Lawsuit watch: A class action suit seeks to protect you... from the government protecting you.

Have you gotten your HAMP modification yet? As with any government program, there's some kinks to work out, kinks ranging from companies not bothering to comply with federal law to, apparently, the government's programs to help you violating your constitutional rights.

In Williams v. Geithner, a case pending in the U.S. District Court for Minnesota, the Housing Preservation Project has filed a class action complaint naming the U.S. Government, Fannie Mae, Freddie Mac, and some big servicers (Ocwen and GMAC), alleging that because HAMP does not give specific reasons for denials of benefits, and no right to appeal is allowed, HAMP violates constitutional due process protections. The complaint alleges that Ocwen and GMAC, in administering the HAMP program for the government, violated the named plaintiffs' rights.

One plaintiff, the complaint alleges, sought modification of his first mortgage under HAMP and his second mortgage under the servicer's (Ocwen) programs. The complaint alleges this plaintiff met all the criteria for a HAMP modification, but that he was denied without any reason -- the letter denying modification gave (allegedly) only "theoretical" reasons.

The other plaintiff, the complaint says, was given several "temporary" loan modifications, "only to have a permanent modification denied for dubious, if not factually wrong reasons," after which she would be offered another temporary modification -- but not through HAMP. The complaint says that this borrower specifically asked for HAMP modifications numerous times but was "effectively denied" that because no offer was made through the HAMP program.

Both borrowers had "80/20" loans, a popular set-up over the last few years; in an 80/20 loan, the borrowers get a first mortgage for 80% of the value of the residence, and a second mortgage for 20% of the value -- effectively getting 100% financing, but avoiding the private mortgage insurance most lenders require when the loan equals more than 80% of the home's value. In some cases, the 80/20 loan is fraudulent: there are cases when the first lender doesn't know that the second loan will be made, and I know of at least one case where the second loan -- the 20% -- closed the day before the first loan, and the proceeds of the second loan were then represented to be the down payment on the first loan.

The nature of the loans isn't played up much in the Complaint, and I haven't read the rest of the pleadings (but I will). The class action is still in the early going, but already appears to be an uphill battle: The Court denied a preliminary injunction, finding that the odds of success were not great. And the defendants have filed motions to dismiss the case, motions that so far as I know have yet to be heard.

Even if the lenders don't have to provide due process guarantees under HAMP -- constitutional due process isn't my area of law, so I'm not giving an opinion on that -- these borrowers have other possibilities, though. As I've pointed out before, not abiding by HAMP can allow a defendant to move to dismiss, and can let a defendant sue for breach of contract or breach of the good faith duty.

Plus, in Wisconsin, foreclosures are equitable actions, so a court could simply deny foreclosure if it found that a failure to follow HAMP is an inequitable stance on the part of the lender or servicer.

There's still a lot of litigation to go, in Williams v. Geithner and in foreclosure cases all over, but one thing is clear: Borrowers are forcing lenders, more and more, to prove their case and treat them fairly.

reddo vestri, haud securus inrideo vobis (Tales of Pro Se Litigants, 3)

In May, 2006, Timothy Ross bought a motorcycle from Terrance Larson for $9,000, with Ross apparently (or allegedly) agreeing to give Larson a lien on the bike to secure the purchase.

By June, 2008, Ross had (allegedly) stopped paying, and Larson then filed a small claims action for repossession of the motorcycle. (Ross claimed, according to court records, that he had paid for the bike and that it might not have been worth $9,000.)

Larson represented himself at the small claims level -- and lost. The Court took evidence and decided that Larson had not created an enforceable security interest in the motorcycle, and because of that, he couldn't repossess it. (Larson's security interest seems to have never been properly created because, according to Larson, Ross never filed the papers to do that.)

Larson then went and got himself a lawyer, and sued again, this time in regular civil court. Larson's theory in civil court was that Ross had breached the contract for sale of the motorcycle and he was therefore entitled to damages. (For some reason, Larson sued in this action the Wisconsin Department of Children & Families. I wasn't able to figure out why that was, but that's not a pro se litigant's fault; that's the lawyer's doing, since Larson was represented in the second action.)

Larson lost the second action on claim preclusion grounds, with the Court ruling that the underlying facts of each suit, the small claims pro se case and the later civil action for breach of cotnract, were the same.

Claim preclusion applies when there have been two different legal actions, and (1) the parties are the same in each (or are deemed to be the same), (2) there was a final judgment in the first action, and (3) there is "an identity of claims" in the two suits.

Larson-- via his lawyer, in the second action -- tried to get around claim preclusion by arguing a couple of theories.

