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COURT OF APPEALS
NOTICE
DECISION
DATED AND FILED                                                                  This opinion is subject to further editing.   If
published, the official version will appear in
the bound volume of the Official Reports.
December 18, 2012
A party may file with the Supreme Court a
Diane M. Fremgen                                                                                                                                  petition to review an adverse decision by the
Clerk of Court of Appeals                                                                                                                         Court of Appeals.   See WIS. STAT. § 808.10
                                                                                                                                                  and RULE 809.62.
                                                                                                                                                  Cir. Ct. No.   2010CV823
Appeal No.                                                                       2012AP151
STATE OF WISCONSIN                                                                                                                                IN COURT OF APPEALS
                                                                                                                                                  DISTRICT III
DALE DROGORUB,
PLAINTIFF-RESPONDENT,
V.
THE PAYDAY LOAN STORE OF WI, INC., D/B/A PAYDAY LOAN STORE,
DEFENDANT-APPELLANT.
APPEAL  from  a  judgment  of  the  circuit  court  for  Eau  Claire
County:   LISA K. STARK, Judge.   Affirmed in part; reversed in part and cause
remanded.
Before  Hoover,  P.J.,  Mangerson,  J.,  and  Thomas  Cane,  Reserve
Judge.
¶1                                                                               PER CURIAM.    The Payday Loan Store of WI, Inc., d/b/a Payday
Loan Store (PLS) appeals a judgment awarding damages to Dale Drogorub under




No.   2012AP151
the Wisconsin Consumer Act.    The circuit court determined a number of loan
agreements Drogorub entered into with PLS were unconscionable.   The court also
determined the arbitration provision in the contracts violated the consumer act by
prohibiting Drogorub  from participating in class action litigation or classwide
arbitration.   Finally, the court awarded Drogorub attorney fees, pursuant to WIS.
STAT. § 425.308.1
¶2                                                                                        We  conclude  the  circuit  court  properly  determined  the  loan
agreements were unconscionable.   However, the court erred by determining the
arbitration provision violated the consumer act.   We therefore affirm in part and
reverse in part.   Additionally, because Drogorub has not prevailed on his claim
that the arbitration provision violated the consumer act, we remand for the circuit
court to recalculate his attorney fee award.
BACKGROUND
¶3                                                                                        On June 2, 2008, Drogorub obtained an auto title loan from PLS.
Under the terms of the loan agreement, Drogorub received $994 from PLS and
agreed to repay $1,242.50 on July 3, 2008.   Thus, Drogorub’s loan had a finance
charge of $248.50 and an annual interest rate of 294.35%.
¶4                                                                                        Drogorub failed to repay the entire balance of the loan when due.
Instead, he paid the finance charge of $248.50, signed a new loan agreement, and
extended  the  loan  for  another  month.    Drogorub  ultimately  made  five  more
“interest only” payments, signing a new loan agreement each time and extending
1  All references to the Wisconsin Statutes are to the 2009-10 version unless otherwise
noted.
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No.   2012AP151
the loan for five additional months.2   Each loan agreement provided for a finance
charge of $248.50 and an annual interest rate of 294.35%.   Drogorub defaulted on
the loan in January 2009.   All told, he paid $1,491 in interest on the $994 loan, and
he still owed PLS $1,242.50 at the time of default.
¶5                                                                                                Drogorub  filed  suit  against  PLS  on  August                         20,   2010,  asserting
violations of the Wisconsin Consumer Act.   Specifically, he alleged:                             (1) the loan
agreements were unconscionable, in violation of WIS. STAT.  § 425.107;  (2) the
loan agreements prohibited him from participating in class action litigation or
classwide arbitration, contrary to WIS. STAT. §§ 421.106 and 426.110; and (3) PLS
engaged   in   prohibited   collection   practices,   in   violation   of   WIS.   STAT.
§ 427.104(1)(j).     Drogorub  sought  actual  damages,  statutory  damages,  and
attorney fees.
¶6                                                                                                Drogorub subsequently moved for summary judgment, submitting
his own affidavit in support of the motion.   PLS opposed Drogorub’s motion and
also asserted that some of his claims were time barred by the relevant statute of
limitations.   The only evidence PLS submitted to the court on summary judgment
was a transcript of Drogorub’s deposition.
¶7                                                                                                At  his  deposition,  Drogorub  testified  he  approached  PLS  about
taking out an auto title loan because he and his wife needed money to purchase
food and pay their rent.   Before going to PLS, Drogorub contacted another title
loan store, but that store refused to extend him credit because his vehicle was too
old.   Drogorub testified the transaction at PLS was “hurried[,]” and PLS “push[ed]
2  Three of the subsequent loan agreements were actually signed by Drogorub’s wife,
Rachelle.  Drogorub testified he authorized Rachelle to sign the loan agreements on his behalf.
