Community Credit Plan, Inc. v. Johnson

DONALD W. STEINMETZ, J.

¶ 1. The petitioner, Community Credit Plan, Inc. (Community), seeks review of the court of appeals' decision, Community Credit Plan, Inc. v. Johnson, 221 Wis. 2d 766, 586 N.W.2d 77 (Ct. App. 1998), awarding attorney fees pursuant to the Wisconsin Consumer Act (WCA) to defendants-appellants. The appellate court's decision reversed the orders of the Milwaukee County Circuit Court, Honorable Michael Malmstadt and Honorable *33Frank T. Crivello, in the consolidated replevin actions. In each case, the circuit court determined that the defendants-appellants (customers) did not "prevail" under Wis. Stat. § 425.308 and were thus not entitled to their attorney fees.1 2

¶ 2. A majority of the court of appeals reversed, concluding that because the customers, in a consumer credit transaction, had succeeded in their motions to vacate the default judgments which had been entered against them, they were the prevailing parties under Wis. Stat. § 425.308. This case is a consumer credit transaction case to which Wis. Stat. § 421.401(2)(b) applies.

¶ 3. The customers all purchased vehicles in consumer credit transactions financed by Community, whose office is in Waukesha County. The transactions did not occur in Milwaukee County, nor did any of the customers live or store any vehicle involved in a transaction in Milwaukee County. When each of these loans went into default, Community commenced small claims replevin actions in Milwaukee County against each customer to recover the vehicles which had secured the consumer credit transactions. None of the customers appeared in court, and default judgments in replevin authorizing repossession were entered against each customer by the Milwaukee County small claims court. All but one of the vehicles subject to orders were repossessed.

¶ 4. After the repossession and sale of the vehicles had occurred (except in the Quattlebaum cases) each customer brought a motion to vacate the respec*34tive judgment and to dismiss the action, under Wis. Stat. § 421.401(2)(b), for lack of jurisdiction on the grounds of improper venue. The motions did not include answers to the small claims replevin actions, and the customers have not made any assertions regarding the underlying basis for the repossession actions.

¶ 5. In five of the cases, Community did not oppose the motions to vacate the judgments (Community objected to the Quattlebaum's motion because of an intervening bankruptcy). The circuit court granted each of the customer's motions to vacate the judgments. The circuit court then granted Community's oral motions to dismiss the actions without prejudice. The circuit court also determined that the customers were not entitled to fees pursuant to Wis. Stat. § 425.308. The court stated, "[t]his is not the kind of mistake [ ] or practice that I believe the Wisconsin Consumer Act was designed and intended to protect consumers from. This was merely a legal error made by a nonlegal, nonlegally trained agent of a company which does routine business perhaps in small claims court." The judge also concluded, "I just do not believe under the reasoning stated in the Footville [State Bank v. Harvell, 146 Wis. 2d 524, 432 N.W.2d 122 (Ct. App. 1988)] decision that the defendants have prevailed on a significant issue in this litigation."

¶ 6. In each of the seven cases, the circuit court did, however, award $250 in fees under Wis. Stat. § 805.04(2), which allows the court to set "such terms and conditions as the court deems proper" in granting a voluntary dismissal.

¶ 7. The customers appealed the denial of attorney fees under the WCA. A majority of the court of appeals reversed, concluding that the customers did *35prevail in circuit court, and were therefore entitled to attorney fees under the WCA.

¶ 8. The court used a two-prong test to reach this conclusion: whether there was a significant benefit in the litigation to the plaintiff, and whether there was a violation of the WCA by the defendant. Because the customers received a "significant benefit" from the dismissal of the default judgments, and because the creditor had in fact violated the WCA by prosecuting the action in Milwaukee County in violation of the venue provisions of the WCA, Wis. Stat. § 421.401(1) and (2)(b), the court held that the customers prevailed.

