Graney v. Board of Regents of University of Wisconsin System

Plaintiffs appeal from an order of the Dane County Circuit Court entered December 6, 1978, granting defendants’ motion for summary judgment. The court’s order dismissed plaintiffs’ action seeking damages and declaratory and injunctive relief for seventeen University of Wisconsin System tenured faculty members laid off or terminated by the defendants.

The plaintiffs were tenured members of the University of Wisconsin System under sec. 37.31, Stats. (1971). In the spring of 1973, the Board of Regents determined that several campuses of the University of Wisconsin System were experiencing a financial exigency which *748 required a layoff of several tenured faculty members throughout the system. In a letter dated April 4, 1973, the president of the university directed each chancellor at the state campuses to select tenured faculty members for layoff effective June, 1974. A letter of May 14, 1973, sent to each chancellor explained that these actions would be considered layoffs rather than terminations, so that the tenured faculty members could retain their tenure status and employment benefits if they were rehired. About May 15, 1973, each of the plaintiffs received notification that he or she would be laid off as of June 30, 1974, due to financial exigency existing at their campuses. The Board of Regents adopted a review procedure in which the plaintiffs’ layoffs were reconsidered by a committee consisting of other faculty members. Although the reconsideration committees at each state campus, with the exception of UW-Platteville, voted to rescind the layoff decisions, the chancellors reinstated the layoffs and the Board of Regents affirmed the chancellors’ decisions.

Plaintiffs moved for a preliminary injunction in federal district court, alleging deprivation of their tenure rights in violation of their rights of due process and free speech protected by the first and fourteenth amendment of the United States Constitution. The preliminary injunction was denied, and the Seventh Circuit Court of Appeals affirmed the district court decision. Johnson v. Bd. of Regents, 377 F. Supp. 227 (W.D. 1974) Aff’d. 510 F.2d 975 (7th Cir. 1975). Plaintiffs brought this action in April, 1976.

Plaintiffs assert six causes of action: (1) that sec. 37.31, Stats. (1971) 1 creates a contract between the state *749 and tenured faculty members which was breached by the defendants; (2) that see. 37.31, creates vested statutory rights which only the legislature, not the Board of Regents, can modify; (3) that the Board of Regent’s power to terminate tenure rights because of a financial exigency may not be delegated to the president or chancellors of the university; (4) that the procedures used to terminate plaintiffs violated their due process rights under the Fourteenth Amendment to the United States Constitution and art. 1, secs. 1, 13 and 22 of the Wisconsin Constitution; (5) that the defendants unlawfully *750 terminated the plaintiffs’ contracts without adopting rules pursuant to secs. 37.31 and 227.13, Stats.; and (6) that the terminations abridged plaintiffs’ contract rights in violation of art. 1, sec. 10 of the United States Constitution.

We find that the plaintiffs are precluded from bringing this action against the Board of Regents because of the doctrines of sovereign immunity and public officer civil immunity and because they failed to exercise their exclusive method of review through ch. 227 administrative procedures.

Article 4, sec. 27, Wisconsin Constitution provides: “The legislature shall direct by law in what manner and in what court suits may be brought against the state.” Express legislative consent is required to sue an agency or officer of the state. Lister v. Board of Regents, 72 Wis.2d 282, 240 N.W.2d 610 (1976); Metzger v. Department of Taxation, 35 Wis.2d 119, 150 N.W.2d 431 (1967); Cords v. State, 62 Wis.2d 42, 214 N.W.2d 405 (1974); Kenosha v. State, 35 Wis.2d 317, 151 N.W.2d 36 (1967); Sullivan v. Board of Regents of Normal Schools, 209 Wis. 242, 244 N.W. 563 (1932).

Independent Going Concern

The doctrine of sovereign immunity does not apply when an agency has “independent proprietary functions and powers” or is an “independent going concern,” Sullivan v. Board of Regents of Normal Schools, 209 Wis. at 244; Lister v. Board of Regents, 72 Wis.2d at 292-93; Majerus v. Milwaukee County, 39 Wis.2d 311, 159 N.W.2d 86 (1968). Sullivan and Lister held that the Board of Regents did not have sufficient characteristics to be an “independent going concern.”. In Sullivan the court *751 found that the board could not collect funds, incur debts or liabilities or dispose of property without legislative approval, and thus, was not sufficiently independent to be sued. Lister held that a suit against the Board of Regents for damages constituted a suit against the state and that the board was not an “independent going concern” amenable to suit. The powers now held by the Board of Regents are essentially the same as the powers of the board at the time Lister was decided. We conclude that the Board is not an independent going concern for purposes of liability.

