Oct. 19, 2011 – Today, a Senate committee will hear public debate on a bill relating to attorney fees. The proposed law would require the courts to consider certain factors in determining reasonable attorney fees and cap fees in compensatory damage cases.

The bill (SS SB 12/SS AB 12) limits attorney fees to no more than three times the amount of compensatory damages awarded in any action not governed by Wis. Stat. section 814.04, which places caps on attorney fees except as provided in fee-shifting statutes.

In general, a prevailing party cannot recover attorney fees or expenses from an opposing party without a specific statutory provision that allows it. Fee-shifting statutes, in general, allow reasonable attorney fees to be awarded. The courts determine what is reasonable.

The Wisconsin Supreme Court has recognized that fee-shifting statutes encourage attorneys to pursue claims that have little monetary value,¹ such as cases involving a tenant’s claim that his or her landlord illegally withheld a security deposit. Citizens act as private attorneys general in enforcing such rights, and the “aggregate effect of individual suits enforces the public’s rights.”²

The proposed bill generally codifies the factors courts must consider in determining a reasonable attorney fee in cases that allow them to be awarded.³ Reasonable attorney fees are often allowed in cases where consumer rights are at issue.

Retired consumer attorney Jeff Archibald says capping attorney fees will allow predatory businesses to thrive without the threat of attorney fees to deter illegal practices.

Archibald, who worked at two prominent law firms before starting his own consumer law practice, says consumer lawyers are able to represent vulnerable and low-income individuals because fee-shifting statutes allow attorneys to recover those fees on contingency.

“Consumer law offices won’t be able to stay in business, and people who get screwed out of smaller amounts will have no access to the courts at all,” said Archibald, who spoke at a press conference last week on the proposed legislation.

Archibald will also testify today in opposition to SS SB 12 at a public hearing before the Senate Committee on Judiciary, Utilities, Commerce, and Government Operations. The Assembly Committee on Judiciary and Ethics the will hold a public hearing Friday on SS AB 12.

The State Bar of Wisconsin opposes the legislation because it could adversely affect the ability of low-income individuals to get representation to prosecute a claim. “For many, the contingent fee is the key to the courthouse door,” the State Bar’s policy manual states.

The Wisconsin Association of Justice also opposes the legislation, as indicated in a released statement by President-elect Edward Vopal. The Independent Insurance Agents of Wisconsin, the Milwaukee Metropolitan Association of Commerce, and the Midwest Food Processors Association support it.

The proposed bill

The proposed legislation – introduced by the committee on Senate Organization at the request of Gov. Scott Walker, Sen. Rich Zipperer (R) and Rep. Robin Vos (R) – would cap reasonable attorney fees, in cases not subject to section 814.04, at three times the amount of compensatory damages “in any action in which compensatory damages are awarded.”

In actions where compensatory damages are not awarded but a court orders injunctive or declaratory relief, rescission or modification, or specific performance, reasonable attorney fees are to be determined according to the factors listed by proposed section 814.045.⁴

In cases where a court orders compensatory damages and injunctive or declaratory relief, rescission or modification, or specific performance, the court must “presume that reasonable attorney fees do not exceed 3 times the amount of the compensatory damages awarded.” The presumption may be overcome if the court determines a greater amount is reasonable.

The proposed bill would directly impact cases involving fee-shifting statutes that are not subject to automatic caps under section 814.04.⁵ Those include cases involving landlord-tenant disputes, motor vehicle repairs, unfair billing for consumer goods or services, housing and employment discrimination, and child and spousal support, among others.

Lawmakers have voiced concern that current provisions do little to promote settlements.

But consumer lawyer David Dudley says that argument is flawed, at least in cases involving low-income individuals asserting their rights. Attorneys are already under scrutiny to show courts that fees are reasonable under the circumstances, he says, and capping fees will just tip the balance of power in favor of parties with more money.

For instance, Dudley helps clients recover rental security deposits wrongfully withheld. The recovery amount could be as little as $200. Under the proposed law, the attorney could not collect more than $600 in attorney fees. But if a landlord chooses to pursue litigation with discovery, depositions, or other expenses, attorney fees could be a lot more.

“Nine times out of ten, we settle cases that fall within the limit that is being proposed,” said Dudley, who works at the Consumer Protection Law Office in Madison. “But we would lose the ability to leverage landlords who know tenant-side lawyers are capped.”

Dudley says an attorneys’ ability to obtain reasonable fees in a person’s private action can deter impermissible conduct, especially where state agencies do not have the resources to enforce the rights of all individuals who file complaints under administrative regulations.

“It’s especially important to recognize that function, especially when facing budget cuts,” Dudley said. “The Department of Agriculture, Trade, and Consumer Protection is already extremely limited in the number of complaints they can pursue. It would only be that much worse if consumer lawyers are out of business.”

By Joe Forward, Legal Writer, State Bar of Wisconsin

Endnotes