First, he said that there was no "identity of claims." His first suit, he said, was for repossession; the second suit was for breach of contract. No go, said the Court of Appeals (using fancier language, of course):

"We use the transactional approach to determine whether there is an identity of claims... [we look at] a claim in factual terms... regardless of the claimant's substantive theories or forms or relief, regardless of the primary rights invaded, and regardless of the evidence needed to support the theories or rights. Under the transactional approach, the legal theories, remedies sought, and evidence used may be different between the first and second actions."

Which is all a lengthy way of saying what the Court then said to sum up:

"We therefore look not only to claims actually brought, but to claims that could have been brought in the first action."

Larson said neither the second nor third element of claim preclusion was met, but he was obviously wrong -- the underlying facts were a sale of the motorcycle to Ross, and Ross' alleged breach of contract. Even though Larson said he didn't know about the failure to properly note the lien on the motorcycle title, there was nothing different about the facts in each suit. (The Court of Appeals noted that by saying "the underlying factual grouping in each case remained identical.")

Larson then attacked the validity of the judgment on competency grounds, which is curious.

Competency is what Wisconsin courts use to make a distinction between jurisdiction, and an inability to hear an action. In the past, people used to argue that courts in Wisconsin had no jurisdiction to hear a case -- meaning generally that the court lacked "subject matter" jurisdiction. But all Wisconsin circuit courts have subject matter jurisdiction over all cases -- that is, there is no legal issue a Wisconsin circuit court is prohibited from hearing. (The issue of circuit court's jurisdiction apparently goes back to when there were county courts and courts of equity and all the other courts people used to have. Nowadays, we just have circuit courts and small claims' courts and circuit courts, at least, have subject matter jurisdiction over any kind of action.)

Competency is a different matter: A circuit court may lose competency to deal with a matter, even though it has subject matter jurisdiction, if statutory procedures leading up to the filing aren't complied with, or under other limited circumstances.

A small claims court may lack competency to deal with sums over the jurisdictional limits -- according to Mueller v. Brunn, 105 Wis.2d 171 (1982). But that doesn't mean that a plaintiff is forbidden to file in small claims; instead, if a small claims court is the forum selected for a civil action in which the damages might exceed that sum, one of a couple things might happen. A court might allow the case to be dismissed with prejudice and refiled as a civil action, or may award damages up to the jurisdictional limits (as happened in the unpublished case Knoll v. Mashak, 166 Wis.2d 4 (1991).)

Or the court could do what it did here, and simply decide that by filing in small claims, the plaintiff has implicitly represented that the value of the claim is less than $5,000.

In that way, the small claims court becomes competent to proceed on the case -- and can award damages up to the limit.

(Inquiring legal minds may now wonder what, if any, is the difference between small claims and regular civil actions. Small claims courts now have lawyers appearing for parties, and parties make more and more liberal use of formal discovery, virtually extinguishing the difference between the two fora. An enterprising legislator, or Court, may want to revisit this to make small claims court truly a small claims court again -- by, say, prohibiting formal discovery. Or, just go the other route and get rid of small claims court altogether.)

(Then again, there are certain benefits and procedures in small claims that are not available in civil actions -- like the fact that virtually no rules of evidence of apply in small claims, and the fact that corporations don't need to appear via a lawyer in small claims court -- they can have an employee represent them, instead. (Sec. 799.06(2) -- but sorry, assignees, that rule doesn't apply to you.)

Larson probably meant to argue jurisdiction, not competency, since Larson was arguing that the Court couldn't actually hear his action, as the value of the motorcycle (in Larson's argument) was greater than $5,000. Larson pointed out (in his second suit) that replevin actions can only be brought in small claims for property worth less than $5,000. (Sec. 799.01(1)(c).) That's where the Court of Appeals said Larson implicitly represented the cycle to be worth less than $5,000, a ruling the Court of Appeals pretty much had to make, since section 799.01(1)(c) might just be jurisdictional; in another case, the Court of Appeals appeared to rule that section 799.01(1)(c) is jurisidictional, but that there are exceptions.

That case was Clearpointe Capital, Inc. v. Townsend, 275 Wis.2d 878, an unpublished 2004 case in which Townsend appealed a replevin judgment by attacking subject matter jurisdiction; Townsend claimed that the collateral was more than $5,000 -- and the Court of Appeals agreed that the collateral was worth more than $5,000, but found a loophole in that the Wisconsin Consumer Act created an exception to the small claims jurisdictional limits for "consumer credit transactions." (In Townsend, the Court of Appeals still spoke of competence, not jurisdiction.)

Anyway, Larson made his argument on competence, not jurisdictional, grounds, and he lost on those grounds because he'd implicitly represented that the cycle was worth less than $5,000 (leaving open the question what if he'd expressly plead that it was worth more?)

That left Larson with claim preclusion again. Because the court was competent to hear the case, the judgment was valid and the facts underlying the first and second claims were identical.