Actions in Excess of Constitutional or Jurisdictional Authority

The doctrine of sovereign immunity also does not bar an action to enjoin officials from acting beyond their constitutional or jurisdictional authority. Barry Laboratories, Inc. v. State Bd. of Pharm., 26 Wis.2d 505, 132 N.W.2d 833 (1965) and Lister, 72 Wis.2d 282. Plaintiffs allege that the defendants have violated their due process rights protected by the Fourteenth Amendment of the United States Constitution and art. 1, secs. 1, 13, and 22 of the Wisconsin Constitution and have interfered with their contract rights under art. 1, sec. 10, United States Constitution.

In addition, plaintiffs claim that the defendants acted in excess of their authority by delegating the termination decision to other university officials and by failing to adopt rules governing the termination of plaintiffs’ contracts.

Plaintiffs are precluded from asserting the due process issue under the doctrine of res judicata because that issue was determined in plaintiffs’ federal court action. *752 See McCourt v. Algiers, 4 Wis.2d 607, 610-11, 91 N.W.2d 194 (1958), where the supreme court found that issues litigated and determined in a federal court action could not be relitigated in a state court action arising from the same facts.

The remaining constitutional issue raised by the plaintiffs alleges a violation of the contract clause of art. 1, sec. 10, United States Constitution. 2 Plaintiffs assert that the tenure statute, sec. 37.31, Stats. (1971), creates a contract between the state and tenured faculty members which only the legislature can modify. In Morrison v. Board of Education, 237 Wis. 483, 487, 297 N.W. 383 (1941) the Wisconsin Supreme Court held that the Teacher Tenure Act, sec. 39.40(2), Stats. (1939), was a declaration of legislative policy and did not create a contract between teachers and school boards. Plaintiffs contend that Morrison is an aberration in Wisconsin law and that the correct law is represented by Butler v. The Regents of the University, 32 Wis. 124 (1873), which described the relationship between a professor and the University of Wisconsin as contractual. More recently, the Wisconsin court in State ex rel. Farley v. Bd. of School Directors, 49 Wis.2d 765, 771, 183 N.W.2d 148, 152 (1971), stated that “teacher tenure laws are in derogation of the common law, creating a contract between the parties by operation of law.”

The cases presented by the parties show two distinct contexts in which the court considered the effect of the tenure statute. In Morrison, 237 Wis. 483, and similar cases, the court considered the legislature’s power to alter provisions of the teacher tenure statute. In the cases represented by Butler, 32 Wis. 124, and Farley, 49 Wis.2d *753 765, the court examined the nature of the relationship between teachers or professors and their respective employers.

Chapter 227 Review Exclusive

The legislature has in fact consented to judicial review of the board’s acts by means of ch. 227 administrative review.

Section 37.31(1) (b), Stats. (1971), provides that the actions and decisions of the board in faculty terminations “shall be final, subject to judicial review under ch. 227.”

The scope of review under ch. 227 is outlined in sec. 227.20, Stats. (1971):

(1) The review shall be conducted by the court without a jury and shall be confined to the record, except that in cases of alleged irregularities in procedure before the agency, testimony thereon may be taken in the court. The court may affirm the decision of the agency, or may reverse or modify it if the substantial rights of the appellant have been prejudiced as a result of the administrative findings, inferences, conclusions or decisions being:

(a) Contrary to constitutional rights or privileges, or

(b) In excess of the statutory authority or jurisdiction of the agency, or affected by other error of law; or

(c) Made or promulgated upon unlawful procedure; or

(d) Unsupported by substantial evidence in view of the entire record as submitted; or

(e) Arbitrary or capricious.

All issues raised by the plaintiffs on this appeal could have been reviewed under ch. 227.

*754 Plaintiffs claim that since the Board of Regents designated its actions as “layoffs” rather than “terminations,” the provision in sec. 37.31, Stats. (1971) for ch. 227 review does not apply. Such reasoning would also force the conclusion that sec. 37.31, does not apply to protect plaintiffs’ tenure rights, and remove the basis for plaintiffs’ claims. 3

Even if sec. 37.31, Stats. (1971) does not apply to plaintiffs’ case, ch. 227 review was still available. Section 227.15, Stats. (1971) describes the types of administrative decisions which are reviewable under ch. 227.

