Neenah Foundry Co. v. Labor & Indus.Review Comm'n
| Decision Date | 29 January 2015 |
| Docket Number | No. 2014AP1113.,2014AP1113. |
| Citation | 860 N.W.2d 524,360 Wis.2d 459 |
| Parties | NEENAH FOUNDRY CO., Plaintiff–Appellant, v. LABOR & INDUSTRY REVIEW COMMISSION and Department of Workforce Development, Bureau of Legal Affairs, Defendants–Respondents. |
| Court | Wisconsin Court of Appeals |
On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Thomas L. Shriner, Jr., and Rachel M. Blise of Foley & Lardner LLP, Milwaukee.
On behalf of the defendant-respondent Labor & Industry Review Commission, the cause was submitted on the brief of William Sherlin Sample of Madison.
On behalf of the defendant-respondent Department of Workforce Development, the cause was submitted on the brief of Daniel J. LaRocque and Andrew J. Rubsam of Madison.
Before LUNDSTEN, SHERMAN and KLOPPENBURG, JJ.
¶ 1 Neenah Foundry Co. appeals the circuit court's order upholding a Labor and Industry Review Commission (LIRC) decision. After Neenah Foundry emerged from Chapter 11 reorganization in federal bankruptcy court, LIRC denied Neenah Foundry's request to be treated as a new employer for purposes of Wisconsin's unemployment insurance law. The effect of LIRC's decision is that, over a seven-year period, Neenah Foundry will pay between $393,216 and $564,780 more into the unemployment insurance system than it would have paid as a new employer.
¶ 2 Neenah Foundry argues that LIRC erred in interpreting the applicable statute, Wis. Stat. § 108.16(8) (2011–12).1 More specifically, Neenah Foundry argues that, contrary to LIRC's interpretation, Neenah Foundry is eligible to be treated as a new employer because both of the following are true: (1) the Chapter 11 reorganization proceedings resulted in the “transfer” of Neenah Foundry's business, as that term is used in § 108.16(8)(a), and (2) Neenah Foundry is not a “mandatory successor” under § 108.16(8)(e). Neenah Foundry argues in the alternative that federal bankruptcy law preempts LIRC's determination that Neenah Foundry is a mandatory successor.
¶ 3 LIRC and the Department of Workforce Development are respondents. They argue that LIRC's decision is entitled to great weight deference and should be upheld.
¶ 4 We assume, without deciding, that Neenah Foundry's Chapter 11 reorganization resulted in a “transfer” under Wis. Stat. § 108.16(8)(a). However, even assuming there was a transfer, Neenah Foundry loses on the mandatory successor issue. More specifically, we conclude that LIRC is entitled to great weight deference on the mandatory successor issue, and that LIRC reasonably interpreted § 108.16(8)(e) to determine that Neenah Foundry is a mandatory successor. We reject Neenah Foundry's federal preemption argument. Accordingly, we affirm.
¶ 5 From mid–2008 through 2009, Neenah Foundry saw dramatic declines in demand for its products. Starting in 2009, Neenah Foundry laid off a large number of employees, directly leading to what is referred to as an adverse “experience rating” and a corresponding increase in its unemployment insurance contribution rates. As Neenah Foundry explains in its briefing:
The [unemployment insurance] system is currently administered by the Department, which sets an employer's contribution rate based on [the employer's] “experience rating.” New employers without any experience pay into the fund at a prescribed rate for the first three years, after which their layoff experience is taken into account. If they lay off a lot of employees, they acquire an adverse experience rating and a correspondingly high contribution rate.
¶ 6 In February 2010, Neenah Foundry filed a voluntary petition for Chapter 11 reorganization in federal bankruptcy court. The bankruptcy court confirmed Neenah Foundry's Chapter 11 reorganization plan in July 2010.2
¶ 7 Under the Chapter 11 reorganization plan, Neenah Foundry remained a wholly owned subsidiary of a company called NFC Castings, Inc., which in turn remained a wholly owned subsidiary of a company called Neenah Enterprises, Inc. However, Neenah Enterprises' common stock was cancelled and new common stock was issued so that Neenah Enterprises came under the ownership of the three companies' former creditors. Reorganization also resulted in an entirely new board of directors. However, Neenah Foundry's executive team remained largely the same. Just two of the top eight executive officers were replaced. Moreover, Neenah Foundry's business activities, its assets, its 833 employees, and its physical facility remained the same as of the reorganization plan's confirmation date.3
¶ 8 After the Chapter 11 reorganization, Neenah Foundry filed a request with the Department of Workforce Development to be treated as a new employer in order to obtain a new employer experience rating and, thereby, reduce its unemployment insurance contribution rates. A Department employee denied this initial request, and Neenah Foundry appealed to the Department's “appeal tribunal.” See Wis. Stat. § 108.10(2) (). The appeal tribunal, an administrative law judge, affirmed the Department's initial determination.
