary or desirable by the department." Section 40.71(3).

¶ 4. As relevant to this litigation, Wis. Stat. § 40.73 provides alternative methods for calculating the' death benefit to which the beneficiary of a WRS participant who dies while actively employed may be entitled. For participants who are neither WRS annuitants nor "participating employees" at the time of their deaths, the lump sum death benefit payable to a named beneficiary is equal to "the sum of the additional and employee required contribution accumulations credited to the participant's account on ... the first day of the month in which the death benefit is approved." Section 40.73(l)(a). Similarly, for "participating employees" who die while actively employed, the lump sum amount payable to a named beneficiary is "the sum of the additional contribution and twice the employee required contribution accumulations credited, including any interest credited to the accumulations, to the participant's account on ... the first day of the month in which the death benefit is approved." Section 40.73(l)(am).

¶ 5. Thus, under either of the foregoing calculations, the beneficiary receives all of (or double) the deceased participant's employee-required contributions to the WRS fund, together with interest credited to the participant's employee contribution account through the first of the month in which the beneficiary's application is processed and paid. The beneficiaries of some participants who die while actively employed may be entitled to a higher benefit. Under Wis. Stat. § 40.73(l)(c), when an active employee dies after reaching the minimum age for retirement set forth in Wis. Stat. § 40.23(l)(a), the death benefit payable to a named beneficiary is the higher of either the death benefit described in the preceding paragraph or a benefit equal to:

the present value on the day following the date of death of the life annuity to the beneficiary which would have been payable if the participating employee had been eligible to receive a retirement annuity... beginning on the date of death and had elected to receive the annuity in the form of a joint and survivor annuity providing the same amount of annuity to the surviving beneficiary as the reduced amount payable during the participant's lifetime.

Section 40.73(1)(c). The statute does not authorize the amount of this "annuity-value" death benefit, if it is the higher amount and thus payable in lieu of the employee-contribution-based benefit, to be increased by any earnings accruing to WRS accounts after the employee's death.

¶ 6. The facts pertaining to Mary Fazio's application for a death benefit are representative and served as the model for the class-action plaintiffs in this suit. Her husband was a WRS participant who died on January 2, 1999, while actively employed as a University of Wisconsin professor. She submitted an application for a death benefit together with a death certificate to the department in November 2000, electing a lump sum payment. The department determined that Fazio was entitled to receive an annuity-value benefit under Wis. Stat. § 40.73(l)(c) in the amount of $507,395, which it paid to her on December 1, 2000. No interest or earnings accruing on the lump sum death benefit after her husband's death were paid to Fazio, notwithstanding the fact that the entire $507,395 benefit remained on deposit in the WRS fund from the date of her husband's death until payment was made almost two years later. Put another way, the investment returns earned on Fazio's death benefit during that period were retained within the WRS fund, earnings the fund would not have realized had Fazio applied for and received her death benefit shortly after her husband's death.

¶ 7. Fazio sued the department, claiming that the failure to pay her the accrued earnings or any interest on her death benefit after the date of her husband's death constituted an unlawful taking in violation of Wis. Const, art. I, § 13. The case was certified as a class action whose plaintiffs consisted of Fazio and all other "persons having an interest as a beneficiary in a lump sum death benefit paid or payable out of the funds of the Employee Trust Funds pursuant to [Wis. Stat. § ]40.73(l)(c) ... from and after January 11,1995." The circuit court granted Fazio's motion for summary judgment and established a formula for calculating the just compensation to be awarded. The department appeals the order for judgment that awarded a total of over $1.5 million to Fazio and the similarly situated plaintiffs.

ANALYSIS

¶ 8. This appeal is before us on the circuit court's grant of summary judgment, which we review de novo, applying the same methodology and standards as the trial court. See Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315, 401 N.W.2d 816 (1987). If there are no disputed issues of material fact, summary judgment is proper where the moving party is entitled to judgment as a matter of law. See id. Here, the facts are stipulated, and our disposition turns on whether they establish an unconstitutional taking of Fazio's property. This is a question of law, which we also decide de novo. See Wisconsin Retired Teachers Ass'n, Inc. v. Employe Trust Funds Bd., 207 Wis. 2d 1, 17-18, 558 N.W.2d 83 (1997).

I. The "Annuity-Value" Beneficiaries under Wis. Stat. § 40.73(1)(c)

¶ 9. The first step in a takings analysis is to determine whether a claimant possessed a property interest in the property that the government allegedly took. Id. at 18. In this case, we must decide whether Fazio had a property interest in the investment earnings attributable to the amount of her lump sum death benefit while it remained in the WRS fund after her husband's death. She clearly acquired a property interest in her death benefit at some point in time, as evidenced by the fact that the department paid the benefit to her. Thus, the dispositive subsidiary question is: When did Fazio's property interest in her death benefit arise — on the date of her husband's death as she claims, or not until she filed her lump sum death benefit application and all required documentation to the department as the department maintains? We conclude it is the latter.

¶ 10. We begin by noting that Fazio was neither a participant in nor an annuitant under the WRS. The fact that the Wisconsin Supreme Court has concluded that "WRS annuitants have a property interest in the WRS," id. at 18, as do actively employed participants in the WRS, see Wisconsin Professional Police Association, Inc. v. Lightbourn, 2001 WI 59, ¶ 100, 243 Wis. 2d 512, 627 N.W.2d 807, is thus of no direct assistance to Fazio. Similarly, annuitants and participants have been held to have a property interest in the earnings of the WRS fund, at least to the extent that they have a contractual right to "the proper use" of those earnings, that is, to have earnings distributed in accordance with Wis. Stat. ch. 40. See Wisconsin Retired Teachers Ass'n, Inc. v. Employe Trust Funds Bd., 207 Wis. 2d at 19; State Teachers' Retirement Board v. Giessel, 12 Wis. 2d 5, 9-10, 106 N.W.2d 301 (1960). These conclusions do not necessarily mean, however, that participants' beneficiaries have similar interests in the WRS fund or its earnings. Fazio cites no authority for the proposition that beneficiaries of participants in the WRS, as opposed to participants themselves, possess a property interest in the WRS or its earnings, and we are aware of none.

¶ 11. It is thus necessary for us to analyze, as a question of first impression, whether a beneficiary who receives a lump sum annuity-value death benefit under Wis. Stat. § 40.73(1)(c) possesses a recognizable, and thus a constitutionally protected, property interest in the WRS fund or its earnings at any point prior to the department's payment of the death benefit. Although the Wisconsin Constitution prohibits the taking of a person's property for public use without just compensation, the constitution does not itself create property interests:

Property interests, of course, are not created by the Constitution. Rather they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law — rules or understandings that secure certain benefits and that support claims of entitlement to those benefits.

Association of State Prosecutors v. Milwaukee County, 199 Wis. 2d 549, 558, 544 N.W.2d 888 (1996) (citing Board of Regents v. Roth, 408 U.S. 564, 577 (1972)). The key attribute of a constitutionally protected property interest is a "legitimate claim of entitlement to it," as opposed to a "unilateral expectation" of it. Roth, 408 U.S. at 577.

¶ 12. Our inquiry thus focuses on the basis in state law for Fazio's claim of entitlement to share in the earnings of the WRS fund during the period after her husband's death but before she applied for and the department paid her a death benefit. Fazio points first to Wis. Stat. § 40.73(1)(c), the paragraph under which the benefit she received was determined, which directs the calculation of an annuity-based lump sum benefit determined as of the date of her husband's death. She notes as well that Wis. Stat. § 40.01 explains that the WRS was created "to aid public employees in protecting themselves and their beneficiaries against the financial hardships of old age [and] death" (emphasis added).

¶ 13. Next, Fazio points to the "overwhelming majority" rule that "interest follows principal," which, according to her, means that "if you have a property right to the principal, you have a property right to any sums earned on that principal." Fazio claims that this principle finds support in Wisconsin law, but she primarily relies on two U.S. Supreme Court decisions (Phillips v. Washington Legal Foundation, 524 U.S. 156 (1998); Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (1980)) to support her claim of entitlement to WRS earnings accruing on the amount of her death benefit after her husband's death. These cases, however, and others Fazio cites in support of the "interest follows principal" rule, are of no assistance to Fazio or to our present analysis. In each of the two federal cases, the Supreme Court was asked to decide whether a state could constitutionally take or retain the interest accruing on privately deposited funds. Neither case involved any dispute that the underlying principal was "private property." See Phillips, 524 U.S. at 164 ("All agree that under Texas law the principal held in IOLTA trust accounts is the 'private property' of the client."); Webb's, 449 U.S. at 160-61 ("The principal sum deposited in the registry of the court plainly was private property .... We do not understand that the appellees contend otherwise so far as the fund's principal is concerned.").

¶ 14. Here, of course, whether Fazio's death benefit was her "private property" before she applied for it is very much in dispute. We agree with the department that Fazio did not acquire a property interest in the death benefit until she applied for it as required under Wis. Stat. § 40.71. The death benefit did not become Fazio's private property until she complied with Wrs. Stat. § 40.71(3), which provides as follows:

(3) Whenever any death benefit is payable in a single cash sum, it shall be paid only after receipt by the department of the following:
(a) A copy of the death certificate of the participant or annuitant;
(b) A written application of the beneficiary for the benefit; and
(c) Any additional evidence deemed necessary or desirable by the department.

We conclude that Fazio acquired a "legitimate claim of entitlement," Roth, 408 U.S. at 577, to the death benefit "only after receipt by the department" of the items listed in § 40.71(3).