The Court of Appeals briefly -- very briefly -- considered the narrowly drawn exceptions to claim preclusion, and found that neither exception applied. The exceptions had to do with the validity of the judgment -- which was already decided -- and an exception that applies when the prior case "fails to yield a coherent disposition" of the controversy.

(When would that ever apply, I wonder?)

Larson was left with no motorcycle and no judgment -- and a lesson in when to hire a lawyer (every time, right?) Had Larson hired his pretty-creative lawyer for the first case, that lawyer could have brought all the claims together in one action and ensured that the circuit court, if it didn't grant repossession, at least granted a judgment for breach of contract (if that case was proven.)

But Larson didn't hire a lawyer, and didn't argue in the first case that the contract had been breached, and didn't get his money or his motorcycle.

This is why I don't do class action suits.

Courtesy of Wondermark.

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.

London Office Space: Can I get some near the Thames?

It's time to give my brethren across the Atlantic a shout-out and a little help: Hey, you barristers and solicitors and people in the wigs: Are you looking for the best commercial property London has to offer? Then you should contact Pearl & Coutts.

It's important, when considering commercial property, to get the best possible property and location. Your business won't stand a chance if your customers can't get to it, or if, once they get to it, they don't like what they see. And you'll drive up your overhead by having your business in the wrong location: Too high of parking costs, or too high of commuting costs.

And what about infrastructure? And room to grow? Will you need lots of computer servers and tech stuff? Or just a large area where you can display your goods? Are you a one-man operation now or are you a large firm?

I know, you haven't given much thought to this so far -- you're a barrister (or solicitor), not a business man. That's why Pearl & Coutts is there to help you. For nearly a half-century, they've been specializing in quality commercial property letting in London. They'll take care of all the little stuff, helping you find the right property for your business.

Is your case REALLY frivolous? Or is the other side just being a jerk?

Back in 2006, the Wisconsin Supreme Court adopted the present version of section 802.05, Wisconsin Statutes, and repealed then-existing section 814.025. The Court did that to grant greater leeway to courts in regulating the conduct of lawyers and litigants, and to better mirror the federal practice followed under Federal Rule 11.

The gist of the rule is that a court may sanction "frivolous" conduct, "frivolous conduct" being actions taken in connection with litigation which have no basis in fact or law and are not good-faith requests for the modification of existing law; or which are presented for some improper purpose. (The entire text of the statute is here.) The law also provides a "safe harbor," in that a litigant is given 21 days' notice of claimed frivolousness during which the party or lawyer can withdraw the problematic claim and face no punishment.

Has the change worked? It doesn't seem so. Claims of frivolousness are more rampant than ever, based on my own experience and what I hear from other lawyers. It is a rare case, these days, that does not at some point have one side or the other claiming that some or all of the case against them is frivolous, and asserting, as a result, a right to reimbursement of their fees.

In my opinion, the vast majority of claims of frivolousness are themselves baseless or in violation of section 802.05. I say that because I am familiar with the actual standard for frivolousness, and it is a high standard indeed -- a high standard that it appears many, many Wisconsin lawyers are unaware of, and many many courts disregard.

The high standard for determining whether an action is frivolous, or not, can be found in the case of Rabideau v. City of Racine, a 2001 Wisconsin Supreme Court case that correctly set out how high the standard is for a frivolous case.

The background of Rabideau is this: Julie Rabideau owned Dakota, and lived across the street from Officer Jacobi, who owned his own dog, Jed. One day, Rabideau got out of her car and Dakota ran across the street. While there was some disagreement about what happened next, everyone agrees on one thing: Officer Jacobi fired three shots, hitting Dakota at least once. Dakota died two days later -- and Rabideau required medical treatment when she heard that news.

Rabideau sued. She filed a small claims complaint on her own (later, she hired a lawyer and amended her complaint). The original complaint said this:

"City of Racine Police Officer Thomas Jacobi shot and killed my dog, Dakota, and caused me to collapse and require medical attention."

That was everything she said in her complaint. That required that the circuit court (and later the appellate courts) construe her complaint, since Rabideau did not spell out what legal theories she was relying on; she simply set forth a short and plain statement of the facts and filed her lawsuit.

That is the first lesson for overly-litigious, hypercritical courts and lawyers these days: Rabideau's complaint, if filed in 2010, would almost certainly draw a motion to dismiss and claims of frivolousness, and require hearings by the circuit court, which might just dismiss it because it seems insufficient.

Seems, but is not. All that's required of a complaint is a "short and plain statement of the claim, identifying the transaction or occurrence or series of transactions or occurrences out of which the claim arises and showing that the pleader is entitled to relief," and "a demand for judgment for the relief the pleader seeks." That's not me talking; that's the law, which is too frequently ignored by lawyers, and even some judges.

(CCAP records show that Rabideau's complaint drew some motions, but I don't know what motions they were, and don't want to speculate on whether the City tried to dismiss for insufficient pleading.)

