Justice O'Connor Writes Opinion Affirming Grant of Summary Judgment Based on Voluntary Payment Doctrine
It's not every day a Supreme Court Justice chastises you for not reading your credit card statement. But that's effectively what Justice Sandra Day O'Connor did in affirming the dismissal of a consumer's breach of warranty and unjust enrichment claims based on the voluntary payment doctrine. See Spivey v. Adaptive Marketing LLC, 09-3619, Slip op. (7th Cir. Sept. 20, 2010).
(Please note that Adaptive Marketing is a client of mine. Neither I nor my firm had involvement in this case, however.)
In Spivey, plaintiff had called a toll-free telephone number to order an Atkins diet product. At the end of the transaction, the telemarketer offered to enroll plaintiff in a 30-day free trial of a membership program, "HomeWorks," that provides discounts to various home goods stores. Afterward, if plaintiff did not cancel the membership, the telemarketer explained, he would be enrolled in the program annually and incur an annual fee that would be charged to his credit card. Plaintiff accepted the trial membership and did not cancel his membership, so he was enrolled in the program and incurred membership charges in 2003 through 2007. In 2007, plaintiff challenged the charge and subsequently filed his lawsuit.
The trial court -- relying on plaintiff's deposition testimony and the membership materials that the defendant testified it sent to plaintiff -- granted the defendant's motion for summary judgment, relying on the voluntary payment doctrine.
The Seventh Circuit affirmed. In an opinion written by Justice O'Connor, who was sitting by designation, the court explained that the voluntary payment doctrine "has long been recognized in common law" and means that "'[a]bsent fraud, coercion, or mistake of fact, monies paid under a claim of right to payment but under a mistake of law are not recoverable.'" Slip op. at 13. Put differently, if you voluntarily pay someone who was not legally entitled to payment, you cannot sue to recover the money absent fraud, coercion, or mistake.
As Justice O'Connor explained, the reason for the doctrine is clear: the payor is the one with the incentive to challenge the payee's legal right to receive payment, and the law wants to encourage the payor to do that at the earliest opportunity so that the parties can be aware of each other's position and tailor their conduct accordingly. Litigation should precede payment, not the other way around. The common law does not want to encourage people to pay "in silence" and then later file a lawsuit. See slip op. at 14 (citations omitted).
The plaintiff did not dispute that the charges for the HomeWorks Plus program appeared on his credit card statements in 2003, 2004, 2005, 2006, and 2007. They even included a telephone number to call about that particular charge. But plaintiff nevertheless argued that the "mistake" exception to the voluntary payment doctrine should apply here because he mistakenly believed, when looking at the statements, that the "HomeWorks Plus" charges were for products that his wife -- a school teacher -- had bought.
Justice O'Connor made short work of this argument, effectively holding that plaintiff had a duty to read and investigate the charges on his credit card statement:
Spivey cannot overcome the voluntary payment defense because he made an erroneous assumption for four years that could have been easily clarified, as it ultimately was, by discussing the charge with his wife and making a call to the phone number provided on his bill.
The relevant facts regarding the basis for and means to challenge the HomeWorks charge were neither obscured, nor inaccessible. . . .
In the five years during which HomeWorks charges appeared on Spivey's credit card bills, "he made no effort to discover the nature of the charge to his credit card and paid it 'in silence.' To 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." [Quoting the district court.] . . . Where, as here, "the plaintiff's lack of knowledge could be attributed to its lack of investigation into the defendant's claim of liability and the basis upon which the defendant was seeking the [payment]," the Illinois courts have rejected a mistake of fact claim. We agree.
Slip op. at 15-16 (citations omitted).
Spivey is a strong reminder that consumers have a responsibility to read their bank and credit card statements and cannot sue to reverse payments made to a business where they could have discovered the basis for the business's claimed entitlement to the money, but simply chose not to do so. Laziness or willfully sitting on one's rights is not the sort of "mistake" that can defeat the voluntary payment doctrine.