¶ 15. Until the department received Fazio's written application and the proof of her husband's death, it could not determine the "single cash sum" to which Fazio might be entitled. Only then could the department perform the alternative calculations under Wis. Stat. §§ 40.73(1)(a) or (am) and (c) to determine which paragraph would provide the higher lump sum payment. This is so, in part, because the amount payable to Fazio under paragraph (a) or (am) continued to increase each month by the addition of interest credited to her husband's WRS account through "the first day of the month in which the death benefit is approved." Section 40.73(1)(am). Moreover, although the calculation of the "annuity-value" lump sum death benefit under § 40.73(1)(c) utilizes a deceased participant's date of death for calculation purposes, nothing in § 40.73 creates an entitlement in the beneficiary to the lump sum benefit as of that date. Rather, a lump-sum-death-benefit beneficiary's entitlement is created under Wis. Stat. § 40.71(3), which plainly specifies when the beneficiary becomes entitled to the benefit: "only after receipt by the department" of the required items. Id.

¶ 16. Our conclusion that a beneficiary's entitlement to a lump sum death benefit from the WRS does not arise until the requirements of Wis. Stat. § 40.71(3) are satisfied finds additional support in Wis. Stat. § 40.02(8), which defines the term "beneficiary" for purposes of Wis. Stat. ch. 40. The definition excludes a person who, although named by the participant, dies before applying for a benefit: " 'Beneficiary' does not include a person who dies before filing with the department either a beneficiary designation applicable to that death benefit or an application for any death benefit payable to the person .. . ." Section 40.02(8)(b) (emphasis added). If a named beneficiary dies before applying for a death benefit (or filing his or her own beneficiary designation), the right to claim a death benefit passes to alternative beneficiaries the deceased participant may have designated, or to the deceased participant's heirs. See § 40.02(8)(a)2. We agree with the department's contention that, if a "named beneficiary had a property interest prior to submitting the application it would pass to her heirs upon her death. The only reasonable expectations supported by chapter 40 is that the property right arises after the application is filed . . . ,"

¶ 17. In sum, we conclude that Fazio acquired no property interest in her lump sum death benefit until she complied with the requirements of Wis. Stat. § 40.71(3). Accordingly, the department's failure to pay her any interest or earnings received by the WRS on the amount of her death benefit calculated under Wis. Stat. § 40.73(l)(c) between the date of her husband's death and the department's receipt and processing of Fazio's death benefit application did not violate Wis. Const, art. I, § 13.

¶ 18. Fazio claims she is not challenging the constitutionality of the statutes in question, but when we decided the prior appeal in this case, we noted that there appeared to be no dispute that Wis. Stat. ch. 40 does not expressly provide for the payment of interest on Fazio's annuity-value lump sum death benefit, and further that no "section implicitly gives [the department] the authority to pay that interest." Fazio v. Department of Employee Trust Funds, 2002 WI App 127, ¶ 13, 255 Wis. 2d 801, 645 N.W.2d 618. We thus concluded that "if Fazio is entitled to interest on the lump-sum benefit, entitlement is not conferred by Wis. Stat. ch. 40, but... by Wis. Const. art. I, § 13." Id. at ¶ 16. We now conclude that the department did not violate the takings clause by refusing, in conformity with the provisions of ch. 40, to pay interest or earnings on Fazio's annuity-value lump sum benefit. Our conclusion also means that ch. 40 itself is not unconstitutional for failing to authorize payment of the amounts Fazio seeks.

II. The "Account-Value" Beneficiaries under § 40.73(l)(am)

¶ 19. In addition to awarding damages to Fazio and other class plaintiffs who received death benefits determined under Wis. Stat. § 40.73(1)(c), the circuit court also awarded damages to certain persons who received account-value benefits under Wis. Stat. § 40.73(1)(am). Our conclusion that Fazio did not possess a recognizable property interest in the lump sum death benefit she received until she had filed a written application for it under Wis. Stat. § 40.71(3) does not dispose of the claims of these account-value beneficiaries. This is because the period for which the account-value plaintiffs claim to have been wrongfully denied interest occurred after they had applied for and received an initial death benefit payment from the department. Thus, if the circuit court properly included the account-value beneficiaries as plaintiffs in this action, a separate takings analysis would be required. We conclude, however, that the circuit court erred in granting the account-value plaintiffs relief in the present action.

¶ 20. As we have noted, the order certifying the plaintiff class limited the class to those persons who had "an interest as a beneficiary in a lump sum death benefit paid or payable out of the [WRS] pursuant to Section 40.73(1)(c)." In its summary judgment ruling, the court analyzed Fazio's circumstances and concluded that she and others similarly situated were entitled to compensation for the period commencing with the date of the participant's death and ending one-week prior to the department's distribution of the benefit to the beneficiary. Following the summary judgment ruling, the parties identified and agreed on the names and amounts due to the annuity-value plaintiffs who were entitled to compensation under the court's ruling, but they disputed whether any account-value beneficiaries were also members of the plaintiff class as certified. They stipulated to an evidentiary hearing on the issue, at the conclusion of which the court would decide whether any beneficiaries beyond those the department had agreed to were entitled to relief in this action.

¶ 21. Notwithstanding the definition of the class quoted above, the circuit court ordered at the conclusion of the hearing that the department must also pay interest to certain account-value beneficiaries who received supplemental payments under Wis. Stat. § 40.73(1)(am) after the lifting of an injunction entered in litigation involving amendments to Wis. Stat. ch. 40 enacted in 1999 Wis. Act 11. (See footnote 14.) The department claims the circuit court erred in so doing. We agree.

¶ 22. Fazio argues that, even though these plaintiffs ultimately received their death benefit payments under Wis. Stat. § 40.73(1)(am), they all "qualified for the payment of a benefit under [paragraph] (c), and since the calculation of the lump sum death benefit for each of [these] plaintiffs always started with a calculation under [paragraph] (c) and could have been paid under (c) had it been the higher figure," their benefits were thus "payable" under § 40.73(1)(c). We are not persuaded by this argument. We agree instead with the department that the express language of paragraph (c) precludes this argument: "If the death benefit payable to the beneficiary under this paragraph would be less than the amount determined under par. (am) the death benefit shall be payable under par. (am) and this paragraph shall not be applicable to the beneficiary." Section 40.73(l)(c). This language plainly provides that a lump sum benefit is "payable" under only one of the two paragraphs, (am) or (c), whichever calculation provides the higher lump sum benefit. Those who received a benefit under paragraph (am), because it produced the higher amount, did not have a death benefit "payable" under paragraph (c).

¶ 23. Not only does Fazio's argument lack statutory support, we conclude that granting the account-value plaintiffs relief in this action contravenes Wisconsin common law governing class actions. We have previously explained that the prerequisites for bringing a class action are:

(1) there must be a common or general interest shared by all members of the class; (2) the named parties must fairly represent the interest involved; and (3) it must be impracticable to bring all interested parties before the court. All members of the class need not share all interests, but all must share a common interest.
The test for common interest is whether all members of the purported class desire the same outcome of the suit that the alleged representatives of the class desire.

Mercury Records v. Economic Consultants, 91 Wis. 2d 482, 490, 283 N.W.2d 613 (Ct. App. 1979).

¶ 24. Here, the common interest of the class, as certified and as represented by Fazio, was the asserted entitlement of beneficiaries who received an annuity-based death benefit under Wis. Stat. § 40.73(1)(c) to interest or earnings from and after the date of a WRS participant's death until the benefit was paid. Beneficiaries who received death benefits under paragraph (am) do not share that common interest because, as the trial court correctly noted, each account-value beneficiary did receive interest accruing after the WRS participant's death through the date of the department's initial determination and payment of a death benefit to the beneficiary. The circuit court concluded on summary judgment that the department had unconstitutionally deprived annuity-value beneficiaries of post-participant-death interest or earnings from the WRS fund. That conclusion did not answer the question whether the department unconstitutionally took private property without just compensation by failing to pay additional interest to beneficiaries who received court-delayed supplemental payments under paragraph (am) for the period between their first and second payments.

¶ 25. The "two-payment" account-value beneficiaries may or may not have a meritorious claim (a question we do not decide), but it is one that is wholly independent of those of Fazio and other annuity-value beneficiaries paid a lump sum death benefit under paragraph (c). We thus conclude that the circuit court erred in awarding damages in this action to these non-members of the plaintiff class.

CONCLUSION

¶ 26. For the reasons discussed above, we reverse the appealed order and direct that on remand Fazio's complaint be ordered dismissed. We note that, because the account-value beneficiaries were improperly included in the plaintiff class, nothing in our opinion or the disposition we direct should be interpreted as precluding the account-value beneficiaries from pursuing elsewhere their claims grounded on the delayed receipt of the full amount of their death benefits. We express no opinion regarding either the merits of the delayed payment claims or whether any procedural impediments not related to this litigation may exist that would preclude the pursuit of these claims in a different action.

By the Court. — Order reversed and cause remanded with directions.

       All references to the Wisconsin Statutes are to the 2003-04 version unless otherwise noted. Although the benefits payable to some of the plaintiffs in this case were determined under earlier versions of the statutes, for convenience, we will refer to the current edition.

       "Participating employee," as defined in Wis. Stat. § 40.02(46), generally refers to a person who is actively employed by a WRS-covered employer and who qualifies for WRS participation.

       The determination of the "annuity-value" lump sum death benefit under Wis. Stat. § 40.73(1)(c) actually involves two separate calculations (a formula-benefit annuity calculation based on the participant's years of service, final earnings and applicable "multiplier(s)"; and a "money-purchase" annuity calculation based on the participant's total account value at death), with the higher of these two amounts utilized for comparison to the account-value death benefit available under paragraph (a) or (am).