Administrative decisions, which directly affect the legal rights, duties or privileges of any person, whether affirmative or negative in form, except the decisions of the department of revenue, the commissioner of banking and the commissioner of savings and loan, shall be subject to judicial review as provided in this chapter; but if specific statutory provisions require a petition for re *755 hearing as a condition precedent, review shall he afforded only after such petition is filed and determined.

The hoard’s decision to affirm the layoffs of the plaintiffs was a final decision which affected “the legal rights, duties or privileges” of the plaintiffs.

Where a specified method of review is prescribed by the legislature, that method is exclusive. Kosmatka v. DNR, 77 Wis.2d 558, 567, 253 N.W.2d 887 (1977); St. ex rel. 1st Nat. Bank v. M&I Peoples Bk., 82 Wis.2d 529, 263 N.W.2d 196 (1978); and Kegonsa Jt. Sanit. Dist. v. City of Stoughton, 87 Wis.2d 131, 274 N.W.2d 598 (1979).

In St. ex rel. 1st Nat. Bank, 82 Wis.2d 529, the Wisconsin court rejected an attempt to bring a quo warranto action to challenge the actions of the banking review board and the commissioner of banking as unconstitutional and in excess of their authority when a statute provided that final orders or determinations of the banking review board were subject to ch. 227 review. The court stated at page 543, that ch. 227 review would have provided a plain, speedy and adequate review of these issues. As in St. ex rel. 1st Nat. Bank, 82 Wis.2d 529, the plaintiffs in this case allowed the time for requesting a ch. 227 review to expire.

Since the exclusive method of review was adequate to consider plaintiffs’ claims, they are precluded from obtaining^ a review outside of ch. 227 proceedings.

Damage Action Against Individual Officers

Plaintiffs finally claim that the individual members of the Board of Regents are liable in damages for the termination or layoff of the plaintiffs.

*756 The doctrine of sovereign immunity does not apply in suits for damages against officers as individuals.

Although the general rule is that “a public officer is not personally liable to one injured as a result of an act performed within the scope of his official authority and in the line of his official duty,” Lister, 72 Wis.2d at 300, 240 N.W.2d at 621, an officer may be held liable for damages resulting from the negligent performance of a ministerial duty. Pavlik v. Kinsey, 81 Wis.2d 42, 50, 259 N.W.2d 709 (1977), and Lister at 300-301.

Although plaintiffs argue in terms of the board members’ negligent performance of a ministerial duty, the substance of their argument is that the members acted outside of the scope of their official authority. 4 Plaintiffs rely on Lowe v. Conroy, 120 Wis. 151, 97 N.W. 942 (1904), which stands for the proposition that public employees may be liable for discretionary acts when acting wholly outside of their authority. Pavlik, 81 Wis.2d 42; Prosser, Law of Torts sec. 132 at 991 (Hornbook Series, 4th ed. 1971). In Lowe, a public health officer was held liable in damages for ordering the destruction of cattle which he incorrectly diagnosed as being diseased with anthrax bacilli. The court explained that the officer’s statutory authority to determine whether an animal is a source of danger to the public health and autho *757 rization to subsequently destroy the diseased animal did not protect him from liability for destroying private property which in fact does not endanger public health. Lowe, 120 Wis. at 157.

Under such circumstances quasi-judicial officers have been held liable to respond in damages upon the ground that the exercise of this discretion is limited by the superior right guaranteeing to every person immunity from having his private property rights invaded except under the regular course of law, sanctioned by the established customs and usages of the courts. The discretion in which such officers are protected must be limited to the line where their acts invade the private property rights of another, for which invasion the law affords no redress other than an action against the one actually committing the trespass. Lowe, 120 Wis. at 159, 97 N.W. at 945.

Section 37.31, Stats. (1971), limits defendants’ authority to terminate tenured faculty to discharge for “cause.” Discharge for “cause” under sec. 37.31 only includes reasons associated with efficiency and good behavior of tenured teachers. State ex rel. Schmidtkuntz v. Webb, 230 Wis. 390, 284 N.W. 6 (1939); State ex rel. Ball v. McPhee, 6 Wis.2d 190, 94 N.W.2d 711 (1959), overruled on other grounds, Stacy v. Ashland County Department of Public Welfare, 39 Wis.2d 595, 602, 159 N.W.2d 630 (1968). Since financial exigency is not a basis for “cause” under sec. 37.41, plaintiffs contend that defendants acted outside their scope of authority in discharging them.

