NEWS: The Wisconsin Supreme Court has granted a request by The League – together with the Wisconsin Bankers Association and the Wisconsin Financial Services Association – to file a joint “friend of the court” brief in a case regarding class action lawsuits under the Wisconsin Consumer Act (“WCA”).
The case does not involve a credit union, but it presents an important issue for credit unions (and other lenders) in Wisconsin that face WCA class actions.
Background
The case, called Gudex v. Franklin Collection Service, Inc., involves a letter that a collection agency sent to a debtor about a $51 AT&T bill. Ms. Gudex, claiming that the letter confused her, filed a class action lawsuit against the agency, alleging violations of the WCA and the federal Fair Debt Collection Practices Act.
As the WCA requires for all class actions, Ms. Gudex sent the agency a notice at the outset of her case, demanding that it pay damages. The WCA says that a party cannot pursue a class action lawsuit for a WCA violation if the defendant responds to such a demand by offering “an appropriate remedy, which shall include actual damages and may include penalties … to such party within 30 days after receipt of such notice.” In other words, a defendant can avoid a class action lawsuit by paying damages after receiving a demand.
The agency responded with an offer to pay Ms. Gudex her actual damages plus the maximum penalty of $1,000 allowed by the statutes, as well as agreeing to other terms. Ms. Gudex rejected the offer and filed a motion for class certification. The collection agency argued that because she had rejected their offer, she could not proceed with her lawsuit as a class action.
A Dane County Circuit Court rejected the collection agency’s arguments. The judge held that the agency “did not offer Gudex an appropriate remedy … because the remedy does not appropriately address the whole class.” The court held that a remedy must be offered to the entire purported class, but the collection agency only made an offer to pay Ms. Gudex individually. The Wisconsin Court of Appeals agreed, and so the agency has now appealed to the Wisconsin Supreme Court.
Our arguments
Our motion, filed by The League’s outside attorneys, the Husch Blackwell law firm, summarized the top reasons why we disagree with the lower courts’ rulings, including these:
- The WCA’s plain language does not require a defendant to pay damages to an entire class, just the individual who initially filed the lawsuit. After all, the WCA says that a “party” commencing a WCA class action lawsuit must demand damages from the defendant, who can avoid the lawsuit if it pays “an appropriate remedy … to such party.” The statute simply does not require paying damages to an entire class of potential plaintiffs.
- Since the adoption of the WCA in 1973, creditors have relied upon this procedure to pay damages to individuals who make WCA claims. “The process increases efficiency and provides incentives for early settlement, and thereby reduces the costs of litigation,” we wrote. The Court of Appeals decision will effectively eliminate the remedy unless it is reversed.
- We questioned how a defendant could make an offer to an entire class at the very earliest stages of a class action lawsuit before a class has even been certified. In fact, we believe that paying a plaintiff damages for an entire class would not stop other consumers with similar claims from suing the defendant again in the future, which is what class action lawsuits are meant to prevent.
Those and other arguments will be fleshed out more fully in our “friend of the court” brief, which is due July 7.
The League will keep you informed of developments as the state Supreme Court process moves forward.
Compliance Roundtable – September 10 (In-Person)
Join The League’s compliance team as they lead a discussion on the latest changes in regulations and need to know information to keep your credit union in compliance. You can find more information or register on our website.