       The parties have employed the following terminology to distinguish between a death benefit paid under Wis. Stat. § 40.73(l)(a) or (am) and one paid under paragraph (c): They call the former a "death value" benefit because it is based on the deceased participant's account value after the participant's death, while they refer to the latter benefit as a "special" benefit, apparently because it is available only to a limited group of beneficiaries and results in a higher benefit for those beneficiaries. We find this terminology confusing, especially when considered in the context of this case. Fazio received a "special" benefit and complains that it was determined based on her husband's date of death but the amount paid to her remained fixed at the date-of-death value, regardless of how long thereafter the benefit was ultimately paid. The "death value" beneficiaries, on the other hand, received amounts that were not based on the dates of participants' deaths. Their benefits were based on the amount accumulated and credited to the deceased participants' accounts through the month before payment of the benefits, meaning that these death benefits continued to increase after the participants' deaths. We will refer to benefits paid under paragraphs (a) and (am) as "account-value" death benefits, and those paid under (c) as "annuity-value" death benefits.

       The appealed order awards Fazio total damages of $219,093, of which $182,494 compensates her for the period between her husband's date of death and one week prior to the date that the $507,395 death benefit was distributed to her. The remainder of the damages ($36,599) represented interest from the latter date through the date of the appealed order (November 3, 2003).
      We also note that the department has identified the specific fund or account within the WRS in which Fazio's husband had an interest prior to his death, and which ostensibly received and retained the earnings that accrued on Fazio's death benefit before she applied for and received it. We do not see the need for that level of detail in this opinion given the issues we must decide. Accordingly, we will simply refer generically to the WRS fund, recognizing, however, that it is composed of several accounts and "reserves." See Wisconsin Professional Police Association, Inc. v. Lightbourn, 2001 WI 59, ¶ 21-36, 243 Wis. 2d 512, 627 N.W.2d 807.

       In a previous appeal, we decided that Fazio was not required to pursue an administrative remedy before commencing this action because it would have been futile, given that the department lacks statutory authority to make payments not authorized under Wis. Stat. ch. 40. Fazio v. Department of Employee Trust Funds, 2002 WI App 127, ¶ 20, 255 Wis. 2d 801, 645 N.W.2d 618. Fazio also initially alleged an unjust enrichment claim, which she voluntarily dismissed following the remand in the earlier appeal.

       We will refer to the plaintiff-respondents, collectively, as Fazio, except where it is necessary to separately identify a group of beneficiaries (the "account-value beneficiaries") who were also awarded damages in the appealed order. The factual circumstances relating to the account-value beneficiaries are described below at ¶ 19 and footnote 14.

       Fazio relies on Wisconsin Professional Police Association, Inc. v. Lightbourn, 2001 WI 59, 243 Wis. 2d 512, 627 N.W.2d 807; Wisconsin Retired Teachers Ass'n, Inc. v. Employe Trust Funds Bd., 207 Wis. 2d 1, 558 N.W.2d 83 (1997); Association of State Prosecutors v. Milwaukee County, 199 Wis. 2d 549, 544 N.W.2d 888 (1996); and State Teachers' Retirement Board v. Giessel, 12 Wis. 2d 5, 106 N.W.2d 301 (1960) for the proposition that the Wisconsin Supreme Court has concluded that "beneficiaries of the [WRS] whose funds were held in interest bearing accounts by [the department] had a protected property right in those funds, including the earnings" (emphasis added). As we have explained above, however, all of the cited cases involved the contractual and property interests of participants in or annuitants under the WRS or other pension funds, not the interests of a beneficiary who receives a benefit from the fund following a participant's death.

       "The property of no person shall be taken for public use without just compensation therefor." Wis. Const, art. I, § 13.

       As a "third source" of her entitlement, Fazio cites a notice given her by the department that informed her as follows: 'You may apply immediately for the death benefit, or you may delay application and interest will continue to accrue on the balance of the account"; and "Interest will be paid on any lump sum amount through the end of the month prior to approval of your application." These statements, which the department acknowledges were "inartful[]," appear to refer to death benefits determined under Wis. Stat. § 40.73(1)(a) and (am), which, as we have noted, do include interest credited to a participant's account through "the first day of the month in which the [lump sum] death benefit is approved." We agree with the department, however, that because Fazio did not allege any claims sounding in misrepresentation or estoppel, the wording of the department's form is irrelevant. Any property interest Fazio acquired in her death benefit was created by Wis. Stat. ch. 40, not by the department's paperwork.
      Fazio also seeks to rely on a purported "concession" by the department's counsel during argument in the circuit court. Fazio quotes the department's counsel as saying that "[t]he (c) individual, by definition, had private property as of the date of death in a formula calculated under subsection (c)." She fails, however, to explain that the department's counsel's statements are plainly shown by the transcript to be a paraphrase of the circuit court's prior summary judgment ruling. Aside from the questionable propriety of quoting a statement by counsel out of context in order to claim it as a concession, see SCR 20:3.3 (Candor Toward the Tribunal), we emphasize again that property interests are created by state law, not by the remarks of an attorney during legal argument, even if the attorney happens to represent a state agency.

       The takings clause of the Fifth Amendment to the U.S. Constitution is worded similarly to Wis. Const, art. I, § 13: "nor shall private property be taken for public use, without just compensation." U.S. Const. amend. V.

       Our conclusion also finds support in the reasoning of the Ohio Supreme Court in State ex rel. Horvath v. State Teachers Retirement Board, 697 N.E.2d 644 (Ohio 1998). The court denied a claim brought in Horvath by the surviving spouse of a deceased teacher who contended that the fund administrator's failure to include interest on the deceased teacher's mandatory contributions to the fund when it paid out those contributions to the surviving spouse constituted an unconstitutional taking under the Ohio and U.S. Constitutions. Id. at 648. The Ohio court, as we have done, distinguished Phillips and Webb's and concluded that "the nature and extent of a contributor's protected property rights in the [State Teachers Retirement System] are determined solely by the statutes that govern the system." Id. at 651-52. Because the statutes in question created in the survivor only the right "to have his wife's contributions refunded to him upon her death" and "that right did not include interest accrued on [her] contributions," the beneficiary did not possess "a vested property right to interest accrued on her ... contributions," and thus "there was no taking under our state or federal constitutions." Id. at 652.

       Because we have concluded that Fazio acquired no recognizable property interest in a lump sum death benefit from the WRS until she applied for it in the manner Wis. Stat. § 40.71(3) directs, we need not decide if the department's failure to award her interest or earnings after the date of her husband's death constituted a "taking" for public use. Cf. Wisconsin Retired Teachers Ass'n, Inc. v. Employe Trust Funds Bd., 207 Wis. 2d at 20 (noting that "[i]f a recognizable property interest exists, we then consider whether the right has been taken" (emphasis added)). Likewise, the question of what remedy is required to effect "just compensation" is not before us.

       As the trial court noted, beneficiaries who received account-value death benefits under either Wis. Stat. §§ 40.73(1)(a) or (am) received interest on the deceased participants' accounts from the date of the participants' deaths through the month prior to the department's calculation and payment of the benefits. Paragraphs (a) and (am) expressly so provide. Some beneficiaries, however, became entitled to an additional payment because the account-value death benefit calculated under sub. (1)(am) increased substantially under 1999 Wis. Act 11. After the lifting of an eighteen-month injunction prohibiting the department from implementing Act 11, the department recalculated account-value lump sum benefits under paragraph (am) as of the date of a beneficiary's original payment. If that amount was higher than the initial death benefit paid to a beneficiary, the department paid out the difference between the newly calculated benefit under paragraph (am) and the amount it had already paid the beneficiary. This "supplemental" payment, however, did not include any additional interest or earnings for the period after the date of the initial payment.
      As we understand the record and the court's order, beneficiaries in this group may have had their initial payments determined under either paragraph (a) or (c), but in all cases, their additional payments were determined and paid under paragraph (am). This means that these beneficiaries received interest or earnings credited to a participant's account after the participant's death through the date of their initial payment, but not thereafter. The account-value plaintiffs included in the appealed order were much fewer in number than the annuity-value plaintiffs like Fazio. In aggregate, their damages totaled less than $200,000, and the individual amounts varied from less than $100 to over $20,000.


source: Caselaw Access Project

author: ANDERSON, PJ.

license: Public Domain

text:
    State of Wisconsin, Plaintiff-Respondent, v. Scott Edward Ziegler, Defendant-Appellant.
    Court of Appeals

      No. 04-0848-CR.

      Oral argument February 22, 2005.

    Decided March 30, 2005.

    2005 WI App 69
    (Also reported in 695 N.W.2d 895.)

      On behalf of the defendant-appellant, the cause was submitted on the briefs of and oral argument by Martha K. Askins, assistant state public defender of Madison.
    On behalf of the plaintiff-respondent-respondent, the cause was submitted on the brief of Shunette T Campbell, assistant attorney general, and Peggy A. Lautenschlager, attorney general. There was oral argument by Shunette T. Campbell.

    Before Anderson, RJ., Brown and Nettesheim, JJ.
   ANDERSON, PJ.

¶ 1. The original judgment of conviction in this case was entered in 1989. It provided that restitution to the victim of Scott Edward Ziegler's act of party to the crime of arson was "to be determined." In late 2003, approximately fourteen years later, the State, after being prompted by the victim, requested a restitution determination. After an eviden-tiary hearing, the trial court amended the judgment of conviction to reflect restitution in the amount of $95,379.61. On appeal, Ziegler argues that the trial court lacked the statutory authority to impose restitution after the fourteen-year delay. He maintains that there were no valid reasons for the delay and that he was prejudiced by it. He asks that we vacate the portion of the amended judgment imposing restitution. We agree and reverse that part of the judgment relating to restitution.

