ARGUMENT: February 1, 2019
OF DECISION OF THE COURT OF APPEALS Reported at 382 Wis.2d
271, 915 N.W.2d 730 (2018 - unpublished)
Circuit Court Washington County L.C. No. 2017SC271 Todd K.
the defendant-appellant-petitioner, there were briefs filed
by Briane F. Pagel, and Lawton & Cates, S.C., Madison.
There was an oral argument by Briane F. Pagel.
the plaintiff-respondent, there was a brief filed by Lisa M.
Lawless, Marci V. Kawski, Edward J. Heiser, Jr., and Husch
Blackwell LLP, Milwaukee. There was an oral argument by Lisa
amicus curiae brief was filed on behalf of Legal Action of
Wisconsin, Inc., by Jessica Roulette, Gregory Myszkowski,
Elizabeth Stinebaugh, Nicole Zimmer, and Legal Action of
Wisconsin, Inc, Milwaukee.
amicus curiae brief was filed on behalf of Credit Union
National Association and Wisconsin Credit Union League, by
John W. Raihala and Clifford & Raihala, S.C., Madison.
amicus curiae brief was filed on behalf of Legal Aid Society
of Milwaukee, Inc., by Karen M. Bauer, Dana M. Roth, and
Legal Aid Society of Milwaukee, Inc., Milwaukee.
ANNETTE KINGSLAND ZIEGLER, J.
This is a review of an unpublished decision of the court of
appeals, Security Finance v. Kirsch, No. 2017AP1408,
unpublished slip op. (Wis. Ct. App. Apr. 11, 2018), affirming
the Washington County circuit court's
order. The order granted Security Finance's
("Security") motion to dismiss Brian Kirsch's
("Kirsch") counterclaims against Security arising
under Wis. Stat, chs. 425 and 427 (2015-16) . The court of
appeals affirmed the circuit court, concluding that
Kirsch's counterclaims were properly dismissed.
This court must consider whether a debtor who has been sued
on a consumer credit transaction without first receiving a
notice of right to cure default under ch. 425 may sue the
creditor for damages under ch. 427, the Wisconsin Consumer
Act ("WCA"). We conclude that a creditor's
failure to provide such notice does not constitute a
sufficient basis for relief under ch. 427. As a result,
Kirsch's counterclaims were properly dismissed, and we
affirm the court of appeals.
FACTUAL BACKGROUND AND PROCEDURAL POSTURE
Security and Kirsch entered into a loan agreement, whereby
Security loaned Kirsch $1, 000 and Kirsch agreed to pay it
back with interest in 12 equal payments from July 1, 2016, to
June 1, 2017. Kirsch defaulted on the payment obligation. On
February 6, 2017, Security filed a small claims lawsuit
against Kirsch to enforce the loan agreement and collect the
alleged debt. Kirsch answered and counterclaimed, alleging
that Security filed this action "seeking to collect
money without, upon information and belief, serving defendant
with a notice of right to cure default which satisfies the
requirements laid out in [Wis. Stat. §§] 425.104
and [425.]105," seeking damages allowed under Wis.Stat.
§ 427.104. Specifically, Kirsch alleged that Security
"has no right to file an action without first serving a
sufficient notice of right to cure default," and that
this failure "constitutes a violation of [§]
427.104(1)(g) . . . and a violation of [Wis. Stat. §]
425.302." Thereafter, Security sought to voluntarily
dismiss the complaint, without prejudice and Kirsch objected.
The case was reopened, and Kirsch filed an amended answer and
counterclaims which added a claim that Security violated
§ 427.104 (1) (j) .
Security moved to dismiss Kirsch's counterclaims. The
circuit court granted the motion to dismiss, stating that
Kirsch "baldly asserts that failure to provide proper
notice of the right to cure default can constitute
threatening or harassing behavior." The circuit court
further stated that "[i]n general, the remedy for the
violation alleged is dismissal without prejudice." The
circuit court concluded that Kirsch made "no showing
[he] would be entitled to any other remedy." The circuit
In terms of the dismissal without prejudice, the
defendant's counterclaim is moot, and the argument that
the defendant is entitled to these additional remedies
requires a . . . tortured interpretation of the statute and
the facts, and that's not an interpretation that I am
required to accept.
result, the circuit court dismissed the counterclaim relating
to the notice of right to cure default.
The court of appeals affirmed the circuit court's
dismissal. Kirsch, No. 2017AP1408, unpublished slip
op., ¶¶1, 26.
The petition for review presented one issue:
Whether a customer [who has been] sued on a consumer credit
transaction without first receiving a notice of right to cure
default may sue the merchant for damages under chapter 427 of
the Wisconsin Consumer Act?
This court's order granting Kirsch's petition for
review provides that "pursuant to Wis.Stat. §
(Rule) 809.62(6), [Kirsch] may not raise or argue issues not
set forth in the petition for review unless otherwise ordered
by the court."
STANDARD OF REVIEW
Whether a complaint or a counterclaim "states a claim
upon which relief can be granted is a question of law for our
independent review; however, we benefit from discussions of
the court of appeals and circuit court." Data Key
Partners v. Permira Advisers LLC, 2014 WI 86, ¶17,
356 Wis.2d 665, 849 N.W.2d 693 (citing DeBruin v. St.
Patrick Congregation, 2012 WI 94, ¶10, 343 Wis.2d
83, 816 N.W.2d 878).
In reviewing a motion to dismiss, this court accepts factual
allegations in the complaint or counterclaim as true.
