Federal Court Grants Summary Judgment to Telemarketer Based on Plaintiff's Failure to Read and Act on Program Terms or Challenge Credit Card Charges
It often seems that courts addressing consumer claims seem to absolve consumers of any personal responsibility to manage their finances. Judge Michael J. Reagan of the Southern District of Illinois -- a former president of the Illinois Trial Lawyers Association -- recently issued a refreshing opinion in a telemarketing case that squarely places responsibility on the consumer to monitor what his money is being spent on and to read his mail. See Spivey v. Adaptive Marketing LLC, No. 07-cv-0779-MJR (S.D. Ill. Sept. 23, 2009).
In Spivey, a putative class action, the plaintiff alleged that the defendant used telemarketing transactions to "cram" consumers' debit and credit cards with unauthorized transactions without the cardholder's knowledge. The complaint asserted two counts: (1) breach of contract, and (2) unjust enrichment. Defendant moved for summary judgment, and the court granted it.
Plaintiff had called a telemarketing number to order an Atkins diet product. The conversation was recorded, revealing that plaintiff was also offered a free 30-day membership to HomeWorks, a membership program offering discounts at numerous chain stores. The salesperson explained that after 30 days, if Plaintiff did not cancel, the membership would be automatically extended and Plaintiff's card would be charged a $96 annual fee once each year. He could cancel at any time, and the full details of the program would be contained in a welcome kit that would arrive in the mail.
Plaintiff claimed not to remember receiving the "welcome kit," alleging that if he did receive it, the kit was designed to look like junk mail and he threw it away without opening it. But the court employed the "mailbox rule" to impose the written terms of the welcome kit to Plaintiff's transaction. The mailbox rule says that where a letter is properly addressed and mailed, there is a presumption that it reached its destination in the usual time and was read by the recipient. The defendant testified that it was its practice to send the welcome kit to each new member in a membership program. Plaintiff's testimony that he did not recall receiving the welcome kit was not enough to rebut the presumption of the mailbox rule.
The court also rejected the Plaintiff's argument that written terms sent after the creation of an oral contract cannot govern the relationship. The court noted that the written terms often follow in the mail after a consumer transaction, and those terms are held to govern the transactions. The court observed:
In sum, Adaptive invited acceptance by conduct, i.e., by sending the kit to Spivey and allowing him the opportunity to call within 30 days to cancel the agreement or to call within the first year to receive a full refund. By not calling the toll-free number in the first 30 days (or even in the first year) -- as advised by the telemarketer and set forth in the agreement -- Spivey accepted the offered services and the terms and conditions under which they were offered. He had a clear mechanism and reasonable opportunity to reject them. Spivey is bound by the written terms provided after the transaction.
Slip op. at 13. The court also noted that the written agreement had an integration clause and that the terms of plaintiff's posited oral contract did not contradict the written contract.
Analyzing plaintiff's claim of "cramming" -- i.e., placing unauthorized charges on credit cards with the hope the consumer will pay the balance without noticing them -- the court began by observing that the charges were not unauthorized. Rather, both the oral and written contracts authorized them.
The court also held that the "voluntary payment doctrine" is an independent alternative ground for dismissing Plaintiff's claims. The doctrine holds that "'a plaintiff who voluntarily pays money in reply to an incorrect or illegal claim of right cannot recover that payment unless he can show fraud, coercion, or mistake of fact.'" Slip op. at 16 (citation omitted).
The court noted that plaintiff paid the annual charges for four years without ever questioning the payments. The charges were clearly labeled "HomeWorks Plus," and the statement provided a toll-free number to inquire about any charge. The court concluded that "[t]o the extent that Spivey was ignorant of the charges on his credit card statement, it was because he failed or refused to apprise himself of that knowledge, and he must bear the consequences." Slip op. at 17.
Accordingly, the court granted judgment to defendant on the breach of contract count. The court also granted judgment for the defendant on the unjust enrichment count because unjust enrichment -- doctrine that implies a contract in law where none exists -- is not available where a contract controls the relationship between the parties. Also, the voluntary payment doctrine applies to the unjust enrichment count as well. Slip op. at 19.
Judge Reagan's opinion in Spivey is an important reminder that we as consumers have responsibilities -- including to read our mail and monthly manage our finances and credit card charges. Where we fail to do that, caveat emptor applies.