A Mayville law firm was properly granted summary judgment on a debtor’s claim that it violated the Fair Debt Collection Practices Act (FDCPA), even if it did so, because the debtor suffered no damages.
In an unpublished Wisconsin Court of Appeals opinion decided Oct. 13, the court found it unnecessary to decide an important issue of first impression – whether the Notice of Intent to File Claim for Lien, required before filing suit against a property owner under sec. 799.06(2), must include the disclosure requirements imposed by the FDCPA.
The court concluded that even if the FDCPA covers the lien notice, the debtor could not recover from the law firm, because it suffered no actual damages.
Erik and Stacy Hanson contracted to have Donald and Darlene Braunschweig perform work on the wood flooring of the Hanson’s home. After the Hansons refused to pay for the work, the Braunschweigs retained the Madden Law Firm to collect the debt.
After the Madden firm filed suit, the Hansons counterclaimed, alleging that the lien notice was a “communication” related to a debt, and thus, the firm violated the FDCPA by not including the required disclosures.
On motion for summary judgment, the circuit court concluded that the Hansons suffered no actual damages, even if the disclosures should have been included. Because no actual damages were awarded, the court declined to award statutory damages or attorney fees.
The Hansons appealed, but the Court of Appeals affirmed in a per curiam opinion.
It was undisputed that the Hansons suffered no actual damages. At issue was the circuit court’s authority to award statutory damages (up to $1,000 per violation, when no actual damages were sustained.)
The court adopted the same standard as the 8th Circuit in Lester E. Cox Medical Center v. Huntsman, 408 F.3d 989 (8th Cir. 2005).
In Cox Medical Center, the court held that courts may refuse to award statutory damages for de minimis or technical violations.
The Wisconsin Court of Appeals agreed, also citing several cases that characterize significant litigation under the FDCPA as a “cottage industry” to generate attorney fees without furthering the purpose of the Act.
Because the Hansons suffered no actual damages, the Court of Appeals held that the circuit court properly exercised its discretion in denying statutory damages and attorney fees.
However, it declined to address whether the firm violated the FDCPA in the first place.
In 2004, the 7th Circuit held that a civil complaint is a “communication” under the FDCPA, and thus, it must include the FDCPA disclosures. Thomas v. Law Firm of Simpson and Cybak, 392 F.3d 914 (7th Cir. 2004((en banc). But, in 2006, Congress overturned the holding by including the following language in the Act: “A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication…”
In the case at bar, the Madden firm contended that, because state statutes require filing of the lien notice before filing suit, it is a “formal pleading” exempt from the rule.
The Hansons argued that such a notice is not a “pleading” as that term is commonly understood, and thus the disclosures were required.
But the court found it unnecessary to resolve the issue given its holding on damages.
Jeremy Vanderloop, who represented the Madden firm, said he was pleased with the result, but disappointed that it remains unsettled whether the lien notice is subject to the FDCPA.
“I don’t think we did anything wrong; we used the standard form from the state bar’s Wisconsin Construction Lien Law Handbook,” Vanderloop said. “It was a very aggressive defense tactic – sue the lawyer rather than pay a $4,000 debt, and seek $16,000 in attorney fees.”
There was another issue before the circuit court that the parties briefed: whether any error by the Madden firm was a bona fide mistake of law, and thus exempted from liability. The court did not address the issue, however.
After briefing was completed, the U.S. Supreme Court resolved this issue against debt collectors, holding that the bona fide error defense applies only to mistakes of fact, not mistakes of law. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 130 S.Ct. 1605 (2010).
David Ziemer can be reached at firstname.lastname@example.org
What the court held
Issues: Can a court deny statutory damages under the FDCPA, when the debtor suffers no actual damages?
Holdings: Yes. A circuit court has discretion to deny statutory
Attorneys: For Plaintiffs: Anthony A. Coletti, Elkhorn; For Defendants: Jeremy Vanderloop, Mayville.