The Circuit Court -- and then the appellate courts -- did the first part of their jobs correctly, though; they construed the complaint, looking at the facts plead and determining what claim, if any, they stated. The courts in particular determined that Rabideau was claiming emotional distress. The Circuit Court decided the claim was for intentional infliction of emotional distress, while the Court of Appeals felt that the claim could be either for intentional, or negligent, infliction of emotional distress.

That's where the greater problem for Rabideau arose: Rabideau's claim was based on the death of a beloved pet-- and "beloved pet" in Wisconsin means "personal property." In Wisconsin, you can no more sue for emotional distress from watching your pet be gunned down than you could sue for emotional distress from watching your purse be gunned down. Dogs, cats, birds, all pets, in Wisconsin, have the same legal standing as a brick.

Because of that, Rabideau was foreclosed from suing for emotional distress caused by killing her dog, whether the shooting was done intentionally or negligently -- for a couple of different reasons.

First, Rabideau couldn't assert negligent infliction of emotional distress because public policy barred those types of claims. It's important to note, though, that prior to Rabideau, Wisconsin had not ever ruled out such a claim -- the only case cited by the Wisconsin Supreme Court in Rabideau on that issue said this:

"it is unlikely that a plaintiff could ever recover for the emotional distress caused by negligent
damage to his or her property."

That case didn't say can't recover; it said it's unlikely -- a word missed by the Circuit Court and Court of Appeals. So Rabideau was the first time, ever -- EVER-- that Wisconsin had ruled out emotional distress damages for loss of property.

Rabideau then couldn't recover on her intentional claim because, the Court held, she had no evidence that the cop had intended to inflict emotional distress on her when he shot her dog:


The plaintiff must establish that the purpose of the conduct was to cause emotional distress. There is no question that Officer Jacobi intended to fire his weapon at Dakota. However, there is no evidence to indicate he did so to cause emotional distress to Rabideau. Certainly that was a by-product, but that is insufficient standing alone. This is a limitation upon the cause of action for the intentional infliction of emotional distress. Anderson v. Continental Ins. Co., 85 Wis.2d 675, 694- 95, 271 N.W.2d 368 (1978). There must be something more than a showing that the defendant intentionally engaged in the conduct that gave rise to emotional distress in the plaintiff; the plaintiff must show that the conduct was engaged in for the purpose of causing
emotional distress.

The Wisconsin Supreme Court didn't rule on any other aspect of Rabideau's claim; it held only that she had failed to produce evidence of that element -- and so her claim failed.

The Court then went on to analyze the remainder of the case, noting that Rabideau, in failing on her emotional distress claims, had still presented a valid claim for loss of property. The Court of Appeals had held that the complaint didn't do that, and in reversing, the Wisconsin Supreme Court noted that


A claim for damages for property loss as the result of Officer Jacobi's action is the most conventional claim Rabideau could have brought, and is without doubt the most widely recognized claim that arises when an animal is killed. ... We therefore hold that Rabideau's complaint, liberally construed, also encompassed a demand for damages for property loss.

The Court of Appeals, then, had missed the "most widely recognized claim" of this sort, in its ruling. The Wisconsin Supreme Court recognized the claim, and reversed the decision dismissing Rabideau's case on those grounds.

Having ruled that Rabideau lost on 2 of her 3 claims, but remanding on one, the Supreme Court then went on to consider whether Rabideau's claim was frivolous; already, the Circuit Court and the Court of Appeals had held it was -- assessing, no doubt, a substantial penalty against Rabideau and her attorney.

The Wisconsin Supreme Court took a different tack:

Courts tread carefully when considering a claim of frivolous action, for the "ingenuity, foresightedness and competency of the bar must be encouraged and not stifled." ... the circuit court is to consider each of the alternative possibilities of a good faith argument, that is, was the existing law ready for an extension, modification or reversal. If the law is not ready for an extension, modification or reversal, the court is to consider whether the argument consider whether the argument for the change was made in good faith.

The Supreme Court then ruled that because one claim was valid -- the property loss claim -- and because the intentional infliction claim was properly brought, and because the argument for negligent infliction of emotional distress was done in good faith (Rabideau "adequately defended her position" in briefs and arguments), that, too, wasn't in bad faith.

The bottom line? Rabideau brought three claims -- premised on a brief allegation. One of those claims was almost entirely new, and barred by public policy. The other ultimately was dismissed for lack of evidence. The third would have resulted in perhaps nominal damages at best.

But none of it was frivolous, according to the Wisconsin Supreme Court. Rabideau's claims, which were barred by public policy and failed for lack of evidence and were nominal in amount, were not frivolous.

After Rabideau, it should be a rare claim, indeed, that is found to be frivolous. And if frivolous claims are rare, it should be equally rare to see lawyers arguing that a claim was frivolous -- so section 802.05 motions should be equally rare.

