Case could open door to billing class action suits

Listen to this article

A case involving the voluntary payment doctrine and “cramming” currently before the Wisconsin Supreme Court could open courthouse doors to large class actions alleging overbilling.

“Cramming” is a practice of billing relatively small, but unauthorized, charges to telecommunications customers, and is prohibited by sec. 100.207.

However, pursuant to the voluntary payment doctrine, a customer who pays a bill, without specifying that it is under protest, is barred from challenging the legality of the bill.

In the case of MBS-Certified Public Accountants LLC v. Wisconsin Bell Inc., No. 2008AP1830, the court will decide whether that doctrine is limited to common law claims, or whether it also bars statutory causes of action.

The plaintiff is an accounting firm, which filed a proposed class action suit against Wisconsin Bell, claiming that it unknowingly paid unauthorized charges tacked on to its phone bills. The plaintiff claims that millions of dollars have been “systematically stolen” from thousands of Wisconsin customers through the practice of cramming.

The statutes at issue are sec. 100.207, which applies specifically to cramming by telecommunications companies; sec. 100.18, which applies generally to misrepresentation claims; and the Wisconsin Organized Crime Control Act, sec 946.80, et seq.

Both the circuit court and the Court of Appeals held that, even if the defendants did engage in unlawful cramming, the case must be dismissed under the voluntary payment doctrine.

The Wisconsin Supreme court granted review and will hold oral arguments Sept. 16.

Two precedents

The lower courts considered themselves bound by two precedents that apply the doctrine: Putnam v. Time Warner Cable of SE Wis., 2002 WI 108, 255 Wis.2d 447, 649 N.W.2d 626; and Butcher v. Ameritech Corp., 2007 WI App 5, 298 Wis.2d 468, 727 N.W.2d 546.

In Putnam, customers alleged that Time Warner charged unreasonably high late fees. While other utilities routinely charged less than a dollar in penalties if a customer did not pay on time, Time Warner charged $5. The Supreme Court held that, by voluntarily paying the charges, without specifying that they were doing so “under protest,” customers lost their right to challenge it.

Butcher involved phone bills. Under federal law, phone companies are obliged to charge customers a universal access charge, a tax designed to expand internet access to underserved areas. The defendant phone company charged sales tax on this tax, rather than calculating sales tax only on services provided.

A customer who had been paying the tax sued, seeking class action status. But relying on Putnam, the Court of Appeals held that, because the plaintiff had paid the tax on the tax, without protest, the doctrine barred his claim.

In the case at bar, the accountants argue that those cases are distinguishable, because they involved common law claims, and thus can properly be barred by the common law voluntary payment doctrine.

They argue that, because the claims they assert are statutory in origin, therefore, the doctrine does not apply.

The Court of Appeals disagreed, concluding that the only recognized exceptions to the doctrine are fraud, duress and mistake of fact. Had the legislature intended to abrogate the doctrine, the court concluded, it would have done so unequivocally in the statutes at issue.

The case against the doctrine

Before the Supreme Court, the accountants have raised several arguments why the doctrine should not apply.

Primarily, they rely on two Supreme Court cases decided subsequent to Putnam that involve the interplay between statutory fraud actions and common law defenses.

In Stuart v. Weisflog’s Showroom Gallery Inc., 2008 WI 22, 308 Wis.2d 103, 746 N.W.2d 762, the court held that the economic loss doctrine did not bar claims asserted pursuant to the Home Improvement Protection Act and sec. 100.20(5).

In Novell v. Migliaccio, 2008 WI 44, 309 Wis.2d 132, 749 N.W.2d 544, the court held that reasonable reliance (an element of common law misrepresentation) was not an element of a statutory misrepresentation claim under sec. 100.18.

In their brief to the Supreme Court, the accountants argue, “Similarly, in this case, applying the voluntary payment doctrine would be contrary to the plain language and purpose of the pertinent statutes, and would effectively rewrite those statutes to include protest requirements, where none exist.”

The second primary argument is that application of the doctrine would gut the whole purpose of the statutes. The brief argues that application of the doctrine would allow those who engage in cramming “to avoid liability for statutory damages simply because their deceptive conduct had the desired effect – specifically, causing customers to unwittingly pay unauthorized (charges).”

Third, the accountants note that numerous other courts in other jurisdictions have held that the doctrine does not apply to similar statutory claims.

Wisconsin Bell, the state

Wisconsin Bell, in response, argues that the applicable rule of statutory construction is that common law rules apply unless a statute unambiguously provides that they don’t.

They also argue in their briefs that Putnam did assert statutory claims as well as common law claims, yet the Supreme Court made no distinction between the two types of claims, holding them all barred.

Disputing the accountants’ policy arguments, Wisconsin Bell notes that the same arguments were made, and rejected, in Putnam. Defending the rule, it argues in its brief, “At bottom, expecting accountants to read their monthly statements before making payment and before running off to court is ultimately reasonable.”

The state is also participating in the case, having filed an amicus curiae brief in favor of the customers.

The state contends, “Individuals have enough difficulty deciphering their telephone bills, but for businesses the problem can be even worse, since the person paying the bill may assume that someone else has authorized the charges on the bill. Even if half of the billed consumers notice the charges and refuse to pay, cramming can generate huge sums given the large numbers of consumers that can be fleeced and the relative ease and low cost of doing so.”

Of the two justices who dissented in Putnam, only Chief Justice Shirley Abrahamson remains on the court. Of the five in the majority, three remain: justices David Prosser, Ann Walsh Bradley and Patrick Crooks.

Crooks, however, dissented in part on another issue, opining that the customers should have been able to seek declaratory relief, barring unlawful billing in the future.