BACKGROUND

¶ 2. In February 1989, the State charged Ziegler with, among other things, one count of party to the crime of arson. The complaint states that the victim claimed approximately $100,000 in damages to his uninsured property.

¶ 3. In December 1989, Ziegler pled no contest to party to the crime of arson. At the sentencing hearing, the trial court imposed and stayed a sentence of seven years and ordered probation for eight years to be served consecutive to Ziegler's prison sentence in another case. The court further indicated that it would order, as a condition of probation, that Ziegler "make a good faith effort to pay some restitution." However, according to the written judgment, restitution was "to be determined."

¶ 4. More than nine years later, in February 1999, the Department of Probation and Parole filed a request for a restitution determination. The trial court amended the judgment two days later to reflect restitution in the amount of $101,819.82 to be paid to the victim.

¶ 5. In October 2000, Ziegler filed a motion to vacate the portion of the amended judgment ordering restitution. At the November motion hearing, the following exchange took place between the court and the State:

THE COURT: Well, I will hear from the State. What's their position?
[STATE]: Judge, Mr. Bundy from the district attorney's office assigned me this case, which was technically Mr. Haughney's case and Mr. Haughney now is a judge, and he asked me to find something to argue against the defendant's motion to vacate the restitution order, and I researched it all last weekend and I cannot find anything to argue against it. So, given that the State is not objecting to [Ziegler's] motion.
THE COURT: Which portion, either portion, or to one portion?
[STATE]: His motion to vacate the restitution order. I don't believe based upon my research the Court can order that given that there has been a violation of the time limits.
THE COURT: That seems to take care of your argument.
The Court has reviewed the statutory authority as well as the case law that [Ziegler] cited, and on that basis the Court will grant [Ziegler's] motion. I will vacate the amended judgment, or the amendment to the judgment of conviction that was dated February 12, 1999. I will sign an appropriate order to that.

The trial court subsequently vacated the amended the judgment of conviction to the extent it imposed restitution.

¶ 6. In July 2003, the victim learned that Ziegler was to be released from prison and contacted the State inquiring about the possibility of restitution payments. In August 2003, the State sent a letter to the trial court requesting additional restitution hearings. Ziegler filed a motion opposing the State's request.

¶ 7. In September 2003, the victim sent a letter to the State outlining his claimed damages. The victim wrote, "Enclosed is the best documentation I have for our loss after all these years. Actual bills were provided at the time of the loss but were destroyed along with other business papers after the business had been closed." He attached an itemized "Statement for Restitution" form from the City of Waukesha Police Department that was signed and dated October 20,1988, and claimed a total of $99,879.61 in damages. He also attached the results of appraisals of the property done in 1985.

¶ 8. In October 2003, the trial court held a hearing during which the parties set forth their arguments concerning the propriety of a restitution hearing. The State argued that pursuant to Wis. Stat. § 973.20 the court was required to set restitution in every case. The State further asserted that the victim in the case had both a statutory and constitutional right to restitution and asked that the court "put this back on track" and order restitution. Ziegler argued that the State was barred from requesting restitution by the statute of limitations and the doctrines of waiver, laches, res judicata and judicial estoppel. Ziegler pointed out that he had already served his sentence and was out on parole. The court granted the State's request for a restitution hearing.

¶ 9. The court held the restitution hearing in November. The court heard testimony regarding the amount of the victim's loss, which was disputed, and Ziegler's ability to pay. The court determined that the victim's loss amounted to $95,379.61 and ordered restitution in that amount. The court amended the judgment of conviction to reflect restitution. Ziegler appeals.

STANDARD OF REVIEW

¶ 10. Ziegler argues that the trial court lacked the statutory authority to amend the judgment of conviction and impose restitution. The scope of a trial court's authority to order particular conditions of probation, including restitution, presents a question of statutory interpretation that we review de novo. See State v. Baker, 2001 WI App 100, ¶ 4, 243 Wis. 2d 77, 626 N.W.2d 862. Trial courts have discretion in deciding on the amount of restitution and in determining whether the defendant's criminal activity was a substantial factor in causing any expenses for which restitution is claimed. State v. Canady, 2000 WI App 87, ¶¶ 6, 12, 234 Wis. 2d 261, 610 N.W.2d 147; State v. Behnke, 203 Wis. 2d 43, 57-58, 553 N.W.2d 265 (Ct. App. 1996).

DISCUSSION

¶ 11. As we have repeatedly explained, "Restitution is governed by Wis. Stat. § 973.20, which requires courts to order full or partial restitution 'under this section' to any victim of a crime 'unless the court finds substantial reason not to do so and states the reason on the record.'" State v. Evans, 2000 WI App 178, ¶ 13, 238 Wis. 2d 411, 617 N.W.2d 220; see also § 973.20(1r). A sentence that fails to provide for restitution is unlawful and is subject to amendment. State v. Borst, 181 Wis. 2d 118, 122-23, 510 N.W.2d 739 (Ct. App. 1993).

¶ 12. When, as here, a trial court orders restitution, but does not determine the amount of restitution at sentencing, Wis. Stat. § 973.20(13)(c) sets forth a list of four alternative procedures that the court may use to finalize the amount due. State v. Johnson, 2002 WI App 166, ¶ 8, 256 Wis. 2d 871, 649 N.W.2d 284. "Each of the options set forth in § 973.20(13)(c) includes a time frame for finalizing the restitution order." Johnson, 256 Wis. 2d 871, ¶ 8. When a court fails to comply with any of the four separate, alternative procedures and instead constructs its own procedure to determine and set restitution and that procedure is not authorized by the applicable and controlling law, the decision cannot stand. Evans, 238 Wis. 2d 411, ¶ 15.

¶ 13. Here, the parties agree that the trial court failed to comply with any of the four alternative procedures for determining restitution and that restitution was set outside of the restitution determination periods of Wis. Stat. § 973.20(13)(c)2. They part company, however, as to the appropriate remedy for this failure. As we indicated at the outset, Ziegler argues that we must vacate the portion of the amended judgment imposing restitution. The State, on the other hand, steadfastly maintains that the appropriate course of action, which was followed by the trial court, was to hold a "retrospective restitution hearing conducted 'in a manner consistent with the requirements of § 973.20(13).' [State v. Krohn, 2002 WI App 96, ¶ 13, 252 Wis. 2d 757, 643 N.W.2d 874]." We agree with Ziegler.

¶ 14. In State v. Perry, 181 Wis. 2d 43, 53, 510 N.W.2d 722 (Ct. App. 1993), we held that the sixty-day restitution determination period of Wis. Stat. § 973.20(13)(c)2. is directory, not mandatory. However, in so holding, we cautioned that directory does not mean that the provision is merely discretionary or permissive because the legislature had plainly "intended that the time limit be followed." Perry, 181 Wis. 2d at 56-57. We explained that the directory construction simply reflected the legislature's intention that the court not be required in all cases to vacate the restitution order for a violation of the statutory time limitation. Id. Accordingly, we concluded that restitution orders resulting from proceedings held outside of the statutory time period for valid reasons may be upheld, provided that doing so will not result in harm or injury to the defendant. See id.; see also Johnson, 256 Wis. 2d 871, ¶¶ 8-14 (citing Perry for the conclusion that a court may impose restitution outside the statutory time frame as long as (1) valid reasons exist for the delay and (2) the defendant has not been prejudiced by the delay).

¶ 15. Here, there is no valid reason for the delay. As the State conceded at oral argument, the victim provided all the information necessary to pursue restitution and the delay can only be attributed to a failure of the system. This is simply not a case where the determination of the defendant's restitution responsibility was postponed for obviously valid reasons such as the ongoing expenses of the victim, see Johnson, 256 Wis. 2d 871, ¶ 10, or the completion of a codefendant's trial, see Perry, 181 Wis. 2d at 56 (delaying the restitution determination allowed the court to consider the codefendants' restitution obligations in a consolidated fashion).

¶ 16. The State suggests that its renewed desire to make the victim whole somehow provides a valid reason for the delay. This argument has no merit; as Ziegler pointed out at oral argument, the ends do not justify the means in this case. The State's desire to facilitate the compensation of the victim, while in accord with the well-established public policy of this state, is not an explanation for why there is a fourteen-year gap between sentencing and the restitution determination hearing.

¶ 17. Before applying the second Perry prong, the prejudice prong, we pause briefly to address a question that arose during oral argument: Is there a "pecking order" between the two prongs or are they analyzed collectively? In other words, must we consider the second component of the Perry test, the question of prejudice to the defendant, if we determine, as here, that there is no demonstrable valid explanation for holding the restitution determination hearing outside the statutory time limits?

¶ 18. We conclude that we must. We can envision a situation where a restitution determination proceeding is held ten days outside the statutory time frame and there is no valid reason for the delay. To hold that such a minor delay, without a showing of prejudice to the defendant, precludes the State from seeking a restitution determination would effectively frustrate the statute's primary goal of facilitating complete restitution of the victim and secondary goal of rehabilitating the defendant. See State v. Sweat, 208 Wis. 2d 409, 422, 561 N.W.2d 695 (1997) (noting that while restitution serves a dual purpose of making the victim whole and rehabilitating the defendant, the primary purpose of restitution is compensating the victim). The victim would be forced to "go through the time, inconvenience and expense of a civil suit in order to recover pecuniary losses," see Perry, 181 Wis. 2d at 55-56, and the defendant would be able to avoid taking responsibility in the criminal proceeding for his or her actions, simply because, for whatever reason, the restitution determination hearing was held outside the time limits by a matter of days or weeks. This is a result we cannot countenance. We therefore hold that the two-pronged Perry test is akin to a balancing test; in each case, the court must balance the length and reasons for the delay against the injury, harm or prejudice to the defendant resulting from the delay. See id. at 56-57.