I doubt they will be, as lawyers find it all too easy to make threats of frivolousness and those threats are themselves rarely punished or litigated -- but I can hope.

If Lyndon Johnson's Zombie wanted to file taxes, even it could do so for free!

This is a Sponsored Post written by me on behalf of eSmart Tax. All opinions are 100% mine.

If you're like me, you put off doing your taxes because, as I like to say "Nothing good happens at tax time." But if you're like Daryl Johnson, you've probably already DONE your taxes, because you got to file for free and use the latest in tax programs to help you prepare and file your taxes through eSmartTax.com.

eSmartTax.com is Liberty Tax Service's online tax preparation program, and using it, anyone can file their federal return online for absolutely free. Liberty's Basic edition is always free and always online, so if you've been paying for tax preparation programs or going to an accountant, you're overpaying.

This year, Liberty added a twist: If you're name is Johnson, you can get the Deluxe edition of their software for free at www.IamAJohnson.com. They did that because there are 2,121,489 Johnsons in America; it's the second most popular name and its the surname of Daryl Johnson, the spokesperson for Liberty.

Daryl Johnson represents me and you and all those other people, the every day tax payer who has to once a year sort through the pile of crumpled papers we've been sticking in a plastic bin all year, who have to try to read that 1099-MISC form that we were given, who have to get calculators and legal pads out and have their wife double-check their numbers, all so that we can figure out that we owe the IRS a couple hundred dollars on top of what they've already taken out of our paychecks.

Liberty is making tax time easier for everyone, especially the Johnsons. At Liberty, Johnsons file free using the Deluxe edition, but everyone files free using the basic edition -- and, as they say, why pay more?

I've always hated tax time, sitting at my desk with my laptop, file folders, searching for answers online, sorting through those booklets you've got to read, and dreading the ultimate result. With Liberty, things can be easier and cheaper. I may still have to pay taxes -- for now!-- but at least I don't have to deal with the hassle and extra cost of filing those taxes.

Weird (?) Lawsuits: 1

Weekends are time to have a little fun, even for lawyers, and in lieu of the great fictional lawyers I usually present here, I want to talk, instead, about weird (?) lawsuits -- the question mark being there because these are suits that seem, at first glance, to be weird or dumb, but which maybe have a grain-of-reason-to-exist in them.

Like the suit of McGinn v. Match.com. I'm not sure if that's the legal caption for the suit filed by a Brooklyn man in June, 2009, alleging that Match.com is liable for posting profiles of people who are no longer members of the site.

McGinn's claims start off promising -- saying that Match is deceptive by posting fake profiles like that -- but veers off into the deep end when he claims:

"Match's policy causes severe emotional distress and anxiety for some [subscribers], including those who keep writing e-mails to one member after another and never hear back because he/she is writing to people who've canceled."

That type of allegation may be why McGinn actually dropped his suit -- although he says it was to avoid ridicule and mocking on the web.

He wasn't too far off-base at the start, though: In Wisconsin, at least, section 100.18 of the statutes would likely apply to practices like posting phony profiles on the site -- so someone who signed up in hopes of meeting a fake "member" might be able to sue to get their money back, if not emotional distress. (They might have to sue in Texas, though -- Match.com claims that it's membership rules require it to be sued there.)

Debtors make a goal-line stand-- and it works!

The Wisconsin Court of Appeals not so long ago made it easier to sue debtors; now, the Court has balanced the scales by making it harder to win those cases.

The Court made it easier to sue debtors in the wrongly-decided-but-its-the-law-for-now case Rsidue LLC v. Michaud. That case (which I discussed at length here) exempted assignees of debts from complying with a rule of pleading under the Wisconsin Consumer Act. The rule of pleading requires that creditors supply certain information, right in the complaint. After Rsidue, assignees of creditors did not have to do that, making it easier for assignees to file suits against debtors than it was for the original creditors to do so. (I predicted, off the record, that Rsidue would mean that Wisconsin would likely see an explosion in the number of assignees bringing claims, instead of creditors. I don't have any hard facts or figures to back that up, but from personal experience I can tell you that virtually every complaint I see for a credit card or consumer debt is, now, brought by an assignee rather than a creditor.)

That anti-debtor, anti-actually-enforcing-the-law-as-it's-written, tide is turning, maybe, based another Wisconsin Court of Appeals case, one that's been brought up by numerous readers -- TrueQ was first to point it out to me, but others did, too -- the case of Palisades Collection LLC v. Kalal. This not-yet-published case constituted a major victory for debtors and a serious blow to the let's-just-assign-the-debt school of thought.

In Kalal, Palisades Collection LLC sued the Kalals, alleging that the Kalals had defaulted on a credit card account and owed $27,343.47. Palisades moved for summary judgment, and in support of that submitted some account statements attached to an affidavit made by a Palisades employee.