Id., ¶18 (citing Strid v. Converse,
111 Wis.2d 418, 422-23, 331 N.W.2d 350 (1983)) . However,
this court does not accept legal conclusions asserted in a
complaint or counterclaim, "and legal conclusions are
insufficient to withstand a motion to dismiss."
Id. (citing John Doe 67C v. Archdiocese of
Milwaukee, 2005 WI 123, ¶19, 284 Wis.2d 307, 700
N.W.2d 180; Mitchell v. Lawson Milk Co., 532 N.E.2d
753, 756 (Ohio 1988)).
This case requires the interpretation and application of
Wis.Stat. § 427.104 to determine if Kirsch's claim
that Security violated § 427.104 by commencing an action
against him before providing a notice of default and right to
cure survives Security's motion to dismiss. "The
interpretation and application of a statute present questions
of law that this court reviews de novo while benefitting from
the analyses of the court of appeals and circuit court."
State v. Alger, 2015 WI 3, ¶21, 360 Wis.2d 193,
858 N.W.2d 346 (citing State v. Ziegler, 2012 WI 73,
¶37, 342 Wis.2d 256, 816 N.W.2d 238).
Kirsch argues that Security's failure to provide
sufficient notice of right to cure required by Wis.Stat.
§§ 425.104 and 425.105 constitutes a violation of
Wis.Stat. § 427.104(1)(g) and (1)(j). Because the
petition for review concerns only the ch. 427 claim, we cabin
our analysis to whether the ch. 425 failure to send
sufficient notice of right to cure default can form the basis
for a violation of ch. 427 of the WCA.
Kirsch argues that he is entitled to relief under Wis.Stat.
§ 427.104 because Security filed the lawsuit against him
without first sending a notice of right to cure under ch.
425. He argues that that dismissal is not the sole
consequence for failing to provide notice because §
427.104 independently creates a cause of action for which
§ 427.105 provides a remedy. Kirsch's argument,
however, fails to connect how a ch. 425 notice failure
transforms into a prohibited practice under § 427.104
(1) (g) or (1) (j) .
We begin with the language of Wis.Stat. § 427.104(1).
See State ex rel. Kalal v. Cir. Ct. for Dane Cty.,
2004 WI 58, ¶45, 271 Wis.2d 633, 681 N.W.2d 110
("[S]tatutory interpretation begins with the language of
the statute."). Section 427.104 states, in relevant part
In attempting to collect an alleged debt arising from a
consumer credit transaction or other consumer transaction,
including a transaction primarily for an agricultural
purpose, where there is an agreement to defer payment, a debt
collector may not:
(a) Use or threaten force or violence to cause physical harm
to the customer or the customer's dependents or property;
(b) Threaten criminal prosecution;
(c) Disclose or threaten to disclose information adversely
affecting the customer's reputation for credit worthiness
with knowledge or reason to know that the information is
(d) Initiate or threaten to initiate communication with the
customer's employer prior to obtaining final judgment
against the customer, except as permitted by statute
including specifically s. 422.404, but this paragraph does
not prohibit a debt collector from communicating with the
customer's employer solely to verify employment status or
earnings or where an employer has an established debt
counseling service or procedure;
(e) Disclose or threaten to disclose to a person other than
the customer or the customer's spouse information
affecting the customer's reputation, whether or not for
credit worthiness, with knowledge or reason to know that the
other person does not have a legitimate business need for the
information, but this paragraph does not prohibit the
disclosure to another person of information permitted to be
disclosed to that person by statute;
(f) Disclose or threaten to disclose information concerning
the existence of a debt known to be reasonably disputed by
the customer without disclosing the fact that the customer
disputes the debt;
(g) Communicate with the customer or a person related to the
customer with such frequency or at such unusual hours or in
such a manner as can reasonably be expected to threaten or
harass the customer;
(h) Engage in other conduct which can reasonably be expected
to threaten or harass the customer or a person related to the
(i) Use obscene or threatening language in communicating with
the customer or a person related to the customer;
(j) Claim, or attempt or threaten to enforce a right with
knowledge or reason to know that the right does not exist;
(k) Use a communication which simulates legal or judicial
process or which gives the appearance of being authorized,
issued or approved by a government, governmental agency or
attorney-at-law when it is not;
(L) Threaten action against the customer unless like action
is taken in regular course or is intended with respect to the
particular debt; or
(m) Engage in conduct in violation of a rule adopted by the
administrator after like conduct has been restrained or
enjoined by a court in a civil action by the administrator
against any person pursuant to the provisions on injunctions
against false, misleading, deceptive or unconscionable
agreements or conduct (ss. 426.109 and 426.110).
§ 427.104(1). The statute prohibits specific harassing
or threatening conduct towards debtors. Specifically,
Kirsch claims that Security violated § 427.104(1) (g)
and (1) (j) by failing to provide ch. 425 notice of right to
cure. Section 427.104(1) (g) prohibits a creditor from
"[c]ommunicat[ing] with the customer . . . with such
frequency or at such unusual hours or in such a manner as can
reasonably be expected to threaten or harass the
customer." Kirsch alleges that Security's filing
suit without first providing a notice of right to cure in and
of itself constitutes a prohibited communication under
subsec. (1) (g). Notably, Kirsch's counterclaim is
completely devoid of any allegation that Security
"[c]ommunicate[d] with [Kirsch] . . . with such
frequency or at such unusual hours or in such a manner as can
reasonably be expected to threaten or harass [Kirsch]."
In other words, the procedural defect of filing suit without
first providing a notice of default and right to cure as
outlined in ch. 425 does not create liability under §