¶ 19. We thus proceed to the question of whether the fourteen-year delay prejudiced Ziegler. We agree with Ziegler that the longer the time between the sentencing hearing and the restitution determination proceeding, the more inherent the prejudice to the defendant. Here, as a practical matter, by the time the court held the restitution hearing, much of the documentation concerning the victim's damages had been lost or destroyed and the victim could not exactly recall the origin of all his calculations, in particular the claim of $26,000 for work done by "SCS of Wisconsin." Also, as Ziegler rightly points out, the passage of so many years made it far more difficult for him to dispute any of the claimed damages. Further, and more importantly, as time passed, Ziegler acquired a legitimate expectation in the finality of the judgment against him — he had served his prison sentence, he was out on parole and the court had already determined that it did not have the authority to impose restitution any longer. See, e.g., State v. Gruetzmacher, 2004 WI 55, ¶¶ 33-34, 271 Wis. 2d 585, 679 N.W.2d 533 (concluding that the defendant's legitimate expectation of finality in the sentence may be influenced by many factors, such as the completion of the sentence, the passage of time, the pendency of an appeal, or the defendant's misconduct in obtaining sentence); State v. Willett, 2000 WI App 212, ¶ 6, 238 Wis. 2d 621, 618 N.W.2d 881 (holding that the defendant did have a legitimate expectation in the finality of his sentence where the circuit court imposed its sentence based on an erroneous understanding of the law and the defendant had begun to serve his sentence); United States v. Daddino, 5 F.3d 262, 265 (7th Cir. 1993) (concluding that a defendant acquired a legitimate expectation of finality in his sentence where he had served his sentence, paid fines and restitution, and only a portion of his probation and supervised release remained). See also State v. Escalona-Naranjo, 185 Wis. 2d 168, 185, 517 N.W.2d 157 (1994) ("We need finality in our litigation.").

¶ 20. The State maintains that although the exact amount had not been determined, Ziegler was aware that he would be ordered to pay restitution at some point and therefore the restitution determination proceedings did not offend any finality expectations. See Perry, 181 Wis. 2d at 56-58 (noting that at the conclusion of sentencing the defendant knew that restitution proceedings were to follow the completion of his codefendant's trial and he therefore "had no legitimate expectation that he would escape the restitution order."). We cannot-agree. In this case, fourteen years passed between the original judgment of conviction leaving restitution "to be determined" and the amended judgment of conviction ordering Ziegler to pay $95,379.61. During that time, the court vacated an amended judgment imposing restitution entered nearly ten years after sentencing because the State conceded that the court lacked the statutory authority to order restitution after such a delay and Ziegler had served his prison sentence and was out on parole. Given these circumstances, Ziegler was entitled to conclude that the judgment of conviction was final and he owed no restitution. We therefore reject the State's argument and hold that Ziegler was prejudiced by the delay.

CONCLUSION

¶ 21. Perry teaches that restitution orders from proceedings held outside the statutory time period for valid reasons may be upheld, provided that doing so will not result in prejudice to the defendant. See id. at 56-57. Because there were no demonstrable valid reasons for delaying the restitution determination hearing for fourteen years and such delay inherently prejudiced Ziegler, the trial court lacked the authority to order restitution. Accordingly, we vacate the restitution portion of the amended judgment of conviction.

By the Court. — Judgment reversed in part.

       The State seems to argue that at this hearing it conceded only that the 1999 amended judgment was partially invalid simply because it was entered without an evidentiary hearing. However, as this exchange clearly demonstrates, the State conceded that the trial court lacked the authority to order restitution because of the time limits in Wis. Stat. § 973.20 (2003-04).

        All references to the Wisconsin Statutes are to the 2003-04 version unless otherwise noted.

       The "Statement for Restitution" listed the following in damages: $66,100 for the assessed value of the building; $3500 for the seats in the building, which was a movie theater; $1000 for a speaker and clocks; and $29,279.61 total costs for demolition. The demolition costs were broken down as follows: $30 for a demolition permit; $26,000 to SCS of Wisconsin for the demolition of the building; and $3249.61 as a nonfinal amount to Waukesha Lime & Stone.

       The second amended judgment ordered Ziegler to pay $150 per month towards his restitution obligation, with the amount to increase to $200 per month in the beginning of July 2004. The third amended judgment noted that restitution was to be paid jointly and severally with Ziegler's codefendant. It also directed Ziegler to pay $150 per month towards his restitution obligation and stayed the increase in the payments pending Ziegler's appeal.

       We note that State v. Borst, 181 Wis. 2d 118, 510 N.W.2d 739 (Ct. App. 1993), is distinguishable from this case. In Borst, the court was able to consider restitution after the original "illegal" sentence lacking restitution had been handed down because there had been no mention of restitution in the plea agreement, the plea questionnaire or the original sentence. Id. at 120-22. Here, unlike Borst, the sentencing court discussed, and the judgment of conviction expressly provided for, restitution. The trial court in this case simply left the determination as to the amount owed for a later date, which is an act clearly contemplated by Wis. Stat. § 973.20(13). The original sentence therefore did not suffer from the same infirmities as the sentence in Borst. Rather, the problem lies in the procedures followed and the time it took for the amount of restitution owed to be finalized. Thus, as will be seen in our discussion, this is a State v. Perry, 181 Wis. 2d 43, 510 N.W.2d 722 (Ct. App. 1993), issue.

       Wisconsin Stat. § 973.20(13)(c) provides in part:
      If the defendant stipulates to the restitution claimed by the victim or if any restitution dispute can be fairly heard at the sentencing proceeding, the court shall determine the amount of restitution before imposing sentence or ordering probation. In other cases, the court may do any of the following:
      1. Order restitution of amounts not in dispute as part of the sentence or probation order imposed and direct the appropriate agency to file a proposed restitution order with the court within 90 days thereafter, and mail or deliver copies of the proposed order to the victim, district attorney, defendant and defense counsel.
      2. Adjourn the sentencing proceeding for up to 60 days pending resolution of the amount of restitution by the court, referee or arbitrator.
      3. With the consent of the defendant, refer the disputed restitution issues to an arbitrator acceptable to all parties, whose determination of the amount of restitution shall be filed with the court within 60 days after the date of referral and incorporated into the court's sentence or probation order.
      4. Refer the disputed restitution issues to a circuit court commissioner or other appropriate referee, who shall conduct a hearing on the matter and submit the record thereof, together with proposed findings of fact and conclusions of law, to the court within 60 days of the date of referral.
      Section 973.20 was enacted in April 1988 and went into effect prior to the date of Ziegler's criminal activity. See 1987 Wis. Act 398, §§ 43-45 (stating that the statute applied to persons who committed crimes on or after the effective date of the section, which was "on the first day of the 4th month commencing after its publication," or September 1, 1988).


author: PER CURIAM. SHIRLEY S. ABRAHAMSON, C.J. ANN WALSH BRADLEY, J. LOUIS B. BUTLER, JR., J.

text:
    In the Matter of Disciplinary Proceedings Against Michael J. Backes, Attorney at Law: Office of Lawyer Regulation, Complainant, v. Michael J. Backes, Respondent.
    Supreme Court

      No. 2002AP3238-D.

      Submitted on briefs December 14, 2004.

      Decided May 25, 2005.

      2005 WI 59
    (Also reported in 697 N.W.2d 49.)

      For the respondent there were briefs by Michael J. Baches, Milwaukee.
    For the complainant there was a brief by Gregg Herman, Matthew J. Price, and Loeb & Herman, S.C., Milwaukee.
   PER CURIAM.

¶ 1. Attorney Michael Backes seeks review of a report and recommendation filed by Referee Joan Kessler on or about October 2, 2003.

¶ 2. Attorney Backes attended law school following a career in real estate. He was admitted to practice in Wisconsin in 1986. He has no prior disciplinary history.

¶ 3. On December 5, 2002, the Office of Lawyer Regulation (OLR) filed a complaint against Attorney Backes, alleging some 15 disciplinary violations stemming from five separate client matters.

¶ 4. Attorney Backes filed a timely answer and the parties stipulated to two exhibits, which were admitted at the hearing before the referee, conducted on July 8 and 9, 2003. The first exhibit was entitled "Binding Stipulation as to Findings of Fact and Conclusions of Law." This constituted a "no contest plea" to the factual allegations and four violations charged in connection with one of the client matters which is referred to herein as "J.J." The parties also stipulated to a document entitled "Facts Admitted by Respondent..." that summarized the other facts admitted by Attorney Backes in connection with the other allegations made against him. The matter proceeded to a hearing before the referee.

¶ 5. Ultimately, the referee concluded that Attorney Backes had committed misconduct in connection with nine of the 15 counts with which he was originally charged. He was cleared of six counts alleged in connection with two client matters. The referee recommended a public reprimand and restitution in the form of fee refunds to two clients. The referee recommended further that Attorney Backes pay the costs of the disciplinary proceeding.

¶ 6. Attorney Backes contends that a public reprimand is excessive discipline in view of the facts of this matter. He suggests that the recommended discipline was derived from considering all the charges against him and is no longer appropriate considering that the referee cleared him of the allegations made in connection with two client matters. Indeed, he points out that he was cleared of one of the most serious allegations, an alleged violation of SCR 20:8.4, which involves conduct involving dishonesty, fraud, deceit or misrepresentation. He suggests further that the referee erred with respect to certain factual findings made in two client matters. He asserts that a private reprimand is sufficient discipline for his misconduct.

¶ 7. For clarity, the allegations against Attorney Backes will be discussed in connection with the client matters to which they relate.

