Background
The dispute arose from a 2018 marital settlement agreement between Thomas and Danah Zoulek, under which Thomas and his company, Mid City Corporation, leased a Caterpillar bulldozer to Danah for one year. Danah needed the dozer to operate Scenic Pit, a clean fill site she received in the divorce. At the end of the lease term, Danah neither returned the bulldozer nor paid the $25,000 purchase price, claiming the machine was inoperable and unrepairable.
Rather than immediately suing for breach, the parties negotiated an amended lease over several months via text messages. The amended agreement extended Danah’s deadline by one year in exchange for $1,000 monthly rental payments, 12% simple annual interest on late payments, and — critically — a clause entitling Mid City to recover attorney’s fees in any future litigation arising from breach of the amended lease. Danah ultimately failed to make payments under either the original or amended agreement, and Mid City sued for monetary judgment.
The circuit court for Washington County entered judgment in favor of Mid City for $54,775.95 plus costs, rejecting Danah’s unconscionability defense. The court found the amended lease was an “eyes-open contract” negotiated at arm’s length, crediting Thomas’s testimony that no duress or threats occurred. The court subsequently awarded Mid City $14,350 in attorney’s fees plus $517.59 in costs under the lease’s fee-shifting provision. Danah appealed both the unconscionability ruling and the reasonableness of the fee award.
The Court’s Holding
The Court of Appeals affirmed the circuit court’s order in all material respects. On unconscionability, the court held that the attorney’s fee provision was neither procedurally nor substantively unconscionable. As to procedural unconscionability, the court found that Danah’s lesser business experience and her characterization of the deal as “take it or leave it” were insufficient, standing alone, to establish an absence of meaningful choice. The circuit court’s credited finding that the parties negotiated terms over several months, and that Danah retained alternatives — including repairing and returning the bulldozer or paying the original $25,000 — weighed decisively against procedural unconscionability.
On substantive unconscionability, the court held that the fee-shifting clause served a commercially reasonable purpose: it protected Mid City’s ability to enforce repayment after Danah had already breached the original lease and sought to continue possessing the equipment under revised terms. The court emphasized that the amended agreement arose from bilateral negotiation rather than an adhesion contract, and that a provision benefiting one party more than the other is not, by itself, grounds for invalidation under Wisconsin law.
On the reasonableness of the $14,350 fee award, the court applied the erroneous-exercise-of-discretion standard and affirmed. The circuit court had explicitly worked through the SCR 20:1.5(a) factors, finding that the flat-fee arrangement equated to roughly $239.97 per hour — below the $300-plus local market rate for similar civil business disputes — and that the fees represented approximately 26% of the recovery, less than the customary 33.33% contingency fee in the area. However, the appellate court remanded for the circuit court to address whether the $750 fee component tied to Mid City’s unsuccessful summary judgment motion was properly included in the total award.
Key Takeaways
- Disparity in bargaining power alone does not establish procedural unconscionability under Wisconsin law; courts look to whether the weaker party had meaningful alternatives and an opportunity to participate in shaping the contract terms.
- A contractual attorney’s fee clause is not substantively unconscionable merely because it benefits one party more than the other — it must be commercially unreasonable in light of the transaction’s context.
- When awarding fees under a flat-fee billing arrangement pursuant to a contractual fee-shifting provision, Wisconsin courts must apply the SCR 20:1.5(a) reasonableness factors, just as they would for hourly-rate engagements.
- Fees tied to unsuccessful motions may require specific scrutiny; the court remanded to determine whether Mid City’s $750 fee for a lost summary judgment motion was properly included in the award.
- On remand, the circuit court may also consider awarding Mid City its attorney’s fees incurred in litigating the appeal, as the fee-shifting clause in the amended lease covers future litigation arising from breach of that agreement.
Why It Matters
This decision reinforces the enforceability of contractual fee-shifting clauses in post-breach renegotiation agreements under Wisconsin law. Attorneys advising clients who are restructuring a defaulted obligation should recognize that adding an attorney’s fee provision to an amended agreement — even one negotiated with an unsophisticated counterparty — will not automatically be voided as unconscionable, provided the renegotiation involved genuine back-and-forth and the counterparty retained real alternatives. The opinion also confirms that flat-fee billing arrangements present no special obstacle to fee-shifting recovery, so long as the awarded amount survives scrutiny under the standard SCR 20:1.5(a) factors.
The remand on the summary judgment fee component is a practical reminder that fees incurred in connection with unsuccessful motions may not automatically flow through a fee-shifting clause without explanation. Circuit courts awarding fees in lump sums should make clear on the record how — or whether — they are accounting for work product that did not benefit the prevailing party, to avoid the need for further proceedings on appeal.