The Board of Regents’ authority to terminate employees for reasons of financial exigency is not expressly granted by the statutes. 5 However, this authority is im *758 plied under the general powers of the board for state universities governed by ch. 37, Stats. (1971), which provide that, “the board of regents shall possess all other powers necessary or convenient to accomplish the objects and perform the duties prescribed by law.” Sec. 37.02(1), Stats. (1971).

Defendants present facts in affidavits of university officials that in 1973, the legislature reduced the university budget for the following biennium and introduced a funding formula which tied budget levels to the number of actual student credit hours. A decline in enrollment at the campuses throughout the state resulted in a loss of instructional funds. In order to comply with the legislature’s budgetary restrictions, the Board of Regents *759 determined that in addition to firing nontenured employees, it was necessary to lay off or terminate tenured faculty.

Several jurisdictions have recognized that educational governing boards possess an inherent authority to discharge tenured faculty for reasons of financial exigency which is distinct from the authority to discharge for cause. Funston v. District School Board, 130 Or. 82, 278 P. 1075 (1929); Downs et al. v. Board of Education of Hoboken Dist., 181 A. 688 (1935); Ehret v. Kulpmont Bourough School District, 333 Pa. 518, 5 A.2d 188 (1939); State ex rel. Frank v. Meigs County Board of Education, 140 Ohio St. 381, 24 Ohio Ops. 303, 44 N.E.2d 455 (1942); Miller v. Stoudnour, 148 Pa. Super. 567, 26 A.2d 113 (1942); Appeal of Ritzie, 372 Pa. 588, 94 A.2d 729 (1953); Levitt v. Board of Trustees of Nebraska State Colleges, 376 F. Supp. 945 (D. Neb. 1974); Cf. Browzin v. Catholic University of America, 527 F.2d 843, 847 (1975); Krotkoff v. Goucher College, 585 F.2d 675 (C.A. 4th Cir. 1978); Steinmetz v. Bd. of Trustees, etc., 68 Ill. App.3d 83, 24 Ill. Dec. 604, 385 N.E.2d 745 (1978); Annot., 100 A.L.R.2d 1159-60, sec. 8 (1965).

The court in Krotkoff, 585 F.2d at 679-80, reconciled this power to terminate with the concept of tenure:

A concept of tenure that permits dismissal based on financial exigency is consistent with the primary purpose of tenure. Tenure’s “real” concern is with arbitrary or retaliatory dismissals based on an administrator’s or a trustee’s distaste for the content of a professor’s teaching or research, or even for positions taken completely outside the campus setting. ... It is designed to foster our society’s interest in the unfettered progress of research and learning by protecting the profession’s freedom of inquiry and instruction.” Browzin v. Catholic University, 174 U.S. App. D.C. 60, 63, 527 F.2d 843, 846 (1975). See also Rehor v. Case Western Reserve University, 43 Ohio St.2d 224, 331 N.E.2d 416, 421 (1975); Note, Dismissal of Tenured Faculty for Reasons of *760 Financial Exigency, 51 Ind. L.J. 417 n. 2 (1976). Dismissals based on financial exincy, unlike those for cause or disability, are impersonal; they are unrelated to the views of the dismissed teachers. A professor whose appointment is terminated because of financial exigency will not be replaced by another with more conventional views or better connections. Hence, bona fide dismissals based on financial exigency do not threaten the values protected by tenure.

Several of the cases listed above were decided on the bases of statutory interpretation of general board powers, Steinmetz, 385 N.E.2d 745; 6 Levitt, 376 F. Supp. 945; 7 Ehret, 5 A.2d 188; 8 interpretation of contract pro *761 visions, Browzin, 527 F.2d at 845; and general custom and understanding by the academic community of the concept of tenure, Krotkoff, 585 F.2d 675. 9 Nevertheless, these courts noted the existence of an inherent power to terminate for reasons of financial emergency.

Courts which based their decision solely on an inherent power to terminate for reasons of financial emergency in the face of a tenure protection statute cited sound educational policy and common sense in support of their conclusions.