MATTER OF J.J.

¶ 8. Pursuant to the terms of the stipulation entered by the parties, Attorney Backes conceded he committed misconduct in this matter. As background, in 1994, the client, J.J., was convicted of one count of attempted first-degree murder and four counts of sexual assault. His conviction was affirmed on appeal.

¶ 9. In March 1998, J.J. contacted Attorney Backes about possible postconviction representation. He suggested he might he entitled to a new trial based on newly discovered evidence. Attorney Backes sent J.J. two letters, explaining first that he charged a flat fee, and later stating that fee would be $2500. On April 16, 1998, J.J. mailed Attorney Backes a check for $2500. There was no formal written fee agreement.

¶ 10. Attorney Backes visited J.J. in prison on June 26, 1998. At that meeting he stated that he would file a postconviction motion on J.J.'s behalf within 60 days of the meeting.

¶ 11. Despite several letters from Attorney Backes promising to take action in the near future, no pleading was ever filed on J.J.'s behalf. J.J. made several attempts to ascertain the status of the matter, including three attempts to terminate representation and obtain a refund of the retainer.

¶ 12. In May 2002, during the course of the ensuing grievance investigation, Attorney Backes did refund the full $2500 retainer to J.J.

¶ 13. The OLR alleged and Attorney Backes conceded that (1) by failing to file a postconviction motion or to conclude his review of J.J.'s file for more than 2V2 years, Attorney Backes failed to act with reasonable diligence in representing J.J. in violation of SCR 20:1.3; (2) by failing to respond to J.J.'s correspondence, Attorney Backes failed to keep J.J. reasonably informed about the status of a matter and promptly comply with reasonable requests for information in violation of SCR 20:1.4(a); (3) by failing to respond to J.J.'s specific inquiries about various postcónviction relief issues, Attorney Backes failed to explain a matter to the extent reasonably necessary to permit J.J. to make informed decisions regarding the representation in violation of SCR 20:1.4(b); and (4) by failing until May 2002, to refund the $2500 fee that J.J. had paid, Attorney Backes failed, upon termination of representation, to refund an advance payment of fees that had not been earned in violation of SCR 20:1.16(d).

MATTER OF DM.

¶ 14. Counts V through VIII of the complaint involved allegations of misconduct with respect to the matter of D.M. The referee concluded that Attorney Backes did not commit misconduct in his handling of the D.M. matter, and the OLR did not appeal that conclusion. Therefore, these facts and conclusions are not in dispute, but are discussed herein for reference because Attorney Backes contends this matter was wrongly considered by the referee in her decision to recommend a public reprimand.

¶ 15. D.M. was convicted of one count of second-degree sexual assault of a child in 1993. His motion for plea withdrawal was denied and the matter affirmed on appeal.

¶ 16. In May 1996, D.M. met with Thomas Russell, another lawyer at Backes' law firm, to discuss filing a possible postconviction motion. D.M. signed a fee agreement with this attorney.

¶ 17. A short time later, D.M. met with Attorney Backes and executed a new written fee agreement, for "post judgment matters" in which he agreed that the initial retainer would be $2500. The agreement provided: "This fee is a minimum and non refundable fee and is to be paid as follows: $1500.00 Down, Bal. 45 Days." The agreement goes on to discuss the possibility of a higher fee "if an appeal is required." D.M. paid Attorney Russell $1500 when he signed the fee agreement.

¶ 18. D.M. then "effectively disappeared." From May 1996 to May 1997, he neither initiated contact with Attorney Backes nor responded to Attorney Backes' attempts to contact him. In September 1997, D.M. "reappeared" and requested legal action from Attorney Backes on a matter apparently unrelated to the earlier fee agreement.

¶ 19. On September 18, 1997, Attorney Russell provided Attorney Backes with a written analysis of D.M.'s case, concluding that there was no good-faith basis upon which a postconviction motion could be filed. At this point, the $1000 balance on the fee agreement was still due and owing.

¶ 20. In October 1997, Attorney Backes wrote to D.M. and asked for the additional $1000 to proceed with the case. The complaint indicates that "[thereafter, for over a year [D.M.] was unable to obtain $1,000.00 to pay [Attorney Backes]." In December 1998, D.M. gave Attorney Backes $1000 to proceed.

¶ 21. In a letter dated January 18, 1999, after some additional review of the file, Attorney Backes informed D.M. that there were no grounds upon which to proceed with a postconviction motion. Correspondence between the two ensued. It appears that D.M. was unwilling to accept Attorney Backes' conclusion, and repeatedly insisted some motion be filed. Attorney Backes declined to file a motion and declined to refund the $1000 payment, asserting that this fee was earned.

¶ 22. On March 21, 2002, four months after D.M. filed a grievance against him, Attorney Backes refunded D.M. $1000.

¶ 23. The OLR complaint alleged that Attorney Backes' conduct with respect to the D.M. matter violated SCR 20:1.3 (reasonable diligence), SCR 20:1.4(b) (failure to adequately explain matter), SCR 20:1.16(d) (failure to refund unearned payment), and the most serious charge levied against Attorney Backes, SCR 20:8.4(c) (conduct involving dishonesty, fraud, deceit or misrepresentation).

¶ 24. The referee, however, concluded that Attorney Backes did not commit misconduct with respect to his handling of the D.M. matter, noting that a fixed fee agreement is not a per se violation of rules of professional conduct, so long as the fee is reasonable in relation to the work performed. The referee observed that there was no evidence that the fee here was unreasonable. The referee noted further that there was no indication that D.M. objected to the delay or to the fee "until after he was told that. . . nothing could be done to reopen the case."

MATTER OF C.D.

¶ 25. The referee also exonerated Attorney Backes from the OLR's charges against him in respect to the matter of C.D. The OLR does not appeal that conclusion. Therefore, again these findings and conclusions are not in dispute and are only summarized here for purposes of evaluating whether they were improperly considered in recommending discipline.

¶ 26. In November 1998, C.S. retained Attorney Backes to pursue a sentence modification motion for her fiancé, C.D., who had been incarcerated since 1991 following his conviction for armed robbery and threats to injure. C.S. paid Attorney Backes $1250 and agreed to pay him another $1250 within 30 days. There was no written fee agreement. C.S. duly paid the remaining $1250 on December 31, 1998. The premise of the requested motion was that C.D.'s parents were ailing and needed C.D. to care for them.

¶ 27. On February 24, 1999, Attorney Backes wrote to C.D. advising him that he had spoken to the parents and had questions about whether the requested motion was appropriate. On March 9, 1999, Attorney Backes contacted C.D. to state that C.D.'s parents had informed him that they were not in ill health, and did not need C.D. to come home to care for them. He advised C.D. that there was thus no basis for filing a motion for sentence modification.

¶ 28. Over the following months, a series of correspondence ensued between C.D. and Attorney Backes, with C.D. demanding Attorney Backes either file a motion or refund $2000 of his fee, and Attorney Backes explaining he had earned his fee.

¶ 29. In October 1999, C.D. wrote to Attorney Backes, asking him to pursue whether a potential witness was available and stating that he had been assaulted by another inmate. Attorney Backes did contact C.D.'s former attorney regarding the potential witness, and on December 20, 1999, forwarded C.D. a letter from that attorney stating that the witness was not available. On January 5, 2000, C.D. was attacked by another inmate and seriously injured. In June 2000, another attorney represented C.D. in a sentence modification motion. The motion was denied.

¶ 30. The referee concluded that Attorney Backes had not committed misconduct with respect to his handling of the C.D. matter, noting that there was no evidence that a flat fee was unreasonable.

¶ 31. Attorney Backes agrees with this conclusion, but emphasizes that the injury C.D. sustained in the altercation with another inmate did not establish a basis for a sentence modification. We acknowledge the point, but conclude that the referee included these facts to establish the chronology; it was not the basis for the referee's decision, nor does it appear to have affected the referee's recommendation with respect to discipline.

MATTER OF D.L.S.

¶ 32. The referee concluded that Attorney Backes committed misconduct in his handling of the matter of D.L.S. Attorney Backes challenges the referee's factual findings on several points.

¶ 33. On January 28, 2000, D.L.S. retained Attorney Backes to defend her son, M.L., against a charge of repeated acts of sexual assault against a child. D.L.S. signed a fee agreement in which she agreed to pay a flat, nonrefundable fee of $2500 to resolve the case short of trial.

¶ 34. On January 31, 2000, Attorney Backes met with M.L. in jail. M.L. requested that Attorney Backes file an immediate motion to reduce his bail. D.L.S. also asked Attorney Backes to file a motion to reduce her son's bail, explaining this was a high priority.

¶ 35. On February 25, 2000, Attorney Backes had not filed the requested motion, and D.L.S. discharged Attorney Backes, requesting an itemization and return of any unearned fees. On February 28, 2000, D.L.S. retained another attorney who promptly entered an appearance and moved for bail modification on March 7, 2000. The motion was granted the same day. M.L. was released on cash bond a few days later.

¶ 36. D.L.S. made two subsequent requests for a refund of unearned fees on March 29 and May 3, 2000. Although Attorney Backes admitted he had worked only five to seven hours on the matter, he did not send D.L.S. a refund until March 21, 2002, more than two years after he was discharged. The refund was in the amount of $1500, leaving a balance of $500 in dispute.

¶ 37. The parties disputed the reason Attorney Backes did not promptly file a motion for bail modification. The referee made findings that Attorney Backes testified that he delayed bringing the motion because he thought the motion would require the support of the district attorney and he was trying to obtain that support, and because it was his understanding that his clients could raise no more than $5000 for bail.

