Trease v. Tri-State Adjustments, Inc.

Citations: 934 F. Supp. 2d 1016; 2013 WL 1285589; 2013 U.S. Dist. LEXIS 45474Docket: Case No. 12-CV-00620

Court: District Court, E.D. Wisconsin; March 29, 2013; Federal District Court

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Plaintiff Lisa Trease alleges that defendant Tri-State Adjustments, Inc. violated the Fair Debt Collection Practices Act (FDCPA) and the Wisconsin Consumer Act (WCA) by seeking interest on debts not reduced to judgment. Between December 5, 2011, and April 5, 2012, Tri-State sent Trease three letters regarding debts owed to Aurora Advanced Healthcare SC, including amounts of $218.84, $83.28, and $14.30, with a subsequent letter reflecting slightly higher amounts due to interest, which was not explained. Trease's agreement with Aurora did not include interest, and the debts were not reduced to judgment.

Defendant moved to dismiss certain counts of the complaint, arguing that Wisconsin law allows for interest on undisputed debts even if not reduced to judgment. Trease opposed the motion and sought to amend her complaint with additional facts; the court allowed this amendment, stating it would not prejudice the defendant. The court emphasized that it must accept Trease's allegations as true and draw inferences in her favor when considering the motion to dismiss.

Wisconsin common law permits recovery of preverdict interest for liquidated or determinable debts. Interest accrues from when payment is due or demanded. Disputes over the debt amount can prevent interest from accruing, but not disputes over the existence of the debt itself. The statutory interest rate for preverdict interest in Wisconsin is 5% per year. Although Trease denies owing the debts, she does not dispute their amounts. Despite her argument that interest cannot be demanded without a judgment, the court found she did not provide sufficient reasoning for this position.

Wisconsin courts have not yet addressed the issue of preverdict interest in the context of the Fair Debt Collection Practices Act (FDCPA), but existing cases indicate that when the amount of a debt is undisputed, preverdict interest is permissible as a matter of law. The precedent set in *Murray v. Holiday Rambler, Inc.* establishes that preverdict interest forms part of a plaintiff's compensatory damages, following guidelines from the Restatement Second of Contracts. This allows for interest recovery from the time of the performance due on the amount owed, minus any legitimate deductions.

In a case similar to the current one, the Western District of Wisconsin ruled that a debt collector can claim preverdict interest. The plaintiff's argument against this, citing various cases, misinterprets their outcomes; these cases did not deny preverdict interest solely due to the absence of a judgment but rather because the debt amount was indeterminate until resolution. The plaintiff's reference to *Erickson by Wightman* is also incorrect, as that ruling clarified that the entitlement to preverdict interest stems from common law, not requiring court approval for collection.

The plaintiff's citation of *Veach v. Sheeks* is deemed irrelevant, as that case involved a debt collector seeking an uncertain amount. Conversely, it aligns more closely with *Fields v. Wilber Law Firm P.C.*, where the Seventh Circuit upheld that a debt collector may include already incurred attorney's fees in collections without needing court permission when the debt amount is undisputed.

Lastly, regarding the plaintiff's assertion that Wis. Stat. § 138.04 does not determine the interest rate for preverdict interest, Wisconsin law confirms that this statute does establish the applicable interest rate for money owed under contracts. Given that the debts in question arose from a contract for medical services, § 138.04 applies.

The court has granted the plaintiff's motion to amend the complaint and the defendant's motion to file supplemental authority. However, the defendant's motion to dismiss is granted for specific counts related to FDCPA violations concerning preverdict interest, while claims regarding the lack of explanation for increased debts and failure to provide required disclosures in collection letters will proceed.