We have carefully read the Tenure of Office Act, particularly the portions the plaintiff relies upon, but find it impossible to draw the conclusion which counsel suggests. To us it seems that plaintiff’s position can be *762 sustained only in the event that words can be found in the act which undertake to provide teachers, situated like the plaintiff, with a life income conditioned only upon their proper conduct. Although plaintiff’s counsel has apparently made a painstaking analysis of the act, he has pointed out no such provision. In its absence he argues that the Tenure of Office Act regulates the discharge of teachers, and that since a severance of employment, by reason of a program of economy or a lack of further need for the teacher’s services, is not expressly mentioned in the act, such developments do not permit the board to dismiss a teacher, who holds a life certificate. Before accepting that conclusion, it may be well to consider briefly the reasons which underlie legislation regulating the discharge of teachers and other public employees. When such an employee’s services must be discontinued because of the demands of economy, or by reason of a lack of pupils, the cause does not have its inception in the teacher, but arises from a source foreign to her and over which she possesses no control. But when her misconduct results in a complaint and subsequently in a dismissal, the cause is personal to herself. Because a ground of removal of the type first above mentioned is one which she did not create and which she could not explain away, statutes of this kind, which regulate the dismissal of teachers and other public employees generally, are interpreted as intending only a regulation of dismissal for causes personal to the employee. An investigation into a situation of the type first mentioned would constitute an inquiry into the policy of the board, and the wisdom of the course it adopted. It is not difficult to perceive that a few decisions by the reviewing tribunal upon matters of policy, adverse to the board, would soon dispossess the latter of its authority and usurp it to the former. Funston 278 P. at 1076.

In Appeal of Ritzie, 94 A.2d at 731, the court reaffirmed the holding of Ehret, 5 A.2d 188, and concluded that to require the board to retain a tenured teacher even though his position had been abolished “is to fly in the face not only of reason but of authority.”

The Ohio court in State ex rel. Frank, 44 N.E.2d at 456 would not accept the contention that the tenure *763 statute prevented the sehool board from terminating tenured teachers for reasons of economy.

To hold that a county board of education, having once established a position in the county public schools, has no power under the law to abolish it, even though there be a sufficient cause, would, in the opinion of the court, seriously challenge the constitutionality of the law itself.

The Pennsylvania court in Miller, 26 A.2d 113, cited its earlier decision in Ehret, 5 A.2d 188, and added at page 114,

If plaintiff must be retained under the conditions which admittedly exist in this case, then the board has no control over the school district’s finances or over school policy. The legislature in the Teachers’ Tenure Act of 1937 manifested no intention to produce such a result.

The court in Ehret, 5 A.2d at 193, cited economic efficiency as the underlying policy basis for the board’s power to terminate “unnecessary” teachers:

When an entire department is lawfully abolished for valid reasons, which may include financial ones, in the interest of a more efficient system, the teachers in that department can be dismissed. Economy is desirable in any governmental function, and we cannot so view the present legislation as to prevent the abolition of a department for this purpose.

The court in Downs, 181 A. at 688, simply concluded, without presenting any analysis, that the board could reduce staff in the interest of economy. 10

*764 Three jurisdictions have rejected the contention that boards of education have the power to terminate for reasons of economy when the tenure statute limits discharges for cause. In Spencer v. Laconia School District, 218 A.2d 437 (N.H. 1966), the court found that in light of the statutory history of the teacher tenure statute, the board only had authority to dismiss teachers for reasons specified in the statute. The statutory history showed that a prior version of the statute included dismissal when the teachers’ services “ ‘were deemed unprofitable to the school.’ ” Spencer, 218 A.2d at 440. Since this basis for dismissal had been excised by the legislature and since the powers of local school boards had traditionally been limited with regard to hiring and terminating staff, the court found that the school board did not have the authority to dismiss for financial reasons.

In Louisiana, the state court recognized the right of school boards to abolish tenured positions, but maintained that the tenured teacher must be retained on the payroll.

An honest discontinuance of his office does not automatically remove a permanent teacher from the school system. He remains therein and should forthwith be placed in a position of standing equal to that formerly held, if it be possible. In any event, he is nonetheless entitled to the salary attributable to the status he has attained even though he be re-employed in a position of lesser rank. State ex rel. Parker v. Vernon Parish School Board, 225 La. 297, 72 So.2d 512. Dugas v. Ascension Parish School Board, 228 La. 80, 81 So.2d 817, 819 (1955).

*765 Although the court did not discuss its reasons for adopting this view, the balance of the opinion reveals that the court believed