But, the Kalals noted, that affidavit didn't pass muster. Summary judgment materials must be admissible in evidence -- a statutory rule that is rarely followed -- and Palisades' affidavit, the Kalals said, wasn't, because the Palisades employee wasn't qualified to say that the credit card statements were business records.

Business records can be admissible into evidence if a custodian, "or other qualified witness" says that they're business records, and that the records were made at or near the time in question by a person with knowledge of the records (I'm simplifying),and that the records were maintained or created in the ordinary course of regular activity. (Wis. Stats. Sec. 908.03(6).) The Palisades' witness didn't meet that criteria -- she didn't know anything about how the records in question were created.

Palisades tried to argue that the witness was a custodian, bu the Court of Appeals shot that down, ruling that it's not enough to be a custodian -- one must be a qualified custodian.

The end result in the Kalal case was a reversal of summary judgment and remand. The case hasn't gone back to the Circuit Court yet, so it's not clear what'll happen from here on out. Palisades may be able to get another qualified witness to testify about the records -- or prove the amount owed through other means.

But the ripples from this case are just beginning. Here in my office, alone, I have at least four files I can think of off the top of my head where the records were submitted by someone other than a qualified custodian; courts in the past have tended to shrug off those objections and overlook them, for a variety of reasons. If Palisades gets published, and becomes law people have to follow (as opposed to unpublished "law that exists for no good reason"), then the practice of assigning debts -- debts ranging from credit cards to mortgages -- will have to be modified.

Especially mortgages, where I see this having the biggest impact. Mortgages are initiated by lenders and rights to the proceeds, and servicing rights, are all-too-frequently assigned over, sometimes many many times over -- sometimes surreptitiously by companies like MERS. Now, with the strength of a hopefully-to-be-published Kalal decision, homeowners can force the original lenders, and everyone down the line, to verify the accounts and business records.

The message to creditors and debt collectors? You'll find it easy to move the ball -- but harder to punch it into the end zone.



Note: I will compare anything to football, given the chance.

A $6,500 tax credit can be yours -- just for buying a house!

Spring is here, and that means that it's time for two of my favorite things: Buying houses, and not paying taxes.

That can be combined into one simple action this year by taking advantage of the Home Buyer Tax Credit that was extended, and expanded, for 2010, and now includes a $6,500 Tax Credit for people aren't first-time buyers but who want to move up or down in homes.

If you've lived in your current home for 5 years or more, and are thinking about moving, now may be the time: The $6500 tax credit is available to those who've lived in their home for 5 of the past 8 years, and who make less than $125,000 (for singles) or $225,000 (for married couples.)

And, of course, there's still the credit out there for new buyers who haven't owned before, or haven't owned a house in the past 3 years -- those people might get up to $8,000 for buying.

The credit may not be extended again, and if you don't take advantage by having a written binding contract in place by April 30, 2010 (with a closing on or before June 30, 2010), you might miss out on this opportunity.

Watch the video for more information, and click that link, above, to find out more.

What's My Case Worth: Legal malpractice

How much would you want to be paid to spend several days in jail as a result of a lawyer's advice?

Me, I'd want at least $1,000,000... unless the time in jail kept me from going to my in-laws. (Ba-dum bum. I'll be here all week.)

In Racine County, Wisconsin, though, a couple days in jail is worth $45,000 -- or less, once you factor in the law and all.

In Rice v. Baraty, Robert Rice sued Cheryl Baraty and her law offices for malpractice in advising him about custodial rights as a parent. Rice had consulted with Baraty about his child, telling her that he'd signed an acknowledgment of paternity but that there were no orders for custody and placement.

Shortly thereafter, Rice, the child, and the child's mother met at a restaurant to discuss these issues. Mom left the restaurant, leaving the kid behind with Rice. Rice called Baraty and asked what he should do, and Baraty told him to take the kid to a motel for the balance of the weekend in order to give him a chance for substantial placement of his child. Baraty supposedly promised to call Mom's lawyer after the weekend -- but seems to have never done that.

Rice ended up being charged with a felony, and spent several days in jail. (A review of CCAP shows that all charges were dismissed about 3 weeks after filing them.) He then sued, and a jury in Racine County awarded him $45,000. But because the jury apportioned 40% of the negligence to Rice, he'll collect only about $27,000.

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Claudius' path to the stars was layered in blood and lit by madness...

As a little boy, Claudius would close his eyes and look to the stars in hopes of escaping from the pain and misery of his life.

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Laws You Should Know About, Three: Don't get ripped off when modifying your mortgage.

Amidst all the hoopla over mortgages and foreclosures this year, one law got passed by the State of Wisconsin that I heard no fanfare about, and yet it's a law that affects virtually every person who has fallen behind on their mortgage or is in foreclosure.

