NEWS: Today, the Wisconsin Supreme Court issued an opinion that is a victory for anyone (including credit unions) facing a class action lawsuit under the Wisconsin Consumer Act (“WCA”).
The League – together with the Wisconsin Bankers Association and the Wisconsin Financial Services Association – filed a joint “friend of the court” brief in this case in 2025 (as this Compliance Courier described). Today, the court agreed with the arguments we made. While the case did not involve a credit union directly, it presented an important issue for credit unions and other consumer lenders in this state.
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 start 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 turned down the offer and filed a motion to certify her lawsuit as a class action. The collection agency argued against that motion, saying that because she had turned down their offer, she could not proceed with a class action lawsuit.
A Dane County Circuit Court sided with Ms. Gudex. 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 said essentially the same thing.
The Wisconsin Supreme Court reversed that decision in today’s opinion, siding with the collections agency and writing that the lower court “relied on an incorrect interpretation of law.”
The Supreme Court’s opinion
The League’s “friend of the court” brief stressed that the WCA’s plain language allows a defendant to avoid the filing of a class action lawsuit by paying damages to the individual who initially filed the lawsuit, and not to an entire class. Since the adoption of the WCA in 1973, creditors have relied on this procedure to pay damages to individuals who make WCA claims.
A majority of the Wisconsin Supreme Court agreed with those points. Their opinion focused on the WCA’s wording and the legislature’s goals in choosing that language. In part of their opinion, the justices wrote:
The statute is clear that [the defendant] is required to give or agree to give “an appropriate remedy” to the particular party who notified [the defendant] pursuant to [the WCA requirement]. That is Gudex, not the putative class.
Gudex also points to the reasoning of the circuit court and court of appeals, both of which concluded that the policy of allowing class action lawsuits in Wisconsin would be frustrated by [the defendant’s] interpretation of [the WCA]. It is true our interpretation … means that a class action for damages may be stopped before it even begins, provided an appropriate remedy has been given or will be given to the party plaintiff. But that is what the text plainly says and means. The text does not contain an unrestrained endorsement of class actions. A better view of the statutory policy choice is that the legislature chose to incentivize making an affected customer whole as quickly as possible, while still preserving access to the class action lawsuit if the customer does not receive an appropriate remedy. The legislature provided a strong incentive for a defendant like [the defendant in this case]: make an injured party whole now, or face a costly and time-consuming class action proceeding that may require you to provide a remedy to a much larger group later.
Three justices also wrote a concurring opinion, “to emphasize that this [WCA] provision is not a get-out-of-class-certification-free card, and to explain some of the important limitations on how and when” that provision can be raised in a lawsuit.
One justice dissented, writing that: “Allowing a defendant to avoid a consumer class action for damages by ‘picking off’ the representative plaintiff defeats the class action mechanism under the WCA.” The dissent went on to say that the majority opinion would undermine “the WCA’s purpose of ‘protect[ing] customers from unfair, deceptive, false, misleading and unconscionable practices.’”
The case is being sent back to the circuit court, which will now have to decide whether the remedy that the collections agency offered to Gudex was sufficient under the WCA to prevent Gudex’s class action. Also, the circuit court could deny class certification for other legal reasons.
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