¶ 38. On appeal, Attorney Backes challenges these findings. The record does reflect statements indicating that he thought the clients could only produce $2500 for bail. Bail was ultimately reduced to $5000, indicating it was reasonable for him to be concerned about the client's inability to raise more than $2500. Indeed, Attorney Backes implies that it would have been futile to bring a motion. He adds that he, in fact, had established the court date for the bail hearing although he concedes that he had not yet prepared a written bail motion.

¶ 39. Attorney Backes also challenges the referee's conclusion that he did not adequately communicate his strategic reasoning to the clients. He points to testimony elicited on cross-examination at the hearing in which the clients acknowledge that Attorney Backes did have discussions with them about various aspects of the case.

¶ 40. While there is record evidence of some misunderstanding as to the amount of money the client had available for bail, the record supports the referee's conclusion that the clients did not understand Attorney Backes' strategic decisions, nor did they believe that Attorney Backes had the matter in hand. M.L. wrote Attorney Backes several letters and D.L.S. telephoned Attorney Backes several times in an effort to obtain information about the status of the bail hearing, without receiving a response from Attorney Backes. Although Attorney Backes may indeed have intended to raise the question of bail at a scheduled pretrial hearing, he never formally filed a motion for bail modification. And, it is undisputed that it took more than two years for Attorney Backes to refund even a portion of the retainer, despite his admission that he spent no more than five to seven hours on the client's file.

¶ 41. We are persuaded that the referee's conclusions that Attorney Backes failed to act with reasonable diligence and promptness in violation of SCR 20:1.3, and failed to timely refund an advance payment that had not been earned in violation of SCR 20:1.16(d) are supported by the record and are not clearly erroneous. We agree further with the referee's recommendation that Attorney Backes be required to refund D.L.S. the balance of the fee retainer in this matter.

MATTER OF C.B.

¶ 42. The referee concluded that Attorney Backes committed misconduct in his handling of the C.B. matter. Attorney Backes challenges the referee's factual findings on several points.

¶ 43. C.B. was convicted of first-degree intentional homicide, while armed, in 1993. In November 1999, C.B.'s mother and aunt retained Attorney Backes to file a motion for postconviction relief on behalf of

C.B.

¶ 44. On C.B.'s behalf, a fee agreement was signed by his mother in which a nonrefundable fee of $2500 was to be paid. C.B.'s aunt paid $1500 on November 18th, and the remaining $1000 was paid 30 days later. The women understood that they were paying to bring the motion to court. They testified that they would never have paid $2500 for an attorney to simply review C.B.'s case. Attorney Backes spoke with C.B. on January 17, 2000. On January 27, 2000, C.B. wrote to Attorney Backes with various suggestions and questions. Attorney Backes never responded to this letter and refused to accept C.B.'s telephone calls from prison. He also failed to return telephone calls from C.B.'s family members, and was repeatedly unavailable to meet with them, even when they went to his office seeking information about the status of C.B.'s case.

¶ 45. C.B. wrote to Attorney Backes again on April 20, 2000. Attorney Backes responded in writing on April 25, 2000, advising him that he had "reviewed the materials we have been sent and the input you have provided and have scheduled this matter for further review to determine what cause of action may have merit and how to bring it forward." The letter concluded: "I would certainly acknowledge that more time has passed on this than I would have liked, and we will proceed to re-review this matter and get back to you before too long."

¶ 46. On April 29, 2000, C.B.'s aunt wrote to Attorney Backes, stating she had reviewed his letter to C.B. and she was terminating Attorney Backes' representation. She requested a refund of the retainer and return of C.B.'s transcripts. Initially, Attorney Backes refused to refund any portion of the retainer, asserting that he had completed extensive document review in the matter. On March 21, 2002, Attorney Backes did refund the clients $2250 of the retainer, leaving a balance of $250 in dispute.

¶ 47. The OLR alleged and the referee concluded that by (1) not completing a review of C.B.'s case between November 19, 1999 and April 29, 2000, Attorney Backes failed to act with reasonable diligence in his representation of C.B. in violation of SCR 20:1.3; (2) failing to respond to C.B.'s letter and the telephone calls from C.B. and his family members, Attorney Backes failed to keep his client reasonably informed about the status of a matter in violation of SCR 20.1.4(a); and (3) failing to return $2250 to C.B. until March 2002, Attorney Backes failed to timely return fees that had not been earned in violation of SCR 20:1.16(d). The referee recommended that Attorney Backes be required to refund the client the remainder of the retainer fee.

¶ 48. Attorney Backes challenges the referee's findings and conclusions of law regarding this matter. The referee stated that she found the witnesses in this matter "substantially believable." Attorney Backes vigorously disputes this finding, asserting that their testimony was "clearly exaggerated" and suggesting that the testimony of C.B.'s mother was "driven by her son's relentless prodding to obtain a refund of the entire legal fee after an excessive amount of work was completed, for purposes of retaining another attorney and getting another 'kick at the can.'" Attorney Backes concedes that he should have accepted the calls from C.B., but explains that his failure to do so was due to the mistaken belief that the telephone calls were collect calls.

¶ 49. He maintains he did work on the matter and cites as evidence the fact that C.B.'s mother "peeked" into his office in one of her attempts to contact him and saw for herself the transcripts stacked next to his desk. He adds that he testified that he performed work on the matter. Attorney Backes asserts that the referee's finding that "it does not appear that any significant work was done to review [C.B.'s] undoubtedly thick file" is in error.

¶ 50. We disagree. Attorney Backes was unable to produce documentation reflecting substantial work on the C.B. matter. He could only document having researched and copied two appellate decisions, and had no notes or other documentation to support his claim that he had reviewed voluminous transcripts. The referee was entitled to disbelieve Attorney Backes' assertions to the contrary. Similarly, there is no reason to disregard the referee's credibility determinations with respect to the witnesses in this matter. We recognize that Attorney Backes maintains that he earned the fee and returned it only to appease the OLR, however, absent documentary evidence of work performed on these files, we will not deem the referee's findings clearly erroneous.

¶ 51. Indeed, having reviewed the record in this matter we adopt the referee's findings of fact and conclusions of law and commend the referee for her detailed report and recommendation and careful citations to the record evidence. The few arguable discrepancies identified by Attorney Backes do not alter the conclusions we reach in this matter.

¶ 52. Turning to the question of the appropriate discipline, Attorney Backes points to statements by the OLR indicating it considered the alleged misconduct committed in the C.D. matter to be the most serious charge levied against Attorney Backes, as well as to statements indicating that it was the combination of incidents of alleged misconduct that warranted a public reprimand. Attorney Backes was, of course, absolved of the allegations of misconduct in the C.D. matter, and also in the D.M. matter.

¶ 53. In considering the appropriate discipline for professional misconduct, we consider a variety of factors, including the seriousness, nature and extent of the misconduct; the level of discipline needed to protect the public, the courts and the legal system from repetition of the lawyer's misconduct; the need to impress upon the attorney the seriousness of the misconduct; and the need to deter other attorneys from committing similar misconduct. See In re Disciplinary Proceedings Against Charlton, 174 Wis. 2d 844, 876, 498 N.W.2d 380 (1993).

¶ 54. We consider Attorney Backes' lack of previous discipline and the fact that he was cleared of several charges. We recognize his extensive cooperation with the OLR and his acknowledgement that he committed certain errors, and that a "lesson has been learned." We are mindful that he did return fees to clients.

¶ 55. However, we share the OLR's concern about "the distressing patterns of behavior. . . carried out against some of the most vulnerable and undereducated clients." Attorney Backes' repeated incidents of failure to proceed with reasonable diligence, failure to keep clients informed of the progress of their cases, and failure to return unearned fees owed to clients does constitute a pattern of conduct that warrants the imposition of public discipline.

¶ 56. Therefore, we adopt the report and recommendation. We order Attorney Backes to pay restitution in the form of a $250 fee refund to C.B., and a $500 fee refund to D.L.S., reflecting the unreimbursed portion of the $2000 fee retainer. In addition, we order Attorney Backes to pay the costs of the disciplinary proceeding.

¶ 57. IT IS ORDERED that Attorney Michael J. Backes is publicly reprimanded for professional misconduct.

¶ 58. IT IS FURTHER ORDERED that Attorney Michael J. Backes make restitution in the amount of $250 to C.B., and $500 to D.L.S.

¶ 59. IT IS FURTHER ORDERED that within 60 days of the date of this order Attorney Michael J. Backes pay to the Office of Lawyer Regulation the costs of this proceeding. If the costs are not paid within the time specified and absent a showing to this court of his inability to pay the costs within that time, the license of Attorney Michael J. Backes to practice law in Wisconsin shall remain suspended until further order of the court.

SHIRLEY S. ABRAHAMSON, C.J.

¶ 60. (concurring). My concurrence in In re Disciplinary Proceedings Against Konnor, 2005 WI 37, 279 Wis. 2d 284, 694 N.W.2d 376, provides context and perspective regarding costs in disciplinary proceedings and also stands as a concurrence in the present case. See also In re Disciplinary Proceedings Against Polich, 2005 WI 36, 279 Wis. 2d 266, 694 N.W.2d 367 (Abrahamson, C.J., concurring).

¶ 61. Keith Sellen, Director of the Office of Lawyer Regulation, has filed an administrative rules petition proposing certain changes to the Supreme Court Rules relating to assessment of costs. The court will hear the petition in the fall of this year. See Rules Petition 05-01, In the Matter of the Petition for Amendment to Supreme Court Rule 22.0001(3) Relating to Cost Assessments in the Lawyer Regulation System (Jan. 18, 2005).

¶ 62. Until the court decides the petition, I would continue the court's practice of generally assessing full costs.