Wisconsin, effective March 6, 2009, made it illegal for foreclosure rescue scams companies to charge you upfront for work they plan to do.

Section 846.45 regulates "foreclosure consultants," who are any person...


...who, directly or indirectly, makes a solicitation, representation, or offer to a foreclosed homeowner to perform for compensation, or who for compensation performs, any service that the person in any manner represents will in any manner do any of the following: a. Stop or postpone the foreclosure sale. b. Obtain any forbearance from a beneficiary or mortgagee. c. Obtain a waiver of an acceleration clause contained in a promissory note or contract secured by a mortgage on the residence in foreclosure or contained in the mortgage. d. Assist the foreclosed homeowner to obtain a loan or advance of funds. e. Avoid or ameliorate the impairment of the foreclosed homeowner's credit resulting from the recording of a lis pendens or the conduct of a foreclosure sale. f. Save the residence in foreclosure from foreclosure.

The law specifically exempts some people who might do those things in their ordinary line of work -- such as lawyers.

Foreclosure consultants are required, under the law, to provide you not only with a right to rescind any contract you might sign with them; and they are forbidden to take any money until they do the work. As the law says:

It is a violation of this section for a foreclosure consultant to do any of the following:... Claim, demand, charge, collect, or receive any compensation until after the foreclosure consultant has fully performed each and every service the foreclosure consultant contracted to perform or represented that he or she would perform.

Violations of the law can allow a customer to sue for their money back or $200, whichever is greater ... plus attorney's fees. And based on what I've seen in the past few months, everybody is violating this law.

It is cute that he takes after me, I guess.

Lately, one of my three year olds-- Mr Bunches -- has taken to squinting. I realized that he's doing it because he's imitating ME. I squint all the time, especially when I'm driving, because everything's so dang bright all the time.

That squinting has effects beyond simply teaching a 3-year-old to do it, too; it leaves me with headaches, and snow- or sun-blind while I'm driving, and leads to wrinkles and premature aging. Not to mention what staring at too-bright snow or sun will do to my eyes. But I've never gotten a pair of sunglasses because sunglasses are expensive and I end up losing or breaking them, or giving them to Mr Bunches to play with.

But I've found a place where I can get wholesale sunglasses, buying them in bulk if I wanted to -- getting multiple pairs of sunglasses for the price of one pair in the store. I can get a dozen pairs for only $17 at that site (It's called cheapwholesalesunglasses.com, fittingly enough) which means that I could order up a bunch of pairs, and then as they break, get lost, or stolen, I've got another pair ready to go. Or I could just have a pair for each car, so that no matter which car I end up driving, I've got shades with me.

People who have their own business -- from hot dog cart to golf course to more -- might want to get them and use them as promotional items, giving them out to customers as a bonus: buy two hot dogs, get some free sunglasses, say. But for me, the real impact is more sunglasses, less expense, and fewer squinty drives into the office.

Who's really suing you? A new defense to foreclosure actions rises up .

As a general rule, I don't like to make new law or extend the boundaries of the current state of the law.

Lawyers are presumed to like to do things like that: to get the courts to declare new rights and break new ground and become famous, but I don't like to, for two reasons.

First, it rarely is welcomed by the opposing sides or the courts, both of whom tend to be suspicious of "new" law. Clarence Gideon didn't get himself a lawyer appointed until he'd been convicted after trial and sued the Florida Department of Corrections and lost and then appealed that -- after which he was finally appointed a lawyer in the U.S. Supreme Court, and, when he won on appeal, his case was sent back to the Florida Supreme Court, which then ordered that Gideon be retried, and he finally won. So all those judges thought Gideon was wrong and refused to let him have a lawyer, right up until the U.S. Supreme Court ruled in his favor.

That shows the second side of the problem, which is not just that it's hard to convince lawyers and judges that one is right about a new claim under the law, but it's expensive, for two reasons. First, the very fact that it's new makes lawyers and judges not recognize that one is right. Opposing counsel rarely admits that a claim against their client is a winner even when it's clearly a winner -- so why would they admit that it's a winner if it's not a well-known legal claim, if it's something new?

Judges, too, take some convincing about whether a novel claim or defense is really good, and should win. And "take some convincing" means time and money -- which many of my clients don't have in excess.

So it's more expensive and time-consuming to present to the Courts a novel legal claim, which is one reason I don't like to do it. Another is that when lawyers nowadays get presented with a "new" type of claim, they typically respond by insisting that the action is frivolous, claiming rights to attorney's fees and demanding sanctions, all of which not only poses a risk that a judge might agree with them -- might agree even if ultimately, I'm right, as Gideon as -- but which also imposes additional costs on me and my clients because now we have to not only prove that our case is good, but defend against the claims that it's frivolous.