¶ 9 Neenah Foundry sought review before LIRC. LIRC concluded that there was no “transfer” within the meaning of Wis. Stat. § 108.16(8)(a) because there were not distinct transferor and transferee entities, such that Neenah Foundry “transferred nothing.” In addition, LIRC determined that, even if there was a “transfer,” Neenah Foundry was not entitled to the new employer rate because the surviving entity was a mandatory successor. LIRC also rejected Neenah Foundry's preemption argument. We reference additional facts as needed below.
¶ 10 The parties agree on the general legal framework. When a transferor employer “transfer[s]” an “asset” or “activity,” as those terms are used in the relevant statutes and administrative code, the transferee employer may become eligible to pay unemployment insurance contribution rates at the new employer rate. See Wis. Stat. §§ 108.16(8)(a) and (j) and 108.18(2) ; Wis. Admin. Code § DWD 115.11 (Dec. 2014); see also Wis. Admin. Code § DWD 115.01 (Dec. 2014) (). Stated another way, the transferee employer may be eligible for a new employer experience rating. If, however, the transferee employer is deemed a “mandatory successor” according to statutory criteria, the transferee employer is ineligible for the new employer rate. See § 108.16(8)(e) and (f) ; Wis. Admin. Code §§ DWD 115.05 and 115.10 (Dec. 2014).4 Stated another way, a mandatory successor must retain the adverse experience rating.
¶ 11 We review LIRC's decision, not the circuit court's decision. Oshkosh Corp. v. LIRC, 2011 WI App 42, ¶ 6, 332 Wis.2d 261, 796 N.W.2d 217. Neenah Foundry argues that LIRC erred because the Chapter 11 proceedings resulted in a “transfer,” as that term is used in Wis. Stat. § 108.16(8)(a), and because Neenah Foundry is not a mandatory successor under § 108.16(8)(e). Additionally, Neenah Foundry argues that LIRC erred because federal bankruptcy law preempts LIRC's determination that Neenah Foundry is a mandatory successor.
¶ 12 As we understand Neenah Foundry's briefing, the net result for Neenah Foundry is the same if either of the following is true: (1) there was no transfer, or (2) assuming there was a transfer, Neenah Foundry meets the criteria for a mandatory successor. Thus, as far as we can tell, there is no need to address the transfer issue if Neenah Foundry is a mandatory successor. We assume, without deciding, that Neenah Foundry's Chapter 11 reorganization resulted in a transfer under Wis. Stat. § 108.16(8)(a) because, even assuming there was a transfer, Neenah Foundry loses on the mandatory successor issue for the reasons we explain below.5
¶ 13 In determining that Neenah Foundry was a mandatory successor, LIRC interpreted and applied Wis. Stat. § 108.16(8)(e), which provides that an employer is a mandatory successor if three listed conditions are met. Neenah Foundry effectively concedes that two of the three conditions are met here. The company disputes only one of the conditions, namely, whether pre–Chapter–11 Neenah Foundry and post–Chapter–11 Neenah Foundry are “owned, managed, or controlled in whole or in substantial part, either directly or indirectly by legally enforceable means or otherwise, by the same interest or interests.”See§ 108.16(8)(e)1.6 LIRC determined that post–Chapter–11 Neenah Foundry remained under “direct management in substantial part by the same interests” because, after its reorganization, Neenah Foundry retained six of its eight pre-Chapter 11 executive officers.
¶ 14 Our remaining analysis is in three parts. First, we explain why we conclude that LIRC's mandatory successor determination under Wis. Stat. § 108.16(8)(e) is entitled to great weight deference. Second, we explain why we conclude that LIRC reasonably interpreted § 108.16(8)(e). And, third, we reject Neenah Foundry's federal preemption argument.
¶ 15 The parties dispute the level of deference that we apply to LIRC's determination that Neenah Foundry is a mandatory successor under Wis. Stat. § 108.16(8)(e). For the reasons below, we conclude that great weight deference is appropriate.
¶ 16 Although courts are never bound by an agency's interpretation of a statute, courts “will under certain circumstances give deference to an agency's statutory interpretation.” MercyCare Ins. Co. v. Wisconsin Comm'r of Ins., 2010 WI 87, ¶ 27, 328 Wis.2d 110, 786 N.W.2d 785. More specifically:
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...court is not bound by an administrative agency's interpretation of a statute. Neenah Foundry Co. v. LIRC, 2015 WI App 18, ¶ 16, 360 Wis.2d 459, 860 N.W.2d 524. Nevertheless, depending on the circumstances, we accord an agency's statutory interpretation one of three levels of deference—no we......