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No.   2012AP151
it through pretty fast.”   While Drogorub understood that he had the right to read
the contract, and he “read what [he] could in the time allotted,” he did not read the
entire  contract  because                                                               “they  didn’t  really  give                                              [him]  the  time.”    Drogorub
testified, “They just said, ‘Here, initial here and sign here,’ and that’s it.   They
really didn’t give  me  the time of  day to say,  ‘Here, read this and take  your
time[.]’”   He also stated PLS’s employees were “hurrying me, rushing me.   They
had other customers waiting, so I felt it was take it or leave it.”
¶8                                                                                      Drogorub  further  testified  he  was  fifty-six  years  old  and  had
completed high school and one year of community college.   He had previously
worked at an electric supply company but had been out of work since 2001.   He
had  not had  a  bank  account since  2002.    His previous experience  borrowing
money was limited to one car loan and one home equity loan.   Drogorub had never
borrowed money from a payday lender before, although PLS had given his wife an
auto title loan at some point in the past.
¶9                                                                                      The  circuit  court  issued  an  oral  ruling  on  Drogorub’s  summary
judgment motion.   First, the court dismissed Drogorub’s claims stemming from
the first three loan agreements on statute of limitations grounds.   The court also
dismissed Drogorub’s claim that PLS engaged in prohibited collection practices.
However, the court granted Drogorub summary judgment on his remaining claims.
The  court  determined  the  loan  agreements  were  both  procedurally  and
substantively unconscionable, and it also concluded they violated the consumer act
by requiring Drogorub to waive his ability to proceed as part of a class.   The court
entered a judgment awarding Drogorub $1,071.75 in actual and statutory damages
and $4,850 in attorney fees.   PLS appeals.
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No.   2012AP151
STANDARDS OF REVIEW
¶10    We review a grant of summary judgment independently, using the
same methodology as the circuit court.   Hardy v. Hoefferle, 2007 WI App 264, ¶6,
306 Wis. 2d 513, 743 N.W.2d 843.   Summary judgment is appropriate where there
is no genuine issue of material fact and the moving party is entitled to judgment as
a matter of law.   WIS. STAT. § 802.08(2).
¶11    Whether a contract is unconscionable involves questions of fact and
law.   Wisconsin Auto Title Loans, Inc. v. Jones, 2006 WI 53, ¶25, 290 Wis. 2d
514, 714 N.W.2d 155.   We will not set aside the circuit court’s findings of fact
unless they are clearly erroneous.   Id.   However, whether the facts found by the
court  render  a  contract  unconscionable  is  a  question  of  law  that  we  review
independently.   Id.
¶12    Statutory interpretation also presents a question of law subject to our
independent review.   See Zellner v. Cedarburg Sch. Dist., 2007 WI 53, ¶16, 300
Wis. 2d  290, 731 N.W.2d 240.                                                            “[T]he purpose of statutory interpretation is to
determine what the statute means so that it may be given its full, proper, and
intended effect.”   State ex rel. Kalal v. Circuit Court for Dane Cnty., 2004 WI 58,
¶44, 271 Wis. 2d 633, 681 N.W.2d 110.   Statutory interpretation begins with the
language of the statute, and if the statute’s meaning is plain, our inquiry goes no
further.  Id., ¶45.
DISCUSSION
I.  Unconscionability
¶13    As  a  threshold  matter,  the  parties  dispute  the  proper  test  for
unconscionability  when  a  contract  is  alleged  to  be  unconscionable  under  the
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No.   2012AP151
Wisconsin Consumer Act.   The circuit court applied the common law test, under
which an unconscionable contract must be both procedurally and substantively
unconscionable.   See Wisconsin Auto Title, 290 Wis. 2d 514, ¶29.   A contract is
procedurally unconscionable if factors bearing upon the formation of the contract
show that the parties did not have a real and voluntary meeting of the minds.   Id.,
¶34.   The relevant factors include the parties’ age, education, intelligence, business
acumen and experience, their relative bargaining power, who drafted the contract,
whether the terms were explained to the weaker party, whether alterations in the
printed terms would have been permitted by the drafting party, and whether there
were alternative providers of the subject matter of the contract.   Id.   A contract is
substantively unconscionable when its terms are unreasonably favorable to the
more powerful party.   Id., ¶36.
