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'Costs' includes 'reasonable costs'

By: dmc-admin//July 23, 2007//

'Costs' includes 'reasonable costs'

By: dmc-admin//July 23, 2007//

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What the court held

Case: Kolupar v. Wilde Pontiac Cadillac, Inc., No. 2005AP935.

Issue: Can a retail buyer alleging fraud by a motor vehicle dealer recover actual costs or only taxable costs?

Holding: A buyer can recover “reasonable costs.” Otherwise, the fee-shifting provision would fail to accomplish its intended purpose of making the party whole.

Attorneys: For Appellant: Erspamer, Paul M.; Lisko, David J.; For Respondent: Gutenkunst, Kathryn S.; Brejcha, Brian M.

The buyer of a motor vehicle who is the victim of fraud can recover reasonable litigation expenses, not just statutory costs, the Wisconsin Supreme Court held on July 12.

The decision reverses a published decision of the court of appeals, Kolupar v. Wilde Pontiac Cadillac, Inc., 2006 WI App 85, 293 Wis.2d 265, 716 N.W.2d 547 (Kolupar II).

In 1994, Tammy Kolupar bought a used Mercedes based on representations by Wilde Pontiac Cadillac, Inc., and a salesman, Randall Thompson, that the car was in good mechanical condition. In 2000, she sued Wilde and Thompson, alleging a number of federal and state claims, including violations of Wisconsin’s motor vehicle statute, sec. 218.01 (1993-94), now renumbered as sec. 218.0163(2).

In 2001, the claim was settled for $6,600, plus costs. By that point, Kolupar had accumulated approximately $41,000 in attorney fees and almost $11,000 in litigation expenses.

At a hearing to determine the reasonableness of the fees and costs, Milwaukee County Circuit Court Judge Thomas R. Cooper awarded only $15,000 in fees and costs combined. A divided court of appeals affirmed in a published decision, Kolupar v. Wilde Pontiac Cadillac, Inc., 2003 WI App 175, 266 Wis.2d 659, 668 N.W.2d 798.

The Supreme Court accepted review, and affirmed in part, and reversed in part. 2004 WI 112, 275 Wis.2d 1, 683 N.W.2d 58 (Kolupar I). The court held that Kolupar failed to properly appeal the issue of whether the reduction in attorney fees was appropriate. However, the court remanded the case to the circuit court to award costs.

Back in circuit court, Judge M. Joseph Donald awarded only taxable costs, not actual litigation expenses. Kolupar appealed, but the court of appeals affirmed (Kolupar II).

The Supreme Court accepted review, and reversed, in a decision by Justice Louis B. Butler, Jr. Justice Jon P. Wilcox dissented, in an opinion joined by Justice David T. Prosser Jr.

Section 814.04 sets forth the limited items of costs that must be awarded to a prevailing party in a civil lawsuit generally.

Section 218.0163(2) provides that “[a]ny retail buyer … suffering pecuniary loss because of a violation by a licensee of [subsections of sec. 218.0116] may recover damages for the loss in any court of competent jurisdiction together with costs, including reasonable attorney fees.”

The court rejected the argument of Wilde — accepted by the court of appeals — that the Legislature’s use of the word “costs,” while allowing for “actual costs” in other statutes (including another paragraph within the same statute), meant that the Legislature intended to allow only the statutory costs provided in sec. 814.04.

The majority acknowledged the soundness of this argument, under general rules of statutory construction. Nevertheless, it concluded that, while the statute and the rules of statutory construction do preclude the award of “actual costs,” they do not preclude the recovery of “reasonable costs.”

The majority also concluded that a denial of reasonable costs would conflict with the purpose of the fee-shifting statute. As a remedial, consumer protection statute, the court concluded that sec. 218.0163(2) “should be liberally construed to suppress the mischief and advance the remedy that the statute intended to afford.”

The court concluded, “In this case, recovery of only Wis. Stat. Sec. 814.04 enumerated costs would discourage litigants with legitimate claims from seeking relief, and thus undermine the statute’s effectiveness in suppressing the prohibited ‘mischief.’”

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Because the cost of litigation may reduce or even eliminate recovery altogether, “costs” must include “reasonable costs,” the court concluded, lest retail buyers have no incentive to enforce their rights when defrauded.

Finally, the court noted that attorney fees are a subcategory of costs, and that sec. 218.0163(2) provides for an awarded of “costs, including reasonable attorney fees.”

The court concluded that a limitation of “costs” to only those enumerated in sec. 814.04 would directly conflict with sec. 814.04, which allows for only token attorney fees. Accordingly, the court interpreted “costs” to mean “
reasonable costs” to harmonize the two statutes.

Before concluding, the court emphasized that the pecuniary value of the action is irrelevant to the reasonableness of an award of costs, stating, “Providing for reasonable attorney fees and costs ensures that individuals will enforce the rights provided to them under the statute by the legislature, even when the costs of litigation exceed the value of the action.”

The dissent rejected the majority’s creation of a category of “reasonable costs,” as an alternative to statutory “costs” or “actual costs” as “contorted interpretation.”

The dissenters wrote, “Why did the legislature not modify the word ‘costs’ with the word ‘reasonable’? Likely because the word ‘costs’ unmodified has meaning in the statutes. Specifically, it means that sec. 814.04 will apply.

“The majority has inflated the scope of sec. 218.0163(2) by arbitrarily inserting ‘reasonable’ as a modifier of the word ‘costs.’”

Click here for Case Analysis.

David Ziemer can be reached by email.

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