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Whitehead v. Discover Bank

United States District Court, E.D. Wisconsin

November 22, 2016




         The plaintiffs, David and Terri Whitehead, claim that the law firm of Messerli & Kramer, P.A., violated the Fair Debt Collection Practices Act and the Wisconsin Consumer Act during the course of two garnishment actions filed in Wisconsin state court. The plaintiffs also claim that Messerli & Kramer's actions caused Discover Bank to violate the Wisconsin Consumer Act. Before me now is the defendants' motion for summary judgment.

         I. BACKGROUND

         David Whitehead defaulted on two separate debts to Discover Bank. Terri Whitehead is David's spouse. Discover retained Messerli & Kramer to collect Mr. Whitehead's accounts.

         On December 14, 2010, Messerli & Kramer commenced an action in Wisconsin state court against Mr. Whitehead on behalf of Discover to collect one of the two delinquent accounts. On January 3, 2011, an attorney, George Peek, entered a notice of appearance in the action to defend Mr. Whitehead. On January 6, 2011, Messerli & Kramer commenced a second action in the same court against Whitehead on behalf of Discover to collect the other delinquent account. Attorney Peek entered his appearance in that action on January 26, 2011. By July 2011, the parties had settled both of these cases and entered into stipulations that provided terms for Mr. Whitehead to pay the delinquent accounts. However, a short time later, Discover deemed Whitehead in default under the stipulated payment schedules. On December 12, 2011, Discover, still represented by Messerli & Kramer, obtained a judgment against Whitehead in one of the state cases. On January 5, 2012, Discover obtained a judgment against Whitehead in the other case.

         After the judgments were entered, Attorney Peek continued to be listed as Whitehead's counsel of record. Peek continued to represent Whitehead until April 8, 2013, when Whitehead informed Peek that he had obtained new counsel and wanted Peek to transfer the file to his new counsel. Dep. of George Peek at 26-27, ECF No. 35. Peek did not file notices of withdrawal in the state-court cases, and Whitehead's new counsel did not immediately file notices of appearance in those cases. Neither Peek nor Whitehead's new counsel notified Discover or Messerli & Kramer that the Whiteheads had obtained new counsel.

         On February 25, 2014, Messerli & Kramer learned that Whitehead had obtained employment at a company called General Dynamics. Because Whitehead had yet to satisfy the outstanding judgments, Messerli & Kramer commenced two earnings garnishment actions in the state court that had entered the judgments-one garnishment for each judgment. The garnishments were filed under the same case numbers as the actions that resulted in the judgments. Messerli & Kramer commenced the first earnings garnishment on March 5, 2014, and it commenced the second earnings garnishment on March 26, 2014.

         Under Wisconsin law, when a creditor commences an earnings garnishment, the clerk of court issues the creditor two “earnings garnishment forms.” Wis.Stat. § 812.35(2). The creditor must serve one of the garnishment forms on the garnishee, who in this case was General Dynamics, Whitehead's employer, and must serve the other form “upon the debtor.” Wis.Stat. § 812.35(3)-(4). The contents of the garnishment form are prescribed by statute. See Wis. Stat. § 812.44(3). The form directs the garnishee to pay the creditor 20% of the debtor's disposable earnings for each pay period covered by the garnishment. The form contains other instructions for the garnishee. As is relevant to this case, the form instructs the garnishee that it should not withhold any of the debtor's earnings if the garnishee receives an answer to the garnishment form from the debtor that “claims a complete exemption or defense.” Wis.Stat. § 812.44(3), ¶ 4.

         After commencing the garnishments, Messerli & Kramer served the garnishment forms on General Dynamics. Messerli & Kramer also served the garnishment forms on Attorney Peek, thinking that he was still Whitehead's counsel for purposes of the two delinquent accounts. Messerli & Kramer did not serve the garnishment forms on David Whitehead personally. Whitehead first learned of the garnishments when General Dynamics informed him that it would be garnishing his wages. Whitehead claims that learning of the garnishments from his employer rather than by service of the garnishment forms caused him emotional distress.

         On March 28, 2014, Whitehead, now represented by new counsel, filed an answer to the garnishment, a counterclaim against Discover Bank, and a motion to reopen the original judgment in one of the two cases. On April 24, 2014, Whitehead's new counsel filed an answer, counterclaim, and motion to reopen in the other case. In his answers to the garnishments, Whitehead did not claim that his earnings were exempt from garnishment, but he did assert several defenses to the garnishments. As noted, the garnishment form instructs the garnishee that if it receives an answer from the debtor claiming a complete exemption or defense, the garnishee must not withhold the debtor's earnings. However, General Dynamics did not follow this instruction. On March 31, 2014, General Dynamics began withholding Whitehead's earnings in connection with one of the garnishments and sending them to Messerli & Kramer. On July 7, 2014, Messerli & Kramer began receiving payments from General Dynamics in connection with the other garnishment.

         Meanwhile, the court in the first garnishment scheduled a hearing for April 29, 2014. On April 11, 2014, a paralegal at Whitehead's new counsel's law firm sent an email to Messerli & Kramer regarding the garnishment on which General Dynamics had begun withholding earnings. The email stated:

Attached is the notice of motion and motion to reopen and allow counterclaims in the above mentioned case. We believe that the garnishment in this case should be stayed pending the outcome of that hearing on April 29, 2014, and are wondering if you would stipulate to that. Please let me know your feelings on this as soon as possible so I can begin drafting a stipulation if need be.

Decl. of Brian Chou Ex. 1010, ECF No. 33-10. As far as the summary-judgment record reveals, Messerli & Kramer did not respond to this email. At the court hearing on April 29, 2014, the court denied Whitehead's motion to reopen the case and to assert a counterclaim.

         In the other garnishment action, a hearing was scheduled for August 8, 2014. However, on August 6, 2014, Whitehead filed a petition to amortize his debts under Wis.Stat. § 128.21. Under Wisconsin law, the filing of this petition prevented the defendants from continuing to garnish Whitehead's wages. See Wis. Stat. ยง 128.21(2). The parties therefore asked the court to cancel the August 8 hearing, and so far as the summary-judgment record reveals, no further action was taken on either garnishment following the ...

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