¶14    Drogorub  argues  the  common  law  unconscionability  analysis  is
inapplicable when a contract is alleged to be unconscionable under the consumer
act.   He points out that WIS. STAT. § 425.107, the section of the act dealing with
unconscionability, lists nine factors a court “may consider … as pertinent to the
issue of unconscionability[.]”   See WIS. STAT. § 425.107(3).   The statute does not
require a finding of either procedural or substantive unconscionability.   He also
notes that, in Bank One Milwaukee, N.A. v. Harris, 209 Wis. 2d 412, 419-20, 563
N.W.2d 543 (Ct. App. 1997), the court found a contract provision unconscionable
under  the  consumer  act  after  applying  several  of  the  factors  set  forth  in
§ 425.107(3),  without  addressing  procedural  or  substantive  unconscionability.
Thus,  he  contends  a  court  should  not  apply  the  common  law  test  for
unconscionability  when  conducting  an  unconscionability  analysis  under  the
consumer act.   We disagree.
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No.   2012AP151
¶15    WISCONSIN STAT.  § 425.107(3) states that a court  “may consider”
certain factors in determining whether a contract is unconscionable.    A court
therefore has discretion to consider all of those factors, some of them, or none at
all.   See Rotfeld v. DNR, 147 Wis. 2d 720, 726, 434 N.W.2d 617 (Ct. App. 1988)
(The word “may” in a statute generally allows for the exercise of discretion, as
opposed to the word “shall,” which indicates mandatory action.).   The last factor
listed in the statute is “[d]efinitions of unconscionability in statutes, regulations,
rulings and decisions of legislative, administrative or judicial bodies.”   WIS. STAT.
§ 425.107(3)(i)                                                                          (emphasis  added).                                              “Definitions  of  unconscionability”  in  the
“decisions”  of                                                                          “judicial  bodies”  plainly  refers  to  the  common  law  of
unconscionability.   Thus, § 425.107(3)(i) gives courts discretion to consider the
common  law  of  unconscionability  when  determining  whether  a  contract  is
unconscionable  under  the  consumer  act.    This  explains  why  Harris  found  a
consumer contract unconscionable without addressing procedural and substantive
unconscionability, but other cases dealing with consumer contracts have applied
the common law approach.  See, e.g., Wisconsin Auto Title, 290 Wis. 2d 514, ¶76.
¶16    In  this  case,  the  circuit  court  determined  the  loan  agreements
Drogorub signed were procedurally unconscionable because:                                (1) Drogorub never
read the contracts; (2) PLS did not explain the contract terms; (3) Drogorub felt
rushed into signing the initial contract and had no opportunity to ask questions;
(4) Drogorub could not get a loan anywhere else, so there was no alternative
provider of the subject matter of the contracts; (5) Drogorub’s bargaining position
was weak because he needed money to purchase food and pay rent; (6) Drogorub
had  no  opportunity  to  negotiate  with  PLS;  (7)  the  loan  agreements  required
Drogorub to use his vehicle—his only asset—as collateral; and (8) Drogorub had a
high school education, had not worked since  2001, had no significant business
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No.   2012AP151
experience,  and  had  relatively  minimal  experience  taking  out  loans.    These
findings of fact are supported by Drogorub’s deposition testimony and are not
clearly erroneous.   See id., ¶25.   We agree with the circuit court that these facts
support a finding of procedural unconscionability.
¶17    The court then determined that, under these circumstances, charging
a 294% interest rate was unreasonably unfair to Drogorub, the weaker party, and
was therefore substantively unconscionable.    The court concluded PLS  “[took]
advantage of a very poor circumstance on the part of the borrower” by charging an
exorbitant interest rate to someone who had no other access to funds, who was
using his only asset as collateral, and who was trying to borrow a relatively small
amount of money to pay day-to-day bills.   The court noted Drogorub was “not
getting much, but [was] paying a lot for the use of the funds.”
¶18    PLS  argues  the  court’s  substantive  unconscionability  finding  is
flawed because it relies on the fact that PLS charged an annual interest rate of
294%.   PLS correctly states that, under WIS. STAT.  § 422.201(2)(bn), consumer
credit transactions entered into after October  31,  1984 are  “not subject to any
maximum limit on finance charges.”3    PLS then notes that, under WIS. STAT.
§ 425.107(4), “Any charge or practice expressly permitted by [the consumer act] is
not in itself unconscionable[.]”    Accordingly, because a  294% interest rate is
permissible under § 422.201(2)(bn), PLS argues it cannot be unconscionable.
¶19    However,  WIS.  STAT.  § 425.107(4)  goes  on  to  state  that,  “even
though a practice or charge is authorized by [the consumer act], the totality of a
3  Under the consumer act, the term “finance charge” includes interest.   See WIS. STAT.
§ 421.301(20)(a).
