By David Ambrosh

On December 7, 2011, Wisconsin Governor Scott Walker signed into law 2011 Wisconsin Act 92 (“the Act”) which caps the amount of attorney fees that can be awarded in certain cases. Specifically, the Act requires judges to presume attorney fees should be no greater than three times the compensatory damages awarded. Judges can award more if they feel it is warranted, but the presumption would have to be overcome. Among the types of cases that are affected by the new law are cases that fall under the Wisconsin Consumer Act (“the WCA”). 

Introduction of the Act through the legislative process came on the heels of a notorious consumer case which centered around $5,000 in car repairs that the customer alleged to have never approved.[1] After years of litigation, the two sides reached a settlement calling for the auto dealer to pay $12,500 in damages, and $151,250 in legal fees. If the Act had been in place at the onset of that litigation, a judge would have had to presume that the most that could have been awarded in attorney fees would have been $15,000 because $5,000 in damages was sought. Instead, the consumer attorney recovered twelve times the amount of damages. 

Awarding attorney fees to customers who prevail in actions arising from consumer actions is nothing new. Since its inception in 1971, the WCA has allowed prevailing customers to recover “reasonable” attorney fees. Wisconsin courts have consistently held that there must be a WCA violation in order for a customer to have “prevailed.” In River Bank of DeSoto v. Fisher[2], the Wisconsin Supreme Court, citing to Suburban State Bank v. Squires[3], held that “[i]f a violation is found to have occurred, attorney’s fees under Wis. Stat. § 425.308 shall be awarded...” whereas “[i]f no Act violation is found, attorney’s fees shall not be awarded.”

            In the case of Community Credit Plan, Inc. v. Johnson[4], the court established a two-part test that must be satisfied in order for a customer to be entitled to an award of attorney fees: (1) there must be a finding that the creditor violated the WCA, and (2) the consumer must have obtained a significant benefit in the litigation. The case of Footville State Bank v. Harvell[5] provided further guidance, wherein the court held that a prevailing party should not get fees for proving minor violations of the Act, but only if they have prevailed on a significant issue. Specifically, the court held that “to be a prevailing party under the WCA ... [i]t is implicit in the definition...that the consumer who succeeds on some but not all issues recovers attorney's fees only as to the successfully litigated issues.” Id.

As previously discussed, Wisconsin courts have shown over the years that they have been up to the task of distinguishing those cases in which fees are warranted versus those in which fees are not warranted. 2011 Wisconsin Act 92 does nothing to change the manner in which courts assess whether fees are warranted. Instead, the Act places a presumptive cap on attorney fee awards that otherwise did not exist. The Act presumptively caps attorney fees, where allowed, at three times the compensatory damages awarded. The Act further provides that when compensatory damages are not awarded but injunctive or declaratory relief, recission or modification, or specific performance is ordered, reasonable attorney fees shall be determined according to factors including but not limited to: time and labor required by the attorney, novelty of the issues involved, skill requisite, customary fee, etc. The Act should serve to encourage early settlements, and at the same time deter fee-padding. In addition, the Act should serve to better align attorney fee awards with the amount of damages at issue.