(I suspect that the reason so many lawyers nowadays claim things are frivolous is to do just that: To burden and slow down a claim, even if its a claim they know is a good one. But that's for another day.)

Still, with all of that, I have to sometimes come up with defenses and claims that are novel, and sometimes those claims and defenses win -- most of the time they win, as I'm so careful about which novel ideas I present -- and this week was one of those times.

This week, I won a stunning legal victory in the case of BAC Home Loans Servicing v. Pukay, a case I can mention because it's public record in Lincoln County, Wisconsin.

BAC Home Loans Servicing -- Lincoln County case numbers 09 CV 269 and 09 CV 270 -- appeared on its surface to be a run-of-the-mill foreclosure case: Two commercial properties, an alleged default by the borrower, and a foreclosure complaint is filed.

But the summons and complaint were unusual, and unusual in a way that I've been seeing more of lately: The summons and complaint was brought by BAC Home Loans Servicing, a company that admitted, right in the complaint, that it was not the lender or holder of the note, but instead was the servicer of the note.

The complaint also alleged that the actual holder of the note -- HSBC Bank -- was a party to the action, but I thought differently. I thought "HSBC isn't really a party to this action," and so I filed a motion to dismiss the complaints.

In Wisconsin, a summons is required to properly commence an action, and the summons must contain "the names and addresses of the parties to the action, plaintiff and defendant.” (Sec. 801.09(1), Stats.) In my case, the summons didn't contain HSBC's address, but instead listed the address for BAC Home Loans.

That posed a problem, because it's well-settled law, here and elsewhere, that only the "holder" of the note can enforce that note, and because an agent can't sue in a principal's name. A "servicer" is, in my opinion, an "agent" of the lender who holds the note -- so the servicer doesn't have any rights that can be enforced via a legal action, and can no more sue in the lender's name than I could file a suit for my client but name myself as the plaintiff.

This wasn't, I reasoned, merely a technicality, either -- if the lender wasn't a party to the action, we couldn't depose the lender or easily get information from the lender, and the lender wouldn't be bound by the lawsuit. Only parties to an action are bound by the court's orders in that action -- so if HSBC wasn't a party to the action, it could refuse to obey the court's orders.

More troubling, HSBC might transfer the loan before the action was completed, and we wouldn't even know. The speed with which assignments are done these days leaves open the possibility that the person suing for foreclosure is not the person who held the loan just a month before the foreclosure was filed, and may not be the person who holds the loan at the end of the case.

In my case, HSBC took an assignment of the loan in July, 2009, and filed the foreclosure in early August, 2009 -- so they had held the loan for less than a month when they foreclosed. Which raises another problem: What if the prior lender had taken action that would bar the foreclosure -- and then assigned the loan to HSBC?

Suppose the prior lender, in spring 2009, had taken steps which would prevent the foreclosure -- such as entering into a modification, or acting inequitably -- and then transferred the loan, knowing that it had done so? In such a case, HSBC, if it knew about those actions, could be held responsible for them and the foreclosure would be barred. But if it didn't know about those actions, then the borrower might have a separate claim against the prior lender.

(And that's exactly what happened in BAC Home Loans, my case -- but I'm not ready to reveal all those details, yet.)

All those reasons show why the servicer shouldn't be a party to the action, and why HSBC (or whoever holds the note) should be a party to the action. Those are good, factual, policy-based reasons why BAC shouldn't be in the action at all, which can be added onto the legal reasons I had for moving to dismiss -- the legal reasons being the statute about naming a party in the summons and the cases about agents not suing in the principal's name. There are other statutes that play into this, too, such as section 843.01, which limits rights to actions for possession of real property to those who both claim an interest in the property and ultimately the right to possession of that property -- sounds like a foreclosure, right? -- and those helped add up to my conviction that the case should be dismissed unless the real party was named, as required by statute.

And on Monday, that's exactly what the Lincoln County Circuit Court, Judge Jay Tlusty, ordered: he agreed with me that BAC wasn't a proper party, and gave 21 days to the plaintiff to amend their complaint to name the proper party, or face a dismissal without prejudice.

It's been a struggle to get that recognized: I've filed similar motions in other cases, some of which are still under consideration and some of which have been compromised or negotiated. None of them have yet been denied -- but in at least one case, I did face the claim that the motion was frivolous (as I expected).

Those types of uphill battles are fights I try to avoid: Why spend lots of my clients' money to get a result I could get by spending only a little of it? But in the cases where I've been filing those motions, I had reasons to need to do so -- as explained herein -- and courts are starting to recognize them.

UPDATE: Later in the day, after I posted this, Judge Juan Colas, Dane County Circuit Court, issued a similar decision in this case. Judge Colas went ahead and dismissed the complaint, because it had been more than four months since we initially raised the issue, so a reasonable time to name the proper plaintiff had already passed. As a result, I'm 2-0 on this issue this week.