¶ 63. I am authorized to state that Justice N. PATRICK CROOKS joins this opinion.

ANN WALSH BRADLEY, J.

¶ 64. (concurring). I have not yet written in what has become a continuing discussion on the issue of imposition of costs in disciplinary cases. Much has been written and the topic has consumed, in my opinion, an undue amount of this court's time and resources. A petition has been filed for the court to consider new guidelines and standards in the imposition of such costs. Let us hear the petition, make changes to our current procedures as we deem necessary, and get on with the business of this court.

¶ 65. Both my life experience and my experience on this court impel me to the conclusion that we need uniform procedures and they need to be uniformly applied. Each case has its unique facts which result in differing levels of discipline. But no matter what the circumstances involved, the procedures should be the same.

¶ 66. The procedures and standards must apply equally regardless if the respondent is with a large firm or small firm, specialized practice or general practice, urban or rural. I believe it to be laudatory that the dissent envisions new approaches and considers better ways of doing things. However, to apply a new standard in this case, which has not been applied in others, only because some justices have a new idea for a temporary standard, promotes instability and lack of uniformity in our procedures. It is also unfair to others who have not had the benefit of catching the attention and imagination that prompts this new stopgap approach.

¶ 67. Notably, this new approach will likely be more costly, which may exacerbate rather than minimize the concern regarding high costs advanced by the dissent. It will require a determination by a fact finder as to what is "substantially related." Although the dissent suggests that such a determination is "simple," I do not think so.

¶ 68. It may not be so simple to parse what part of trial preparation is attributed to which count. Likewise, in my experience, it may not be able to easily determine what fraction of the hearing before the referee or the oral argument in this court is as a result of what count. Are we to add the total minutes or hours of the proceeding, and then analyze the questions and answers to determine how each is to be allocated?

¶ 69. After we have a hearing on the newly filed petition and consider the positions advanced by those who appear, the court may well embrace the position set forth by the dissent. Or, it may consider an alternative. But whatever we do, we must be consistent in the application of our standards and procedures.

¶ 70. Let's have the hearing on the filed petition, decide it, and turn our attention to the many other pressing issues before this court.

¶ 71. I am authorized to state that CHIEF JUSTICE SHIRLEY S. ABRAHAMSON, JUSTICE JON E WILCOX, and JUSTICE N. PATRICK CROOKS, join this concurrence.

LOUIS B. BUTLER, JR., J.

¶ 72. {concurring in part, dissenting in part). I join the per curiam's decision and order as to the discipline imposed in this action. I write separately because I disagree with the court that full costs should be imposed in this case. Because Attorney Backes was absolved of any allegations of misconduct in both the C.D. and D.M. matters, I would not assess any costs for the counts associated with those complaints.

¶ 73. On December 5, 2002, Attorney Backes was charged with 15 disciplinary violations stemming from five separate client matters. Ultimately, the referee concluded that Attorney Backes had committed misconduct in connection with nine of the 15 counts concerning three separate client matters. We accept the referee's findings of fact and conclusions of law with respect to the disciplinary proceedings. Those findings include a determination that Attorney Backes did not commit misconduct with respect to his handling of the D.M. matter contained in counts five through eight of the complaint, and that he did not commit misconduct with respect to his handling of the C.D. matter contained in counts 11 and 12 of the complaint.

¶ 74. Given our determination, we must now determine the appropriate discipline for the professional misconduct found. As the per curiam opinion indicates, we consider a variety of factors, including the seriousness, nature, and extent of the misconduct; the level of discipline needed to protect the public, the courts, and the legal system from repetition of the lawyer's misconduct; the need to impress upon the attorney the seriousness of the misconduct; and the need to deter other attorneys from committing similar misconduct. Per curiam op., ¶ 53. See also Disciplinary Proceedings Against Charlton, 174 Wis. 2d 844, 876, 498 N.W.2d 380 (1993). In considering these factors, the critical term used in the evaluation is "misconduct." Where no misconduct occurs, by definition nothing serious has happened. Where no misconduct occurs, the public, courts, and legal system are not in need of protection from its repetition. Where no misconduct occurs, there is no need to impress upon the attorney the seriousness of a nonexistent violation. Where no misconduct occurs, the need to deter other attorneys is absent.

¶ 75. We have determined that Attorney Backes has committed nine counts of misconduct against three different clients. Of course, he should be held responsible for the costs of the proceeding with respect to these counts, as well as the restitution ordered by the court. Per curiam op., ¶ 56. He did not commit any misconduct with respect to C.D. and D.M., however.

¶ 76. For the reasons stated in my concurring in part, dissenting in part opinion in In re Disciplinary Proceedings Against Polich, 2005 WI 36, ¶¶ 39-40, 279 Wis. 2d 266, 694 N.W.2d 367, I would adopt a "substantially related" approach to ordering costs in Office of Lawyer Regulations ("OLR") proceedings. In other words, where evidence is introduced that relates to multiple violations, I would assess costs associated with the prosecution of both the successful and the related unsuccessful counts. See United States v. Pieper, 854 F.2d 1020, 1027-28 (7th Cir. 1988). Costs should not be assessed against an attorney in unrelated, unsuccessful counts where no misconduct has been found concerning a particular client. Such an assessment simply does not support the purposes underlying the factors we consider in determining the appropriate level of discipline where misconduct has occurred, but in unrelated matters.

¶ 77. I recognize that the "substantially related" approach that I would apply in this matter may not be a long-term solution as to how costs should be awarded in attorney-discipline cases. Supreme Court Rule 22.24 (1) establishes that this court has discretion to apportion costs in OLR proceedings. Until we establish standards, guidelines, and procedures for how to exercise our discretion, I propose the "substantially related" approach as a temporary measure so that we do not abdicate our responsibility to exercise our discretion in cases like this where discretion is warranted. Accordingly, I would follow the rationale set forth in Pieper until we devise our own procedures.

¶ 78. Applying the "substantially related" test is simple in this case. I conclude that imposing costs on Attorney Backes regarding the allegations of misconduct with respect to handling C.D.'s and D.M.'s matters is not warranted. Attorney Backes was acquitted of all allegations of misconduct regarding these clients, and there is no basis upon which to conclude that these allegations were in any way, much less substantially, related to the misconduct that was established.

¶ 79. In view of his lack of prior discipline, his "extensive cooperation with the OLR," his acknowledgement that he committed certain errors, and the fact that he returned fees to clients, imposing full costs on Attorney Backes is not justified. The factors we are to consider when imposing discipline simply do not warrant that result.

¶ 80. I therefore respectfully dissent from that portion of the per curiam opinion that assesses full costs against the respondent. I concur with the remainder of the decision.

¶ 81. I am authorized to state that Justice PATIENCE DRAKE ROGGENSACK joins this opinion.

       Attorney Backes' notice of appeal was untimely. The Office of Lawyer Regulation (OLR) moved to dismiss the entire appeal. This court acknowledged that the appeal was untimely but directed the parties to file briefs in the matter pursuant to SCR 22.17(2), which provides that "[i]f no appeal is filed timely... [t]he court, on its own motion, may order the parties to file briefs in the matter."

       These nine violations include the four counts to which Attorney Backes stipulated.

       SCR 20:1.3 provides that "[a] lawyer shall act with reasonable diligence and promptness in representing a client."

       SCR 20:1.4(a) provides: "(a) A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information."

       SCR 20:1.4(b) provides: "(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation."

       SCR 20:1.16(d) provides:
      (d) Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee that has not been earned. The lawyer may retain papers relating to the client to the extent permitted by other law.

        See, e.g., OLR v. Trewin, 2004 WI 116, 275 Wis. 2d 116, 684 N.W.2d 121; OLR v. Polich, 2005 WI 36, 279 Wis. 2d 266, 694 N.W.2d 367; OLR v. Konnor, 2005 WI 37, 279 Wis. 2d 284, 694 N.W.2d 376.

       Petition Number 05-01, In the Matter of the Petition For Amendment to Supreme Court Rule 22.001(3) Relating to Cost Assessments in the Lawyer Regulation System, filed by Keith Sellen, Director, Office of Lawyer Regulation. The petition requests that the court amend SCR 22.001(3) to define "costs" in the Lawyer Regulation System to include "the compensation and necessary expenses of referees [and] litigation expenses other than counsel fees of the office of lawyer regulation ...." As a result, counsel fees would not be assessed against the respondent in a disciplinary case, but would be absorbed by the Office of Lawyer Regulation's operating expenses, paid for by all of the members of the Bar.

       Per curiam op., ¶ 51.

       Per curiam op., ¶ 24.

       Per curiam op., ¶ 30.

       We agree with the concurrence that one way to handle the lack of standards for assessing costs is by rule petitions. Bradley, J., concurrence, ¶¶ 64, 70. Nevertheless, Supreme Court Rule 22.24 (1) unequivocally vests this court with discretion to apportion costs in OLR proceedings. "The fact that we have not established standards, guidelines, and procedures for when we exercise that discretion does not abdicate our responsibility to do so in cases like this where discretion is warranted." In re Disciplinary Proceedings Against Polich, 2005 WI 36, ¶ 43, 279 Wis. 2d 266, 694 N.W.2d 367 (Butler, J., dissenting).
      The key word is "discretion." As this court reaffirmed just last term in State v. Gallion, 2004 WI 42, ¶ 3, 270 Wis. 2d 535, 678 N.W.2d 197, discretion is not synonymous with decision-making. The exercise of discretion " 'contemplates a process of reasoning.'" Id. (quoting McCleary v. State, 49 Wis. 2d 263, 280-81, 182 N.W.2d 512 (1971)).

       Per curiam op., ¶ 54.