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By Kirk R. Emick, Associate Attorney 

            Your client obtains a judgment against a defendant in State X.  However, that defendant has moved to Wisconsin.  You’d like to proceed with a garnishment in Wisconsin, but you only have a judgment in State X.  What are your options?  One option you have is to have that judgment moved into Wisconsin.  This is called a foreign judgment.  A foreign judgment is “any judgment, decree or order of a court of the United States or of any other court which is entitled to full faith and credit” in the state of Wisconsin.  Wis. Stat. § 806.24(1).  

Once you have your foreign judgment, a few questions may arise.  The purpose of this article is to further examine two of the issues that arise regarding foreign judgments in Wisconsin.  The areas discussed will include the length of a foreign judgment in Wisconsin, and the interest associated with the foreign judgment.  

            Once you have your judgment, it is important to know how long that judgment is valid.  Once you have docketed the foreign judgment in Wisconsin, the lien is enforceable for ten years from the date it was entered.  Wis. Stat. § 806.15(1).  “Every judgment properly entered in the judgment and lien docket showing the judgment debtor’s place of residence shall, for 10 years from the date of entry, be lien on all real property.”  Id.  There is no case law or annotations that apply to a foreign judgment that may indicate that a foreign judgment should not be considered under “every judgment.”  As with any other judgment in Wisconsin, the property may be subject to the homestead exemption as found in Wis. Stat. § 815.20.  

            While the firm does not obtain child support judgments, it may come into effect.  If a debtor has a child support judgment either in their favor or against them, it may alter the household income.  Unlike the ten years a property lien is valid, a foreign child support lien is only valid for five years from the date it becomes effective.  Wis. Stat. § 49.854(12)(a).  

            The State of Wisconsin allows for a money judgment to accrue interest.  The interest rate for a money judgment is controlled by Wis. Stat. § 815.05(8).  The interest rate is set at:  

“[O]ne percent plus the prime rate in effect on January 1 of the year in which the judgment is entered if the judgment is entered on or before June 30 of that year or in effect on July 1 of the year in which the judgment is entered after June 30 of that year, as reported by the federal reserve board in federal reserve statistical release H. 15, on the amount recovered from the date of the entry of the judgment until it is paid.”  Id.  

The prime rate as of June 30, 2017 was 4.25%, therefore the interest rate on money judgments in Wisconsin would accrue interest at 5.25% under Wis. Stat. § 815.05(8).  

            However foreign judgment interest rates are not controlled by Wis. Stat. § 815.05(8).  The Court of Appeals of Wisconsin determined the interest rate for foreign judgments in Prof. Office Buildings, Inc. v. Royal Indemnity Co.  In Prof. Office Buildings, an airplane owned by a Wisconsin corporation crashed near Tupelo, MS, causing serious injuries to several passengers.  145 Wis. 2d 573, 577, 427 N.W.2d 427 (Ct. App. 1988).  The injured sued the Wisconsin corporation in Mississippi, and obtained a judgment against the Wisconsin corporation.  Id. at 578.  The judgment was then subsequently docketed in Wisconsin.  Id. at 579.  

The insurance company for the Wisconsin corporation, Royal Indemnity, argued that the interest rate should be controlled by the state where judgment was originally obtained, here Mississippi, rather than where the foreign judgment occurred (Wisconsin).  Id. at 586.  The Court of Appeals of Wisconsin held that even when the judgment had been docketed in Wisconsin, the interest rate provided in the Mississippi judgment is applicable.  Id. at 577. 

As with standard judgments, the State of Wisconsin has regulated how long a foreign judgment is valid in Wisconsin.  Once you have your judgment, and docket it in Wisconsin, you have a typical ten-year lien.  While you do have that judgment, you will have to ascertain the interest rate for the state where the judgment was first obtained.  Once you have determined that interest rate, you will be cleared to collect on your judgment.

Posted: 12/4/2017 9:55:36 AM by Tom Connor | with 0 comments


 By: Attorney Ellen French

                Under Wis. Stat. §801.18, the Wisconsin Court System began its transition to mandatory electronic filing (e-filing).  The transition began over one year ago with Dodge County becoming the first county to utilize mandatory e-filing.  Since that time, mandatory e-filing has been rolled out in phases, as additional counties transition into compliance with the new statutory requirements.  On September 1, 2017, Milwaukee County entered the realm of mandatory e-filing.[1]  At this time, there remain only three (3) counties in Wisconsin that do not have mandatory e-filing: Brown, Monroe, and Burnett.[2]  However, these counties are scheduled to implement mandatory e-filing in October 2017.

                The implementation has created many clear benefits for participants.  First and foremost, for attorneys who practice in a variety of venues, e-filing allows quick filing of documents when the statute of limitations may otherwise pose an obstacle.  Accordingly, a Milwaukee attorney could e-file a Summons and Complaint in Door County with the click of a button.  Furthermore, e-filing creates ease in quickly obtaining documents filed by opposing parties.