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No.   2012AP151
creditor’s  conduct  may  show  that  such  practice  or  charge  is  part  of  an
unconscionable course of conduct.”   The circuit court essentially determined the
294% interest rate PLS charged was part of an unconscionable course of conduct,
in  which  PLS  preyed  on  a  desperate  borrower  who  had  no  other  means  of
obtaining funds and rushed him into signing a contract without giving him the
chance to ask questions or negotiate.   The court concluded that, while a  294%
interest rate is not per se unconscionable, it is unconscionable under the facts of
this case.   We agree with the court’s analysis.
¶20    Moreover, we note that WIS. STAT. § 425.107(1) permits a court to
strike down a transaction as unconscionable if  “any result of the transaction is
unconscionable.”                                                                                      (Emphasis added.)    Here,  the  result  of  the  transaction was
plainly unconscionable.   Drogorub borrowed $994 from PLS, paid back $1,491,
and still owed $1,242.50 at the time of default.   Thus, in a seven-month period,
Drogorub was required to pay $2,733.50 for a $994 loan.4   As the circuit court
aptly noted, Drogorub was “not getting much, but [was] paying a lot for the use of
the funds.”   We agree with the circuit court that the result of this transaction was
oppressive, unreasonable, and unconscionable.
¶21    PLS nevertheless argues the circuit court erred by granting summary
judgment because it “rel[ied] exclusively on the deposition and affidavit of Dale
Drogorub, in which he one-sidedly describe[d] his experiences in the PLS store.”
4  In addition, between January 12, 2009, when payment was due, and February 21, 2009,
when PLS issued a notice of default, PLS charged Drogorub $320.65 in additional interest.   The
notice of default further provided, “Additional Interest after the date of this notice continues at
$8.02 / day until Obligation is paid in full.”   PLS demanded that Drogorub pay the entire amount
due by March 8, 2009 and stated that, if he paid on that date, the amount owing would be
$1,683.45.
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No.   2012AP151
However, Drogorub’s deposition and affidavit were the only evidence before the
court on summary judgment.   It is therefore disingenuous for PLS to argue that the
court erred by relying exclusively on Drogorub’s version of events.   PLS could
have   submitted   evidence   contradicting   Drogorub’s   version—for   instance,
affidavits of the PLS employees who handled the transactions.   Having failed to do
so,  PLS  cannot  now  complain  that  the  circuit  court  relied  exclusively  on
Drogorub’s undisputed testimony.
¶22    PLS also contends it should have been allowed to present evidence
on procedural unconscionability at an evidentiary hearing.    Yet,  as Drogorub
points out, PLS never requested an evidentiary hearing in the circuit court.   PLS
asked the court to deny Drogorub’s summary judgment motion and “allow this
matter  to  proceed  to  trial,”  but  it  never  asserted  the  court  should  hold  an
evidentiary hearing before deciding Drogorub’s motion.    We do not ordinarily
address issues raised for the first time on appeal, and we make no exception here.
See  State  v.  Van  Camp,                                                                 213  Wis. 2d                                      131,   144,   569  N.W.2d  577  (1997).
Furthermore, PLS cites no authority for the proposition that an evidentiary hearing
is an available procedure on summary judgment.   WISCONSIN STAT. § 802.08(2)
anticipates   judgment   based   on                                                        “the   pleadings,   depositions,   answers   to
interrogatories, and admissions on file, together with the affidavits, if any,” and
does  not  explicitly  authorize  the  court  to  hold  an  evidentiary  hearing.
Accordingly, we affirm that portion of the circuit court’s judgment holding that
Drogorub’s loan agreements were unconscionable.
II.  Arbitration provision
¶23    Each of the loan agreements Drogorub signed included an arbitration
provision, which read, “Either BORROWER or LENDER can give written notice
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No.   2012AP151
to the other of an intention to require arbitration of the other party’s Claim[.]”   The
provision went on to state,  “If arbitration is chosen by either BORROWER or
LENDER  … all BORROWER’S claims must be arbitrated and BORROWER
MAY NOT PARTICIPATE IN A CLASS ACTION OR A CLASS-WIDE
ARBITRATION, EITHER AS A REPRESENTATIVE OR MEMBER OF
ANY CLASS[.]”   The circuit court determined this provision violated WIS. STAT.
§ 426.110, which gives consumers the right to bring class action lawsuits, and
WIS. STAT.  § 421.106, which states that consumers may not “waive or agree to
forego rights or benefits under [the consumer act].”   The court therefore awarded
Drogorub  $100  in  statutory  damages,  or  $25  per  violation.    See  WIS.  STAT.
