Mortgage bankers have to break your leg before you can sue them? (Mortgage Banking.)

More alarming, to lawyers who understand how things really work, than the recent fee-limitation imposed by Republicans who were bought off by a disgruntled car dealer-- John Lynch Chevrolet-Pontiac -- who wanted to be free to illegally overcharge his customers without fear of reprisal is the threat that courts are going to undermine the right to sue period, without fretting over how much attorney's charge.

I'm not as concerned about the fee shifting as many lawyers are. In one recent fee-shifting case, the fees I sought were just over 2 times the damages our clients were awarded, and were far less than the fees that were charged by the defendants. In another case -- the one I mentioned here -- my fees through trial were only 1/5 of the fees charged by just one defendant's team of lawyers, and if lawyers who charge $80,000 to get a case partway to trial want to gripe that I charged one-fifth of that to completely try the case, they're free to make that argument. I look forward to them explaining to their client how I was able to win charging 20% of what they charged.

What I don't look forward to is courts making rulings that limit a person's right to enforce the law, especially when the law is set up to be enforced by private people.

There's been a recent spate of laws not intended to be enforced coming out of Wisconsin's Capitol -- Gov. Scott "Patsy" Walker's First-Amendment-Abridging Pay-Up-Front rules among them -- and that kind of thinking ("let's have a law but not really enforce it") might be a hallmark of the type of lawyering you get when your top state lawyer ran for office on an anti-terrorism platform. But laws are meant to be enforced, and laws like Wisconsin's mortgage banking regulations are in particular meant to be enforced by "private attorneys general," i.e., you and me.

A private attorney general law is one which lets people sue for statutory violations and win statutory damages even if they're not otherwise harmed. A classic example is the FDCPA, which awards up to $1,000 in statutory damages even if no actual damages are involved -- letting debtors hire lawyers to sue to enforce even hypertechnical provisions of that law.

Such laws are set up to encourage people to enforce them when enforcement actions would be numerous and over small or nonexistent amounts of damages: The state has little incentive or resources to sue every landlord over every withheld security deposit, so the fee-shifting and statutory damage provisions are meant to create a sort of citizen-law-enforcement setup.

Statutory damages are a key provision of such laws: by awarding statutory damages, the laws recognize hard-to-quantify technical injuries and provide a penalty simply for ignoring the law.

Which brings us to Avudria v. McGlone Mortgage Company, 2010 AP 2032 (Unpublished, Wis. Ct. App. 5/17/11.)

In Avudria, an opportunistic lawyer or plaintiff tried to make a quick buck and in doing so, might have created a precedent that will make it more difficult to enforce laws like the mortgage banker regulations. The plaintiff sued McGlone, claiming (correctly) that McGlone had used forms that disclosed what the plaintiff was paying, but which were not the approved DFI forms.

Avudria, the plaintiff, had not been misinformed by any of the forms, which were standard-issue industry forms, but which were not the ones required by DFI to be used in Wisconsin. In fact, Avudria admitted that he was pleased with what McGlone had done for him.

But he sued anyway.

The Court of Appeals looked at the case and decided that Avudria had no claim, because he wasn't aggrieved.

The statute requires that someone be aggrieved before they can sue, and the Court of Appeals glommed onto that:

The question before this court is whether Avudria is a “person who is aggrieved” under Wis. Stat. § 224.80(2), such that he can pursue a private cause of action against McGlone for its failure to use the forms required by the DFI. In order to answer the question, we must turn to the statute itself.

...

Based upon the plain language of Wis. Stat. § 224.80(2), we determine that a “person who is aggrieved” is one who suffered at least some actual injury or damage.

That's all well and good, except that the statute sets up two different ways of measuring a penalty: first, a doubling of the loan origination fee, and second, an award of actual damages, whichever is larger:

Section 224.80
(1)  Penalties. A person who violates any provision of this subchapter or any rule promulgated under this subchapter may be fined not more than $25,000 or imprisoned for not more than 9 months or both. The district attorney of the county where the violation occurs shall enforce the penalty under this subsection on behalf of the state.

(2) Private cause of action. A person who is aggrieved by an act which is committed by a mortgage banker, mortgage loan originator, or mortgage broker in violation of any provision of this subchapter or of any rule promulgated under this subchapter may recover all of the following in a private action: (a) An amount equal to the greater of the following:
1. Twice the amount of the cost of loan origination connected with the transaction, except that the liability under this subdivision may not be less than $100 nor greater than $25,000 for each violation. 2. The actual damages, including any incidental and consequential damages, which the person sustained because of the violation.

That structure suggests that "aggrieved" doesn't mean "suffered actual injury or damage" at all. A fair reading of the statute says that an aggrieved person may be one who suffered no actual damages, in which case an aggrieved person would be awarded the statutory damages.

It's not even hard to come up with an example that fits such a category. Under the law, a mortgage broker may not:

"Make, in any manner, any materially false or deceptive statement or representation, including engaging in bait and switch advertising or falsely representing residential mortgage loan rates, points, or other financing terms or conditions."

Now let's suppose that my client in my recent trial wants to go refinance, and before working with Mortgage Brokers, Inc., says "You don't employ any of these people that I sued," because she doesn't want to work with them. And Mortgage Brokers, Inc. lies and says "No, we don't," and then simply makes sure that all the defendants our client sued don't work on her file.

Our client then gets the loan she wants, but finds out that she was lied to and all these people she sued actually do work there.

Has she suffered actual damages? No -- discounting such potentials as "fear that the former defendants are badmouthing her" or "worry that because those people work there she actually didn't get a good loan" -- but does that mean the mortgage broker should go unpunished?

Should a mortgage broker be allowed, in short, to lie in order to get a client, even if they then do a good job?

Is that what was intended by the legislature when they put in that double-loan-origination fee? Or were they intending to punish brokers who break the law by taking away the compensation (double the compensation) for lawbreaking, and empowering citizens to enforce that law?

In every state in the country, you can be penalized for speeding even if you didn't hurt anyone. If I drive down a deserted highway in broad daylight on dry roads with open views -- in short, causing no danger-- and I'm going only 1 mile per hour over the speed limit, I can still be ticketed and fined, because breaking the law can be punished even if nobody was hurt.

Unless the law is one like Wisconsin's mortgage banker law, which, thanks to Avudria's opportunism and the Wisconsin Court of Appeals' laziness, just got less enforceable than a speed limit.