                However, for attorneys practicing Collections Law, mandatory e-filing creates a unique dilemma for post-judgment collections, especially for older judgments.  As the Wisconsin Circuit Court Access website (CCAP) records cases as “closed” once judgment has been entered, the cases will need to be converted to e-filing in order to comply with the requirements of Wis. Stat. §801.18.  Creditors’ attorneys must be conscious of the transition to mandatory e-filing in particular counties, as a request of the Court must be made to convert the case to e-filing.  Thus, to commence post-judgment executions that require court involvement such as wage and non-earnings garnishments, a letter or other similar request must be sent to the Court and the case will be converted to e-filing.  When the case has been converted to e-filing, the filings may resume under the new e-filing system implemented.

                While the process seems to be relatively straightforward, the delays in larger counties which are just beginning the implementation of mandatory e-filing pose an interesting scenario.  Creditors’ attorneys will need to weigh the additional time in having a judgment case converted to e-filing against any voluntary payment arrangements that can be worked out with a consumer.  As previously noted above, Milwaukee County recently transitioned to mandatory e-filing at the beginning of September 2017.  Firms must be cognizant of the large volume of cases which will need conversion to e-filing and plan accordingly to be proactive in converting cases with active garnishments so to avoid a lag in re-filing a garnishment action due to e-filing conversion.  If properly timed, a firm may be able to convert a case while the previous garnishment is running and e-file the new garnishment action as it would have done prior to mandatory e-filing.

                Certainly, the hurdles created by mandatory e-filing will be fleeting as cases which were commenced electronically will always be stored in that manner.  For these cases, there will be no growing pains and post-judgment collections should be a seamless transition.  Similarly, as cases continue to be converted, the multitude of files that will require conversion to e-filing should dwindle.  Finally, as mandatory e-filing is still a new process in the Wisconsin Courts System, it is to be expected that the process will increase in efficiency and speed as court officials and attorneys alike become more familiar with the nuances of mandatory e-filing.

Posted: 9/11/2017 9:58:01 AM by Tom Connor | with 0 comments


 By: Attorney Jennifer Anderson

After a hearing in small claims court before a court commissioner, either party has an absolute right to appeal the case to the presiding judge.  Section 799.20, Wis. Stats., entitled Proceedings Before Circuit Court Commissioner, sets forth the procedure required for a party who wishes to file a Demand for Trial following a small claims hearing before a court commissioner:

(2) The circuit court commissioner's decision shall become a judgment 11 days after rendering, if oral, and 16 days after mailing, if written, except that:
      (a) Default judgments will have immediate effect.
      (b) Either party may file a demand for trial within 10 days from the date of an oral decision or 15 days from the date of mailing of a written decision to prevent the entry of the judgment.

(3) (a) There is an absolute right to have the matter heard before the court if the requirements of this section are complied with.  
    (b) The circuit court commissioner shall give each of the parties a form and instructions which shall be used for giving notice of an election to have the matter heard by the court.  
    (c) The demand for trial must be filed with the court and mailed to the other parties within 10 days from the date of an oral decision or 15 days from the date of mailing of a written decision. Mailing of the notice and proof of such mailing is the responsibility of the party seeking review.  
    (d) Notice of a demand for trial may also be given in writing and filed by either of the parties at the time of an oral decision.

(4) Following the timely filing of a demand for trial, the court shall mail a trial date to all of the parties.

(5) A timely filing of a demand for trial shall result in a new trial before the court on all issues between the parties.

The statute specifically requires the Demand for Trial to be filed within 10 days from the date of the court commissioner’s oral decision or 15 days from the date of a written decision and the instructions on the forms provided by the court very clearly indicate this fact.  Failure to strictly comply with the statutory requirements will waive a party’s right to a trial before the judge.  The statute does not provide for judicial discretion or permit enlarging the time period before judgment is entered if the proper documents are not filed with the court and sent to the opposing party within the required time period.  

In a recent case handled by our office, the defendant filed a Demand for Jury form within 10 days of the date of the court commissioner’s oral decision, but failed to file a Demand for Trial within the required time period.  Because the defendant did not comply with the statutory requirements that would entitle her to a trial before the judge, our office filed a Motion to Enter Judgment on the commissioner’s ruling.  The judge agreed that the ruling the commissioner made at the hearing must stand.  The court determined that the filing of the Demand for Jury alone is insufficient without the Demand for Trial and did not meet the statutory requirements to permit the defendant an opportunity for a de novo review.  

