Aug. 29, 2023 – The Wisconsin Court of Appeals has ruled that a statute that prohibits misleading advertising is not limited to advertisements made to Wisconsin residents.
In State v. Talyansky, 2022 AP 788 (July 25, 2023), the Wisconsin Court of Appeals District I also held that the statute does not require the state to prove that customers who received the misleading advertising suffered a monetary loss.
Complaints About Salvage Yard
Alfred Talyansky’s family founded Mid City Auto Salvage (Mid City) in the 1990s. The company sold auto parts from a location in Milwaukee.
The Talyanskys dissolved Mid City in 2006 and formed Midwest Auto Recycling (Midwest); they also relocated the company to Cudahy.
Midwest sold auto parts over the Internet. To that end, Midwest formed a number of companies and websites.
In 2015, the state of Wisconsin received hundreds of complaints about Midwest. Complainants said that Midwest had misrepresented the mileage on auto parts; they also complained about poor quality parts.
Fraud Action Filed
The state filed a complaint against Midwest in Milwaukee County Circuit Court in 2017. The complaint alleged the following:
fraudulent misrepresentation in marketing and selling, in violation of Wis. Stat. section 100.18(1);
fraudulent misrepresentation regarding where the business was located, in violation of section 100.18(10r); and
unfair billing practices, in violation of section 100.195(2)(a).
In March 2021, Midwest filed a motion to reconsider the denial of a previous motion for partial summary judgment. The company argued that a recent federal court decision held that section 100.18(1) does not apply to representations made to customers outside Wisconsin.
The circuit court granted Midwest’s motion. The circuit court also ruled that evidence regarding Midwest’s dealings with customers outside Wisconsin was not admissible.
A Win for Midwest
After the presentation of evidence, the circuit court decided to add, over the state’s objection, a question on the special verdict form. The question asked the jury to find whether any Wisconsin customer had suffered a monetary loss due to Midwest’s misrepresentations.
The jury found that Midwest’s ads to Wisconsin consumers were not deceptive, and that the state failed to prove that any Wisconsin consumer had suffered a monetary loss because of any misrepresentation by the company.
The circuit court granted a judgment on the verdict for Midwest and dismissed the case. The state appealed.
Phrase Applies to Advertiser’s Actions
On appeal, the state argued that the circuit court had erred by: 1) determining that section 100.18(1) does not apply to misrepresentations made to customers outside Wisconsin; and 2) asking the jury to determine whether any customers had lost money because of Midwest’s misrepresentations.
Writing for a three-judge panel, Presiding Judge Joseph Donald began his opinion by concluding that section 100.18(1) is not limited to misrepresentations made to customers in Wisconsin.
Donald pointed out that section 100.(18)(1) prohibits making, publishing, or causing to be made “in this state” an “untrue, deceptive, or misleading” advertisement or other misrepresentation.
“The verbs … focus on the advertiser’s conduct or actions, not the recipient or the consumer,” Judge Donald wrote.
“After a comma, the statute provides that these actions may not take place ‘in this state’. The statute does not proscribe where the recipient or consumer must be or reside.”
As a result, Judge Donald reasoned, the state may enforce section 100.18(1) against Wisconsin businesses that communicate with out-of-state customers.
Midwest argued that “in this state” as used in section 100.18(1) meant that misrepresentation must be made to customers or potential customers located inside Wisconsin.
But Donald disagreed.
“There is a comma that separates the phrase ‘before the public’ and ‘in this state,’” Judge Donald wrote. “If ‘in this state’ modified ‘before the public,’ then there would be no need for a comma.”
Donald also pointed out that the legislature could have added wording to section 100.18(1) that limited its application to misrepresentations made to customers inside Wisconsin – as it did in section 100.174(1)(a)1.-2. (“buyer” defined as a resident of Wisconsin) – but didn’t.
Regarding the federal case cited by Midwest in support of its motion for partial summary judgment, Judge Donald reasoned that the federal court erred by focusing on the legislative purpose behind section 100.18(1) instead of the section’s plain wording.
Only Two Elements
Midwest argued that two Wisconsin Supreme Court opinions interpreting section 100.18(1) establish that the state must prove that Midwest’s misrepresentations caused customers monetary loss.
But Donald pointed out that those two cases involved lawsuits by private parties, brought under section 100.18(11)(b)2. – a section that specifies that the party suing must suffer “pecuniary loss.”
But the state hadn’t filed suit under section 100.18(11)(b)2., Judge Donald pointed out.
Moreover, he noted that in State v. American TV & Appliance of Madison, 146 Wis. 2d. 292, 430 N.W.2d 709 (1988), the supreme court explicitly held that there were only two elements of an action brought by the state under section 100.18(1): 1) an advertisement or announcement; and 2) an untrue, deceptive, or misleading statement contained in the advertisement or announcement.
Error Not Harmless
Midwest argued that the circuit court’s error in adding the question about monetary loss to the special verdict form was harmless.
But Donald reasoned that the error could not be harmless. It had affected the state’s substantial rights, Judge Donald noted, because there was a reasonable probability the error had contributed to the outcome of the trial.
“The error was not harmless because the jury found that Midwest misrepresented the location of four of their businesses, and the circuit court denied the State any relief based on the circuit court’s incorrect view that the State needed to prove a pecuniary loss,” Donald wrote.
The court of appeals reversed and remanded the case with directions.