¶ 9. The court of appeals rejected Community's claim that the customers did not prevail because their motions to dismiss were not granted. Instead, the court concluded that Community's motions to voluntarily dismiss achieved the very same result; therefore, the customers were the prevailing party for fee-shifting purposes. In reaching this conclusion, the court looked to the "catalyst test" which was developed to determine whether to award attorney fees under the fee shifting provision of 42 U.S.C. § 1988. The two-part catalyst test requires that a causal link between the lawsuit and the relief obtained be established, and that the opponent's conduct was required by law. The catalyst test differs from the "substantial benefit" test in that neither a "substantial benefit" nor a violation of the WCA by the creditor need be shown.

¶ 10. The issue to be determined is if, under Wis. Stat. § 421.401(1) and (2)(b), the customers prevailed under the statute and are therefore entitled to an award of attorney fees pursuant to the WCA. The majority of this court affirms and adopts the reasoning and decision of the majority of the court of appeals in *36this case. Community Credit Plan, Inc. v. Johnson, 221 Wis. 2d 766, 586 N.W.2d 77 (Ct. App. 1998).

¶ 11. We disagree with the view held by Judge Curley in her dissent that Community did not violate the WCA because it is the circuit court's duty to screen out improperly venued actions. See Community Credit Plan, 221 Wis. 2d at 780 (Curley, J., dissenting). While the circuit court is to dismiss an improperly venued action for lack of jurisdiction, see Wis. Stat. § 421.401(2) and (b), the venue provision of the WCA clearly defines for creditors the proper venue for actions arising from consumer credit transactions. See Community Credit Plan, 221 Wis. 2d at 774; Wis. Stat. § 421.401(1). Where a creditor in a consumer credit transaction fails to prosecute an action in the proper venue, the creditor prosecutes contrary to the venue provisions, and is in violation of those provisions. Wis. Stat. § 421.401(2)(b). To hold otherwise would fail one of the purposes behind the WCA, which is to "protect customers against unfair, deceptive, false, misleading and unconscionable practices by merchants." Wis. Stat. § 421.102(2)(b).

¶ 12. We also disagree with the argument made by the Wisconsin Financial Services Association (Association) in its amicus curiae brief to this court. Upon setting forth the multiple purposes of the Wisconsin Consumer Act, see Wis. Stat. § 421.102(2)(a)-(c), the Association contends that an award of attorney fees is not in accord with those purposes for it neither serves to deter violations of the venue provisions nor is consistent with the "severity" of a violation of those provisions. Contrary to its position, a violation of the venue provision in a consumer credit transaction is serious, as the default judgments and subsequent *37repossessions involved in these cases amply demonstrate.

¶ 13. In reaching its conclusion, the Association failed to address a fourth purpose of the Wisconsin Consumer Act, which is the coordination of the regulation of consumer credit transactions [in Wisconsin] with the policies of the federal consumer credit act. Wis. Stat. § 421.102(2)(d). The federal consumer credit act was designed to counter a broad variety of abuses, including the prosecution in venues far from a customer's residence. Blakemore v. Pekay, 895 F. Supp. 972, 978 (N.D. Ill. 1995) ("The venue provision of the FDCPA was designed to limit the ability of debt collectors to file debt collection actions in courts inconvenient to the debtor."). Likewise, the Wisconsin Consumer Act protects customers from the serious problems and inconveniences accompanying actions prosecuted in an improper venue, as these actions were.

¶ 14. For the reasons set forth in Community Credit Plan, 221 Wis. 2d 766, we hold that the customers were prevailing parties under Wis. Stat. § 425.308. The customers received a significant benefit in the opening and dismissal of the default judgments against them in accordance with Wis. Stat. § 421.401(2)(b), and Community's prosecution of the seven actions in the Milwaukee County Circuit Court was a violation of Wis. Stat. § 421.401(2)(b), the WCA venue provision.

By the Court. — The decision of the court of appeals is affirmed.

The Wisconsin Consumer Act consists of Wis. Stat. chs. 421-27.

Unless otherwise noted, all statutory cites are to the 1995-96 version.