In another case, our office was successful in obtaining a judgment against a company 11 days after the commissioner-level hearing.  Thereafter, the company’s attorney filed a motion arguing, essentially, that the time to file a request for de novo review should be extended under Wis. Stat. §806.07(1)(a) based upon excusable neglect.  However, pursuant to Wis. Stat. §799.01, Wis. Stat. §806.07 does not apply, as the procedure set forth in Chapter 799 is the exclusive procedure to be used in small claims matters (with limited exceptions not applicable for purposes of this article) and, therefore, an “excusable neglect” analysis does not apply.  The demand “must” be filed within 10 days if the decision is oral or 15 days if the decision is written and, if not, the court’s decision “shall” become a judgment.  Wis. Stat. §799.207(3) and (2).  Therefore, the company’s motion was denied and the judgment was upheld.

After a small claims hearing, either party has an absolute right to a de novo review.  However, if the statutory requirements are not strictly complied with, this right will be lost and, once the time for filing has expired, it is gone forever.
Posted: 8/8/2017 3:03:32 PM by Tom Connor | with 0 comments


 Maria N. Lewis, Shareholder/Compliance Manager 

In a traditional law firm, the existence of a department or specific staff focused solely on internal compliance is not common. However, because of the regulatory environment surrounding debt collection and litigation, firms that practice in this area must devote staff and resources to actively monitor their internal practices and procedures for compliance with all applicable legal and regulatory requirements. This has been a “new normal” for debt collection firms ever since the publication of the Consumer Financial Protection Bureau’s (CFPB) Supervision and Examination Manual in 2012, as well as the many recent Consent Orders the agency has entered into with credit issuers, debt buyers, and law firms. 

                In adjusting to this new reality, it is important that debt collection law firms learn what works in terms of structuring their internal compliance system and what does not work in order to efficiently devote resources towards the effective monitoring of internal processes and procedures. Compliance staff should have a role in call monitoring, procedure development and approval, complaint and dispute review and reporting, and communication with clients as well as implementation of client requirements. So, what works when developing a compliance department? First, it is often helpful to have compliance staff members that have previously held positions in other departments within the firm. For example, having compliance attorneys who previously litigated collection cases creates a level of credibility in the eyes of the attorneys who are actively litigating cases. The litigation attorneys can rest assured that even though the compliance attorney may be dictating a client or legal requirement that affects the practice of law, the compliance attorney understands how that requirement will affect their practice. 

Additionally, employing former collectors in a compliance department can be beneficial both from the standpoint of rolling out new requirements such as voice mail or disclosure scripts, as well as call monitoring. Having a staff member who has previously sat in the place of collectors on the phone on a daily basis again lends credibility to the compliance department’s work, especially in the area of call monitoring. Importantly, having compliance staff who worked in other areas of the firm opens the lines of communication between departments because staff already has a relationship with each other. 

It is also very important to get input from other departments before changing a procedure or rolling out a new process. Again, this allows for buy-in and opens the lines of communication firm wide.  Lastly, and perhaps most importantly, shareholder/partner involvement is crucial when structuring a compliance department within a debt collection law firm. Compliance staff should report directly to a shareholder or partner who is not directly involved in managing or directing the firm’s revenue-generating functions on a daily basis. This allows for independence from other departments and operations to ensure that the compliance department has the freedom to properly implement procedures and monitor those procedures. 

While the above ideas are important to consider, it is equally important to take into consideration what may not work when structuring a compliance department. Operating in a silo between departments and between tasks definitely does not work well for a compliance department in a debt collection law firm. Other firm departments, including collections, litigation, IT and other support staff, need to feel comfortable bringing potential problems or questions to compliance attorneys and staff. If a problem or even a potential process improvement is not communicated between departments, it cannot be implemented successfully. This must include involvement of the firm’s compliance staff to ensure any changes in firm process and procedures comply with all legal and client requirements. What is more, operating in a silo between departments can cause an “us versus them” mentality.  For example, collectors may feel like internal auditors are “out to get them” during call monitoring if defects are identified. Opening the lines of communication between departments allows staff to identify training opportunities, rather than just focusing on and pointing out the problems. This will ensure the firm’s collection procedures are strong going forward. 

                Although the allocation of specific staff to focus on compliance within a debt collection law firm is extremely important, it is also necessary to remember that it is not solely the compliance department that is responsible for compliance. Every employee of a debt collection law firm must play a role in compliance. And hopefully with the above concepts of what can work and what may not, debt collection law firms can build a culture of compliance.

 

Posted: 5/9/2017 9:01:19 AM by Tom Connor | with 0 comments


 By: Joseph R. Johnson and Tyler Helsel

            In recent years, limited liability companies (LLC’s), have become the default entity for business owners.   In fact, per the Wisconsin Department of Financial Institutions website, 34,067 new LLC’s were formed in 2016 and already 2017 is 7.0% ahead of that pace.[1]   With LLC’s coming to dominate the business landscape, a question we often get from our clients is what options are available for collecting against an LLC, particularly one that has minimal or no assets. 

