Getting a case dismissed equals winning -- or, common sense hits the Courts!

It appears that times are tough not just for debtors, but for creditors, too. In the wake of the much-discussed Palisades case making it harder for assignees to prove the debt owed (discussed here) comes an unpublished decision of the Wisconsin Court of Appeals awarding costs and fees to a consumer who prevailed under the Wisconsin Consumer Act.

I have a bit of a personal interest in this issue, as I've been on the losing side of it before. In State Bank of Cross Plains v. Garavalia, (unpublished) I moved to dismiss a complaint for failing to comply with the Wisconsin Consumer Act. The creditor then amended the complaint, and I argued that the amendment made us a prevailing party, entitled to fees and costs under the Consumer Act. The Court of Appeals decided that our client hadn't prevailed enough to get costs and fees, and denied the request for those.

I had a bit of a problem with that: The WCA is supposed to work, in part, as a "private attorney general" law, and that means that consumers should be rewarded for enforcing it, and that means that lawyers should be paid for representing consumers who enforce the law, which means that the Court of Appeals should probably keep in mind that a consumer who (as Garavalia, through us, did) gets the creditor to comply with the law when they initially did not should be compensated for doing the State's job.

But rather than keep running into that wall, our strategy in those cases then changed tactics, and we began, when creditors filed complaints which we thought were deficient under the Act, filing counterclaims asserting a right to damages for failing to comply with the Act. Some creditors and their lawyers argued that there were no damages for such a violation -- relying on the terrible decision in Rsidue LLC which held that assignees were not subject to certain WCA requirements (that case is discussed here) and relying on my Garavalia case and also relying on another case, GE Money Bank v. Mercado, another unpublished case that made a vague reference to the idea that failing to comply with the Wisconsin Consumer Act's requirements might not lead to damages or costs of fees. (I discussed Mercado here, too.)

But now, along comes Auto Cash Title Loans of Wisconsin v. Webster, an unpublished case in which the Court of Appeals undid some of the Mercado/Rsidue/Garavalia harm.

In Webster, Auto Cash got a replevin judgment which apparently violated the Consumer Act's requirements. Webster moved to reopen the judgment and won, getting it dismissed without prejudice. Webster then asked for his costs and fees as a prevailing party under the Act, but the court denied those, ruling that Webster hadn't prevailed enough.

(Getting a case dismissed, with or without prejudice, isn't winning enough? I don't get it.) Webster appealed, and argued that he'd gotten the case dismissed, and that was prevailing, and the Court of Appeals agreed:

the benefit may or may not be merely temporary... For any number of reasons, a creditor might simply decide not to or no longer be able to proceed with a new case... the dismissal of a case without prejudice constitutes a "significant benefit in the litigation."

The Court also ruled that Rsidue's holding (if it was that) rejecting the award of fees and costs "had been long-since rejected" in Consumer Act cases.

So now, if you get a case dismissed -- however temporarily -- under the Consumer Act, you should be awarded your fees and costs. Creditors, and debt collectors, are facing even greater hurdles in getting these cases into court, and the risks of losing have increased significantly, because now failing to comply with pleading requirements may well result in not just a dismissal-and-restart, but an award of costs and fees to the other side.

On the other hand, it's an unpublished decision, which is almost worthless in court; lawyers and litigants have to hope that judges and commissioners are reading these cases and aware of what the hidden secret law in Wisconsin is, because the Court of Appeals isn't bothering to make all the law apply to all the public.