Voluntary Payment Case Analysis

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The case is a good candidate for review in the Supreme Court. The court of appeals twice deferred considering the equities of the case by remarking that any exception to the voluntary payment doctrine must be created by that court.

Were the court to grant review, however, and then affirm, it would effectively preclude any public policy exceptions to the doctrine in any case; if any case is going to present compelling reasons for an exception, this is that case.

The plaintiffs in Putnam v. Time Warner, 2002 WI 108, 225 Wis.2d 447, 649 N.W.2d 626, may have made a good case for an exception, but not nearly as good as here.

In Putnam, the court declined to create a public policy exception for allegedly excessive late fees for cable TV service.

However, a customer could easily have determined that the late fee charged by the defendant was excessive, simply by comparing it to the late fees charged by other utilities, such as the phone company.

The telephone bill that a customer receives every month plainly states that if it is not paid by a certain date, there will be a small fee — less than a dollar. A customer could easily have inferred from this that the five dollar late fee the cable company was charging was an excessive liquidated damage charge.

In the case at bar, on the other hand, nothing so obvious is present to alert the customer that he is being illegally taxed. The customer would have to examine sec. 77.51(21m) and determine what can be taxed, divide each item in his phone into taxable and untaxable categories, multiply the taxable items by five percent, notice the sales tax on the bill is a few cents too high, and then figure out which of the untaxable itemizations is being taxed.

Nobody except an ambitious young attorney looking for a class action to file would do such a thing.

Furthermore, the facts are more egregious than in Putnam for another reason: basic telephone service is a necessity, while cable TV is not.

The court summarily found the case of Dreyfus v. Ameritech Mobile Comm., Inc., 700 N.E.2d 162 (Ill.App.1998), inapplicable, without undertaking a comparison of the two.

In Dreyfus, the court held that cellular phone service is not a necessity, and thus, it was not purchased under duress. Dreyfus, 700 N.E.2d at 167. Admittedly, many young people consider a cell phone a necessity, and a basic land line worthless.

Nevertheless, most older people would consider the basic phone service to be the necessity. In addition, this lawsuit wasn’t filed yesterday; it has been pending since 2001, and the purportedly unlawful sales taxes go back to 1998. Back then, even more people considered a land line a necessity.

Furthermore, the court never seriously addressed the duress issue. In Putnam, the plaintiffs had initially claimed that cable TV was a necessity, and thus the duress exception applied. However, they wisely abandoned this rather frivolous argument in the Supreme Court. Putnam, 649 N.W.2d at 633, fn. 5.

In the case at bar, there is a legitimate necessity/duress argument to be made, that is not controlled by Putnam. Nevertheless, the court avoids the issue with one sentence: “The supreme court in Putnam declined to adopt exceptions beyond fraud, duress, or mistake of fact, and it specifically referred to the elements of duress.”

Given the abandonment of the duress argument by the plaintiffs in Putnam, however, Putnam is not controlling as to the duress issue. The court in the case at bar could have found duress to be present, without creating any new exceptions to the doctrine beyond those few the Supreme Court has already recognized.

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Finally, a cable TV customer knows that, if payment is late, the $5 fee will be assessed, even if he doesn’t know it is excessive. In contrast, the telephone user has no knowledge he is being unlawfully taxed at all, without going through the lengthy procedure described above.

The decision in Putnam was recently distinguished
by a federal court in Minnesota on this basis. Auto-Chlor System of Minnesota, Inc., v. JohnsonDiversey, 328 F.Supp.2d 980, 1011-12 (D.Minn.2004). The plaintiffs in that case, unlike the plaintiffs in Putnam, did not know in advance what they would be charged if they breached the contract. Accordingly, the court held the voluntary payment doctrine inapplicable.

As in Auto-Chlor, the plaintiffs here have no knowledge of the facts underlying the amount they are billed by the telephone company, and Putnam could be distinguished for that reason.

For all these reasons, if the Supreme Court were to accept review, and nevertheless affirm, the voluntary payment doctrine is all but ironclad. If this case doesn’t warrant an exception, no other case will.

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David Ziemer can be reached by email.