            One option available to creditors to satisfy a judgment is to pierce the corporate veil to reach the assets of the owner and/or members of the LLC.  However, as noted below, a creditor cannot pierce the corporate veil just because an LLC owes a debt and has insufficient assets to satisfy said debt.  There is a strong presumption that the members or owner of an LLC cannot be held liable for acts of the LLC.  So what must a creditor do to overcome that presumption?

           The first prevalent corporate veil case in Wisconsin is Milwaukee Toy Co. v. Industrial Com. of Wisconsin, 203 Wis. 493 (1931).  In that case, the court stated the corporate veil could be pierced if leaving the veil intact “would accomplish some fraudulent purpose, operate as a constructive fraud, or defeat some strong equitable claim.” Id. at 496.  

           Today, to determine whether the corporate veil can be pierced, a plaintiff must overcome the burden of the alter-ego test, with Consumer’s Co-op v. Olsen being the lead case. 142 Wis. 2d 465.  In Consumer’s Co-op, a corporation owned by Olsen took out a substantial line of credit with the plaintiff.  Id. at 471.  The plaintiff sought to impose liability on Olsen for the debt of the corporation.  

           The Consumer’s Co-op court held that the corporate veil may be pierced only when the “corporate fiction would accomplish some fraudulent purpose, operate as a constructive fraud, or defeat some strong equitable claim.” Id. at 475.  When considering what fraud is, courts are to look at factors such as undercapitalization and lack of corporate formalities. Id. at 478-85.  In Consumer’s Co-op the court used the “alter ego” approach, where “corporate affairs are organized, controlled, and conducted so that the corporation has no separate existence of its own and is the mere instrumentality of the shareholder and the corporate form is used to evade an obligation, to gain and unjust advantage or to commit an injustice.” Id. at 476.  The court looked at various factors in making its determination.  First, the court stated that undercapitalization is an important factor in determining if a fraud has occurred. Id. at 477.  The court analyzed capital at the time and formation of the corporation to determine if it is fraudulent. Id. at 486.  For example, if capital is rapidly increased immediately prior to the opening of a store at the formation of the corporation, this is likely to purchase the building or some other business asset.  In Consumer’s Co-op, the initial capital was small, and was to start the corporation. Id. at 491. The increases thereafter did not suggest something inappropriate was occurring.  Id. at 491-92. 

            Additionally, corporate formalities are an important factor when analyzing fraud.  Id. at 484. When determining formalities, courts will look to three factors: (1) control of finances and other transactions that are not separate in mind or will from the defendant and the corporation; (2) that control is used in a fraud; and (3) the fraud caused an injury or unjust lost.  Id.  In Consumer’s Co-op, the court held that the defendants had adequate corporate formalities: stock was issued, officers were elected, meetings were held and records of meetings kept, and all business interactions were undertaken under business name.  Id. at 488.  This evidenced corporate control of finances and business transactions. Id.  As such, the court declined to pierce the corporate veil in Consumer’s Co-op. 

             In addition to the specific factors above, courts are to look at the totality of all factors to determine if a plaintiff should be permitted to pierce the corporate veil.  Michels Corp. v. Haub, 2012 WI App 106, ¶20.  In Haub, the court held that control, sophistication, and corporate procedures on their own may not be sufficient to pierce the corporate veil, taken together are more than sufficient to show the Consumer’s Co-op test.  Id., ¶20.  The court further held that the facts supported the notion that the defendant had exclusive control of the finances, was the corporation’s president and sole employee, and had sole authority within the corporation.  Id., ¶19.  Additionally, the corporation had separate tax returns and bank accounts, but the defendant moved substantial funds from the business accounts to personal accounts of the defendant.  Id., ¶¶24-25. As the Court in Consumer’s Co-op stated, the court is to look at “reality and not form.”  Id., ¶23.  Although separate accounts give the form of separation, complete control and moving funds to private accounts does not give the reality of separation.  Id., ¶25. 

             In Sprecher v. Weston’s Bar, the court held that the corporate veil should be pierced. 78 Wis. 2d 26, 39 (1997).  The defendant held no corporate meetings nor maintained any records, the corporation had no substantial assets, and the defendant took out all corporate profits as salary. Id. at 38-39.  The defendant even used the corporate bank account as a personal checking account. Id.  There, the court stated the corporate veil could be pierced. Id.  

Overall, there is a strong presumption against piercing the corporate veil and creditors should be cautioned that piercing is not a “magic bullet” that can be used to collect on every LLC that lacks the assets to satisfy a judgment.  However, if through investigation, discovery, and/or supplemental examinations, a creditor learns or has reason to believe that the LLC is simply an alter ego of its owner, piercing can be an effective tool to collect.



[1] www.wdfi.org

Posted: 3/14/2017 11:34:29 AM by Tom Connor | with 0 comments