§ 425.302(1)(a).
¶24    However, the United States Supreme Court recently held that the
Federal  Arbitration  Act                                                                  (FAA)  preempts  state  laws  that  prohibit  arbitration
agreements from disallowing class actions and classwide arbitration.   See AT & T
Mobility LLC v. Concepcion, 563 U.S. __, 131 S. Ct. 1740, 1753 (2011).   The
Court reasoned that  § 2 of the FAA, which requires enforcement of arbitration
agreements “save upon such grounds as exist at law or in equity for the revocation
of any contract[,]” does not “preserve state-law rules that stand as an obstacle to
the accomplishment of the FAA’s objectives.”    Id. at  1745,  1748; see also  9
U.S.C. § 2 (2011).   The Court then determined that requiring the availability of
classwide proceedings conflicts with the “overarching purpose” of the FAA—that
is, “ensur[ing] the enforcement of arbitration agreements according to their terms
so as to facilitate streamlined proceedings.”   Concepcion, 131 S. Ct. at 1748.   The
Court therefore held the FAA preempts state laws that strike down arbitration
provisions that prohibit classwide proceedings.   See id. at 1753.
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No.   2012AP151
¶25    Concepcion’s holding notwithstanding, Drogorub argues the FAA
does not preempt the consumer act in this case because the contracts at issue
specify they are governed by Wisconsin law, and, consequently, the FAA does not
apply.   We disagree.   Contract language does not preclude application of the FAA
unless the parties’ intent to do so is “abundantly clear.”   See UHC Mgmt. Co. v.
Computer Scis. Corp., 148 F.3d 992, 997 (8th Cir. 1998).   A general choice-of-
law clause does not make it abundantly clear that the parties intended to preclude
the application of the FAA.   See Porter Hayden Co. v. Century Indem. Co., 136
F.3d                                                                                     380,                                                                         382-83  (4th  Cir.   1998)  (general  choice-of-law  provision  does  not
demonstrate clear intent to displace federal arbitration law); see also Mastrobuono
v. Shearson Lehman Hutton, Inc.,  514 U.S.  52,  59-60  (1995)  (holding that a
choice-of-law provision opting for New York law was not sufficient to annul an
arbitrator’s award that was prohibited under New York law but allowed by the
FAA).   Thus, despite the choice of law clause in Drogorub’s loan agreements, the
FAA  preempts  the  consumer  act’s  requirement  that  the  agreements  allow
classwide  proceedings.    The  circuit  court  therefore  erred  by  concluding  the
agreements violated the consumer act and by awarding statutory damages for the
violations.
III.   Attorney fees
¶26    The circuit court awarded Drogorub $4,850 in attorney fees pursuant
to WIS. STAT. § 425.308, which provides that a court “shall” award attorney fees
and  costs                                                                               “[i]f  the  customer  prevails  in  an  action  arising  from  a  consumer
transaction.”    PLS argues Drogorub did not prevail because:                            (1)  he asserted
claims based on seven contracts, but his claims related to three of the contracts
were  dismissed;  and  (2)  the  court  dismissed  his  claim  that  PLS  engaged  in
prohibited  collection  practices.    PLS  therefore  contends  that,  “[a]t  maximum,
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No.   2012AP151
Drogorub prevailed on half of his total claims” and his attorney fee award should
be reduced accordingly.   See Footville State Bank v. Harvell, 146 Wis. 2d 524,
539-40, 432 N.W.2d 122 (Ct. App. 1988) (A consumer who succeeds on some but
not all issues recovers attorney’s fees under § 425.308 “only as to the successfully
litigated issues.”).
¶27    In reply, Drogorub points out that the circuit court already reduced
his attorney fee award by $1,000 to account for “the time spent in filing, briefing
and arguing claims that were not successful in this matter[.]”   Thus, he contends
that, if we affirm the circuit court in all other respects, we should also affirm the
attorney fee award.    However, we have reversed that portion of the judgment
concluding that the loan agreements’ arbitration provision violated the consumer
act.                                                                                     Accordingly,  Drogorub  has  not  prevailed  on  his  claim  regarding  the
arbitration  provision.    We  therefore  remand  for  the  circuit  court  to  review
Drogorub’s attorney fee award to account for the time spent filing, briefing, and
arguing this additional unsuccessful claim.
By the Court.—Judgment affirmed in part; reversed in part and cause
remanded.   No costs on appeal.
                                                                                         This  opinion  will  not  be  published.     See  WIS.  STAT.  RULE
809.23(1)                                                                                (b)5.
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